CHAPTER NINE

Operations Management (Production)

Manufacturing Service

Whats Had The Biggest Effect on Productivity?

Downsizing Hiring Part-Time Workers Empowering Workers Quality & Customer Satisfaction Computers & Technology 0 20 40 60 80

Percentage of Workforce

Leading U.S. Manufacturing States

W AS H IN G TO N

New York
MO N T AN A NO R TH D AK O T A MAIN E

OR E GO N

Illinois
MIN N ESO T A ID AH O SO U TH D A K O T A WY O M IN G IO W A NEV AD A NEBR A SKA

MIC H IGA N VT NH

WIS C O N S IN

NEW Y O R K

MAS S CO N N RI

MIC H IG AN

PEN N SY L V AN IA NE W JER S EY OH IO DELA W AR E ILLIN O IS IN D IA N A WES T VIR G IN IA DC MAR Y LAN D

UT AH

CO LO R AD O KAN SA S

VIR G IN IA

CALIFO R N IA

MIS SO U R I KEN TU C KY

TE N N ESS EE AR IZO N A NEW M EXIC O OKLA H O M A AR KAN SA S

Ohio
GE OR G IA

NO R TH C A R O LIN A

SO U TH C AR OLIN A

California
TEX AS
ALASKA

ALA BAM A LO U ISIA N A MISSIS SIPP I

Pennsylvania
FL O R ID A

HAWAII 0 600 Miles 0 200 Miles

Texas

100

200 Miles

The Americans and the Japanese decided to engage in a competitive boat race.

Both teams practiced hard and long to reach their peak performance. On the big day they felt they were ready

The Japanese won by a mile.

Afterwards the American team was discouraged by the loss. Morale sagged.

Corporate management decided that the reason for the crushing defeat had to be found, so a consulting firm was hired to investigate the problem and recommend corrective action

The consultants finding:

The Japanese team had eight people rowing and one person steering;

the American team had one person rowing and eight people steering..

After a year of study and millions spent analyzing the problem, the consultant firm concluded that too many people were steering and not enough were rowing on the American team

So as race day neared again the following year, the American teams management structure was completely reorganized.

The new structure:

Four steering managers, three area steering managers, and a new performance review system for the person rowing the boat to provide work incentive.

The next year, the Japanese won by TWO miles

Humiliated, the American corporation laid off the rower for poor performance and gave the managers a bonus for discovering the problem.

What has the US done to regain a competitive edge?

Customer focus Cost savings through site selection New manufacturing techniques Reliance on the Internet Total Quality Management
ISO 9000/ISO 140000

Using land, labor, capital, entrepreneurship, knowledge to produce goods and services.

Transforms resources into goods and services. inventory management production scheduling quality control follow-up services

The Production & Operations Process

Inputs Conversion Process
Manufacturing

Output

UBs Dry Cleaners

Service

1. Facility location
a. Near resources b. Near markets

2. Facility layout
a. For services: customer friendly b. For manufacturing - customer focused work cells - away from assembly lines c. Outsourcing

3. Quality Control
a. Measurement of products and services against set requirements b. Often at the end of the line c. Now quality becomes everyones concern

Quality Control Standards

Six Sigma () Quality (3.4)

Statistical Quality Control (SQC)

Statistical Process Control (SPC) Deming Cycle (Plan, Do, Check, (Eliminate mistakes)
Act)

Quality Function Deployment (QFD) (maximize customer satisfaction) Baldridge Award ISO 9000/14000/9001:2002

1. Baldridge Awards: quality in

a. b. c. d. e. f. g. leadership Strategic planning Customer and market focus Information and analysis Human resource focus Process management Business results

2. ISO 9000 - Sets global measures for the quality of individual products - Provides a common denominator of business quality accepted around the world

3. ISO 14000 - Concerns managing an organizations environmental impact - Requires targets, policies and reviews of environmental programs

1. Measuring quality - Productivity strong in manufacturing, but weak in services - Quality versus quantity issues

2. -

Technological improvements ATMs improve banking Universal Price Codes make checkout faster Computerized airline reservations, meal selection, and luggage handling (finger printing foreigners) Interactive services from banks, stockbrokers, travel agents

1. Form Utility - the value added by the creation of finished goods and services

2. Types of Production Processes

a. Process manufacturing - physically or chemically changing materials - making steel, or cooking eggs b. Assembly process -putting together components - TV, cars

X
X X

X
X X

X
X X X

2. Types of Production Processes a. Continuous 1) one long production run turns out finished goods 2) like an assembly line b. Intermittent 1) short production runs where machines are changed to make different products 2) custom made furniture 3) easier to respond to customer requests.

1. Materials Requirement Planning (MRP) a. Uses sales forecasts to make sure required parts are available when needed b. Now outdated 2. MRPII Manufacturing resource planning a. involved more than just materials b. also has been updated 3. ERP Enterprise resource planning a. Links multiple firms. b. Monitors quality and satisfaction as its happening. c. IT has had a major influence

Modern Production Techniques

Mass Customizing (JIT) Inventory Competing in Time Technology Purchasing Assisted Flexible Computer-Aided Manufacturing Design (CAD) Lean Computer-Aided Manufacturing Manufacturing
Just-In-Time
(CAM)

1. Just in time inventory control (JIT) a. Parts and supplies are delivered just as needed in the production process b. Avoids storage charges and damages 2. Internet purchasing a. Reduces purchasing costs b. 3 types 1) trading exchange platforms - assist companies in several markets 2) industry-sponsored exchanges 3) Net market makers -host electronic marketplaces

3. Flexible Manufacturing a. Designing machines to do multiple tasks b. Ford makes both V-8 and V-6 engines 4. Lean Manufacturing a. Increasing capacity to produce high-quality goods while decreasing need for resources b. Workers perform a cluster of tasks, not one assembly line job. 5. Mass customization - Flexible machines can produce a good as fast as mass-produced goods once could.

6. Competing in Time a. Being as fast or faster than all competition in responding to customer want and needs b. Essential in global marketplace

7. CAD and CAM a. CAD 3D designing b. CAM direct computer involvement in production process c. CIM Computer Integrated Manufacturing 1) software that unites CAD and CAM 2) currently expensive 3) cuts 80% of the time needed to program machines to make parts

Just in time inventory control

Flexible manufacturing

Mass customization Lean manufacturing

Competing in time

The Daimler-Chrysler plant in Fenton, MO receives shipments about every 4 hours from its seat supplier, and literally hundreds of other parts continually. There is virtually no storage. Volvo uses modular construction in their plants, where workers are grouped into autonomous teams working on mobile assembly platforms that carry the cars to the workers. Each worker has been trained to do a whole cluster of tasks. This system enabled Volvo to build quality cars with fewer workers in more space efficient plants and has reduced the number of hours to assemble a car. Because of the increases competition from its Japanese counter-parts Xerox implemented a program designed to cut its new product development time in half Levis markets a service which enables any customer to order a custom-made pair of jeans from any retailer at any time. The jeans cost $10 more than an off-the-rack pair. At Dynalink Industries, 15 machines are used to make, test and package component parts for stereo and quadraphonic sound systems. The parts are never touched by human hands.

Control Procedures
Program Evaluation & Review Techniques (PERT)
Critical Path Method (CPM) Gantt Chart

Program Evaluation & Review Techniques (PERT) Designing a PERT Chart

1. 2. 3. Analyze and sequence task that need to be done Estimate the time needed to complete each task Draw a PERT network illustrating the two previous steps

4. Identify the critical path - the sequence that takes the longest

brew coffee 6 min

pour coffee (1 min) assemble eggs and toast (1 min)

Start Start

cook eggs (3 min) make toast (2 min)

serve

butter toast (1 min)