Chapter 9 Production and Operations Management 1 Manufacturing and Services in Perspective a Activity in the nation s manufacturing sector declined last month to the lowest level in more than two decades offering evidence that the economy is in a deep recession b The rise of technology and mass production is reducing the number of workers needed in the manufacturing industry more rapidly i U S economy is no longer manufacturing based because the U S service sector is growing much 1 Causes managers to become more occupied with service productivity and with blending services and manufacturing through the Internet c To maintain a competitive edge i Focus more on customers ii Maintain closer relationships with suppliers and other companies to satisfy customer needs iii Practice continuous improvement iv Focus on quality v Save costs through site selection vi Rely on the Internet to unite companies that work together vii Adopt new production techniques 2 Production Operations Management a Production The creation of finished goods and services using the factors of production land labor capital entrepreneurship and knowledge Historically refers to manufacturing i Production Management The management activities that help firms create goods b Operations Management Specialized area in management that converts or transforms resources into goods and services i Includes inventory management quality control production scheduling follow up services etc ii The implementation phase of management 3 Production Processes a Form Utility The value producers add to materials in the creation of finished goods and services taking a raw material and turning it into something meaningful b Three basic requirements of production i To build and deliver products in response to the demands of the customer at a scheduled delivery time ii Provide an acceptable quality level iii Provide everything at the lowest possible cost c Process Manufacturing Physically or chemically changing materials d Assembly Process Puts together components to make a product i Continuous Process Long production runs turn out finished goods over time 1 Ex A chemical plant ii Intermittent Process Production run is short and the machines are changed frequently to make different products used more often help to custom design 1 Ex Bakers use ovens diners use toasters custom design furniture manufacturers e Computer Aided Design CAD The use of computers in the design of products f Computer Aided Manufacturing CAM Use of computers in the manufacturing of products i Both CAD CAM make it possible to custom design products to meet the needs of small markets with very little increase in cost g Computer Integrated Manufacturing CIM The uniting of CAD with CAM cuts as much as 80 of the time needed to program machines to make parts h Flexible Manufacturing Designing machines to do multiple tasks so they can produce a variety of products products remain untouched by human hands or physical labor i Lean Manufacturing The production of goods using less of everything than in mass production less human effort less manufacturing space less investment in tools and less engineering time to develop a new product i Become lean by increasing the capacity to produce high quality goods while decreasing its need for resources 1 Takes half human effort 2 Half the defects in the finished product or service 3 Require 1 3 of engineering effort 4 Use half the floor space for the same output 5 Carry 90 less inventory j Mass Customization Tailoring products to meet the needs of a large number of individual customers can also be used in the service sector sectors 4 Operations Management Planning Helps solve many of the problems in the service and manufacturing a Facility Location Selecting a geographic location for a company s operations i IT Information Technology is giving firms and employees increased flexibility to choose locations while staying in the competitive mainstream b Interfirm Process Companies work closely together to design produce and ship products to customers c Telecommuting Working from home via computer and modem d Facility Layout Physical arrangement of resources including people to most efficiently produce goods and provide services for customers i Assembly Line Workers do only a few tasks at a time 1 Used to produce large quantities of a few types of products ii Modular Layout Teams of workers combine to produce more complex units of the final product 1 Can accommodate changes in design or in customer demand iii Fixed Position Layout Workers congregate around the product to be completed iv Process Layout Similar equipment and functions are grouped together 1 Used in operations that serve different customers different needs e Materials Requirement Planning MRP Computer based operations management system that uses sales forecasts to makes sure needed parts and materials are available at the right time and place f Enterprise Resource Planning ERP Newer version of MRP that combines the computerized functions of all the divisions and subsidiaries of the firm into single integrated software program that uses a single database i Customers can place an order either through a customer service representative or online and immediately see when the order will be filled and how much it will cost ii Representatives can instantly see the customer s credit rating and order history the company s inventory and the shipping schedule g Purchasing The function that searches for high quality material resources finds the best suppliers and negotiates the best price for quality goods and services h Just In Time Inventory Control JIT Keep a minimum of inventory on the premises and deliver parts supplies and other needs just in time to go on an assembly line Very expensive to hold high amounts of inventory in storage i Quality Consistently producing what the customer wants while reducing errors before and after delivery to the customer Used to inspect quality control at the end of the production line but resulted in problems i Too many extra people resources ii Costly to fix mistakes after product is produced iii Customers might be the ones to find the mistake j Quality Control Standards i Six Sigma Quality Sets a benchmark of just 3 4 defects per million opportunities ii Statistical Quality Control SQC Process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning iii
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