1 BMGT CHAPTER 9 PRODUCTION AND OPERATION MANAGEMENT September 26 2012 Manufacturing and Services in Perspective From 2001 2008 recession the US was the world s leading manufacturer accounting for 25 of all goods produced in the world each year Some areas of the country were enjoying economic growth from manufacturing while others were experiencing declines One key to ending such declines was to adapt to the new realities and attract new manufacturers The construction industry is ready to build homes that are easier to heat and cool US automakers are trying to manufacture more competitive vehicles Productivity in management lowered the number of manufacturing workers required The US economy is no longer manufacturing based About 70 of US GDP and 85 of US jobs are in service sector o Legal services medical services entertainment broadcasting accounting finance and management consulting Manufacturers and Service Organizations Become More Competitive Foreign countries are using US technology and concepts to increase effectiveness and efficiency US is still leader in nanotech and biotech US service sector becomes a large part of the overall economy US manufacturers service organizations maintain a competitive edge o Focusing on customers o Maintaining relationships w suppliers o Continuous improvement o Focusing on quality o Saving on costs o Relying on internet to unite companies o Adopting production techniques From Production to Operations Management Production the creation of finished goods and services using the factors of production land labor capitalism entrepreneurship and knowledge o AKA manufacturing Production management management activities that helped firms create goods Operations management specialized area in management that converts resources including human resources into goods and services o Ex In a college or university the professors supplies buildings offices and computer systems transform students into educated people Organizations produce goods factories farms mines Some organizations produce services hospitals schools govt agencies Some produce a both goods and services automobile manufacturer not only makes car but also provides services such as repairs financing and insurance Operations Management in the Service Sector Operations management in the service industry is all about creating a good experience Operations Management is responsible for location and producing such amenities to make customers o Ex Ritz Carlton happy Knowing customer needs and satisfying them are two different things o O M is the implementation phase of management o Delighting customers by anticipating their needs had become the quality standard for luxury 2 hotels Production Processes Production adds value to materials or processes Form utility the value producers add to materials in the creation of finished goods and services o Ex Transforming silicon into computer chips o Ex Putting together services to create a vacation package Manufacturers use several different processes to produce goods 1 build and deliver products in response to the demands of the customer at a scheduled delivery time 2 to provide an acceptable quality level 3 to provide everything at the lowest possible cost Process manufacturing physically or chemically changing the material Assembly process putting together components to make a product Continuous process long production runs turn out finished goods over time continuously mass producing Intermittent process production run is short the producer adjusts machines frequently to make different products custom design products o Today many manufacturers use intermittent process computers robots and flexible manufacturing processes allow firms to turn out custom made goods almost as fast as mass produced goods were once produced The Need to Improve Production Techniques and Cut Costs OM s goal is to provide high quality goods and services in response to customer demand Traditional organizations were designed to make goods efficiently Mass production producing a large amount of products at a low cost New global competition led to production of high quality custom designed products at a low cost 1 Computer aided design and manufacturing 2 flexible manufacturing 3 lean manufacturing 4 mass customization Computer Aided Design and Manufacturing 1 developmental change in production is implementing computers into the design and manufacturing of products Computer aided design CAD the use of computers to design products o Has doubled productivity in many firms Computer aided manufacturing CAM the use of computers in the manufacturing of products Computer integrated manufacturing CIM uniting of CAM and CAD o Software is expensive but cuts 80 of time needed to program machines Flexible manufacturing designing machines to do multiple tasks so they can produce a variety of Flexible Manufacturing products Lean Manufacturing Lean manufacturing production of goods using less of everything compared to mass production o Increase the capacity to produce high quality goods while decreasing its need for resources They take half the human effort They have half the defects They require 1 3 of engineering effort 3 They use half the floor space The carry 90 less inventory The solution to the economic crisis depends on innovations and making them more individualistic Mass Customization Customize making a unique product or service to a specific individual Mass customization tailoring products to meet the needs of a large number of individual customers o Now widely practiced o Ex Custom made M M s o CPI Capital Protection Insurance uses the latest computer software and hardware to sell customized risk management plans to companies Operations Management Planning OMP helps solve many problems in the service and manufacturing sectors Ex Facility location layout materials required planning purchasing inventory control and quality control Facility Location Facility location selecting a geographical location for the company s operations Convenient location is KEY Find a site that makes it easy for consumers to use the company s services Facility Location for Manufacturers Companies spend millions of dollars to move their facilities from one location to another They must consider labor costs availability of resources access to transportation proximity to suppliers consumers crime rates quality of life of employees cost of living and need to train workers Availability of low cost labor remains a key
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