CHAPTER 9 PRODUCTION AND OPERATIONS MANAGEMENT The U S is no longer manufacturing based it has become a service economy How can U S manufacturers and service organizations maintain a competitive edge Most of them can and are o Focusing more on customers o Maintain closer relationships with suppliers and other companies to satisfy customer needs o Practicing continuous improvement o Focusing on quality o Saving on costs through site selection o Relying on the internet to unite companies that work together o Adopting production techniques such as enterprise resource planning and computer integrated flexible and lean manufacturing Production manufacturing the creation of finished goods and services using the factors of production land labor capital entrepreneurship and knowledge Production management term used to describe all the activities managers do to help their firms create goods Operations management a specialized area in management that converts or transforms resources including human resources into goods and services o Includes inventory management quality control production scheduling follow up services and more o For services it is all about enriching the customer experience Form utility the value producers add to materials in the creation of finished goods and Process manufacturing that part of the production process that physically or chemically services changes materials Assembly process that part of the production process that puts together components Continuous process a production process in which long production runs turn out finished goods over time conveyor belts Intermittent process a production process in which the production run is short and the machines are changed frequently to make different products Major developments have made U S companies more competitive o 1 Computer aided design and manufacturing 2 flexible manufacturing 3 lean manufacturing and 4 mass customization Computer aided design CAD the use of computers in the design of products Computer aided manufacturing CAM the use of computers in the manufacturing of products Computer integrated manufacturing CIM the uniting of computer aided design with computer aided manufacturing o Expensive but cuts as much as 80 of the time needed to program machines to Flexible manufacturing designing machines to do multiple tasks so that they can make parts produce a variety of products Lean manufacturing the production of goods using less of everything compared to mass production Characteristics of lean companies o They take half the human effort o They have half the defects in the finished product or service o They require one third the engineering effort o They use half the floor space for the same output o They carry 90 percent less inventory Mass customization tailoring products to meet the needs of individual customers Facility location the process of selecting a geographic location for a company s Telecommuting working from home via computer and modem Facility layout the physical arrangement of resources including people in the operations production process Fixed position layout allowed workers to congregate around the product to be completed Process layout similar equipment and functions are grouped together Materials requirement planning MRP a computer based operations management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place Enterprise resource planning ERP a newer version of MRP that combines the computerized functions of all the divisions and subsidiaries of the firm such as finance human resources and order fulfillment into a single integrated software program that uses a single database Purchasing the function in a firm that searches for high quality material resources finds the best suppliers and negotiates the best price for goods and services Just in time JIT inventory control a production process in which a minimum of inventory is kept on the premises and parts supplies and other needs are delivered just in time to go on the assembly line Quality consistently producing what the customer wants while reducing errors before and after delivery to the customer Six Sigma quality a quality measure that allowed only 3 4 defects per million opportunities Statistical quality control SQC the 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 Statistical process control SPC the process of testing statistical samples of product components at each stage of the production process and plotting those results on a graph Any variances from quality standards are recognized and can be corrected if beyond the set standard Some companies use a quality approach method called the Deming cycle Its steps are Plan Do Check Act PDCA to find errors before they happen In order to qualify for Malcolm Balridge National Quality Awards and organization has to show quality in seven key areas o Leadership o Strategic planning o Customer and market focus o Information and analysis o Human resources focus o Process management o Business results ISO 9000 the common name given to quality management and assurance standards world standard for quality ISO 14000 a collection of the best practices for managing an organization s impact on the environment Program evaluation and review technique PERT a method for analyzing the tasks involved in completing a given project estimating the time needed to complete each task and identifying the minimum time needed to complete the total project o The steps used in PERT 1 analyzing and sequencing tasks that need to be done 2 estimating the time needed to complete each task 3 drawing a PERT network illustrating the information from steps 1 and 2 4 identifying the critical path o Critical path in a PERT network the sequence of tasks that takes the longest time to complete anything past this path is late Gantt chart bar graph showing production managers what project are being worked on and what stage they are in at any given time Summaries on page 248
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