UMD BMGT 110 - Chapter 9: Production and Operations Management

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Chapter 9: Production and Operations Management Manufacturing and Services in Perspective - US economy is no longer manufactured based - 70% of the US GDP and 85% of US jobs now come from the service sector - Foreign producers have become competitive bc they use US technology and concepts to increase effectiveness and efficiency >> good thing bc it helps reduce poverty and hunger in developing countries & opens new markets to the developed world - US manufacturers and service organizations shouldo Focus more on customers, maintain closer relationships with suppliers and other companies to satisfy customer needs, practice continuous improvement, focus on quality, save on costs through site selection, rely on the internet to unite companies that work together, adopt production techniques such as enterprise resource planning, computer integrated manufacturing, flexible manufacturing, and lean manufacturing From Production to Operations Management - Production: the creation of finished goods and services using the factors of production; labor, land, capital, entrepreneurship and knowledge- Production management: the 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 serviceso Operations management in the service industry is all about creating a good experience for those who use the service Production Processes- Form utility: the value producers add to materials in the creation of finished goods and services - 3 basic requirements of productiono To build & deliver products in response to the demands of the customer at a scheduled delivery timeo To provide an acceptable quality levelo To provide everything at the lowest possible cost - Process manufacturing: that part of the production process that physically or chemically 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- Intermittent process: a production process in which the production run is shot and the machines are changed frequently to make different products - Ultimate goal of operations management: provide high quality goods and services instantaneously in response to customer demand - US companies more competitive due to o Computer aided design and manufacturing Changed production techniques the most Computer aided design (CAD): the use of computers in the design of products Computer aided manufacturing (CAM): the use of computersin the manufacturing of products Computer integrated manufacturing (CIM): the uniting of CAD and CAMo Flexible manufacturing: means designing machines to do multiple tasks so they can produce a variety of products o Lean manufacturing: the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment tools, less engineering time  Company becomes lean by increasing its capacity to produce high quality goods while decreasing its need for resources  Characteristics: they take half the human effort, they have half the defects in the finished product/service, they require 1/3 the engineering effort, they use half the floor space for the same output, they carry 90% less inventory  Technological improvements are largely responsive for the increase in productivity and efficiency o Mass customization: tailoring products to meet the needs of individual customers Operations Management Planning- Operations management planning helps solve many of the problems in the service and manufacturing sectors - Facility location: the process of selecting a geographic location for a company’s operationso Companies take into account: labor costs, availability of resources, access to transportation, proximity to suppliers and customers, crime rates, quality of life for employees, cost of living, need to train/retrain the local workforce - Operations management is an interfirm process: many companies do little production themselves and outsource engineering, design, manufacturing, and other tasks - Information technology is giving firms and employees increased flexibility to choose locations while staying in the competitive mainstream o Telecommuting: working from home via computer and modem- Companies location affected by the tax situation at a particular location and the degree of government support - Facility layout: the physical arrangement of resources (including people) in the production process o Many companies are moving from an assembly line layout (workers only do a few tasks at a time) to a modular layout (teams of workers combine to produce more complex units of the final product) o Fixed position layout: used when working on a major project such as abridge; allows workers to congregate around the product to be completed o Process layout: is one in which similar equipment and functions are group 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 materials requirement planning (MRP) that combines the computerized functions of allthe 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 o Shorter time between orders and payments, less staff needed to do ordering and order processing, reduced inventories, better customer service - 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 o Manufacturers today rely on just 1 or 2 suppliers bc their relationship is much closer than the past - 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 o To work effectively, the process requires an accurate production schedule and excellent coordination with carefully selected suppliers - Quality: consistently producing what the consumer


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UMD BMGT 110 - Chapter 9: Production and Operations Management

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