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Operations Management
Systematic direction, control, and evaluation of
the entire range of processes that transform
inputs into finished goods or services.
Environmental factors-culture, political, and
market influences
Inputs-HR, capital, materials, land, energy,
information, customer
Transformations-convert inputs into outputs
O.M. (cont)
Outputs-goods or services, and waste
Customer Contact-customers actively
participate in transformation processes, self-
service
Performance Feedback-repair records,
customer comments
Operations Management
Mixed
Intangible, nondurable Tangible, durable
Positioning Strategies-approach
selected for transformational
processes many of one product
high-volume, highly
Process Focus-layout of
automated
plant and equipment
low flexibility
around each production
Factory Lines
unit
custom made
Intermediate Strategy-
Low Volume
plant and equipment
Norwegian Ship Building
layout reflects some of
both strategies
Product Focus-arranging
batches of products
plant and equipment
Kinkos, Ball Homes
around one or a few
output types Agile Strategy-mass
Hellriegel, Jackson, and Slocum customization
MANAGEMENT, 8E
South-Western College Publishing
Copyright 1999
PPT
Flexibility
Product Flexibility-speed with which products
are created, ability to customize, ability to
modify products for special needs
Volume Flexibility-ability to respond to sudden
changes in demand, change from small to full
scale
Process Flexibility-ability to manufacture a
variety of goods in a short time, adjust to
product mix over time, ability to accommodate
changes in raw materials
Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright 1999
PPT 21.5
Mass plant
production
Intermediate Mail processing
Garment
Large industry
batch
Process focus
Branch banks
Space shuttle
Legal practice
Sporadic
(unstable)
Custom products,
Mixture of custom and standard Standard products,
low volume products, moderate volume high volume
Product volume
Sources: Adapted from Brown, H.K., Clark, K.B., Holloway, C.A.,
and Wheelwright, S.C. The Perpetual Enterprise Machine: Seven
Keys to Corporate Renewal Through Successful Product and
Hellriegel, Jackson, and Slocum Process Development. New York: Oxford University Press, 1994;
MANAGEMENT, 8E Upton, D.M. The management of manufacturing flexibility. Adapted from Figure 21.2
South-Western College Publishing California Management Review, Winter 1994, 7289.
Copyright 1999
PPT
Average
value
Economy
value Outstanding
Source: Adapted from Gale,
value B.T., and Buzzell, R.D. Market
perceived quality: Key strategic
Lower concept. Planning
Review, March-April, 1989, 10.
Inferior Superior
Relative Quality
Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E Adapted from Figure 21.3
South-Western College Publishing
Copyright 1999
PPT
Price v. Attributes
Improving Efficiency
Labor productivity allows labor comparisons between
organizations.
Improved efficiency leads to lower costs and better
performance.
TQM and Efficiency: TQM can lead to much higher
labor productivity.
When quality rises, less time is wasted on scrap.
Flexible manufacturing and efficiency: reduces the
set-up costs for production systems.
Facilities layout: seeks to design the machine-worker interface
to increase production efficiency.
Efficient Manufacturing
Most firms face major expense when setting up to
produce a product.
These costs must be paid before production begins.
The more often products to be built change, the higher setup
costs become.
Flexible Manufacturing reduces setup costs.
Just-in-Time (JIT) inventory, while developed for
TQM, also adds to efficient production.
Many costs are reduced including warehousing, holding costs
and inventory tracking.
Firm does not have a supply of parts, but can be vulnerable to
strikes or supply problems.
Efficient Manufacturing
Self-managed teams boost efficiency by allowing for a
flatter organization structure.
The team takes the role of the supervisor.
Teams working together often become very skilled at enhancing
productivity.
Kaizen: Japanese term for a management philosophy
the stresses the need for continuous improvement.
Better operations can come from many, small, continuous
improvements.
Focus on what adds value to the product and try to eliminate
steps that do not add value (such as inspection for defects).
Reengineering
Process Reengineering: the fundamental rethinking
and radical redesign of the business process.
Can boost efficiency by directing efforts to activities that add
value to the good or service produced.
While Kaizen focuses on continuous enhancements, process
reengineering considers wholesale change.
Top managers must support operations enhancement
tools for them to be accepted by workers.
Usually, a successful operations change means a complete
change in the organizational culture.
Without a supporting culture, change will not succeed.
Product plans
Competitive Priorities
Positioning Strategies
Location
Technological Choices
Quality management and control
Inventory management and control
Materials Management
Master production scheduling
Inventory Costs
What contributes to inventory costs?
TOTAL COST = ORDERING + CARRYING
Carrying Costs
Warehouse
Insurance
Obsolescence
taxes
breakage
Ordering Costs
Placing the order
Transportation
Shortage
Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
South-Western College Publishing
Copyright 1999
PPT
Inventory Terms
Lead Time
Elapsed time between placing and receiving an order
EOQ-economic order cost
optimum order quantity yielding the lowest total
inventory cost
Just-in-time
finished goods to sell
sub assemblies to be assembled
purchases of raw materials to be transformed
Carrying cost
Order cost
Low
Small Q1 Large
Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E
Quantity (Q) Adapted from Figure 21.5
South-Western College Publishing
Copyright 1999