Factory Management

Overview

Introduction Different Ways of Studying FM Wrap-Up: What World-Class Producers Do

Introduction

Factory management is the management of an organizations productive resources or its production system. A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production system. The primary concern of an operations manager is the activities of the conversion process.
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Organizational Model
Finance
Sales HRM

FM
Marketing MIS QA

Engineering

Accounting

Scientific Management

Frederick Taylor is known as the father of scientific management. His shop system employed these steps: Each workers skill, strength, and learning ability were determined. Stopwatch studies were conducted to precisely set standard output per worker on each task. Material specifications, work methods, and routing sequences were used to organize the shop. Supervisors were carefully selected and trained. Incentive pay systems were initiated.

Scientific Management

In the 1920s, Ford Motor Companys operation embodied the key elements of scientific management: standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts

Human Relations and Behavioralism

In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production. Researchers and managers alike were recognizing that psychological and sociological factors affected production. From the work of behavioralists came a gradual change in the way managers thought about and treated workers.

Operations Research

During World War II, enormous quantities of resources (personnel, supplies, equipment, ) had to be deployed. Military operations research (OR) teams were formed to deal with the complexity of the deployment. After the war, operations researchers found their way back to universities, industry, government, and consulting firms. OR helps operations managers make decisions when problems are complex and wrong decisions are costly.
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The Service Revolution

The creation of services organizations accelerated sharply after World War II. Today, more than two-thirds of the US workforce is employed in services. About two-thirds of the US GDP is from services. There is a huge trade surplus in services. Investment per office worker now exceeds the investment per factory worker. Thus there is a growing need for service operations management.
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The Computer Revolution

Explosive growth of computer and communication technologies Easy access to information and the availability of more information Advances in software applications such as Enterprise Resource Planning (ERP) software Widespread use of email More and more firms becoming involved in EBusiness using the Internet Result: faster, better decisions over greater distances
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Today's Factors Affecting FM

Global Competition Quality, Customer Service, and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues

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Studying Factory Management

Operations as a System Decision Making in FM

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Operations as a System
Production System Conversion Subsystem
Control Subsystem

Inputs

Outputs

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Inputs of an Operations System

External Legal, Economic, Social, Technological Market Competition, Customer Desires, Product Info. Primary Resources Materials, Personnel, Capital, Utilities

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Conversion Subsystem

Physical (Manufacturing) Locational Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services (Federal)

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Outputs of an Operations System

Direct Products Services Indirect Waste Pollution Technological Advances

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Production as an Organization Function

US companies cannot compete with marketing, finance, accounting, and engineering alone. We focus on FM as we think of global competitiveness, because that is where the vast majority of a firms workers, capital assets, and expenses reside. To succeed, a firm must have a strong operations function teaming with the other organization functions.

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Decision Making in FM

Strategic Decisions Operating Decisions Control Decisions

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Strategic Decisions

These decisions are of strategic importance and have long-term significance for the organization. Examples include deciding: the design for a new products production process where to locate a new factory whether to launch a new-product development plan

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Operating Decisions

These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits. Examples include deciding: how much finished-goods inventory to carry the amount of overtime to use next week the details for purchasing raw material next month

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Control Decisions

These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. Examples include deciding: labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria

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What Controls the Operations System?

Information about the outputs, the conversions, and the inputs is fed back to management. This information is matched with managements expectations When there is a difference, management must take corrective action to maintain control of the system

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Wrap-Up: World Class Practice

FM important in any organization Global competition forces rapid evolution of OM Decision based framework focus of course Strategic, Operating, and Control

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Supply Chain Management - Introduction

Supplier
Supplier

Storage

Mfg.

Storage

Dist.

Retailer

Customer

Supplier

Supplier

Supplier

Storage

Service

Customer

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Product design Should products be redesigned to reduce logistics costs? Should products be redesigned to reduce lead times? Would delayed differentiation be helpful? Information technology and decision-support systems What data should be shared (transferred) How should the data be analyzed and used? What infrastructure is needed between supply chain members? Should e-commerce play a role? ?

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Customer value How is customer value created by the supply chain? What determines customer value? How do we measure it? How is information technology used to enhance customer value in the supply chain?

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Creating an effective supply chain Develop strategic objectives and tactics Integrate and coordinate activities in the internal portion of the supply chain Coordinate activities with suppliers and customers Coordinate planning and execution across the supply chain Consider forming strategic partnerships

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Shop Floor Control

Even a journey of one thousand li begins with a single step. Lao Tze It is a melancholy thing to see how zeal for a good thing abates when the novelty is over, and when there is no pecuniary reward attending the service. Earl of Egmont
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What is Shop Floor Control?

Definition: Shop Floor Control (SFC) is the process

by which decisions directly affecting the flow of material through the factory are made.

Functions:
Status Monitoring

WIP Tracking

Throughput Tracking

Material Flow Control

Work Forecasting

Capacity Feedback

Quality Control

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Planning for SFC

Gross Capacity Control: Match line to demand via: Varying staffing (no. shifts or no. workers/shift) Varying length of work week (or work day) Using outside vendors to augment capacity Bottleneck Planning: Bottlenecks can be designed Cost of capacity is key Stable bottlenecks are easier to manage

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Span of Control: Physically or logically decompose system Span of labor management (10 subordinates) Span of process management (related technology?)

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Discovering the Hidden Factory

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Plant capacity can be increased by putting the hidden factory to work. The hidden factory is all the production capacity lost due to the unnecessary waste of operating time and production rate. It can total to more than half of the plant and equipment capacity in those organisations that are not aware of their time and production wastes.

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To find the size of the hidden factory it is necessary to measure actual performance against the maximum rated potential of the operation. The difference between the two - maximum possible and actual achievement is the size of the hidden factory.

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As the plant uptime is increased more production is made in the same time for the same cost. This drives the unit cost down, the return on assets goes up, the profit also goes up, and because customers get their orders sooner, their satisfaction also rises.

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STORE MANAGEMENT

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Managing the Store

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Nordstrom for Store Managers

This is your business. Do your own thing. Dont listen to us in Seattle, listen to your customers. We give you permission to take care of your customers.
James Nordstrom, the CEO of Nordstroms

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Responsibilites of Store Managers Undertaken by Store Managers

John

Managing Store Employees

Recruiting & selecting Socializing & training Motivating Evaluating & providing constructive feedback Rewarding & compensating

Controlling Costs
Increasing labor and productivity Reducing maintenance & energy costs Reducing inventory losses Displaying merchandise & maintaining visual standards Working with buyers Suggesting new merchandise Buying merchandise Planning & managing special events Marking down merchandise

Managing Merchandise

Providing Customer Service

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Steps in the Employee Management Process

1. Recruit & select employees

2. Socialize & train new employees

3. Motivate & manage employees to achieve store performance goals

4. Evaluate employee performance & provide feedback

5. Compensate & reward employees

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Recruiting and Selecting Employees

Job analysis Job description Locating prospects Screening applicants

- Application form, references, testing

Selecting applicants

- Interviewing candidates
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Socializing and Training Employees

Orientation program

Training
- Where, when, what

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Motivating and Managing Employees

Leadership - Task and group maintenance management Participate and authoritarian

Motivation

- Setting goals
- Maintaining morale

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Evaluating and Providing Feedback to Employees

Evaluation - Who, when, how often? Feedback - Performance outcome vs. process

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Factors Used to Evaluate Sales Associates at The Gap

25% Operations 25% Compliance

50% Sales/Customer Relations

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Common Evaluation Errors

Ratings unduly negative Rating unduly positive Using the same rating on all aspects of the evaluation Placing too much weight on recent events rather than evaluating performance over the entire period Having the evaluation of a salesperson unduly influenced by the evaluation of other salespeople Making errors in identifying causes of the salespersons performance

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Compensating and Rewarding Employees

Extrinsic vs. intrinsic rewards Compensation

- Type Straight salary Straight commission Salary plus commission Quota bonus (Setting quotas)
- Individual vs. group incentives

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Advantages and Disadvantages of Straight Salary

Straight Salary
Offers flexibility in assigning employees to activities Builds stronger employee commitment Is easy for employees to understand

Incentive Compensation
Has high motivating potential

Has more variable cost Relates compensation to productivity

Is easy to administer
Allows for better performance of non-selling activities such as customer service

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Controlling Costs

Labor scheduling

Store maintenance
Energy maintenance

Reducing inventory loss

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Sources of Inventory Shrinkage

Employee theft (38%)

Shoplifting (36%)
Mistakes and inaccurate records (19%)

Vendor errors (6%)

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Preventing Shoplifting

Store design

Employee training
Good customer service

- Security measures
- TV cameras - Prosecution

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Reducing Employee Theft

Trusting, supportive work atmosphere Employee screening - Honesty, drug testing

Security personnel - mystery shoppers

Policies and procedures

Employee theft is an HR problem.

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Closing the Knowledge GAP

Customer research

More interactions between managers and customers Better communications between managers and service providers

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Closing the Standards GAP

High quality service commitment

Innovative solutions Define the role of service providers Set service goals

Measure service performance

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Closing the Delivery GAP

Information and training

Internal communications
Reduce conflicts Empower employees Providing incentives

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Closing the Communications GAP

Realistic commitments

Managing customer expectations

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Service Recovery
Listen to the customer
Provide a fair solution Resolve problem quickly - Reduce number of contacts - Give clear instructions - Avoid jargon

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Retail Selling

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Steps in the Selling & Buying Process

1. Approaching the customers 2. Collecting Information

3. Presenting & demonstrating merchandise &

overcoming reservations

4. Making the sale 5. Building future sales

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Steps in the Selling & Buying process

1. Problem recognition 2. Information search 3. Alternative evaluation 4. Alternative choice 5. Postpurchase evaluation
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Selling Benefits, Not Features

PRESENTATION EMPHASIZING FEATURES This chinawear has a hard glaze that is applied after the pattern is on the cups and plates. The handles are molded into the cup before it is fired. All the china is fired at 2600 F.

PRESENTATION EMPHASIZING BENEFITS This chinawear will last a long time. It is stronger than most chinawear because it is fired at 2600 F. To prevent the cup handles from breaking off, they are molded into the cup body before it is fired. The pattern will also last a long time. It wont fade because a hard leadless glaze is applied over the pattern. 61

Types of Reservations
Store
I dont know about this stores return policy.

Timing
I havent made up my mind.

Location
I cant find it.

Merchandise
I dont think this is made well.

Salesperson
I dont like him.

Price
This is too expensive.

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Building Relationships With a Customer

11-10-97 Dear Ms. Marker, It was a pleasure meeting you and assisting you with your sunglasses from our accessories dept. at our Neimans Northpart store. Looking forward to seeing you again soon, and please do not hesitate to call for any assistance. Sincerely, Diana Carreon
Neiman Marcus
Diana Carreon
SALES . FASHION . ACCESSORIES
(214)363-8311 Ext. 2127 Res. 327-2258

400 NORTHPARK CENTER DALLAS, TX 75225

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Patterns of Nonverbal Communication

INTERPRETATION BODY ANGLE FACE ARMS HANDS

Power, dominance, superiority

Exaggerated leaning over.

Piercing eye contact.

Hands on hips.

Hands behind neck or back. Steepling (fingertips touching).

HANDS

INTERPRETATION

BODY ANGLE

FACE

ARMS

Nervousness, submission, apprehension

Fidgeting or shifting from side to side.

Head down. Minimum eye contact. Constant blinking.

Hands to face, hair. Rubbing back of neck.

Wringing hands. Fingers clasped.

Source: Barton Weitz, Stephen Castleberry, and John Tanner, Selling: Building Parternships, 3rd ed. (Burr Ridge, IL: Irwin/McGraw-Hill, 1998).

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Patterns of Nonverbal Communication

INTERPRETATION BODY ANGLE FACE ARMS HANDS

Disagreement, anger, skepticism

Turning body Negative away. shake of head, frown. Lips pursing. Eyes squinting. Chin thrusting out.
BODY ANGLE FACE

Arms crossed. Finger under collar.

Fist. Finger pointing. Hands gripping edge of display.

HANDS

INTERPRETATION

ARMS

Boredom, distinterest

Slouching against display.

Lack of eye contact. Looking at door, at watch, out window. Blank stare.

Playing with object on display case. Drumming on display case..

Source: Barton Weitz, Stephen Castleberry, and John Tanner, Selling: Building Parternships, 3rd ed. (Burr Ridge, IL: Irwin/McGraw-Hill, 1998).

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Points to Consider in Handling Objective

Anticipate objections Create opportunities from objectives

Maintain a positive attitude

Understand customer objections

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Sources of Objections

The customer may be objecting due to lack of information

The customer may be setting a condition The objection may be genuine

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Indicators of Assertiveness
Less Assertive
Ask oriented Go-along attitude Cooperative Supportive Risk avoider Makes decisions slowly Lets others take initiative Leans backward Indirect eye contact Speaks slowly, softly Moves deliberately Makes few statements Expresses moderate opinions

More Assertive
Tell oriented Take-charge attitude Competitive Directive Risk taker Makes decisions quickly Takes initiative Leans forward Direct eye contact Speaks quickly, intensively Moves rapidly Makes many statements Expresses strong opinions

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Indicators of Responsiveness
Less Responsive
Controls emotions Cool, independent Task oreinted Use facts Serious Impersonal, businesslike Moves rigidly Limited use of gestures Formal dress Disciplined about time Controlled facial expressions Monotone voice

More Responsive
Shows emotions Warm, approachable People oriented Uses opinions Playful Personable, friendly Moves freely Gestures frequently Informal dress Undisciplined about time Animated facial expressions Many vocal inflections

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The Social Style Matrix

Low Responsiveness

1
2
Low Assertive

1
2
High Assertive

3 4 D C B A
High Responsiveness

3 4
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Cues to Identify the Social Styles of Customers

Analyticals
Technical background Achievement awards on wall Office is work-oriented, showing a lot of activity Conservative dress Like individual leisure activities, such as reading, individual sports

Drivers
Technical background Achievement awards on wall No posters or slogans on office walls Calendar prominently

displayed
Desk placed so contact with people is across desk Conservative dress Like group activities, such as politics, team sports 71

Cues to Identify the Social Styles of Customers

Amiables
Liberal arts background Office has friendly, open atmosphere Pictures of family displayed Personal mementos on wall Desk placed for open contact with people Casual or flamboyant dress Like individual leisure

Expressives
Liberal arts background Motivational slogan on wall Office has friendly, open atmosphere Cluttered, unorganized desk

Desk placed for open

contact with people Casual or flamboyant dress Like group activities, such as politics, team sports 72

activities, such as reading,

individual sports

Versatile and Non-Versatile Behavior

Less Versatile
Limited adaptability to others needs Specialist Well-defined interests Firm of principle Predictable

More Versatile
Able to adapt to others needs Generalist Broad interests Negotiates issues Unpredictable

Single-minded

Looks at many sides of

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Techniques to Alter Sales Behaviors

Reducing Assertiveness
Ask for customers opinion Acknowledge merits of customers viewpoint Listen without interruption

Reducing Responsiveness
Become businesslike Talk less

Restrain enthusiasm

Be more deliberate dont rush

Make decision based on facts

Stop and think

Let customer direct flow of conversation

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Techniques to Alter Sales Behaviors

Increasing Assertiveness
Get to the point Dont be vague or ambiguous Volunteer information Be willing to disagree

Reducing Responsiveness
Verbalize feelings Express enthusiasm Pay personal compliments Spend time on relationships rather than business Socialize--engage in small talk Use nonverbal communication 75

Take a stand Initiate conversation

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