Production _Aims| Q Discuss the process of industrial production Q Consider the global impact of international supply chains Lead-in + What do production and quality managers do? + What particular skills do you think production and operations managers require? Do you think you have these skills yourself? + Would you like to work in this field? + What do you think the objectives of a production department usually are? Vocabulary: Industrial production “'m a local craftsperson ~ I make money.” ©The New Yorker Before reading and hearing about industrial production, match up the half-sentences below, which define some basic terms. 1 Inventory (Amé and Bré) or stock (Bré) is a company’s reserves 2 Acomponentis any of the pieces or parts 3 Capacity is the (maximum) rate of output 4 Plant is a collective word for all the buildings, machines, equipment, 5 Location means the geographical situation 6 Asupply chain is a network of organizations 7 Outsourcing means buying products or processed materials 8 Economies of scale are the cost savings 9 Lead time is the time needed to perform an activity A and other facilities used in the production process. B arising from large-scale production C from other companies rather than manufacturing them. D involved in producing and delivering goods or a service of a factory or other facility F of raw materials, parts, work in process, and finished products G such as manufacturing a product or delivering it to a customer. H that can be achieved from a production process. 1 that make up a product or machine. m Reading: Capacity and inventory Operations managers have to decide where to manufacture different products, how much productive capacity their factories and plants should have, and how much inventory to maintai Read the 15 sentences on the next page, and classify them under the six headings (A-F). Some sentences may fall under two headings. ‘A The consequences of insufficient capacity B The consequences of excess capacity C The advantages of large facilities D The disadvantages of large facilities E The advantages of havinga large inventory F The disadvantages of having a large inventory Production Unit 8 47Alan Goodfellow 1 Along lead time may allow competitors to enter the market 2 As production volume increases, you get economies of scale (the average fixed cost er unit produced decreases). Finding enough workers and coordinating material flows can become difficult. IFlead time increases, some customers may go to other suppliers Lost sales and market share are usually permanent. The working environment might get worse and industrial relations could deteriorate. There are costs of storage, handling, insurance, depreciation, the opportunity cost of capital, and so on. 8 You can be more flexible in product scheduling, and have longer lead times and lower Cost operation through larger production runs with fewer setups. 9 There is always a risk of obsolescence, theft, breakage, and so on. 10 You can meet variation in product demand 11 You may be under-utilizing your workforce. 12 You have protection against variation in raw material delivery time (due to shortages, strikes, lost orders, incorrect or defective shipments, etc.) 13 You may be forced to produce additional, less profitable, products 14 You can take advantage of quantity discounts in purchasing, 15. You may have to reduce prices to stimulate demand. Nouaw Listening 1: Purchasing Listen to Alan Goodfellow, Global IT Director of Leica Microsystems, talking about purchasing and manufacturing, and answer the questions. Leica is part of the Danaher group of companies. They make microscopes, imaging systems and medical equipment. 1 What does he describe as ‘one of the main goals of any company"? 2 Whatis the advantage of being part of a larger group of companies? 3 How does a reverse auction work? 4 Whyis it called ‘reverse’? 5 What does he mean by ‘price isn’t everything"? 6 Whats the consequence of this? Listening 2: Low-cost manufacturing Listen to Alan Goodfellow talking about manufacturing in Asia, and answer the questions. 1 What are the advantages of having factories in Singapore and China? 2 Why is this not outsourcing? 3. What was the problem with staff in China? A.Leica factory in Singapore’Logistics ‘Q Compare different strategies for stock control and manufacturing Q Discuss potential supply chain risks Lead-in na manufacturing or retail business, what are the advantages and disadvantages of: + simply satisfying current demand + planning to meet (possible) future demand? Vocabulary: Pull and push strategies You are going to read about pull and push strategies for stock control and manufacturing. But first, match the words and definitions below. 1 accurate ‘A a guess of what the size or amount of something might be 2 agile B a statement of what is expected to happen in the future 3 estimate n) C able to move quickly and easily 4 forecast (n.) D correct, exact and without any mistakes 5 lean ladj,) E designing and managing the flow of goods, information and 6 logistics other resources 7 manual (adj) F done with the hands 8 replenish G (of production) using small quantities and avoiding any waste H to fill something up again Reading: Pull and push strategies These eight paragraphs make up a text about inventories, pull and push strategies, and Just-In-time (IT) production. Put them in the right order to make a logical text. Two have already been done. Manufacturing com or push strategies. [1 janies can pro ice according to pull because demand forecasts are not alw: gies often incorporate safety stock pual system in wii times. [ ically, Kanban bins ishing; t ther words, were f a signal th vant ced in component in is is a replenishment strat production and suppliers are constantly rea actual consumption of components, rat items ded reple software is use + than planning part from JIT, other names for pull str: ion, stockless production, continuous wre and agile manufacturin demand, whic , nothing is bought or produced until it is small) inventory. When pi needed replacements are auto Ty, a. company manufactures is satisfied from This replenishment strat IT) production bj common JIT syst in-Tim The mos a Planning (MRPJ, on the contrary, production is based on s of future demand, and begin: i estim planned production ccheduled to meet expected demAlan Goodfellow A Leica surgical microscope 52 Comprehension: Pull and push strategies Now match up the following half-sentences. 1 Pull strategies are based on A current demand. 2 Pull systems only buy or produce ——_—&B estimated future demand 3 Konban systems signal € safety stocks and lead times 4 Push strategies are based on D thatitems need to be replaced. 5 Push strategies often allow for E things when they are needed, Listening 1: Inventory, Kanban and MRP Listen to Alan Goodfellow of Leica Microsystems talking about inventory levels, and answer the questions. 1 Why do companies want to keep inventory as low as possible? 2 What do Leica need inventory for? 3. What strategy enables them to keep a low inventory? 4 What changed when Leica was taken over by Danaher? 5 Why does Goodfellow say ‘it’s not Just-In-Time as such’? Listening 2: Leica’s supply chain Listen to Alan Goodfellow talking about Leica’s international supply chai answer the questions. 1 Whats the difference between Leica's business units and selling units? 2 Does the Singapore factory make all the parts it uses? 3 Why might the Singapore factory send some products to Europe rather than to the end customer? 4 What does he say about languages and currencies? 5 Explain the balance or trade-off between customers! needs and having local stocks or inventories Reading: Supply-chaining On the next page there is another extract from Thomas Friedman's book The World ts Flat: A Brief History of the Twenty-first Century. Here he is writing about Wal-Mart's supply chain. Wal-Marts are large, discount department stores in the US. At the time of writing, Wal- Mart had the largest revenue of any company in the world, and was the world's largest private employer. Read the extract. What is Friedman's overall impression of the operation?Quality my 7 ‘ Q Discuss different managerial approaches to quality Q Consider how companies try to ensure quality Lead-in Quality can mean a|ot of different things. lf you were talking about quality in relation to these products and services, what would you mean? + small car (automobile) + a mobile phone or internet provider + araincoat + an insurance company + alaptop computer Reading and discussion A well-known book is Quality Is Free by Philip B. Crosby. He writes: Doing things right the first time adds nothing to the cost of your product or service. Doing things wrong is what costs money. The typical American corporation spends 15-20 per cent of its inspection, testin damage corpo es dollar on reworking, scrappi repeated service, ng, Warranties and other quality related costs. Lapses in quality also te reputations and provoke government regulation. Most, or all, of these headaches could be prevented by a properly managed quality operation. Quality is not only free but a bountifial source of profits. 56 Unit 10 Quali;1 Match up the words from the text with the definitions on the right. 1 bountiful A changing or improving a product or service 2 headaches B guarantees: written promises to repair or replace products that develop a fault 3 regulation € providing a large amount of good things 4 reworking D things that cause difficulties 5 scrapping E official rules or the act of controlling something 6 service F to examine a machine and repair any faulty parts 7 warranties G getting rid of things which are no longer useful or wanted 2 Give some more examples of the expenses companies can avoid by preventing poor quality before it happens. Reading: Total Quality Management Total Quality Management (TQM) is a management approach designed to improve the production quality of goods and services. Read the text below, and answer the comprehension questions that follow. TOM d in, W. Edw st taken up e products, ser ive their verything is capable o ess of the time y Ameri fff to be involved in the in the 1980s, sly improving quality, in all S — not just production or Management) involves an attitude te ci (0 providing human reso se of the knowledge a aff to identify and correct organizat them right Comprehension The following five statements are all false. Correct them. TQM isa Japanese management theory. TQM guarantees ‘zero defect’ production and no waste. TQM stops when you have the perfect product. TQM cancers production and customer service personnel TQM involves maximizing output and reducing costs. 2 3 4 5 The Toyota Motor Corporation has long been associated with TOM y Unit10 57Marketing Q Consider the product life cycle and the role of marketing Q Discuss pricing and distribution strategies Lead-in Here are four definitions of marketing. Which do you prefer, and why? [Lz * Selling means you sell what you make; marketing means you make what you can sell a * Marketing means the right product, in the right place, at the right price, and at the right time. : at, + Marketing means identifying customers, defning and 4s developing the products or services they want, and making and distributing them, + Marketing means anticipating and creating needs: Ee producing useful things customers didn't know they wanted until you produced them. ‘It’s all marketing - no one actually wears that stuff’ © The New Yorker Vocabulary: Basic marketing terms Below are some more basic marketing terms. Match up the words in the box to the definitions. Gistribution channel market opportunities market penetr market segmentation market skimming price elasticity. product features sales representative wholesaler 1 all the companies or individuals (‘middlemen’) involved in moving goods or services from producers to consumers 2 an intermediary that stocks manufacturers’ goods or merchandise, and sells it to retailers and professional buyers 3 dividing a market into distinct groups of buyers who have different requirements or buying habits 4 making a product (appear to be) different from similar products offered by other sellers, by product differences, advertising, packaging, etc. 5 possibilities of fling unsatisfied needs in sectors in which a company can profitably produce goods or services 6 setting a high price for anew product, to make maximum revenue before competing products appear on the market 7 someone who contacts existing and potential customers, and tries to persuade them to buy goods or services 8 the attributes or characteristics of a product, such as size, shape, quality, price, reliability etc. 9 the extent to which supply or demand (the quantity produced or bought) of a product responds to changes of price 10 the strategy of setting a low price to try to sella large volume and increase market share 64 unit 12 MarketingWriting Write two or three short paragraphs (60-100 words in total) describing the different distribution channels used for two different products. Reading: Marketing is everything Read the following extracts from an article by Regis McKenna in the Harvard Business Review, and answer the questions on the next page. Several decades ago, there were sales-criven companies. These organizations focused their energies on changing customers’ minds to fit the product — practicing the ‘any color as long asit's black’ school of marketing. As technology developed and competition increased, some companies shifted In 1909, Henry Ford their approach and became customer driven. These companies expressed a new famously said about wilingness to change their product to fit customers’ requests — practicing the ‘tell us the Model T: what color you want schoo! of marketing Successful companies are becoming market driven, adapting their products to fit their customers’ strategies, These companies will practice ‘Let's figure out together how and whether color matters to your larger goa’ marketing, It is marketing that is oriented toward creating rather than controling a market. ‘The old approach — getting an idea, conducting tracitional market research, developing a product, testing the market, and finally going to market —is slow and unresponsive. ‘As the demands on the company have sifted from controling costs to competing on products to serving customers, the center of gravity inthe company has shifted from finance to engineering — and now to marketing, Marketing today s not a function; it isa way of doing business, Marketing isnot a new ad campaign or this onth’s promotion. Marketing has to be all-pervasive, part of everyone's job description, from the receptionists to the board of directors. ts job isneither to fool the customer nor to falsify the company's image. Itis to integrate the “Any customer can customer into the design ofthe product. have a car painted any US companies typically make two kinds of mistake. Some get caught up in the caine that. be wants #9) ‘excitement and crive of making things, particulary new creation. Others become eed absorbed in the competition of selling things, particularly to increase their market share in a given product ne. Both approaches could prove fatal to business. The problem with the fist is that iteads to an internal focus. Companies can become so fixated on pursuing their R&D agendas that they forget about the customer, the marke, the competition. The problem withthe second approach is that it leads to a market-share mentality. It tums marketing into an expensive fight over crumbs rather than a smart effort to own the whole pie. ‘The real goal of marketing is to own the market — not just to make or sell products. Smart marketing meas defining the whole pie as yours. In marketing, what you lead you own. Leadership is ownership, That i why marketing is everyone's job, why marketing is everything and everything is marketing, Marketing Unit 12 67Porras Word partnerships See the DVD-ROM fortheiGlossary. UNITS >> MARKETING For each group of words below (1-5): * fil in the missing vowels to complete the word partnerships; * match each of the three word partnerships to the correct definition (a-c). 1 market research me the percentage of sales a company has s_gm_nt ) information about what customers want and need sh_re ©) a group of customers of similar age, income level and social group 2 consumer b_h_v___r a) description of a typical customer prfiil ©) where and how people buy things gids ©) things people buy for their own use 3 product. I__nch ) introduction of a product to the market feycl. b) length of time people continue to buy a product rong. ©)_ set of products made by a company 4 sales flricst @)_how much a company wants to sellin a period fleits b) how much a company thinks it will sellin a period trgt ©) numbers showing how much a company has sold ina period 5 advertising ¢_mp__gn 2) a business which advises companies on . advertising and makes ads bgt euocy >) an amount of money available for advertising during a particular period ©) aprogramme of advertising activities over period, with particular aims 4 cb2.15 Mark the stress on the word partnerships in Exercise A. Listen and check your answers. EXAMPLE: ‘market re'search Choose a well-known brand for each of these categories. © car/motorbike Mercedes * food/drink * mobile phone / camera © magazine/newspaper + clothing/perfume * computer / electronic goods For each brand, think about these questions. 1 What is the product range of the brand? The range includes cars, vans and trucks. 2 Which market segment is it aimed at in your country? 3. What is a typical consumer profile for the brand? Include the following: sage gender »job/profession * income level interests/hobbies * other products the consumer might buy Work in pairs. Choose one of the brands you looked at in Exercise C. Discuss what sort of advertising campaign you could have for it in your country. How else could you try to increase the sales figures of the brand? Exchange your ideas with another pair. 75Wena Brand management Peo Du cy See the DVD-ROM forthe i-Glassary. Ww UNIT1 +> BRANDS Match these word partnerships to their meanings. 1 loyalty @) the title given to @ product by the company that makes it 2 image ) using an existing name on another type of product 3 stretching ©) the ideas and beliefs people have about a brand 4 awareness d) the tendency to always buy a particular brand 5 name €) how familiar people are with a brand (or its logo and slogan) 6 launch f)_ the set of products made by a company 7 lifecycle ®) the use of a well-known person to advertise products 8 range when products are used in films or TV programmes 9 placement the introduction of a product to the market 10 endorsement 1) the length of time people continue to buy a product 11 leader ) the percentage of sales a company has 12 research customers of a similar age, income level or social group 13 share m) the best-selling product or brand in a market 14 challenger 1) information about what consumers want or need 15 segment 0) the second best-selling product or brand in a market Complete these sentences with word partnerships from Exercise A. 1. No one recognises our ogo or slogan. We need to spend more on advertising to reise brand awareness 2 Consumers who always buy Sony when they need a new TV are showing 3 Afashion designer who launches his or her own perfume is an example of... 4 The of Mercedes-Benz is such that its products are seen as safe, reliable, luxurious, well made and expensive 5 George Clooney advertising Nespresso is an example of. 6A Consists of introduction, growth, maturity and decline. 7 Tesco's wide means that it appeals to all sectors of the UK market. 8 The use of Aston Martin cars and Sony computers in James Bond films are examples of : 9 Microsoft is the in computer software, 10 In countries with ageing populations, the over-60s age group is becoming an increasingly important... 11 Pepsi is the in carbonated soft drinks. 12 Focus groups and consumer surveys are ways of conducting. Discuss these questions. What are the advantages and disadvantages for companies of product endorsements? How can companies create brand loyalty? Can you give any examples of successful or unsuccessful brand stretching? Think of a cheap or expensive idea for a product launch. What other market segments can you identify (e.g. young singles). What action can companies take if they start to lose market share?