MGMT6072

Introduction to Management and Business

Week 8

Production and Operations Management

1
Outline
 PRODUCTION and
PRODUCTION MANAGEMENT

• Production -- The creation of goods using land,

labor, capital, entrepreneurship and knowledge
(the factors of production).
• Production
Management -- All the
activities managers do to
help firms create goods.
 OPERATIONS MANAGEMENT

• Operations Management -- A specialized area

in management that converts or transforms
resources into goods and services.
• Operations management includes:
• Inventory management
• Quality control
• Production scheduling
• Follow-up services
 *
The PRODUCTION
PROCESS

Input Production control

Land Planning Outputs
Labor Routing Goods
Capital Scheduling Services
Entrepreneurship Dispatching Idea
Knowledge Follow up
 *
FORM UTILITY

• Form Utility -- The value producers

add to materials in the creation of
finished goods and services.
 GROVE’S BASIC PRODUCTION
REQUIREMENTS

1. To build and deliver products in response to

the demands of the customer.
2. To provide an acceptable quality level.
3. To provide everything at the lowest possible
cost.
 PROCESS and ASSEMBLY in
PRODUCTION

• Process Manufacturing -- The part of

production that physically or chemically changes
materials.
• Assembly Process -- The part of the production
process that puts together components.
 KEY PRODUCTION
PROCESSES

• Production processes are either

continuous or intermittent.
• Continuous Process -- Long
production runs turn out finished
goods over time.
• Intermittent Process --
Production runs are short and
the producer adjusts machines
frequently to make different
products.
 COMPUTER-AIDED DESIGN and
MANUFACTURING

• 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.
 FLEXIBLE MANUFACTURING

• Flexible Manufacturing -- Designing machines

to do multiple tasks so they can produce a variety
of products.
 LEAN MANUFACTURING

• Lean Manufacturing -- Using less of everything

than in mass production.

• Compared to others, lean companies:

• Take half the human effort.
• Have half the defects in finished products.
• Require one-third the engineering effort.
• Use half the floor space.
• Carry 90% less inventory.
 MASS CUSTOMIZATION

• Mass Customization --
Tailoring products to meet
the needs of a large
number of individual
customers.

• More manufacturers are

learning to customize.

• Mass customization exists

in the service sector too.
 OPERATIONS MANAGEMENT

• Operations management planning helps solve

problems like:
- Facility location
- Facility layout
- Materials requirement planning
- Purchasing
- Inventory control
- Quality control
 FACILITY LOCATION

• Facility Location --
The process of
selecting a geographic
location for a
company’s operations.

• Rising numbers of Internet businesses means

brick-and-mortar retailers must find great
locations.
 OPERATIONS MANAGEMENT
on the INTERNET

• Sometimes businesses outsource

engineering, design and manufacturing to
other companies.

• Often these relationships are managed

through the Internet.

• Many companies are developing Internet-

focused strategies.
 FUTURE FACILITY LOCATION

• Information technology gives firms increased

flexibility in terms of location.

• Telecommuting -- Working from home via

computer and modem.
 SETTING UP the FACILITY

• Facility Layout -- The physical arrangement of

resources, including people, to most efficiently
produce goods and provide services.

• Facility layout depends on the processes

performed:
- Service: Help customers find products
- Manufacturing: Improve efficiency
 FACILITY LAYOUT OPTIONS

1. Assembly Line Layout – Workers do only a

few tasks at a time.

2. Modular Layout – Teams of workers produce

more complex units of the final product.

3. Fixed-Position Layout – Allows workers to

congregate around the product.

4. Process Layout – Similar equipment and

functions are grouped together.
 PROCESS LAYOUT

Storage Cutting Stamping Deburing

Shipping Packing Assembly Bending

 MRP and ERP

• Materials Requirement Planning (MRP) -- A

computer-based operations management system
that uses sales forecasts to make sure parts and
materials are available when needed.

• Enterprise Resource Planning (ERP) -- A

newer version of MRP, combines computerized
functions into a single integrated software program
using a single database.
 PURCHASING

• Purchasing -- The function that searches for

high-quality material resources, finds the best
suppliers and negotiates the best price for goods
and services.
• The Internet has
transformed
purchasing.
 INVENTORY CONTROL

• Just-in-Time (JIT) Inventory Control -- The

production process in which a minimum of
inventory is kept and parts, supplies and other
needs are delivered just in time to go on the
assembly line.

• To work effectively, the process requires

excellent coordination with suppliers.
 QUALITY CONTROL

• Quality -- Consistently producing what the

customer wants while reducing errors before and
after delivery.

• Six Sigma Quality -- A quality measure that

allows only 3.4 defects per million opportunities.
 STATISTICAL QUALITY CONTROL &
STATISTICAL PROCESS CONTROL

• Statistical Quality Control -- A process used

to continually monitor all phases of the production
process.

• Statistical Process Control -- A process of

testing statistical samples of product components
at each stage of production.

• Measuring quality along the production

process reduces the need for quality-control
at the end.
 *
The BALDRIGE
AWARDS*

• Companies can apply for awards in

these areas:
- Manufacturing
- Services
- Small Businesses
- Education
- Healthcare
 *
WHAT is the ISO?

• The International Organization for

Standardization (ISO) is a worldwide
federation of national standards bodies.

• ISO 9000 -- The common name given to

quality management and assurance standards.

• ISO 14000 -- A collection of the best practices

for managing an organization’s impact on the
environment.
 PERT

• Program Evaluation and Review Technique

(PERT) -- A method for analyzing the tasks
involved in completing a given project and
estimating the time needed.
 STEPS INVOLVED in PERT

1. Analyzing and sequencing tasks

2. Estimating the time needed to complete
each task
3. Drawing a PERT network illustrating the first
two steps
4. Identifying the critical path

• Critical Path -- The sequence of tasks that

takes the longest time to complete.
 GANTT CHARTS

• Gantt Chart – A bar graph that shows what

projects are being worked on and how much has
been completed.
GANTT CHART for a
DOLL FACTORY
• Nickels, Williams G, James M. Mc Hugh,
Susan M. McHugh (2010),Understanding
Business, 9th Edition, Mc Graw- Hill, ISBN :
978-0-07-735546-3
Thank You