7

chapter Operations Management and Quality

Business Essentials, 7th Edition

Ebert/Griffin

Instructor Lecture PowerPoints

PowerPoint Presentation prepared by
© 2009 Pearson Education, Inc. Carol Vollmer Pope Alverno College
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 What Does Operations Mean Today?
• Operations (Production)
– All the activities involved in making products—
goods and services—for customers
• Service Operations (Service Production)
– Provide intangible and tangible service products
• Goods Operations (Goods Production)
– Produce tangible products

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 Creating Value Through Operations
• Operations managers create utility for customers through
production, inventory and quality control.
• Utility
– The ability of a product to satisfy a want or need
• Form utility
• Time utility
• Place utility

• Operations (Production) Management

– The systematic direction and control of processes that transform
resources into finished services and goods that create value for
and provide benefits to customers

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 Differences Between Service and Goods
Manufacturing Operations
• Goods are produced,
• services are performed
• Service operations differ from manufacturing
operations in that service operations:
1. Involve interacting with consumers.
2. Are sometimes intangible and unstorable.
3. Involve a customer’s presence in the process.
4. Involve certain service quality considerations.

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TABLE 7.1 Business Strategies That Win
Customers for Four Companies

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 Operations Planning
• Capacity Planning
– Capacity: The amount of a product that a
company can produce under normal conditions
– Planning deals with determining how much can
be produced
• Location Planning
– Location affects production costs and flexibility
– Planning deals with determining where it will be
produced

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 Operations Planning (cont’d)
• Layout Planning
– The layout of machinery, equipment, and supplies
determines whether a company can respond
efficiently to demand for more and different
products or whether it finds itself unable to match
competitors’ speed and convenience
– Planning deals with determining how the product
will be produced
• Process layouts
• Product layouts

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 Operations Management
1. Purchasing – buying materials and services, procurement
2. Management control – Delegation, evaluations, budgets,
performance, personnel
3. Product and Service management – R&D, new products
4. Quality Management – TQM, benchmarking
5. Inventory Management – JIT, RFID
6. Logistics – flow of materials from suppliers to customer,
transportation, telecommuting
7. Facilities Management – buildings, computer systems, signage,
lighting
8. Configuration management – software versions
9. Distribution Channels – Wholesalers, retailers, seen on TV, QVC,
mail order, catalog, WWW
 Quality Planning
• What Is Quality?
– The combination of “characteristics of a product or
service that bear on its ability to satisfy stated or
implied needs” (American Society for Quality)
– Quality planning begins when products are designed:
goals are set for performance and consistency
– Quality planning includes deciding what constitutes a
high-quality product and determining how to
measure these quality characteristics

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14
 Operations Scheduling
• Operations Scheduling
– Identifying times when specific production
activities will occur
• Kinds of Planning Schedules
– Master schedule: Shows which products will be
produced, and when, in upcoming time periods
– Detailed schedule: Shows day-to-day activities
that will occur in production
– Staff schedules: Show who and how many
employees will be working, and when
– Project schedules: Coordinate completion of
large-scale projects
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 FIGURE 7.3 Example Partial Master Production
Schedule (Tons of Each Product to be Produced)

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 Project Scheduling

• Gantt Chart
– Breaks down projects into steps to be performed
– Specifies the time required to complete each step
– A Project Manager uses the Gantt chart to:
• List all activities to be performed
• Estimate the time required for each step
• Record the progress on the chart
• Check the progress against the time scale on the report

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Figure 7.4 Gantt Chart

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 Operations Control
• Operations Control
– Requires managers to monitor performance by
comparing results with detailed plans and
schedules.
– Follow-up: Checking to ensure that production
decisions are being implemented—is a key and
ongoing facet of operations.

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 Lean Production Systems: Just-
in-Time Operations

• Lean Production Systems Goals

– Smooth production flows avoid inefficiencies
– Elimination of unnecessary inventories
– Continuous improvement in production processes
• Just-in-Time (JIT) Production
– Bringing together all needed materials only when
they are required, creating fast and efficient
responses to customer orders
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 Quality Control

• Quality Control
– Taking action to ensure that operations produces
products that meet specific quality standards
– Requires establishment of specific standards and
measurements

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Quality Improvement and Total Quality Management
• Quality Improvement
– Building quality into products and services rather than
trying to control quality by inspection
• Total Quality Management (TQM)
– All of the activities necessary for getting high-quality goods
and services into the marketplace
• Quality Ownership
– Quality belongs to each person who creates it while
performing a job and it requires a focus on quality by all
parts of an organization

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 Total Quality Management

• Always Delivering High Quality

– Planning for quality
– Organizing for quality
– Directing for quality
– Controlling for quality

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 Tools for Total Quality Management
• Competitive Product Analysis
– Analyzing competitors’ products to identify improvements
• Value-Added Analysis
– Eliminating wasteful and unnecessary activities
• Quality Improvement Teams
– Adopting quality circles
• Getting Closer to the Customer
– Identifying internal and external customers
• ISO 9000 and ISO 14000
– Ensuring certification of quality management in processes
• Business Process Reengineering
– Starting over from scratch to improve processes

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 Adding Value Through Supply Chains

• Supply Chain (or Value Chain)

– The flow of information, materials, and services
that starts with raw-materials suppliers and
continues adding value through other stages in
the network of firms until the product reaches the
end customer

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FIGURE 7.5 Supply Chain for Baked Goods

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 The Supply Chain Strategy
• Supply Chain Management (SCM)
– Working with the supply chain as a whole to
improve overall flow through a system composed
of companies working together
• Supply Chain Reengineering
– Improving the process for better results:
• Lower costs, speedier service, and coordinated flows of
information and material
• Outsourcing and Global Supply Chains
– Paying suppliers and distributors to perform
certain business processes or to provide needed
materials or services
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 Key Terms
assembly line lean production system
business process reengineering low-contact system
capacity make-to-order operations
competitive product analysis make-to-stock operations
consistency (in quality) master production schedule (MPS)
detailed schedule materials management
follow-up operations (production)
Gantt chart operations (production) management
goods operations (goods production) operations (production) manager
high-contact system operations capability
inventory control operations control
ISO 14000
operations process
ISO 9000
just-in-time (JIT) production

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 Key Terms (cont.)

performance (in quality) supply chain (value chain)

process layout supply chain management (SCM)
product layout total quality management (TQM)
purchasing transportation
quality
utility
quality control
value-added analysis
quality improvement team
warehousing
quality ownership
service operations (service
production)
staff schedule
supplier selection

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