7

chapter Operations Management and

Quality

Business Essentials, 12th Edition

Ebert/Griffin
 What Does Operations Mean Today?
• Operations (Production)
– All the activities involved in making products (goods
and services) for customers
• Service Operations (Service Production): activities
producing intangible and tangible products, such as
entertainment, transportation, and educationGoods
• Operations (Goods Production): activities producing
tangible products, such as radios, newspapers, buses,
and textbooks
• Operations managers create utility for customers through
production, inventory, and quality control.

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 Creating Value Through Operations
• Utility
– The ability of a product to satisfy a want or need
• Form utility: raw materials+human skills -- form utility
• Time utility: adds customer value by making products available
whenever different consumers want them
• Place utility: It makes products available wherever they are
convenient for consumers.

• Operations (Production) Management

– 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:
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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 Operations Processes
• Operations Process
– Methods and technologies used to produce a good or service
• Goods Production Processes
– Make-to-order: activities for one-of-a-kind or custom-made
production
– or make-to-stock processes: activities for producing
standardized products for mass consumption
• Service Production Processes
– Extent of Customer Contact
• Low-contact systems: low customer involvement
• High-contact systems: high customer involvement

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 Business Strategy Determines Operations Capabilities

 Consider the four firms listed in Table 7.1. Two are in goods
production (Toyota and 3M), and two are in services.
 These companies have contrasting business strategies and, as
we shall see, they have chosen different operations capabilities.
 Companies design their operations based on business strategy.

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Operations Planning
 Business Strategy Determines Operations
Capabilities
• Operations Capability (Production Capability) : special
ability that production does especially well to outperform
the competition. Excellent firms learn, over time, how to
achieve more than just one competence
• Capacity Planning
– Determining the amount of a product that a company
can produce under normal conditions
• Location Planning
– Determining where production will happen based on
costs and flexibility

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• Layout Planning
– Planning for the layout of machinery, equipment, and supplies
– Determines whether a company can respond to demand for
more and different products or it finds itself unable to match
competitors’ speed and convenience
• Process layouts: (custom-product layout), which is well
suited to make-to-order shops (or job shops) specializing in
custom work, equipment and people are grouped according
to function
• Product layouts: (a same-steps layout or assembly line
layout) is set up to provide one type of service or make one
type of product in a fixed sequence of production steps
• Fixed Position Layouts: the product or client remains at one
location; equipment, materials, and human skills are moved
to that location, as needed, to perform the service or to
build the product

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FIGURE 7.1 Operations Planning and Control

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• Quality Planning
– The combination of “characteristics of a product or service
that bear on its ability to satisfy stated or implied needs” .
When products/services are designed: goals are set for
performance and consistency
– Includes deciding what constitutes a high-quality product
and determining how to measure these quality
characteristics
• Methods Planning
 Methods planning can reduce waste and inefficiency by
examining procedures on a step-by-step basis by using an
approach called methods improvement.
– Improving process flows
– improving customer service.
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 Operations Scheduling

• Operations Scheduling
– Times when specific production activities will occur
a) Master schedule: Shows which products will be
produced, and when
b) Detailed schedule: Shows day-to-day activities
c) Staff schedules: Show who and how many
employees will be working, and when
d) Project schedules: Coordinate completion of
large-scale projects

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 Gantt Chart & Pert Chart
• Production schedule that breaks down large projects into
steps to be performed and specifies the time required to
perform each step
1. Pert Chart: production schedule specifying the sequence of
activities, time requirements, and critical path for
performing the steps in a project
2. Gantt chart: breaks down large projects into steps to be
performed and specifies the time required to perform each
one.
• The project manager lists all activities needed to complete the
work, estimates the time required for each step,
• records the progress on the chart, and checks the progress
against the time scale on the chart to keep the project moving
on schedule.
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 Operations Control
• Operations Control: Requires managers to
monitor performance by comparing results with
detailed plans and schedules.
a) Material Managements: The process by
which managers plan, organize, and control
the flow of materials from sources of supply
through distribution of finished goods
b) Quality control: taking action to ensure that
operations produce goods or services that
meet specific quality standards.

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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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 Total Quality Management
 TQM: All of the activities necessary for getting high-quality
goods and services into the marketplace.
 Tools for TQM:
a) Competitive Product Analysis: Analyzing competitors’ products to identify
improvements
b) Value-Added Analysis: Eliminating wasteful and unnecessary activities
c) Quality Improvement Teams: Adopting quality circles
d) Getting Closer to the Customer: Identifying internal and external
customers
e) ISO 9000 and ISO 14000: Ensuring certification of quality management in
processes
f) Business Process Reengineering: Starting over from scratch to improve
processes
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 The Supply Chain Strategy

• 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
• Supply Chain Management (SCM)
– Working with the supply chain to improve overall flow by 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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 CHAPTER 8

Employee Behavior and Motivation

 Employee Behavior
• Employee Behavior: The pattern of actions by the members of
an organization that directly or indirectly influences the
organization's effectiveness
a) Performance Behaviors: The total set of work-related behaviors
that the organization expects employees to display
b) Organizational Citizenship: The behavior of individuals who
make a positive overall contribution to the organization
c) Counterproductive Behaviors: Behaviors that detract from,
rather than contribute to, organizational performance =
Absenteeism, Turnover, Theft, Sabotage, Discriminatory
harassment, Workplace aggression and violence
 Individual Differences Among Employees
1. Personality at Work
• Personality—the relatively stable set of psychological attributes
that distinguish one person from another.
• Tools to identify employers personality
a) The “Big Five” Personality Traits
– Agreeableness
– Conscientiousness
– Emotionality
– Extraversion
– Openness
b) Emotional Intelligence or Emotional Quotient: The extent to
which people are self-aware, can manage their emotions, can
motivate themselves, express empathy for others, and possess
social skills
c) The Myers-Briggs Framework
• Extraversion (E) Versus Introversion (I). Extraverts get their
energy from being around other people, whereas introverts
are worn out by others and need solitudeto recharge their
energy.
• Sensing (S) Versus Intuition (N). The sensing type prefers
concrete things, whereas intuitives prefer abstract concepts.
• Thinking (T) Versus Feeling (F). Thinking individuals base their
decisions more on logic and reason, whereas feeling
individuals base their decisions more on feelings and
emotions.
• Judging (J) Versus Perceiving (P). People who are the judging
type enjoy completion or being finished, whereas perceiving
types enjoy the process and openended situations.
2. Attitudes at work : reflect our beliefs and feelings
about specific ideas, situations, or other people
• Attitudes are formed by personal values,
experiences, and personalities
• Attitudes structure: attitudes contain three
components:
(1) cognition:the knowledge a person presumes to have
about something
(2) affect:a person’s feelings toward something
(3) intention: part of an attitude that guides a person’s
behavior
 Cognitive Dissonance: when two sets of cognitions
or perceptions are contradictory or incongruent --
internal conflicts/anxiety
• Key word Related Attitudes
 Job Satisfaction (Morale): The extent to which
people have positive attitudes toward their jobs
 Organizational Commitment: An individual’s
identification with the organization and
its mission
 Matching People and Jobs
• Psychological Contract
– The overall set of expectations held by employees and the
organization regarding what employees will contribute to
the organization and what the organization will provide in
return
• The person job fit:
a) Contributions: What does each employee expect to
contribute to the organization?
b) Inducements: What will the organization provide to
each employee in return?
 Basic Motivation Concepts and Theories

• Classical Theory of Motivation

– The set of forces that cause people to behave in
certain ways
• Approaches to Human Relations
– Classical theory and scientific management
– Early behavioral theory
– Contemporary motivational theories
 Classical Theory

• Scientific Management (Frederick Taylor)

– Paying workers more motivates them to
produce more
– Industrial engineering: Analyzing jobs to find
better ways to perform them makes goods
cheaper, creates higher profits, and allows the
firm to better pay and motivate its workers

© 2009 Pearson Education, Inc.

 Early Behavioral Theory
• Hawthorne Studies
– Original purpose was to examine the relationship
between changes in the physical environment and
worker output (productivity).
– Hawthorne effect: Worker productivity rose in
response to any management actions that workers
interpreted as special attention.
• Other Major Motivation Theories
– Human Resources Model (Theories X and Y)
– Maslow’s Hierarchy of Needs Model
– Herzberg’s Two-Factor Theory
TABLE 8.1 Theory X and Theory Y
FIGURE 8.2 Maslow’s Hierarchy of Needs
FIGURE 8.3 Two-Factor Theory
 Contemporary Motivation Theory
• Expectancy Theory
– Suggests that people are motivated to work
toward rewards that they want and that they
believe they have a reasonable chance—or
expectancy—of obtaining
– Helps explain why some people do not work as
hard as they can when their salaries are based
purely on seniority
 Contemporary Motivation Theory (cont’d)
• Equity Theory
– Employees evaluate their
treatment relative to the
treatment of others
• Inputs: Employee contributions
to their jobs
• Outputs: What employees
receive in return
– The perceived ratio of
contribution to return
determines perceived equity
 Strategies and Techniques for Enhancing
Motivation
• Reinforcement/Behavior Modification
• Management by Objectives
• Participative Management
and Empowerment
• Team Management
• Job Enrichment and Job Redesign
• Modified Work Schedules
Reinforcement/Behavior Modification Theory

Punishment
When negative consequences are
attached directly to undesirable
behavior

Positive Reinforcement
When rewards are tied directly to
performance
 Management by Objectives (MBO):
Collaborative Goal-setting

Collaborative Communicating
Periodic
Goal Setting Organizational Evaluation
Review
and Planning Goals and Plans

Meeting
Setting
Verifiable Goals
and Clear Plans
Counseling
Identifying
Resources
 Participative Management, Empowerment and
Team Management
• Increasing job satisfaction by
encouraging participation
• Team management represents
an increasing trend
– For example, in smaller, more
flexible organizations make
decisions more quickly and
efficiently
 Job Enrichment and Job Redesign
• Job Enrichment
– Adding one or more motivating factors to job
activities (such as increasing responsibility or
recognition)
• Job Redesign
– Designing a better fit between workers and their
jobs
• Combining tasks
• Forming natural work groups
• Establishing client relationships
 Modified Work Schedules
• Work-Share Programs (Job Sharing)
– Pros: Employees appreciate attention to their needs,
company can reduce turnover and save on benefits
– Cons: Job-share employees generally receive fewer benefits
and may be the first to be laid off
• Flex-time Programs/Alternative Workplace Strategies
– Allow people to choose their work hours by adjusting a
standard work schedule
• Telecommuting
– Performing a job away from standard office settings
 Modified Work Schedules and
Alternative Workplaces
• Advantages • Disadvantages
– More satisfied, – Challenging to
committed employees coordinate and manage
– Reduced stress – Poor fit for some
– Improved productivity workers
– Less congestion – Lack of network and
coworker contact
– Lack of management
belief

© 2009 Pearson Education, Inc.