Fundamentals of Management

Global Edition

Operations
Module
Managing Operations

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The Operations System
Exhibit MOM–1 The Operations System

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Service Firms vs. Manufacturing
Firms
Manufacturing organizations produce physical goods,
such as cars or food products.
Service organizations produce nonphysical outputs in the
form of services, such as medical and transportation
services.

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Improving Productivity
•
Productivity = People + Operations variables

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Deming: Improving Mangers’
Productivity
The truly effective organization will increase productivity by
successfully integrating people into the overall operations
system.

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Operations Management and
Company Strategy
Successful organizations recognize the crucial role that
operations management plays as part of the overall
organizational strategy to achieve and maintain global
leadership.

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Value Chain Management
Value chain management:
• The process of managing the sequence of activities and
information along the entire value chain.

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Goals of Value Chain Management
Value chain:
• The entire series of organizational work activities that add
value at each step from raw materials to finished product.

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Benefits of Value Chain Management
• Improved procurement
• Improved logistics
• Improved product development
• Enhanced customer order management

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The Value Chain Management
Process
The dynamic, competitive environment facing contemporary
global organizations demands new solutions.

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Successful Value Chain Management
Exhibit MOM–2 Requirements for Successful Value Chain
Management

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Organizational Processes and
Leadership
• Better demand forecasting
• Select functions done collaboratively with other partners in
the chain
• New measures needed for evaluating the performance of
various activities along the chain

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Employees and Human Resources
• Flexible job design
• Effective hiring process
• Ongoing training

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Obstacles to Value Chain
Management
Exhibit MOM–3 Obstacles to Successful Value Chain
Management

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Barriers and Cultural Attitudes
Organizational Barriers:
– Refusal or reluctance to share information
– Reluctance to break up the status quo
– Security issues

Cultural Attitudes:
– Trust
– Control

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Capabilities and People
Capabilities:
– Coordination and collaboration
– Configuration that satisfies customers and suppliers
– Education of internal and external partners

People:
– Commitment
– Time
– Energy

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Contemporary Issues
• Technology
• Quality initiatives
• Project management

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Quality Control
Exhibit MOM–4 What Is Quality?
PRODUCT QUALITY DIMENSIONS
1. Performance—Operating characteristics
2. Features—Important special characteristics
3. Flexibility—Meeting operating specifications over some period of time
4. Durability—Amount of use before performance deteriorates
5. Conformance—Match with preestablished standards
6. Serviceability—Ease and speed of repair or normal service
7. Aesthetics—How a product looks and feels
8. Perceived quality—Subjective assessment of characteristics (product image)
SERVICE QUALITY DIMENSIONS
1. Timeliness—Performed in promised period of time
2. Courtesy—Performed cheerfully
3. Consistency—Giving all customers similar experiences each time
4. Convenience—Accessibility to customers
5. Completeness—Full service, as required
6. Accuracy—Performed correctly each time

Sources: Based on J. W. Dean and J. R. Evans, Total Quality: Management, Organization, and
Society (St. Paul, MN: West Publishing Company, 1994); H. V. Roberts and B. F. Sergesketter,
Quality Is Personal (New York: The Free Press, 1993); D. Garvin, Managed Quality: The
Strategic and Competitive Edge (New York: The Free Press, 1988); and M. A. Hitt, R. D. Ireland,
and R. E. Hoskisson, Strategic Management, 4th ed. (Cincinnati: South-Western Publishing,
2001), p. 121.
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Quality Goals
1. ISO 9000
2. Six Sigma

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Gantt Charts
Exhibit MOM–5 A Sample Gantt Chart

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Load Charts
Exhibit MOM–6 A Sample Load Chart

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PERT Network Analysis (1 of 2)
Exhibit MOM–7 Developing PERT Charts
Developing a PERT network requires the manager to identify all key activities needed to complete a project, rank
them in order of dependence, and estimate each activity’s completion time. This procedure can be translated into five
specific steps:
1. Identify every significant activity that must be achieved for a project to be completed. The accomplishment of each
activity results in a set of events or outcomes.
2. Ascertain the order in which these events must be completed.
3. Diagram the flow of activities from start to finish, identifying each activity and its relationship to all other activities.
Use circles to indicate events and arrows to represent activities. The result is a flowchart diagram that we call the
PERT network.
4. Compute a time estimate for completing each activity, using a weighted average that employs an optimistic time
estimate (to) of how long the activity would take under ideal conditions, a most-likely estimate (tm) of the time the
activity normally should take, and a pessimistic estimate (tp) that represents the time that an activity should
take under the worst possible conditions. The formula for calculating the expected time (te) is then

to  4t m  t p
te 
6
5. Finally, using a network diagram that contains time estimates for each activity, the manager can determine a
schedule for the start and finish dates of each activity and for the entire project. Any delays that occur along the
critical path require the most attention because they delay the entire project. That is, the critical path has no slack in
it; therefore, any delay along that path immediately translates into a delay in the final deadline for the completed
project.

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PERT in Action (1 of 2)
Exhibit MOM–8 Major Activities in Building a Custom
Home
Event Description Time (Weeks) Preceding Activity
A Approve design and get permits 3 None
B Perform excavation/lot clearing 1 A
C Pour footers 1 B
D Erect foundation walls 2 C
E Frame house 4 D
F Install windows 0.5 E
G Shingle roof 0.5 E
H Install brick front and siding 4 F,G
I Install electrical, plumbing, and heating and A/C rough-ins 6 E
J Install insulation 0.25 I
K Install sheetrock 2 J
L Finish and sand sheetrock 7 K
M Install interior trim 2 L
N Paint house (interior and exterior) 2 H, M
O Install all cabinets 0.5 N
P Install flooring 1 N
Q Final touch-up and turn over house to homeowner 1 O,P

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PERT in Action (2 of 2)
Exhibit MOM–9 A PERT Network for Building a Custom
Home

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Copyright

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