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Chapter 18 Managing

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Chapter 18 Managing Powered By Docstoc
					        Chapter 18
   Managing Service and
  Manufacturing Operations

    MGMT
                  Designed & Prepared by
Chuck Williams              B-books, Ltd.
                                        1
Operations Management

Operations Management

Managing the daily production of
goods and services.




                                   2
  Managing for Productivity and
            Quality
After reading these sections,
you should be able to:


  1. discuss the kinds of productivity and their
     importance in managing operations.
  2. explain the role that quality plays in managing
     operations.
                                               3
             Productivity

         Productivity   =   Outputs
                             Inputs




       Why               Different
    Productivity          Kinds of
      Matters           Productivity


1
                                       4
            Why Productivity Matters

        Higher       Lower        Lower
      Productivity   Costs        Prices




       Higher
                                  Higher
      Standard       Higher
                                  Market
         of          Profits
                                  Share
       Living

1.1
                                           5
         Why Productivity Matters
      • Increased wages and new jobs

      • More donations to charities

      • More affordable and better products




1.1
                                              6
      Kinds of Productivity

             Partial productivity =

                    Outputs
              Single Kind of Input


           Multifactor productivity =
                    Outputs
      Labor + Capital + Materials + Energy


1.2
                                             7
      Multifactor Productivity Growth




1.2
                                        8
                Quality

    Quality-Related   Quality-Related
      Product            Service
    Characteristics   Characteristics

                  ISO
              9000 & 14000

      Baldrige            Total
      National           Quality
    Quality Award      Management
2                                       9
        Meanings for Quality

                    …A product or service
                     free of deficiencies

    Quality
              …The characteristics of a product or
              service that satisfy customer needs




2
                                               10
    Car Quality




2
                  11
      Quality-Related Product Characteristics




                      Product


                     Durability



2.1
                                           12
Quality-Related Product Characteristics
   Serviceability-refers to how easy or difficult it
    is to fix a product.

   Durability-a quality characteristic that applies
    to products that cannot be repaired. The mean
    time to failure.

   Reliability-the ability to consistently perform a
    service well.



                                                        13
      Characteristics of Service Quality




2.1
                                       15
Characteristics of Service Quality
 Service reliability-the ability to consistently
  perform a service well.
 Tangibles-refers to the appearance of the
  offices, equipment, and personnel involved
  with the delivery of a service.
 Responsiveness-the promptness and
  willingness with which service providers
  give good service.
 Assurance –the confidence that service
  providers are knowledgeable, courteous, and
  trustworthy.
 Empathy-the extent to which service
  providers give individual attention and care
  to customer’s concerns and problems.            16
           ISO 9000 and 14000
      ISO 9000

      A series of five international standards
      (ISO 9000 to ISO 9004) for achieving
      consistency in quality management and
      quality assurance in companies
      throughout the world.
                                                 http://www.ansi.org
                                     Web Link    http://www.iso.ch
      ISO 14000                                  http://www.asq.org

      A series of international standards for
      managing, monitoring, and minimizing
      an organization’s harmful effects on the
      environment.
2.2
                                                             17
       Baldrige National Quality Award



      • Given to U.S. companies to recognize
        achievement in quality and business
        performance

      • Raises awareness about the importance of
        quality and performance excellence as a
        competitive edge
2.3
                                                   18
      Total Quality Management

            Principles of TQM


      Customer focus and satisfaction

         Continuous improvement

                Teamwork


2.4
                                        21
                        Total Quality Management
                            6 Sigma   3.4
      Sigma Quality Level


                            5 Sigma   230
                            4 Sigma   6,210
                            3 Sigma         66,800
                            2 Sigma                    308,538
                            1 Sigma                  690,000
                                       50     150 250 350 450 550 650 750
                                       Defects Per Million Parts (000)
2.4
                                                                         22
        Managing Operations
After reading these sections,
you should be able to:
  3. explain the essentials of managing a service
     business.
  4. describe the different kinds of manufacturing
     operations.
  5. explain why and how companies should
     manage inventory levels.
                                              23
           Service Operations
         Services…             Goods…

    •   are performed    •   are made
    •   are intangible   •   are tangible
    •   are unstorable   •   are storable
    •   57.2% of GDP     •   32.7% of GDP




3
                                            24
           Service Operations


     Service-Profit
        Chain




       Service
      Recovery
        and
    Empowerment
3
                                25
      The Service-Profit Chain




3.1
                                 26
       Components of Internal Service
                 Quality
      Policies and         Do they facilitate serving customers?
      Procedures
      Tools                Do service employees have tools needed?
      Effective Training   Is job-specific training available?
      Rewards and          Are good performers rewarded/recognized?
      Recognition
      Communication        Both vertical and horizontal communication?
      Management           Does management aid or hinder employees?
      Support
                           Are goals of senior management and frontline
      Goal Alignment       service employees aligned?
      Teamwork             Is there teamwork among individuals
3.1                        and departments?
                                                                   28
               Service Recovery and
                  Empowerment

      • Service recovery is restoring customer
        satisfaction to strongly dissatisfied customers
        – Fixing the mistakes that were made
        – Performing “heroic” service that delights
          customers
      • Empowering workers can help solve customer
        dissatisfaction
        – The goal is zero customer defections
3.2
                                                      29
               Costs of Empowering
                Service Employees
      1. Finding service workers capable of solving problems


      2. Training service workers

      3. Higher wages

      4. Less emphasis on service reliability

      5. Eagerness to provide “giveaways”

      6. Unintentional unfair customer treatment
3.2
                                                          30
             Benefits of Empowering
               Service Employees
      1. Quicker response to customer complaints


      2. Employees feel better

      3. Enthusiastic employee interaction with customers

      4. Employees offer ideas for improvement and prevention

      5. Great word-of-mouth advertising and customer retention


3.2   6. Satisfied employees more likely to stay with company
                                                            31
    Manufacturing Operations



     Amount of        Flexibility
     Processing   of Manufacturing




4                                    32
          Manufacturing Classifications
      • Manufacturing operations may be classified
        according to the amount of processing and assembly
        that occurs after the customer order has been
        received.
      • Make-to-order operations
         – manufacturing doesn’t begin until an order is
           placed( Dell)
      • Assemble-to-order operations
         – used to create semi-customized products(GM)
      • Make-to-stock operations
4.1      – manufacture standardized products(Maytag)

                                                           33
      Amount of Processing in
      Manufacturing Operations
            More Processing

              Make-to-Order


            Assemble-to-Order


              Make-to-Stock


            Less Processing
4.1
                                 34
Manufacturing Classifications
• Manufacturing flexibility.
  – Another way to categorize
    manufacturing operations.
  – the degree to which
    manufacturing operations can
    easily and quickly change the
    number, kind, and
    characteristics of products they
    produce.


                                       35
              Flexibility of Manufacturing
                       Operations
      Continuous-flow production Produces products
                                 continuously, like oil drilling

      Line-flow production         Uses predetermined, linear
                                   steps, like beverage bottling
      Batch production             Produces specific quantities
                                   of different items, like a
                                   bakery or commissary
      Job shops                    Handle small, specialty
                                   batches




4.2
                                                             36
      Flexibility of Manufacturing
                Operations

              LEAST FLEXIBLE
               Continuous-Flow
                  Line-Flow
                   Batch
                 Job Shops


              MOST FLEXIBLE


4.1
                                     37
                 Inventory


     Types of            Measuring
    Inventory         Inventory Levels


         Costs of           Systems for
       Maintaining           Managing
        Inventory            Inventory


5                                         39
              Inventory
• Inventory
  – The amount and number of raw
    materials, parts, and finished
    products that a company has in its
    possession.
  – Manufacturing operations are
    concerned with four kinds of
    inventory.


                                         40
                Types of Inventory

                       Raw materials
      Vendors                      Fabrication

                      Component parts

                         Initial   Assembly

                      Work-in-process

                         Final     Assembly

                      Finished goods
5.1
                                                 41
           Types of Inventory
                   Finished Goods
                     Inventories

         Field                      Distribution
      Warehouses                      Centers
                     Wholesalers



                      Retailers



                      Customers
5.1
                                                   43
              Measuring Inventory
      1. Average Aggregate Inventory
        – the average overall inventory for a certain time
          period
      2. Weeks of Supply
        – the number of weeks to run out of inventory
      3. Inventory Turnover
        – the number of times a year that a company sells its
          average inventory


5.2
                                                             44
      Costs of Maintaining an Inventory
                 all costs associated with ordering
      Ordering
                 inventory, correcting mistakes,
        Cost     determining when/how much to order

                 costs of downtime and lost efficiency
       Setup
                 when a machine is changed to produce
       Cost      different kinds of inventory

       Holding   cost of keeping inventory until it is
        Cost     used or sold


      Stockout   costs when a company runs out of
       Costs     a product
5.3
                                                         45
      Managing Inventory

                   Economic
      EOQ
                 Order Quantity


                  Just-in-Time
       JIT
                   Inventory


                    Materials
      MRP
              Requirement Planning

5.3
                                     48
          Managing Inventory

      Kanban

      Kanban, which is Japanese for “sign,” is
      a simple ticket-based JIT system that
      indicates when to reorder inventory.




5.3
                                                 49

				
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