hapter

Twenty Two

Operations & Service

Management
2000 by Harcourt, Inc.

Developed by Stephen M.Peters

All rights reserved. Requests for permission to make copies of any part of the
work should be mailed to the following address: Permissions Department,
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2000
bySea
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rights reserved.
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Operations Management
The field of management that specializes in the
physical production of goods or services and uses
quantitative techniques for solving manufacturing
problems

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

The Organization as an
Operations Management System
Feedback

Operations Strategy

Inputs
Raw materials
Human resources
Land, buildings
Information
Technology

Operations Management

Products and Facilities Structure

Product design
Reporting relationships
Facilities layout
Teams
Capacity planning
Facilities location

Control Processes
Inventory management
Productivity
Quality

The Technical Core

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Outputs
Products
Services

Manufacturing and Service Operations

Service
Service sector
sector has
has increased
increased three
three times
times as
as fast
fast as
as the
the

manufacturing sector
sector
manufacturing
More
More than
than one-half
one-halfof
ofall
all businesses
businesses are
are service
service

organizations
organizations
Manufacturing
Manufacturing organizationproduces
organizationproduces physical
physical goods.
goods.

Service
Service organizationproduces
organizationproduces nonphysical
nonphysical outputs
outputs that
that

require customer
customer involvement
involvement and
and cannot
cannot be
be stored
stored in
in
require
inventory.
inventory.

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Manufacturing and Service

Operational Problems
Should be concerned with
quality & productivity

Must obtain materials

& supplies

Concerned with
scheduling
Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Operations Strategy
The recognition of the importance of operations to
the firms success and the involvement of operations
managers in the organizations strategic planning.

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Four Stages of
Operations Strategy
Stage 1
No Involvement
No positive
contribution to
strategy formulation
Concerns:
Cost
Labor efficiency

Stage 2
Industry Current
Goals set according to
industry practice
Concerns:
Capital investment
Quality control
Inventory management
Capacity

Stage 3
Organizationally
Supportive
Organizations
competitive strategy
closely followed and
supported
Concerns:
Advanced process
technologies
New plants
What to make for the
United States

Stage 4
Initiates Competitive
Advantage
Advanced capabilities
developed and
significant input to
strategic process
provided
Concerns:
New products
New services
New technologies
International

Source: Based on R.H. Hayes and S.C. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984).

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Designing Operations
Management System

Using
UsingDFMA
DFMAisisextremely
extremelyexpensive
expensive

DFMA
DFMAoften
oftenrequires:
requires:
restructuring
restructuringoperations
operations
creating
creatingteams
teamsofofdesigners
designers
manufacturers
manufacturers

Four
Fourobjectives
objectivesofofproduct
productdesign:
design:
producibility
producibility
cost
cost
quality
quality
reliability
reliability

Reengineering
Reengineeringprocess:
process:
management
managementsystems
systems
job
jobdesign
design
Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Facilities Layout
Process
Process layout:
layout: machines
machines that
that perform
perform the
the same
samefunction
function

are grouped
grouped together
together in
in one
one location.
location.
are
Product
Product layout:
layout: machines
machines and
and tasks
tasks are
are arranged
arranged

according to
to the
the sequence
sequence of
of steps
steps in
in the
theproduction
production of
of aa
according
single product.
product.
single
Cellular
Cellular layout:
layout: machines
machines dedicated
dedicated to
to sequences
sequencesof
of

production are
are grouped
grouped into
into cells.
cells.
production
Fixed-position
Fixed-position layout:
layout: the
the product
product remains
remains in
in one
one location
location

and the
the required
required tasks
tasks and
and equipment
equipment are
are brought
brought to
to it.
it.
and
Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Production Technology
factory of the future

* Extremely sophisticated systems that can work almost

unaided by employees for producing products and
services.

General Motors

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Flexible Manufacturing Systems

Use
Use of
of automated
automated production
production lines
lines that
that can
can be
be

adapted to
to produce
produce more
more than
than one
one kind
kind of
of product.
product.
adapted
Automated
Automated functions
functions include:
include:

loading
loading
unloading
unloading
storing parts
parts
storing
changing tools
tools
changing
machining
machining
Support
Support aa strategy
strategy of
of mass
mass customization.
customization.

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Capacity Planning
The Green Dean

Determination
Determination and
and adjustment
adjustment of
of an
an organizations
organizationsability
ability
to
to produce
produce products
products or
or services
services to
to match
match demand.
demand.

Can
Can do
do several
several things
things to
to increase
increase capacity:
capacity:
1.create
1.create additional
additional shifts
shifts
2.ask
2.ask existing
existing people
people to
to work
work overtime
overtime
3.outsource
3.outsource or
or subcontract
subcontract extra
extra work
work
4.expand
4.expand aa plant
plant and
and add
add more
more equipment
equipment

Biggest
Biggest problem
problemfor
for most
most organizations:
organizations:
1.excess
1.excess capacity
capacity
2.add
2.add capacity
capacity as
as needed
needed without
without excess
excess
Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Inventory Management
Office Depot

Three types of inventory:

Finished-goods inventory: items that have passed
through the entire production process but have not been
sold.
Work-in-process inventory: materials moving through
the stages of the production process that are not
completed products.
Raw materials inventory: basic inputs to the
organizations production process.
Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

Two Basic Decisions that can Help

Minimize Inventory Concerns
Economic Order Quantity
Technique designed to
minimize the total of
ordering and holding costs
for inventory items.

Just-in-time Inventory System

Designed to produce the
level of an organizations
inventory to zero.
Referred to as stockless
systems, zero inventory
systems, or Kanban systems.
Developed by Stephen M.Peters

Techniques for
Management

Materials Requirement Planning

Dependent demand
inventory planning and
control system that
schedules the exact amount
of all materials required to
support the desired end
product.
Manufacturing Resource Planning
Extension of MRP to
include the control of
resources pertaining to all
operations of the
organization.

Copyright 2000 by Harcourt, Inc. All rights reserved.

Managing Productivity
Productivity is the organizations output of
goods and services divided by its inputs.

Two approaches for measuring productivity:

Total factor productivity: the ration of total outputs to
the inputs from labor, capital, materials, and energy.
Partial productivity: the ration of total outputs to a
major category of inputs.

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.

TQM Can Improve

Operations Management
TQM Leads To:

Waytotomake
makecompany
company
Way
oneofofthe
thebest
best
one

Developed by Stephen M.Peters

Achievegrowth
growthby
by
Achieve
attractingnew
new
attracting
customers
customers

waytotoposition
positionfor
for
AAway
thefuture
future
the

Copyright 2000 by Harcourt, Inc. All rights reserved.

Improving Productivity
Three places to look:
Technological productivity: the use of more efficient
machines, robots, computers, and other technologies to
increase output.
Worker productivity: having workers produce more
output in the same time period.
Managerial productivity: managers do a better job of
running the business.

Developed by Stephen M.Peters

Copyright 2000 by Harcourt, Inc. All rights reserved.