Chapter
10
Operational and Production
Aspects of Contemporary
Business
Business as a System
Production & Operations Management
• Production: Use of resources, such as workers and machinery,
to convert materials into finished goods and services.
• Operations Management: is the set of activities that creates
value in the form of goods and services by transforming inputs
into outputs
Production Systems
Operations Systems
Operations Systems
Ten Operations Management Critical
Decisions
1. Service and Product Design
2. Quality Management
3. Process and Capacity Planning
4. Layout Design
5. Location
6. Human Resources and Job Design
7. Supply-Chain Management
8. Inventory, MRP and JIT
9. Scheduling
10. Maintenance
Decision 1
Service and Product Design
Service and product design
• What product or service should we offer?
• How should we design these products and services?
Decision 2
Quality Management
Importance of Quality
A good or service free of deficiencies.
Poor quality can account for 20% loss
in revenue.
Benchmarking is the process of
analyzing other firms’ best practices.
Quality Control
Quality control is measuring goods and
services against established quality
standards.
Many companies evaluate quality using the
Six Sigma concept.
A company tries to make error-free
products 99.9997% of the time, a tiny 3.4
errors per million opportunities.
ISO Standards
International Organization for Standardization (ISO)-
mission is to promote the development of standardized
products to facilitate trade and cooperation across national
borders.
Representatives from more than 146 nations.
ISO 9000 series of standards sets requirements for quality
processes.
Nearly half a million ISO 9000 certificates have been
awarded to companies around the world.
ISO 14000 series also sets standards for operations that
minimize harm to the environment.
Decision 3 & 4
Process and Capacity Planning
Layout Strategy
Capacity
It involves choosing the amount of products,
services, or both that can be produced.
Planning the Production Process
Choose what goods or services to offer customers.
Convert original product ideas into final specifications.
Design the most efficient facilities to produce those products.
Planning the Implementing
Selecting the Controlling
Production the Production
Most the
Process Plan
Appropriate Production
Layout Process
Strategic Importance of the Production Function
Effective production and operations management can:
lower a firm’s costs of production.
boost the quality of its goods and services.
allow it to respond dependably to customer demands.
enable it to renew itself by providing new products.
Two kind of Process Manufacturing
Analytic production system
reduces a raw material to its component parts in order to
extract one or more marketable products.
CDU Plant (crude oil)
Two kind of Process Manufacturing
Synthetic production system
Is the reverse of an analytic system. It combines a number of
raw materials or parts or transforms raw materials to produce
finished products.
Susu Bubuk
Production Processes
Process Focus / Intermittent production process
Facilities are organized around specific activities or processes
General purpose equipment and skilled personnel
High degree of product flexibility
Typically high costs and low equipment utilization
Product flows may vary considerably making planning and
scheduling a challenge
Burger process
Process Layout
Like machines and equipment are grouped together
Flexible and capable of handling a wide variety of products
or services
Scheduling can be difficult and setup, material handling, and
labor costs can be high
Production Processes
Product Focus/ Continuous process
Facilities are organized by product
High volume but low variety of products
Long, continuous production runs enable efficient processes
Typically high fixed cost but low variable cost
Generally less skilled labor
LNG Plant
Production Processes
Repetitive Focus / Assembly line Process
Facilities often organized as assembly lines
Characterized by modules with parts and assemblies made
previously
Modules may be combined for many output options
Less flexibility than process-focused facilities but more efficient
Automotive
Product Layout
Product layout sets up production equipment along a
product-flow line, and the work in process moves along
this line past workstations.
Efficiently produces large numbers of similar items.
Production Processes
Mass Customization Process
The rapid, low-cost production of goods and service to satisfy
increasingly unique customer desires
Combines the flexibility of a process focus with the efficiency
of a product focus
Clothing
Fixed-Position Layout
A fixed-position layout places the product in one spot, and
workers, materials, and equipment come to it.
Decision 5
Location Strategy
The Location Decision
Decision 6
Human Resources and Job Design
Human resources and job design
• How do we provide a reasonable work
environment?
• How much can we expect our employees to
produce?
Decision 7
Supply Chain Management
Make, Buy, or Lease Decision
Choosing whether to manufacture a needed product or
component in-house, purchase it from an outside
supplier, or lease it.
Factors in the decision include cost, availability of
reliable outside suppliers, duration of the firm’s supply
needs, and the need for confidentiality.
Selection of Suppliers
Based on comparison of quality, prices, dependability
of delivery, and services offered by competing
companies.
Decision 8
Inventory, Material Requirement planning and
JIT (just-in time)
Inventory Control
Inventory Control
function requiring production and operations managers to balance
the need to keep stock on hand to meet demand against the costs of
carrying inventory
Inventory Control
Just-in-Time Systems
broad management philosophy that reaches beyond the narrow activity of
inventory control to influence the entire system of production and operations
management.
Decision 9
Intermediate and Short-term Scheduling
Gantt Chart
PERT Diagram
Decision 10
Maintenance
Maintenance Management
All activities involved in keeping a system’s
equipment working
Objective: Maintain system capability & minimize
total costs
•
Types of Maintenance
Non-routine
inspection
& servicing
• Remedial
• Basis for doing
Equipment failure
How Would You Define Productivity?
An economic measure of efficiency that summarizes what is produced relative
to resources used to produce a product or service.
Levels of productivity:
The units of analysis used to calculate or define productivity.
Forms of productivity:
Why Is Productivity Important?
• It determines the organization’s level of profitability.
• It determines people’s standard of living within a
particular country.
