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11 Operations and Productivity
Operations and Productivity
PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer and Render Heizer and Render Operations Management, 10e Operations Management, 10e Principles of Operations Management, 8ePrinciples of Operations Management, 8e
MarketingSales promotionAdvertisingSalesMarket research
Organizational ChartsOrganizational Charts
OperationsFacilities Construction; maintenance
Production and inventory control Scheduling; materials control
Quality assurance and controlSupply-chain managementManufacturing Tooling; fabrication; assembly
Design Product development and design Detailed product specifications
Industrial engineering Efficient use of machines, space, and personnel
Process analysis Development and installation of production tools and equipment
Finance/ accountingDisbursements/ credits Receivables Payables General ledgerFunds Management Money market International exchangeCapital requirements Stock issue Bond issue and recall
Manufacturing
Figure 1.1(C)
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Options for Increasing Options for Increasing ContributionContribution
What Is Operations Management?What Is Operations Management?
ProductionProduction is the creation of goods and services
Operations management (OM)Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs
The production activities that go on in the organization are operations
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Why Study OM?Why Study OM?1. OM is one of three major functions of
any organization, we want to study how people organize themselves for productive enterprise
2. To know how goods and services are produced
3. To understand what operations managers do
4. To reduce costs and improve profitability
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Ten Critical DecisionsTen Critical DecisionsTen Decision Areas Chapter(s)
1. Design of goods and services 52. Managing quality 6, Supplement 63. Process and capacity 7, Supplement 7
design 4. Location strategy 85. Layout strategy 96. Human resources and 10
The Critical DecisionsThe Critical Decisions1. Design of goods and services
What good or service should we offer?
How should we design these products and services?
2. Managing quality How do we define quality?
Who is responsible for quality?
3. Process and capacity design What process and what capacity will these products require? What equipment and technology is necessary for these processes?
4. Location strategy Where should we put the facility? On what criteria should we base the location decision?
5. Layout strategy How should we arrange the facility? How large must the facility be to meet our plan?
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The Critical DecisionsThe Critical Decisions6. Human resources and job design
How do we provide a reasonable work environment? How much can we expect our employees to produce?
7. Supply-chain management Should we make or buy this component? Who should be our suppliers and how can we integrate them into our
strategy?
8. Inventory, material requirements planning, and JIT How much inventory of each item should we have? When do we re-order?
9. Intermediate and short–term scheduling Are we better off keeping people on the payroll during slowdowns? Which jobs do we perform next?
10. Maintenance How do we build reliability into our processes? Who is responsible for maintenance?
Table 1.2 (cont.)
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Where are the OM Jobs?Where are the OM Jobs? Technology/methods
Facilities/space utilization
Strategic issues
Response time
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement
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CertificationsCertifications APICS, the American Production and Inventory
Control Society
American Society of Quality (ASQ)
Institute for Supply Management (ISM)
Project Management Institute (PMI)
Council of Supply Chain Management Professionals
Charter Institute of Purchasing and Supply (CIPS)
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The Heritage of OMThe Heritage of OM Division of labor (Adam Smith 1776; Charles Babbage 1852)
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Coordinated assembly line (Ford/ Sorenson 1913)
Gantt charts (Gantt 1916)
Motion study (Frank and Lillian Gilbreth 1922)
Quality control (Shewhart 1924; Deming 1950)
Computer (Atanasoff 1938)
CPM/PERT (DuPont 1957, Navy 1958)
Material requirements planning (Orlicky 1960)
Computer aided design (CAD 1970)
Flexible manufacturing system (FMS 1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
Globalization (1992)
Internet (1995)
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New Challenges in OMNew Challenges in OM
Global focus
Just-in-time
Supply-chain partnering
Rapid product development, alliances
Mass customization
Empowered employees, teams
ToToFromFrom Local or national focus
Batch shipments
Low bid purchasing
Lengthy product development
Standard products
Job specialization
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Characteristics of Goods & ServicesCharacteristics of Goods & Services
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction
Intangible product
Produced and consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based
Frequently dispersed
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Goods and ServicesGoods and ServicesAutomobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/investment management
Consulting service/teaching
Counseling
Percent of Product that is a Good Percent of Product that is a Service
100% 75 50 25 0 25 50 75 100%| | | | | | | | |
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Industry and Services as Industry and Services as Percentage of GDPPercentage of GDP
Services Manufacturing
Au
stra
lia
Can
ada
Ch
ina
Cze
ch R
ep
Fra
nce
Ger
man
y
Ho
ng
Ko
ng
Jap
an
Mex
ico
Ru
ssia
n F
ed
So
uth
Afr
ica
Sp
ain
UK
US
90 −
80 −
70 −
60 −
50 −
40 −
30 −
20 −
10 −
0 −
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120 –
100 –
80 –
60 –
40 –
20 –
0 –| | | | | | |
1950 1970 1990 2010 (est)1960 1980 2000
Em
plo
ymen
t (m
illi
on
s)
Manufacturing and Service Manufacturing and Service EmploymentEmployment
Figure 1.4 (A)
Manufacturing
ServiceService
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Manufacturing Employment Manufacturing Employment and Productionand Production
Figure 1.4 (B)
40 –
30 –
20 –
10 –
0 – | | | | | | |1950 1970 1990 2010 (est)
1960 1980 2000
– 150150
– 125125
– 100100
– 7575
– 5050
– 2525
– 00
Em
plo
ymen
t (m
illi
on
s)
In
dex
: 19
97 =
100
Ind
ex:
1997
= 1
00
Manufacturingemployment
(left scale)
Industrial Industrial productionproduction
(right scale)(right scale)
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Development of the Development of the Service EconomyService Economy
Figure 1.4 (C)
United States
Canada
France
Italy
Britain
Japan
W. Germany
1970 2010 (est)
| | | | |
40 50 60 70 80Percent
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Organizations in Each SectorOrganizations in Each Sector
Service SectorService Sector ExampleExample% of all % of all
JobsJobs
Education, Legal, Medical, other
San Diego Zoo, Arnold Palmer Hospital
25.8
Trade (retail, wholesale)
Walgreen’s, Wal-Mart, Nordstrom’s
14.9
Utilities, Transportation
Pacific Gas & Electric, American Airlines
5.2
Professional and Business Services
Snelling and Snelling, Waste Management, Inc.
10.7
Table 1.3
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Organizations in Each SectorOrganizations in Each Sector
Service SectorService Sector ExampleExample% of all % of all
JobsJobs
Finance, Information, Real Estate
Citicorp, American Express, Prudential, Aetna
9.6
Food, Lodging, Entertainment
Olive Garden, Motel 6, Walt Disney
8.5
Public Administration
U.S., State of Alabama, Cook County
4.6
Total 78.8
Table 1.3
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Organizations in Each SectorOrganizations in Each Sector
Other SectorsOther Sectors ExampleExample% of all % of all