Chapter 18ii 2011

Management: Arab World Edition Robbins, Coulter, Sidani, Jamali

Chapter 18: Managing Operations Lecturer: : [Insert your name here]

18.1 The Role of Operations Management

•Define operations management.

• Contrast manufacturing and services organizations.

•Describe the managers’ role in improving productivity.

•Discuss the strategic role of operations management.

18.2 What Is Value Chain Management and Why Is It

Important?

•Define value chain and value chain management.

•Describe the goal of value chain management.

•Describe the benefits of successful value chain management.

Learning Outcomes Follow this Learning Outline as you read and study this chapter.

18-3 Copyright © 2011 Pearson Education

18.3 Managing Operations by Using Value Chain

Management

•Discuss the requirements for successful value chain

management.

• Explain the obstacles to value chain management.

18.4 Current Issues in Operations Management

•Discuss technology’s role in manufacturing.

• Explain ISO 9000 and Six Sigma.

•Describe mass customization and how operations management

contributes to it.

Learning Outcomes


The Role of Operations Management

1. Define operations management.

2. Contrast manufacturing and services organizations.

3. Describe the managers’ role in improving productivity.

4. Discuss the strategic role of operations management.


What Is Operations Management?

– Operations Management refers to the design, operation, and

control of the transformation process that converts such resources

as labor and raw materials into goods and services that are sold to

customers.


The Importance of Operations Management

– It encompasses both services and manufacturing.

– It is important in effectively and efficiently managing productivity.

– It plays a strategic role in an organization’s competitive success.


Exhibit 18–1 The Operations System


Manufacturing and Services

Manufacturing Organizations

– Use operations management in the transformation process of turning

raw materials into physical goods.

Service Organizations

– Use operations management in creating non-physical outputs in the

form of services (the activities of employees interacting with

customers).


Managing Productivity

Productivity

– The overall output of goods or services produced divided by the

inputs needed to generate that output.

– A combination of people and operations variables.


Benefits of Increased Productivity

– Economic growth and development

– Higher wages and profits without inflation

– Increased competitive capability due to lower costs


Managing Productivity (cont’d)

Exhibit 18–2 Deming’s 14 Points for Improving Productivity

1. Plan for the long-term future.

2. Never be complacent concerning the quality of your product.

3. Establish statistical control over your production processes and require your suppliers to do so as well.

4. Deal with the best and fewest number of suppliers.

5. Find out whether your problems are confined to particular parts of the production process or stem from the overall process itself.

6. Train workers for the job that you are asking them to perform.

7. Raise the quality of your line supervisors.

8. Drive out fear.

9. Encourage departments to work closely together rather than to concentrate on departmental or divisional distinctions.

10. Do not adopt strictly numerical goals.

11. Require your workers to do quality work.

12. Train your employees to understand statistical methods.

13. Train your employees in new skills as the need arises.

14. Make top managers responsible for implementing these principles.

Source: W.E. Deming, ―Improvement of Quality and Productivity Through Action by Management,‖ National Productivity Review, Winter 1981–1982, pp. 12–22. With permission. Copyright 1981 by Executive Enterprises, Inc., 22 West 21st St., New York, NY 10010-6904. All rights reserved.


Strategic Role of Operations Management

– The era of modern manufacturing began in the U.S. over 100

years ago.

– After WWII, U.S. manufacturers focused on functional areas other

than manufacturing.


– By the 1970’s, German and Japanese competitors integrated

manufacturing technologies were producing quality goods at lower

costs.

– Today, successful organizations recognize the crucial role that

operations management plays as part of the overall organizational

strategy to establish and maintain global leadership planning.


Strategic Role of Operations Management (cont’d)

What Is Value Chain Management and Why Is It

Important?

1. Define value chain and value chain management.

2. Describe the goal of value chain management.

3. Describe the benefits of successful value chain management.


Value Chain Management

Value

– The performance characteristics, features and attributes, and any

other aspects of goods and services for which customers are

willing to give up resources (i.e., spend money).


The Value Chain

– The entire series of organizational work activities that add value

at each step beginning with the processing of raw materials and

ending with the finished product in the hands of end users.


Value Chain Management (cont’d)

What is Value Chain Management?

Value Chain Management

– The process of managing the entire sequence of integrated

activities and information about product flows along the entire

value chain.


Goal of Value Chain Management

– To create a value chain strategy that fully integrates all members

into a seamless chain that meets and exceeds customers’ needs and

creates the highest value for the customer.


Benefits of Value Chain Management

Improved Procurement

Improved Logistics

Enhanced Customer Order

Management

Improved Product

Development

Benefits of Value Change Management


Managing Operations by Using Value Chain

Management

1. Discuss the requirements for successful value chain

management.

2. Explain the obstacles to value chain management.


Exhibit 18–3 Value Chain Strategy Requirements


Requirements for Value Chain Management

Coordination and collaboration

Collaborative relationships must exist among all chain

participants.

Sharing information and being flexible throughout the value

chain.

Requires open communication among the various value chain

partners.


Investment in information technology

Successful value chain management is not possible without a

significant investment in information technology.

Information technology can be used to restructure the value

chain to better serve end users.


Requirements for Value Chain Management (cont’d)

Changes in organizational processes

Organizational processes must be critically evaluated, from

beginning to end, to see where value is being added.

Non-value-adding activities should be eliminated.

Better demand forecasting is necessary and possible because of

closer ties with customers and suppliers.

Selected functions may need to be done collaboratively with other

partners in the value chain.

New measures are needed for evaluating performance of various

activities along the value chain.



Committed leadership

Value chain management requires managers’ continuous support,

facilitation, and promotion.

A culture focused on superb customer value requires serious

leadership commitment.

Managers need to outline expectations for what is involved in

value chain management.

Managers should clarify expectations regarding each employee’s

role in the value chain.



Employees/Human Resources

Design jobs that are flexible.

Hire employees who have the ability to learn and adapt.

Employees need to learn:

how to use information technology software,

how to improve the flow of materials throughout the chain,

how to identify activities that add value,

how to make better decisions faster, or

how to improve any number of other potential work activities.



Organizational culture and attitudes

Cultural attitudes include:

sharing

collaborating

openness

flexibility

mutual respect

trust

Attitudes encompass external partners as well.



Exhibit 18–4 Obstacles to Successful Value Chain Management


Obstacles to Value Chain Management

Organizational barriers

– Refusal or reluctance to share information

– Reluctance to shake up the status quo

– Security issues


Cultural attitudes

– Lack of trust and too much trust

– Fear of loss of decision-making power

Required capabilities

– Lacking or failing to develop the requisite value chain

management skills


Obstacles to Value Chain Management (cont’d)

People

– Lacking commitment to do whatever it takes

– Refusing to be flexible in meeting the demands of a changing

situation

– Not being motivated to perform at a high level

– Lack of trained managers to lead value chain initiatives


Obstacles to Value Chain Management (cont’d)

Current Issues in Operations Management

1. Discuss technology’s role in manufacturing.

2. Explain ISO 9000 and Six Sigma.

3. Describe mass customization and how operations

management contributes to it.


Technology’s Role in Manufacturing

– Smart companies are looking at ways to use technology to

improve operations management.

– To connect more closely with customers, production must be

synchronized (i.e. well-coordinated) across the enterprise.


– To avoid bottlenecks and slowdowns, the production function must

be a full partner in the entire business system.

– Technology is making such extensive collaboration possible.


Technology’s Role in Manufacturing (cont’d)

– Increased automation and integration of production facilities

with business systems also helps in controlling costs.

– Predictive maintenance, remote diagnostics, and utility cost

savings


Technology’s Role in Manufacturing (cont’d)

The Concept of Quality

– The ability of a product or service to reliably do what it’s supposed

to do and to satisfy customer expectations.


Exhibit 18–5 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 pre-established 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)

Sources: Adapted from J.W. Dean, Jr., 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, OH: SouthWestern, 2001), p. 211.


Exhibit 18–5 (cont’d) 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 – Fully serviced, as required

6. Accuracy – Performed correctly each time


Sources: Adapted from J.W. Dean, Jr., 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, OH: SouthWestern, 2001), p. 211.

Quality initiatives and Quality Goals

Quality Initiatives

– Planning for quality

– Organizing and leading for quality

– Controlling for quality

Quality Goals

– ISO 9000 certification

– Six Sigma standards


Quality Initiatives – 1

Planning for quality

– Managers must have quality improvement goals and

strategies and plans to achieve those goals.

– Goals can help focus everyone’s attention on some objective

quality standard.


Organizing and leading for quality

– Because quality improvement initiatives are carried out by

employees, managers need to look at how they can best organize

and lead them.

– Organizations with extensive and successful quality improvement

programs tend to rely on two important people approaches:

– (1) cross-functional work teams; and

– (2) self-directed, or empowered, work teams.



Controlling for quality

– Quality improvement initiatives are not possible without a means

of monitoring and evaluating their progress.

– This involves implementing many standards such as those

related to inventory control, defect rate, raw materials

procurement, or other operations management areas.



Quality Goals – ISO 9000 certification

– ISO 9000 is a series of international quality management

standards established by the International Organization for

Standardization which sets uniform guidelines for processes to

ensure that products conform to customer requirements.

– These standards cover everything from contract review to

product design to product delivery.


– The ISO 9000 standards have become the internationally

recognized standard for evaluating and comparing companies

in the global marketplace.

– This type of certification can be a prerequisite for doing business

globally.


Quality Goals – ISO 9000 certification (cont’d)

Quality Goals – Six Sigma

– Six Sigma is a quality standard that establishes a goal of no more

than 3.4 defects per million units or procedures.

–Sigma is a Greek letter used in statistics. The higher the sigma, the

fewer the deviations from the norm—that is, the fewer the defects.

– At Six Sigma, you are about as close to defect free as you can get. It

is an ambitious quality goal!

– Many quality-driven businesses are using it and benefiting from it

including many in the Arab region.


Mass Customization

– Is a design-to-order concept that provides consumers with a

product when, where, and how they want it.

– Makes heavy use of technology (flexible manufacturing techniques)

and engages in a continual dialogue with customers.


Benefits of Mass Customization

– Creates an important relationship between the firm and the

customer in providing loyalty-building value to the customer and in

garnering valuable market information for the firm.


operations management

manufacturing organizations

service organizations

productivity

value

value chain

value chain management

organizational processes

RFID

intellectual property

quality

ISO 9000

Six Sigma

mass customization

Cellular manufacturing

Terms to Know



Chapter 18ii 2011

Business

value chain management

operations management

goal of value chain

managing operations

operations variables

operations lecturer

managers role

pearson education12