Chapter 9

1

2

CHAPTER 9

PRODUCTIVITY & QUALITY

3

LEARNING OBJECTIVES

1. Identify main resources used for production process.

2. Identify the factors that affect the plant site decision.

3. Describe how many factors affect the design and layout decision.

4. Describe the main tasks that are involved in production control.

5. Describe the main factors that affect production efficiency.

Main ResourcesPlant Site

Design LayoutProduction

ControlProduction

Efficiency

4

INTRODUCTION

Production management or operation management is the process which resources are used to produce products or services.

In this process, a firm must decide: What human resources and other resources

are needed to produce products or services. Where should it produce its products and

services? How could it control the quality of its

production? How to produce its products or services more

efficiently?

Main ResourcesPlant Site

Design LayoutProduction

ControlProduction

Efficiency

5

RESOURCES IN PRODUCTION PROCESS

To produce products and services, a firm needs a production process which also called a conversion process.

Conversion process is a series of tasks in which resources are used to produce a product or service.

The main resources that firms use for production process are human resources (employees), materials and other resources such as building, machinery and equipment.

Main ResourcesPlant Site

Design LayoutProduction

ControlProduction

Efficiency

6

RESOURCES IN PRODUCTION PROCESS - Human Resources

Type of employee needed is important in production processes

In some production, skilled labor is a must, but unskilled labor can be used for other forms.

For labor-intensive production, more labor is required than materials

Main ResourcesPlant Site

Design LayoutProduction

ControlProduction

Efficiency

7

INTRODUCTION

Production management or operation management is the process which resources are used to produce products or services.

In this process, a firm must decide: What human resources and other resources

are needed to produce products or services. Where should it produce its products and

services? How could it control the quality of its

production? How to produce its products or services more

efficiently?

Main ResourcesPlant Site

Design LayoutProduction

ControlProduction

Efficiency

8

INTRODUCTION

Production management or operation management is the process which resources are used to produce products or services.

In this process, a firm must decide: What human resources and other resources

are needed to produce products or services. Where should it produce its products and

services? How could it control the quality of its

production? How to produce its products or services more

efficiently?

Main ResourcesPlant Site

Design LayoutProduction

ControlProduction

Efficiency

9

RESOURCES IN PRODUCTION PROCESS - Materials In the production process, the materials used

will be transformed into a final product. For example, Car manufacturers rely on steel

and furniture manufacturers rely on wood. Service firms such as financial institutions do

not rely as much on material because they do not involved in manufacturing activities.

10

RESOURCES IN PRODUCTION PROCESS – Other Resources Most of production activities needs:

Building (such as factories, offices)

Machinery

Equipment

Technology All these resources for production will be utilized at

the work station and assembly line. A work station is an area in which one or more

employees are assigned a specific task.

11

HOW TO CHOOSE A SITE

Choosing a site (location) for the factory or offices is a critical decision to make by the management team.

This is because location will significantly affect the cost of production.

12

Factors Influence the Side (location) Decision Cost of Workplace Space The cost of purchasing or leasing buildings or office space can vary significantly among

regions. One of the reasons many companies moved from the western countries to the Asian countries over the past decade is that workplace space tends to be cheaper in the Asian countries.

Cost of Labor The cost of human resources varies considerably among locations. For example, labor

tends to be more expensive in Kuala Lumpur than in a smaller town such as Nilai Tax Incentives Many state and local governments offer tax credits and other incentives to induce firms to

locate in their regions. Source of Demand Some firms want to locate as close as possible to their customers in order to reduce the

cost of transporting the product and provide greater convenience to customers. This is particularly important in many service industries.

Access to Transportation Firms that sell their products over a wide geographic area often want to locate in an area

with access to good transportation facilities, like highways, major rivers, rail facilities, and major airports.

Supply of Labor Some firms need workers with highly specialized skills. These firms are likely to locate in

areas where the type of labor they need is abundant.

13

Evaluating and Choosing Possible Sites If the firm intends to rent space, it is important to

meet with the landlord before deciding on a specific location.

In some locations, rentals are very expensive and may require large deposit.

The optimal site chosen is mostly dependent on the characteristics of the firm. For instance, the selection of sites by multinational firms is crucial, since costs, and market conditions, can vary tremendously from one nation to the next.

14

DESIGN AND LAYOUT

The design is refer to size and structure of the facility

The layout is the arrangement of the machinery and equipment within the factory or office.

15

Factors Affecting Design and Layout Site Characteristics

The physical characteristics of the site and the expense may affect design decisions. For example, if land is expensive, a high-rise facility may be selected, while if land is cheap, the firm may design a facility that is all on one level.

16

Factors Affecting Design and Layout Production Process

- Product layout which is commonly used in assembly line process. It is referring to the arrangement of tasks are in the sequence that they are performed.- A fixed-position layout is used when the product is very large and difficult to move while it is being produced. This process is common in the manufacture of items such as ships, airplanes, and houses.- A flexible manufacturing is the most common, which enables the firm to restructure its layout to accommodate future revisions.

17

Factors Affecting Design and Layout Product Line

Narrow product lines can design more specialized facilities where as a wider range of products must have a more flexible layout that can be changed easily when production needs change.

Desired Production Capacity

Facilities are often designed to make it easy for firms to increase capacity over time. For example, the facility may be designed to allow additional levels to be added on, or for additional space to be added to existing levels.

18

PRODUCTION CONTROL Purchasing materials involves:

Selecting a supplier of materials requires managers to evaluate such factors as the price, quality, speed, reliability, servicing, and credit availability offered by potential suppliers to pick the best sources for its materials.

Many firms now rely on e-procurement, or the use of the Internet to purchase materials. Thus, the ability of a supplier to react to an Internet-based order system may be a consideration when buyers select suppliers.

Managers of large firms will also attempt to negotiate volume discounts when they order large quantities of materials.

Production managers must also determine the degree they want to make use of outsourcing, which is the act of purchasing component parts from suppliers rather than producing the components internally. A related issue is whether to make use of deintegration, which is the strategy of delegating some parts of the production process itself to other firms.

19

PRODUCTION CONTROL – Inventory Control Inventory control: - Control of Materials Inventories

Control the carrying costs, which involve the cost of storing, insuring, and financing inventories.Control ordering costs, which deal with the expense of placing orders for additional inventory as needed.

- The just-in-time inventory is a popular method for reducing carrying costs. This approach minimizes the amount of materials inventory by placing frequent orders of small amounts.

20

PRODUCTION CONTROL – Inventory Control Control of Work-in-Process Inventory

Consist of inventories of partially completed products. Managers must watch this inventory in order to control costs while ensuring that shortages do not arise that would require the firm to shut down production.

Control of Finished Goods Inventories

This inventory is fluctuate in nature. If inventories of a particular finished good increase too much, the firm may switch to the production of other products, or it might try to pursue strategies to increase the demand for the product.

21

PRODUCTION CONTROL – Routing Routing represents the specific sequence of

tasks necessary to complete the production of a product.

Routing determines the path raw materials and component parts follow as they proceed from work station to work station and are converted into the final product.

22

PRODUCTION CONTROL – Scheduling Scheduling involves setting time periods for the

completion of tasks in the production process. A production schedule is a plan for the timing and

volume of production activities. Scheduling activity is important for special long-

term projects that must be completed by a specific time-frame. Scheduling special projects that are complex and that must be completed on time requires special scheduling techniques.

23

PRODUCTION CONTROL – Scheduling

A Gantt chart shows the expected timing of each activity that must be performed to complete a project.

Program evaluation and review technique (PERT). This technique enables managers to schedule tasks so as to minimize project completion time.

A key element of PERT is the identification of the critical path, which is the sequence of interrelated tasks that takes the longest to complete. Management must ensure that activities on the critical path are completed on time, because any delays will delay the completion of the overall project.

24

PRODUCTION CONTROL – Quality control Quality is defined as meeting or exceeding

customer’s requirements or expectations consistently.

Quality control is the process of determining whether the quality of a product meets a desired standard of quality level and identifying any improvements that must be made in the production process.

25

PRODUCTION CONTROL – Quality control Total Quality Management (TQM), is the term commonly used to refer

to the act of monitoring and improving the quality of products and services

Firms may assess quality through various techniques: Technology in the form of computers is used to screen out defective

parts and to determine if component parts meet quality standards. Employees may asses the quality of a product and offer suggestions

for improvement using a quality control circle. Sampling involves the random selection of some products and testing

them to determine if they meet the firm’s quality standards. Complaint monitoring entails the firm assessing customer feedback

on products after they have been produced, sold, and used by customers.

Correcting deficiencies is the most important part where in quality control process not only to detect quality deficiencies but also to correct them.

26

HOW TO IMPROVE PRODUCTION EFFICIENCY Production efficiency is a goal towards

which firms strive where they are able to produce products at a low cost for a given amount of output and a given level of quality.

Many firms use benchmarking as a method of evaluating performance by comparison to some specific level, typically a level achieved by another company.

27

HOW TO IMPROVE PRODUCTION EFFICIENCY Production efficiency can be improved

through the following methods:

New technology adoption

Economies of scale

Restructuring

Integration of the Production Task

28

Critical Thinking Questions If you were a plant manager, what primary resources

would you use for production? You are moving your plant from the North Region to

the South Region. What key location decisions should be considered?

Explain what steps are involved with PERT. Why is it necessary to identify the critical path when working on a project?

Define downsizing and restructuring. How are the two related?

29

SUMMARY

In this chapter we have:1. Identified the key resources used for production and

the resources a business used to produce goods (product) and services.

2. Described how various factors affect the design and layout decision and the main tasks that are involved in production control.

3. Explained the main factors that affect production efficiency.