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CREATING AND PRODUCING CREATING AND PRODUCING WORLD-CLASS GOODS AND WORLD-CLASS GOODS AND
SERVICESSERVICES
Text by Profs. Gene Boone & David KurtzText by Profs. Gene Boone & David KurtzMultimedia Presentation byMultimedia Presentation byProf. Milton PressleyProf. Milton PressleyThe University of New OrleansThe University of New Orleans
• Outline the importance of production Outline the importance of production and operations managementand operations management
• Explain the roles of computers and Explain the roles of computers and related technologies in productionrelated technologies in production
• Identify the factors involved in a plant Identify the factors involved in a plant location decisionlocation decision
• Identifying briefly explain the major Identifying briefly explain the major tasks of production and operations tasks of production and operations managersmanagers
• Businesses can create or Businesses can create or enhance four basic kinds ofenhance four basic kinds of utilityutility: time, place, ownership, : time, place, ownership, and formand form
• Marketing creates time, place, Marketing creates time, place, and ownership utilityand ownership utility
• Production creates form utilityProduction creates form utility
• Production:Production: application of application of resources such as people and resources such as people and machinery to convert materials into machinery to convert materials into finished goods or servicesfinished goods or services
• Production and operations Production and operations management:management: managing people managing people and machinery in converting and machinery in converting materials and resources into materials and resources into finished goods and servicesfinished goods and services
• Describes the process of producing Describes the process of producing goods and servicesgoods and services
• Looks at the importance of production Looks at the importance of production and operations managementand operations management
• Discusses new technologies that are Discusses new technologies that are transforming the production processtransforming the production process
• Discusses the tasks of the production Discusses the tasks of the production and operations manager, the and operations manager, the importance of quality, and methods importance of quality, and methods businesses use to insure high-qualitybusinesses use to insure high-quality
STRATEGIC IMPORTANCE OF STRATEGIC IMPORTANCE OF THE PRODUCTION FUNCTIONTHE PRODUCTION FUNCTIONSTRATEGIC IMPORTANCE OF STRATEGIC IMPORTANCE OF THE PRODUCTION FUNCTIONTHE PRODUCTION FUNCTION
• Without production, none of the Without production, none of the other functions would operateother functions would operate
• Production function adds value to a Production function adds value to a company’s inputs by converting company’s inputs by converting them into marketable outputsthem into marketable outputs
Mass ProductionMass ProductionMass ProductionMass Production
• Mass production:Mass production: system for manufacturing system for manufacturing products in large amounts through effective products in large amounts through effective combinations of employees with specialized combinations of employees with specialized skills, mechanization, and standardizationskills, mechanization, and standardization
• Assembly line: Assembly line: manufacturing technique that manufacturing technique that carries the product on a conveyor system past carries the product on a conveyor system past several workstations, where workers perform several workstations, where workers perform specialized tasks specialized tasks
system that evaluates customer system that evaluates customer demands in order to link what a demands in order to link what a manufacture makes with what the manufacture makes with what the customers want to buycustomers want to buy
• One method establishes computer One method establishes computer links between factories and links between factories and retailers’ systems, using data retailers’ systems, using data about sales as the basis for about sales as the basis for creating short-term forecasts in creating short-term forecasts in designing production schedulesdesigning production schedules
• Team concept:Team concept: combines combines employees from various employees from various departments and functions to departments and functions to work together in designing work together in designing and building productsand building products
PRODUCTION PROCESSESPRODUCTION PROCESSESPRODUCTION PROCESSESPRODUCTION PROCESSES
• Methods of production differ according Methods of production differ according to firms’ means of operating and time to firms’ means of operating and time requirementsrequirements
• Means of operating may involve either Means of operating may involve either an an analyticanalytic or a or a syntheticsynthetic system system
• Time requirements call for either a Time requirements call for either a continuouscontinuous or an or an intermittentintermittent process process
• Robot: reprogrammable machine capable of performing numerous tasks that require manipulations of materials and tools
• More efficient and consistent than humans for many activities
RobotsRobotsRobotsRobots
TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS
• Computer-aided design (CAD): system for interactions between a designer and a computer to design a product, facility, or part that meets predetermined specifications
• Enables engineers to design faster and with fewer mistakes than they can achieve working with traditional drafting systems
RobotsRobots
CAD and CAMCAD and CAMCAD and CAMCAD and CAM
TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS
• Computer-aided manufacturing (CAM): electronic tools to analyze CAD output and determine necessary steps to implement the design, followed, by electronic transmission of instructions to guide to the activities of production equipment
• Picks up where the CAD system leaves off
RobotsRobots
CAD and CAMCAD and CAMCAD and CAMCAD and CAM
TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS
• Flexible manufacturing system (FMS): production facility that workers can quickly modify to manufacture different products
• Typical system consists of computer-controlled machining centers, robots, and remote-controlled carts
RobotsRobots
CAD and CAMCAD and CAM
FMSFMSFMSFMS
TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS
• Computer-integrated manufacturing (CIM): protection system that integrates computer tools and human workers to design products, handle materials, and control production• An integration of robots,
CAD/CAM, FMS, computers, and other technologies
• Key to CIM is a centralized computer system that integrates and controls separate processes and functions
RobotsRobots
CAD and CAMCAD and CAM
FMSFMS
CIMCIMCIMCIM
TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS
THE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISION
• The best locations The best locations provide advantages provide advantages in three categories:in three categories:• TransportationTransportation• PhysicalPhysical• Human factorsHuman factors
THE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISION
• Environmental impact Environmental impact study: study: analyzes how a analyzes how a proposed plant would proposed plant would affect the quality of life affect the quality of life in the surrounding areain the surrounding area
Determining the Facility LayoutDetermining the Facility LayoutDetermining the Facility LayoutDetermining the Facility Layout
• Determining the best Determining the best layout for the facility layout for the facility requires managers to requires managers to consider all phases of consider all phases of production and the production and the necessary inputs at necessary inputs at each stepeach step
Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan
Making, Buy, Making, Buy, or Leaseor Lease
Making, Buy, Making, Buy, or Leaseor Lease
Selection of Selection of SuppliersSuppliers
Selection of Selection of SuppliersSuppliers
Inventory Inventory ControlControl
Inventory Inventory ControlControl
• Decisions involving Decisions involving these three activities these three activities are involved in the are involved in the implementation of the implementation of the production plan production plan
• This begins after the This begins after the production process is production process is planned and the best planned and the best layout is determined layout is determined
Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan
Making, Buy, Making, Buy, or Leaseor Lease
Making, Buy, Making, Buy, or Leaseor Lease
• Make, buy, or lease Make, buy, or lease decision: decision: choosing choosing whether to manufacture a whether to manufacture a needed product or needed product or component in house, component in house, purchase it from an outside purchase it from an outside supplier, or lease itsupplier, or lease it• Factors affecting the Factors affecting the
decision include costs, decision include costs, availability, the need for availability, the need for confidentiality, and short- or confidentiality, and short- or long-term needlong-term need
Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan
Making, Buy, Making, Buy, or Leaseor Lease
Selection of Selection of SuppliersSuppliers
Selection of Selection of SuppliersSuppliers
• Managers compare Managers compare quality, prices, quality, prices, dependability of delivery, dependability of delivery, and services offered by and services offered by competing supplierscompeting suppliers• Final decision often rests Final decision often rests
on factors such as the on factors such as the firm’s experience with the firm’s experience with the supplier, speed of delivery, supplier, speed of delivery, warranties, and other warranties, and other servicesservices
Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan
Making, Buy, Making, Buy, or Leaseor Lease
Selection of Selection of SuppliersSuppliers
Inventory Inventory ControlControl
Inventory Inventory ControlControl
• Requires balancing the Requires balancing the need to keep stocks on need to keep stocks on hand to meet demand hand to meet demand against the expenses of against the expenses of carrying the inventorycarrying the inventory
• Perpetual inventory:Perpetual inventory: system that continuously system that continuously monitors the amounts monitors the amounts and location of inventory and location of inventory
Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan
Making, Buy, Making, Buy, or Leaseor Lease
Selection of Selection of SuppliersSuppliers
Inventory Inventory ControlControl
Inventory Inventory ControlControl
• Vendor-managed Vendor-managed inventory:inventory: system that system that hands over a firm’s hands over a firm’s inventory control inventory control functions to suppliersfunctions to suppliers
Just-in-Time SystemsJust-in-Time SystemsJust-in-Time SystemsJust-in-Time Systems
• Just-in-Time (JIT) Just-in-Time (JIT) system:system: management management philosophy aimed at philosophy aimed at improving profits and improving profits and return on investment by return on investment by minimizing costs and minimizing costs and eliminating waste eliminating waste through minimizing through minimizing inventory on handinventory on hand
• Reengineering:Reengineering: process of mapping out process of mapping out delivery-chain processes delivery-chain processes in detail to identify in detail to identify potential ways of potential ways of reducing cycle times or reducing cycle times or process errors by process errors by applying technology to applying technology to each step in a processeach step in a process
• Materials requirement Materials requirement planning (MRP):planning (MRP): computer-based production computer-based production planning system that lets a planning system that lets a firm ensure that it has all firm ensure that it has all the parts and materials that the parts and materials that it needs to produce goods it needs to produce goods and services at the right and services at the right time and place and in the time and place and in the right amountsright amounts
Controlling the Production Controlling the Production ProcessProcessControlling the Production Controlling the Production ProcessProcess• Production control:Production control:
creates a well-defined set creates a well-defined set of procedures for of procedures for coordinating people, coordinating people, materials, and machinery materials, and machinery to provide maximum to provide maximum production efficiencyproduction efficiency
Controlling the Production ProcessControlling the Production ProcessControlling the Production ProcessControlling the Production Process
• Production planning:Production planning: determines the determines the amount of resources (including raw amount of resources (including raw materials and other components) a firm materials and other components) a firm needs to produce a certain outputneeds to produce a certain output
• Routing: Routing: determines the sequence of determines the sequence of work throughout the facility and specifies work throughout the facility and specifies who will perform each aspect of who will perform each aspect of production at what locationproduction at what location
Controlling the Production ProcessControlling the Production ProcessControlling the Production ProcessControlling the Production Process
• Scheduling:Scheduling: developing timetables that developing timetables that specify how long each operation in the specify how long each operation in the production process takes and when production process takes and when workers should perform itworkers should perform it
• Gantt chart:Gantt chart: tracks projected and actual tracks projected and actual work progress over timework progress over time
Controlling the Production ProcessControlling the Production ProcessControlling the Production ProcessControlling the Production Process
• PERT (Program Evaluation and PERT (Program Evaluation and Review Technique):Review Technique): chart which seeks chart which seeks to minimize delays by coordinating all to minimize delays by coordinating all aspects of the production processaspects of the production process
• Critical Path:Critical Path: sequence of operations sequence of operations that requires the longest time for that requires the longest time for completioncompletion
Controlling the Production ProcessControlling the Production ProcessControlling the Production ProcessControlling the Production Process
• Dispatching:Dispatching: phase of production phase of production control in which the manager instructs control in which the manager instructs each department on what work to do and each department on what work to do and time allowed for its completiontime allowed for its completion
• Follow-Up: Follow-Up: phase of production control phase of production control in which employees and their supervisors in which employees and their supervisors spot problems in the production process spot problems in the production process and determine needed adjustmentsand determine needed adjustments
resource planning resource planning (MRP II):(MRP II): production- production-control system that control system that integrates planning data integrates planning data from individual from individual departments to produce a departments to produce a master business planmaster business plan
IMPORTANCE OF QUALITYIMPORTANCE OF QUALITYIMPORTANCE OF QUALITYIMPORTANCE OF QUALITY• Quality is vital in all areas of Quality is vital in all areas of
business, including the product business, including the product development and production development and production functionsfunctions
• Cost of quality is ultimately Cost of quality is ultimately reduced by investing money up reduced by investing money up front in quality design and front in quality design and developmentdevelopment
• Typical costs of poor quality Typical costs of poor quality include downtime, repair costs, include downtime, repair costs, rework, and employee turnoverrework, and employee turnover
measuring goods and measuring goods and services against established services against established quality standardsquality standards• Such checks needed to spot Such checks needed to spot
defective products and to defective products and to avoid delivering inferior avoid delivering inferior shipments to customersshipments to customers
• Standards should be set high Standards should be set high enough meet customer enough meet customer expectationsexpectations
ISO StandardsISO StandardsISO StandardsISO Standards
• International Organization for International Organization for Standardization (ISO):Standardization (ISO): organization’s mission is to promote organization’s mission is to promote the development of standardized the development of standardized products to facilitate trade and products to facilitate trade and cooperation across national borderscooperation across national borders
• Established in Europe in 1947, ISO Established in Europe in 1947, ISO includes representatives from about includes representatives from about 130 nations 130 nations
• Next four chapters explore the Next four chapters explore the many activities involved in many activities involved in customer-driven marketing, customer-driven marketing, including:including:• Product developmentProduct development• PricingPricing• Distribution of products to Distribution of products to