- 1. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT Operations
ManagementOperations Management Systematic direction, control, and
evaluation of the entire range of processes that transform inputs
into finished goods or services. Environmental factors-culture,
political, and market influences Inputs-HR, capital, materials,
land, energy, information, customer Transformations-convert inputs
into outputs
2. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT O.M. (cont)O.M. (cont)
Outputs-goods or services, and waste Customer Contact-customers
actively participate in transformation processes, self- service
Performance Feedback-repair records, customer comments 3.
Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT Operations
ManagementOperations Management Refers to the management of the
production system that transforms inputs into finished goods and
services. Production system: the way a firm acquires inputs then
converts and disposes outputs. Operations managers: responsible for
the transformation process from inputs to outputs. Operations
management seeks to increase the quality, efficiency, and
responsiveness of the firm. Seeks to provide a competitive
advantage. 4. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E
South-Western College Publishing Copyright 1999 PPT Operations
Management ConceptsOperations Management Concepts Quality: goods
and services that are reliable and perform correctly. Quality
allows customers to receive the performance that they expect.
Efficiency: the amount of input to produce a given output. Less
input required lowers cost and waste. Responsiveness to customers:
actions taken to respond to customer needs. Firm can react quickly
and correctly to customer needs as they arise. 5. Hellriegel,
Jackson, and Slocum MANAGEMENT, 8E South-Western College Publishing
Copyright 1999 PPT Differences Between Services andDifferences
Between Services and GoodsGoods Information Asymmetry Intangible
Inventory Customer Contact Response Time Labor Intensity 6.
Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT Typical Characteristics of
Services and Goods ProducersTypical Characteristics of Services and
Goods Producers Adapted from Table 21.1 Primarily ServicePrimarily
Service ProducersProducers Primarily GoodsPrimarily Goods
ProducersProducersContinuum ofContinuum of
CharacteristicsCharacteristics Intangible, nondurable Output cant
be inventoried High customer contact Short response time Labor
intensive Tangible, durable Output can be inventoried Low customer
contact Long response time Capital intensive MixedMixed 21.3 7.
Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT Positioning
Strategies-approachPositioning Strategies-approach selected for
transformationalselected for transformational processesprocesses
Process Focus-layout of plant and equipment around each production
unit custom made Low Volume Norwegian Ship Building Product
Focus-arranging plant and equipment around one or a few output
types many of one product high-volume, highly automated low
flexibility Factory Lines Intermediate Strategy- plant and
equipment layout reflects some of both strategies batches of
products Kinkos, Ball Homes Agile Strategy-mass customization 8.
Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT FlexibilityFlexibility
Product Flexibility-speed with which products are created, ability
to customize, ability to modify products for special needs Volume
Flexibility-ability to respond to sudden changes in demand, change
from small to full scale Process Flexibility-ability to manufacture
a variety of goods in a short time, adjust to product mix over
time, ability to accommodate changes in raw materials 9.
Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT Core Positioning
StrategiesCore Positioning Strategies Adapted from Figure 21.2
Sources: Adapted from Brown, H.K., Clark, K.B., Holloway, C.A., and
Wheelwright, S.C. The Perpetual Enterprise Machine: Seven Keys to
Corporate Renewal Through Successful Product and Process
Development. New York: Oxford University Press, 1994; Upton, D.M.
The management of manufacturing flexibility. California Management
Review, Winter 1994, 7289. Process focus Space shuttle Legal
practice Product focus Auto assembly plant Mail processing
Intermediate Garment industry Branch banks Product volumeProduct
volume Custom products, low volume Standard products, high volume
Mixture of custom and standard products, moderate volume Continuous
process (stable) ResourceflowsResourceflows Mass production Large
batch Sporadic (unstable) 21.5 10. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E South-Western College Publishing Copyright 1999 PPT
Improving Responsiveness to CustomersImproving Responsiveness to
Customers Without customers, organizations cease to exist.
Non-profit and for-profit firms all have customers. Managers need
to identify who the customer is and their needs. What do customers
want? Usually customers prefer: A lower price to a higher price.
High quality over low quality. Fast service over slow service. Also
good after sale support. Many features over few features. Products
tailored to their specific needs. 11. Hellriegel, Jackson, and
Slocum MANAGEMENT, 8E South-Western College Publishing Copyright
1999 PPT Quality-how well a product doesQuality-how well a product
does what the customer expectswhat the customer expects Internal
View-within the organization External View-value customers expect
Value-the relationship between quality and price 12. Hellriegel,
Jackson, and Slocum MANAGEMENT, 8E South-Western College Publishing
Copyright 1999 PPT Competitiveness Value MapCompetitiveness Value
Map Relative QualityRelative Quality SuperiorInferior Higher Lower
Poor value Adapted from Figure 21.3 RelativePriceRelativePrice
Economy value Outstanding value Premium value Average value Source:
Adapted from Gale, B.T., and Buzzell, R.D. Market perceived
quality: Key strategic concept. Planning Review, March-April, 1989,
10. 21.7 13. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E
South-Western College Publishing Copyright 1999 PPT PricePrice v.v.
AttributesAttributes Firms offering high quality, fast service and
other customer desires, often must raise price. Customers must
tradeoff price for attributes. Operations management tries to push
the price/attribute curve to the right with better production.
Provides more attributes at the same cost. By enhancing the
price/attribute relationship, the firm can increase its competitive
position. 14. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E
South-Western College Publishing Copyright 1999 PPT Customer
Responsive Production SystemsCustomer Responsive Production Systems
An outputs attributes is determined by the production system. Firms
must strike a balance between cost and attributes Improving
Quality: can apply to firms producing goods and services. A firm
that provides higher quality than others at the same price is more
responsive to customers. Higher quality can also lead to better
efficiency. Lowers waste levels and operating costs. 15.
Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT Total Quality ManagementTotal
Quality Management The continuous process of ensuring every aspect
of production builds in product quality Traditional Quality-product
inspection during or at the end of the transformation process 16.
Hellriegel, Jackson, and Slocum MANAGEMENT, 8E South-Western
College Publishing Copyright 1999 PPT Total Versus Traditional
QualityTotal Versus Traditional Quality Adapted from Table 21.3
Quality is a strategic issue Plan for quality Quality is everybodys
responsibility Strive for zero defects Quality means conformance to
requirements that meet or exceed customers expectations Scrap and
reworking are only a small part of the costs of nonconformance
Traditional Quality ControlTraditional Quality ControlTotal Quality
ManagementTotal Quality Management Quality is a tactical issue
Screen for quality Quality is the responsibility of the quality
control department Some mistakes are inevitable Quality means
inspection Scrap and reworking are the major costs of poor quality
21.11 17. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E
South-Western College Publishing Copyright 1999 PPT Improving
EfficiencyImproving Efficiency Labor productivity allows labor
comparisons between organizations. Improved efficiency leads to
lower costs and better performance. TQM and Efficiency: TQM can
lead to much higher labor productivity. When quality rises, less
time is wasted on scrap. Flexible manufacturing and efficiency:
reduces the set-up costs for production systems. Facilities layout:
seeks to design the machine-worker interface to increase production
efficiency. 18. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E
South-Western College Publishing Copyright 1999 PPT Efficient
ManufacturingEfficient Manufacturing Most firms face major expense
when setting up to produce a product. These costs must be paid
before production begins. The more often products to be built
change, the higher setup costs become. Flexible Manufacturing
reduces setup costs. Just-in-Time (JIT) inventory, while developed
for TQM, also adds to efficient production. Many costs are reduced
including warehousing, holding costs and inventory tracking. Firm
does not have a supply of parts, but can be vulnerable to strikes
or supply problems. 19. Hellriegel, Jackson, and Slocum MANAGEMENT,
8E South-Western College Publishing Copyright 1999 PPT Efficient
ManufacturingEfficient Manufacturing Self-managed teams boost
efficiency by allowing for a flatter organization structure. The
team takes the role of the supervisor. Teams working together often
become very skilled at enhancing productivity. Kaizen: Japanese
term for a management philosophy the stresses the need for
continuous improvement. Better operations can come from many,
small, continuous improvements. Focus on what adds value to the
product and try to eliminate steps that do not add value (such as
inspection for defects). 20. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E South-Western College Publishing Copyright 1999 PPT
ReengineeringReengineering Process Reengineering: the fundamental
rethinking and radical redesign of the business process. Can boost
efficiency by directing efforts to activities that add value to the
good or service produced. While Kaizen focuses on continuous
enhancements, process reengineering considers wholesale change. Top
managers must support operations enhancement tools for them to be
accepted by workers. Usually, a successful operations change means
a complete change in the organizational culture. Without a
supporting culture, change will not succeed. 21. Hellriegel,
Jackson, and Slocum MANAGEMENT, 8E South-Western College Publishing
Copyright 1999 PPT Nine Categories of Operations Management
DecisionsNine Categories of Operations Management Decisions Product
plans Competitive Priorities Positioning Strategies Location
Technological Choices Quality management and control Inventory
management and control Materials Management Master production
scheduling 21.4 22. Hellriegel, Jackson, and Slocum MANAGEMENT, 8E
South-Western College Publishing Copyright 1999 PPT Inventory
CostsInventory Costs What contributes to inventory costs? TOTAL
COST = ORDERING + CARRYING Carrying Costs Warehouse Insurance
Obsolescence taxes breakage Ordering Costs Placing the order
Transportation Shortage 23. Hellriegel, Jackson, and Slocum
MANAGEMENT, 8E South-Western College Publishing Copyright 1999 PPT
Inventory TermsInventory Terms Lead Time Elapsed time between
placing and receiving an order EOQ-economic order cost optimum
order quantity yielding the lowest total inventory cost
Just-in-time finished goods to sell sub assemblies to be assembled
purchases of raw materials to be transformed 24. Hellriegel,
Jackson, and Slocum MANAGEMENT, 8E South-Western College Publishing
Copyright 1999 PPT Quantity (Q)Quantity (Q) HighHigh LowLow
Averageannualcost($)Averageannualcost($) Total cost Carrying cost
Order cost SmallSmall LargeLargeQ1 Adapted from Figure 21.5 Cost
Trade-Offs in Determining Inventory LevelsCost Trade-Offs in
Determining Inventory Levels 21.13