Post on 14-Apr-2018
7/27/2019 J0712 Pert06
1/51
*
*Chapter Nine
Productionand
OperationsManagementof Goods and
Services
Copyri ght 2010 by the McGraw-Hil l Companies, Inc. All ri ghts reserved.McGraw-Hill/Irwin
7/27/2019 J0712 Pert06
2/51
*
*Profile
Current CEO and President ofIBM, he started in the companyin 1973.
The company invested $16billion in acquiring 60 othercompanies.
Switching the companys focusfrom production to service,Palmisano has led IBM to enterthe emerging global market.
SAMUEL J. PALMISANOIBM
9-2
http://www.ibm.com/http://www.ibm.com/7/27/2019 J0712 Pert06
3/51
*
*Manufacturing
and Services in
Perspective
From 2001 to 2009, manufacturing output in theU.S. rose 4% each year.
The U.S. is still the worlds leadingmanufacturer.
MANUFACTURING in the U.S.
LG1
Almost 25% of all
goods produced eachyear come from theU.S.
9-3
7/27/2019 J0712 Pert06
4/51
*
*
Source: Parade Magazine, www.parade.com/intel, April 19, 2009.
LG1
Manufacturing
and Services in
PerspectiveWHATS MADE in the USA?
Leading U.S. Manufactured Goods
Products Value Number of Employees
ChemicalsPharmaceuticals,cosmetics, soaps, paints,fertilizers
$250 Billion 830,000 Americans
Transportation Equipment
Cars, planes, trains, ships$195 Billion Over 1.4 Million Americans
Processed Foods,Beverages and Tobacco
Cookies, coffee, cigarettes,
prepared meals
$175 Billion 1.7 Million Americans
Computers and Electronics
Computers and communicationequipment
$146 Billion 1.2 Million Americans
9-4
http://www.parade.com/intelhttp://www.parade.com/intel7/27/2019 J0712 Pert06
5/51
*
*
Source: BusinessWeek, www.businessweek.com, November 12, 2007.
Exporters ExtraordinaireTop Ten States that Manufacture Goods for Export
State Thousands of Workers
California 206.1
Texas 108.9
Ohio 95.6Michigan 79.8
New York 77.2
Illinois 76.6
Pennsylvania 71.8
Washington 71.3
North Carolina 60.1
Indiana 59.6
Manufacturing
and Services in
Perspective
LG1
9-5
http://www.businessweek.com/http://www.businessweek.com/7/27/2019 J0712 Pert06
6/51
*
*
Source: Industry Week, www.industryweek.com.
MASSIVE MANUFACTURERSThe Top Ten U.S. Manufacturers
Rank Company
1 Exxon-Mobil
2 Chevron
3 ConocoPhillips4 General Electric
5 General Motors
6 Ford Motor
7 Valero Energy
8 Hewlett-Packard
9 IBM
10 Procter & Gamble
Manufacturing
and Services in
Perspective
LG1
9-6
http://www.industryweek.com/http://www.industryweek.com/7/27/2019 J0712 Pert06
7/51
*
*
The Green Economy is worth more than $200billion annually and is expected to reach $1 trillionby 2020.
Consumers like products that say all natural,
locally grown, energy efficient, etc.
The market for new green products and services
is almost endless.
The Green Movement, however, is onlybeginning.
The GREEN MOVEMENT
IMPROVES the ECONOMY
(Thinking Green)
9-7
7/27/2019 J0712 Pert06
8/51
*
*
The U.S. economy is no longer manufacturingbased.
85% of jobs are in the service sector. The top-paying service jobs in the U.S. are in:
- Legal services
- Medical services
- Entertainment
- Accounting
- Finance
- Management consulting
TOP PAYING SERVICE JOBS
LG1
Manufacturing
and Services in
Perspective
9-8
7/27/2019 J0712 Pert06
9/51
*
* Manufacturersand Service
Organizations
Become More
Competitive
U.S. is still the leader in nanotechnology andbiotechnology.
How can U.S. businesses maintain a competitiveedge?
- Focusing on customers
- Practicing continuous improvement
- Focusing on quality
- Relying on the Internet to unite companies
- Adopting new production techniques.
REMAINING COMPETITIVE inGLOBAL MARKETS
LG1
9-9
7/27/2019 J0712 Pert06
10/51
*
*From Production
to Operations
Management
Production -- The creation of goods using land,labor, capital, entrepreneurship and knowledge (the
factors of production).
PRODUCTION andPRODUCTION MANAGEMENT
LG2
ProductionManagement --All theactivities managers do to
help firms create goods.
9-10
7/27/2019 J0712 Pert06
11/51
*
*From Production
to Operations
Management
Operations Management --A specialized area inmanagement that converts or transforms resources
into goods and services.
Operations management includes:
Inventory management
Quality control
Production scheduling
Follow-up services
OPERATIONS MANAGEMENT
LG2
9-11
7/27/2019 J0712 Pert06
12/51
*
*Progress
Assessment
What have U.S. manufacturers done to regain acompetitive edge?
What must U.S. companies do to continue tostrengthen the countrys manufacturing base?
What led companies to focus on operationsmanagement rather than production?
PROGRESS ASSESSMENT
9-12
7/27/2019 J0712 Pert06
13/51
*
*Production
ProcessesThe PRODUCTION PROCESS
LG3
9-13
7/27/2019 J0712 Pert06
14/51
*
*Production
Processes
Form Utility -- The value producers add to materialsin the creation of finished goods and services.
FORM UTILITY
LG3
9-14
7/27/2019 J0712 Pert06
15/51
*
*
1. To build and deliver products in response to thedemands of the customer.
2. To provide an acceptable quality level.
3. To provide everything at the lowest possiblecost.
GROVES BASIC PRODUCTION
REQUIREMENTSLG3
Production
Processes
9-15
7/27/2019 J0712 Pert06
16/51
*
*
Process Manufacturing -- The part of productionthat physically or chemically changes materials.
Assembly Process -- The part of the productionprocess that puts together components.
PROCESS and ASSEMBLY inPRODUCTION
LG3
Production
Processes
9-16
7/27/2019 J0712 Pert06
17/51
*
*
Production processes are either continuous orintermittent.
Continuous Process -- Long production runs turnout finished goods over time.
Intermittent Process -- Production runs are shortand the producer adjusts machines frequently to
make different products.
KEY PRODUCTION PROCESSES
LG3
Production
Processes
9-17
7/27/2019 J0712 Pert06
18/51
*
*
MADE in a MINUTEProduction of Some of Americas Favorite Products
ProductNumber of ItemsMade in a Minute
Krispy Kreme Doughnuts 5,208
Chips Ahoy! Cookies 4,000
Twinkies 972
Jello Boxes 764
LifeSavers 100 rolls
Production
Processes
LG3
9-18
7/27/2019 J0712 Pert06
19/51
*
*The Need to
Improve Production
Techniques and
Cut Costs
DEVELOPMENTS MAKING U.S.COMPANIES MORE COMPETITIVE
LG3
1. Computer-aided design and manufacturing
2. Flexible manufacturing
3. Lean manufacturing
4. Mass customization
9-19
7/27/2019 J0712 Pert06
20/51
*
*Computer-Aided
Design and
Manufacturing
COMPUTER-AIDED DESIGN andMANUFACTURING
LG3
Computer-Aided Design(CAD) -- The use of
computers in the design ofproducts.
Computer-Aided
Manufacturing (CAM) --The use of computers in themanufacturing of products.
9-20
7/27/2019 J0712 Pert06
21/51
*
*Flexible
ManufacturingFLEXIBLE MANUFACTURING
LG3
Flexible Manufacturing -- Designing machines todo multiple tasks so they can produce a variety of
products.
9-21
7/27/2019 J0712 Pert06
22/51
*
*Lean
ManufacturingLEAN MANUFACTURING
LG3
Lean Manufacturing -- Using less of everythingthan in mass production.
Compared to others, lean companies: Take half the human effort.
Have half the defects in finished products.
Require one-third the engineering effort.
Use half the floor space.
Carry 90% less inventory.
9-22
*
7/27/2019 J0712 Pert06
23/51
*
*Mass
CustomizationMASS CUSTOMIZATION
LG3
Mass Customization --Tailoring products to meet the
needs of a large number of
individual customers.
More manufacturers arelearning to customize.
Mass customization existsin the service sector too.
9-23
*
7/27/2019 J0712 Pert06
24/51
*
*Progress
Assessment
Whats form utility?
Define and differentiate the following: process
manufacturing, assembly process, continuousprocess and intermittent process.
What do you call the integration of CAD andCAM?
Whats mass customization?
PROGRESS ASSESSMENT
9-24
*
7/27/2019 J0712 Pert06
25/51
*
*Operations
Management
Planning
Operations management planning helps solveproblems like:
- Facility location
- Facility layout
- Materials requirement planning
- Purchasing- Inventory control
- Quality control
OPERATIONS MANAGEMENT
LG4
9-25
*
7/27/2019 J0712 Pert06
26/51
*
*Facility
Location
Facility Location --The process of
selecting a geographiclocation for a
companys operations.
FACILITY LOCATION
LG4
Rising numbers of Internet businesses meansbrick-and-mortar retailers must find greatlocations.
9-26
*
7/27/2019 J0712 Pert06
27/51
*
*
Potential of low-cost labor is very attractive tocompanies hoping to remain competitive.
However, shuttering operations and moving canoften cause severe economic problems independent areas.
What would you do if you were the CEO ofChildrenWear Industries faced with this problem?
STAY or LEAVE(Making Ethical Decisions)
9-27
*
7/27/2019 J0712 Pert06
28/51
*
*TakingOperations
Management to
the Internet
Sometimes businesses outsource engineering,design and manufacturing to other companies.
Often these relationships are managed throughthe Internet.
Many companies are developing Internet-focusedstrategies.
OPERATIONS MANAGEMENTon the INTERNET
LG4
9-28
*
7/27/2019 J0712 Pert06
29/51
*
*Facility Location
in the Future
Information technology gives firms increasedflexibility in terms of location.
Telecommuting -- Working from home viacomputer and modem.
FUTURE FACILITY LOCATION
LG4
9-29
*
7/27/2019 J0712 Pert06
30/51
*
*
Dain Hancock of Lockheed Martin had theformidable task of uniting 80 companies into asingle production unit.
PARTNERING BEYONDCOUNTRY BORDERS
(Reaching Beyond Our Borders)
Using the Internetand tech tools, likeelectronic white
boards, kept thecompanies in touchin real time.
9-30
*
http://www.lockheedmartin.com/http://www.lockheedmartin.com/7/27/2019 J0712 Pert06
31/51
*
*Facility Layout
Facility Layout -- The physical arrangement ofresources, including people, to most efficiently
produce goods and provide services.
Facility layout depends on the processesperformed:
- Service: Help customers find products- Manufacturing: Improve efficiency
SETTING UP the FACILITY
LG4
9-31
*
7/27/2019 J0712 Pert06
32/51
*
*Facility Layout
1. Assembly Line LayoutWorkers do only a fewtasks at a time.
2. Modular LayoutTeams of workers produce morecomplex units of the final product.
3. Fixed-Position LayoutAllows workers to
congregate around the product.
4. Process LayoutSimilar equipment and functionsare grouped together.
FACILITY LAYOUT OPTIONS
LG4
9-32
*
7/27/2019 J0712 Pert06
33/51
*
*
LG4
Facility LayoutASSEMBLY LINE LAYOUT
9-33
*
7/27/2019 J0712 Pert06
34/51
*
*
LG4
Facility LayoutMODULAR LAYOUT
9-34
*
7/27/2019 J0712 Pert06
35/51
*
*
LG4
Facility LayoutPROCESS LAYOUT
9-35
*
7/27/2019 J0712 Pert06
36/51
*
*
LG4
Facility LayoutFIXED-POSITION LAYOUT
9-36
*
7/27/2019 J0712 Pert06
37/51
*
*Materials
Requirement
Planning
Materials Requirement Planning (MRP) --Acomputer-based operations management system that
uses sales forecasts to make sure parts and
materials are available when needed.
Enterprise Resource Planning (ERP) --A newerversion of MRP, combines computerized functions
into a single integrated software program using asingle database.
MRP and ERP
LG4
9-37
*
7/27/2019 J0712 Pert06
38/51
*
*Purchasing
Purchasing -- The function that searches for high-quality material resources, finds the best suppliers
and negotiates the best price for goods and services.
PURCHASING
LG4
The Internet hastransformedpurchasing.
9-38
*
7/27/2019 J0712 Pert06
39/51
*
*Just-in-Time
Inventory Control
Just-in-Time (JIT) Inventory Control -- Theproduction process in which a minimum of inventory
is kept and parts, supplies and other needs aredelivered just in time to go on the assembly line.
To work effectively, the process requires excellent
coordination with suppliers.
INVENTORY CONTROL
LG4
9-39
*
7/27/2019 J0712 Pert06
40/51
*
*Quality Control
Quality -- Consistently producing what the customerwants while reducing errors before and after delivery.
Six Sigma Quality --A quality measure that allowsonly 3.4 defects per million opportunities.
QUALITY CONTROL
LG4
9-40
*
7/27/2019 J0712 Pert06
41/51
*
*Quality Control
Statistical Quality Control --A process used tocontinually monitor all phases of the production
process.
Statistical Process Control --A process oftesting statistical samples of product components at
each stage of production.
Measuring quality along the production processreduces the need for quality-control at the end.
STATISTICAL QUALITY CONTROL &STATISTICAL PROCESS CONTROL LG4
9-41
*
7/27/2019 J0712 Pert06
42/51
*
*The Baldrige
Awards
Companies can apply for awards in these areas:
- Manufacturing
- Services- Small Businesses
- Education
- Healthcare
The BALDRIGE AWARDS
LG4
9-42
*
7/27/2019 J0712 Pert06
43/51
*
Source: National Institute of Standards and Technology, www.quality.nist.gov.
Cargill Corn Milling North AmericaWayzata, Minnesota (Manufacturing)
Poudre Valley Health SystemFort Collins, Colorado (Healthcare)
Iredell-Statesville SchoolsStatesville, North Carolina (Education)
THE WINNERS ARE2008 Baldrige Award Recipients
The Baldrige
Awards
LG4
9-43
*
http://www.quality.nist.gov/http://www.quality.nist.gov/7/27/2019 J0712 Pert06
44/51
*
*ISO 9000 and
ISO 14000
Standards
The International Organization for Standardization(ISO) is a worldwide federation of nationalstandards bodies.
ISO 9000 -- The common name given to qualitymanagement and assurance standards.
ISO 14000 --A collection of the best practices formanaging an organizations impact on the
environment.
WHAT is the ISO?
LG4
9-44
*
7/27/2019 J0712 Pert06
45/51
*
Progress
Assessment
What are the major criteria for facility location?
Whats the difference between MRP and ERP?
Whats just-in-time inventory control?
What are Six Sigma quality, the Baldrige Award,ISO 9000 and ISO 14000?
PROGRESS ASSESSMENT
9-45
*
7/27/2019 J0712 Pert06
46/51
*
Control
Procedures:
PERT and
GANTT Charts
Program Evaluation and Review Technique(PERT) --A method for analyzing the tasks involved
in completing a given project and estimating the timeneeded.
PERT
LG5
9-46
*
7/27/2019 J0712 Pert06
47/51
*
Control
Procedures:
PERT and
GANTT Charts
1. Analyzing and sequencing tasks
2. Estimating the time needed to complete each
task3. Drawing a PERT network illustrating the first two
steps
4. Identifying the critical path
Critical Path -- The sequence of tasks thattakes the longest time to complete.
STEPS INVOLVED in PERT
LG5
9-47
*
7/27/2019 J0712 Pert06
48/51
*LG5
Control
Procedures:
PERT and
GANTT Charts
PERT CHART for a MUSIC VIDEO
9-48
* l
7/27/2019 J0712 Pert06
49/51
*
Control
Procedures:
PERT and
GANTT Charts
Gantt ChartA bar graph that shows what projectsare being worked on and how much has been
completed.
GANTT CHARTS
LG5
9-49
*C l
7/27/2019 J0712 Pert06
50/51
*LG5
Control
Procedures:
PERT and
GANTT Charts
GANTT CHART for aDOLL FACTORY
9-50
*
7/27/2019 J0712 Pert06
51/51
*
Progress
Assessment
Draw a PERT chart for making breakfast of three-minute eggs, buttered toast and coffee. Define
the critical path.
How could you use a Gantt chart to keep track ofproduction.
PROGRESS ASSESSMENT