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Page 1: ****** 9-1 1-1 McGraw-Hill/Irwin Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Nickels McHugh McHugh ** Producing.

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1-1McGraw-Hill/IrwinUnderstanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights

Reserved.

Nickels McHugh McHughNickels McHugh McHugh

**Producing

World-ClassGoods

andServices 9

CH

AP

TE

R*

* *

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Leading U.S. Leading U.S. Manufacturing StatesManufacturing States

0 100 200 Miles

WASHINGTON

OREGON

IDAHO

MONTANA

WYOMING

NEVADA

CALIFORNIA

UTAH

ARIZONA

COLORADO

NEW MEXICO

KANSAS

OKLAHOMA

MISSOURI

ARKANSAS

TEXAS

LOUISIANA

MISSISSIPPI

ILLINOIS

NORTH DAKOTA

SOUTH DAKOTA

MINNESOTA

W ISCONSIN

IOWA

NEBRASKA

MICHIGAN

MICHIGAN

INDIANA

OHIO

W ESTVIRGINIA

PENNSYLVANIA

NEW YORK

VIRGINIA

DC

KENTUCKY

VTNH

MAINE

RI

MASS

CONN

NEWJERSEY

DELAWARE

MARYLAND

NORTH CAROLINA

TENNESSEE

ALABAMA GEORGIA

SOUTHCAROLINA

FLORIDA

HAWAII

ALASKA

0 600 Miles0 200 Miles

CaliforniCaliforniaa

New YorkNew York

IllinoisIllinois

OhiOhioo

PennsylvaniPennsylvaniaa

TexaTexass

MichigaMichigann

Source: Britannica Student Encyclopedia, 2006Source: Britannica Student Encyclopedia, 2006

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Top Ten US ManufacturersTop Ten US Manufacturers

1.1. ExxonMobilExxonMobil

2.2. Chevron Chevron

3.3. General MotorsGeneral Motors

4.4. ConocoPhillips ConocoPhillips

5.5. Ford MotorFord Motor

6.6. General ElectricGeneral Electric

7.7. Altria GroupAltria Group

8.8. IBM Corp.IBM Corp.

9.9. Hewlett-PackardHewlett-Packard

10.10.Valero EnergyValero Energy

Source: Industry Week, June 1, 2006

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How Manufacturers HaveHow Manufacturers Have Become More Effective Become More Effective

• Focus on customersFocus on customers

• Maintain close relationshipsMaintain close relationships

• Continuous improvementContinuous improvement

• Focus on qualityFocus on quality

• Save costsSave costs

• Rely on the InternetRely on the Internet

• New production techniquesNew production techniques

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Labor Hours / VehicleLabor Hours / Vehicle

• Ford – 35.79 hoursFord – 35.79 hours

• Daimler/Chrysler – 33.71 Daimler/Chrysler – 33.71 hourshours

• GM – 33.19 hoursGM – 33.19 hours

• Honda – 32.51 hoursHonda – 32.51 hours

• Toyota – 29.4 hoursToyota – 29.4 hours

• Nissan – 28.46 hoursNissan – 28.46 hours

Source: Detroit Free Press, June 2, 2006Source: Detroit Free Press, June 2, 2006

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From Production to From Production to Operations ManagementOperations Management

• ProductionProduction

• Production Production ManagementManagement

• Operations Operations Management Management (OM)(OM)

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Comparing Asian GiantsComparing Asian Giants

CHINACHINA

• Driving Force: Driving Force: ManufacturingManufacturing

• Largest Communist Largest Communist CountryCountry

• Population: 1.3 Population: 1.3 BillionBillion

• Economic Growth Economic Growth Rate: 9%Rate: 9%

• Financial/Commercial Financial/Commercial Capital: ShanghaiCapital: Shanghai

INDIAINDIA

• Driving Force: Driving Force: ServicesServices

• Largest DemocracyLargest Democracy

• Population: 1.1 Population: 1.1 Billion Billion

• Economic Growth Economic Growth Rate: 7%Rate: 7%

• Financial/Commercial Financial/Commercial Capital: MumbaiCapital: Mumbai

Source: Kiplinger.com December 19, 2005, BBC News, In Depth, accessed July 15, 2006Source: Kiplinger.com December 19, 2005, BBC News, In Depth, accessed July 15, 2006

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9-8

*** Production ProcessesProduction Processes

• Form UtilityForm Utility

• Process ManufacturingProcess Manufacturing

• Assembly ProcessAssembly Process

• Continuous ProcessContinuous Process

• Intermittent ProcessIntermittent Process

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Three RequirementsThree Requirements For Production For Production

1.1. Build and deliver products in response Build and deliver products in response to the demands of the customer at a to the demands of the customer at a scheduled delivery timescheduled delivery time

2.2. Provide an acceptable quality levelProvide an acceptable quality level

3.3. Provide everything at the lowest Provide everything at the lowest possible costpossible cost

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Production EfficiencyProduction Efficiency

• Krispy Kreme Doughnuts – 5,208 a minuteKrispy Kreme Doughnuts – 5,208 a minute

• Twinkies – 972 a minuteTwinkies – 972 a minute

• LifeSavers 5 Flavor Roll – 100 rolls a minuteLifeSavers 5 Flavor Roll – 100 rolls a minute

• Jell-O Gelatin Boxes – 764 a minuteJell-O Gelatin Boxes – 764 a minute

• Chips Ahoy! – 4,000 a minuteChips Ahoy! – 4,000 a minute

Source: World Features SyndicateSource: World Features Syndicate

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What Is IncreasingWhat Is Increasing Productivity?Productivity?

Source: 2005 National Innovation Survey, Council on CompetitivenessSource: 2005 National Innovation Survey, Council on Competitiveness

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Product Improvements WithProduct Improvements With Computer TechnologyComputer Technology

• Computer-Aided Design - Computer-Aided Design - CADCAD

• Computer-Aided Manufacturing - Computer-Aided Manufacturing - CAMCAM

• Computer-Integrated Manufacturing - Computer-Integrated Manufacturing - CIMCIM

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Top Ten Tech SpendersTop Ten Tech SpendersSTATESTATE $ in Billions$ in Billions

• CaliforniaCalifornia 38.938.9• New YorkNew York 29.829.8• TexasTexas 24.624.6• IllinoisIllinois 15.115.1• FloridaFlorida 13.913.9• PennsylvaniaPennsylvania 12.812.8• OhioOhio 11.811.8• New JerseyNew Jersey 11.311.3• North CarolinaNorth Carolina 9.4 9.4• GeorgiaGeorgia 9.3 9.3

Source: Business Week Online, December 5, 2005Source: Business Week Online, December 5, 2005

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Production TechniquesProduction Techniques

• Flexible Flexible ManufacturingManufacturing

• Lean Lean ManufacturingManufacturing

• Mass Mass CustomizationCustomization

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Operations ManagementOperations Management PlanningPlanning

• Facility LocationFacility Location

• Facility LayoutFacility Layout

• Materials Requirement Materials Requirement PlanningPlanning

• PurchasingPurchasing

• J-I-T Inventory ControlJ-I-T Inventory Control

• Quality ControlQuality Control

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Quality ControlQuality Control

• Six Sigma QualitySix Sigma Quality

• Statistical Quality Control (SQC)Statistical Quality Control (SQC)

• Statistical Process Control (SPC)Statistical Process Control (SPC)

• The Baldrige AwardThe Baldrige Award

• ISO 9000ISO 9000

• ISO 14000ISO 14000

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Baldrige Award RecipientsBaldrige Award Recipients• Sunny Fresh Foods, Inc.,Sunny Fresh Foods, Inc.,

Monticello, MNMonticello, MN (Manufacturing)(Manufacturing)

• DynMcDermott Petroleum Operations,DynMcDermott Petroleum Operations, New Orleans, LA (Service)New Orleans, LA (Service)

• Park Place Lexus,Park Place Lexus, Plano, TX (Small Business)Plano, TX (Small Business)

• Richland College,Richland College, Dallas, TX (Education)Dallas, TX (Education)

• Jenks Public Schools,Jenks Public Schools, Jenks, OK (Education)Jenks, OK (Education)

• Bronson Methodist Hospital,Bronson Methodist Hospital, Kalamazoo, MI, (Health care)Kalamazoo, MI, (Health care)

Source: NIST News Release, November 22, 2005Source: NIST News Release, November 22, 2005

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ISOISO

• ISO was founded in 1947ISO was founded in 1947

• At the end of 2004, the worldwide At the end of 2004, the worldwide total of certificates:total of certificates:• ISO 9000ISO 9000 – 670,000 in 154 countries – 670,000 in 154 countries

• ISO 14000ISO 14000 – 90,000 in 127 countries – 90,000 in 127 countries

Source: Business Week Online, March 17, 2006Source: Business Week Online, March 17, 2006

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Control ProceduresControl Procedures

• Program Evaluation & Review Techniques (PERT)

• Gantt Chart

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PERT StepsPERT Steps

1.1. Analyzing and sequencing tasks that Analyzing and sequencing tasks that need to be doneneed to be done

2.2. Estimating the time needed to complete Estimating the time needed to complete each taskeach task

3.3. Drawing a PERT network illustrating the Drawing a PERT network illustrating the information from steps 1 and 2information from steps 1 and 2

4.4. Identifying the critical pathIdentifying the critical path

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Gantt ChartGantt Chart

• Named for its developer, Named for its developer, Henry GanttHenry Gantt

• A bar graph that clearly A bar graph that clearly shows what projects are shows what projects are being worked on and how being worked on and how much has been much has been completed at any given completed at any given timetime

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Learning from FailureLearning from Failure

• Formalize forums for analyzing failureFormalize forums for analyzing failure

• Move the goalpostsMove the goalposts

• Share personal storiesShare personal stories

• Bring in outsidersBring in outsiders

• Prove yourself wrong, not rightProve yourself wrong, not right

• Celebrate smart failuresCelebrate smart failures

Source: Business Week Online, July 10, 2006Source: Business Week Online, July 10, 2006


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