CHAPTER 15OPERATIONS, QUALITY, AND PRODUCTIVITY

CH 15© 2015 SAGE Publications

Foundation Terms• Time-based: Use of strategies to increase the speed

with which an organization goes from creativity to delivery.

• Operations: Transforming resource inputs into product outputs. Effective operations give you the ability to change quickly in a dynamic environment.

• Product: A good, a service, or a combination of the two.

Classifying Operations Systems• The tangibility of products refers to:

• Tangible Products• Intangible Products• Mixed Products

Level of Customer Involvement• The amount of input from customers

• Make-to-Stock (MTS) Operations• Assemble-to-Order (ATO) Operations• Make-to-Order (MTO) Operations

Operations Flexibility• The amount of variety in the products an operation

produces, which determines whether the products are produced • Continuously: Continuous Process Operations (CPO)• Repetitively: Repetitive Process Operations (RPO)• In batches- Batch Process Operations (BPO)• Individually: Individual Process Operations (IPO)• By project: Project Process Operations (PPO)

Technology and Intensity• Technology: Process used to transform inputs into

outputs• Intensity: Balance between the use of machine or

human labor• In capital-intensive operations, machines do most of the work. • In labor-intensive operations, human resources do most of the

work. • Manufacturing firms use a balance of capital and labor.

Designing Operations Systems• In a changing environment, operations systems must

be continually redesigned.• Product mix includes the number of product lines, the

number of products offered within each line, and the mixture of goods and services within each line.

• Product design refers to new or improved product development.

Quality• “Quality is a virtue of design”: products are well

designed through the use of cross-functional team input: • There will be fewer operations problems• The product will be easier to sell• Servicing the product will be less costly

Facility Layout• The spatial arrangement of physical resources:

• Product layout is associated with make-to-stock and assemble-to-order levels of customer involvement, relatively inflexible repetitive process or continuous process operations, and capital intensity with high volume and low variety.

• Process, or functional, layout is associated with a make-to-order level of customer involvement, flexible individual process operations, and labor intensity or a balanced intensity.

Facility Layout• The spatial arrangement of physical resources:

• Cellular layout is associated with make-to-stock and assemble-to-order levels of customer involvement, relatively flexible batch process operations, and a balanced intensity.

• Fixed-position layout is associated with make-to-order and assemble-to-order levels of customer involvement, flexible project process operations, and balanced intensity.

Facility Layout

Facility Location & Capacity Planning• Location is the physical geographic site of facilities. • The facility location must be determined based on the

classification of the operations system and the organization’s product mix, layout requirements, and capacity planning.

Facility Location & Capacity Planning• Cost• Proximity to inputs• Customers, • Competitors• Availability of transportation• Access to human resources• Number of facilities

Capacity• The amount of products an organization can produce.

Planning Schedules• Scheduling is the process of listing activities that must

be performed to accomplish an objective. • Scheduling answers the planning questions

• Which employees will make which products? • When, how and where will they be produced? • How many of each will be produced?

• Routing is the path and sequence of the transformation of a product into an output.

Planning Schedules• Priority scheduling is the continuing evaluation and

reordering of the sequence in which products will be produced.• First come–first served.• Earliest due date. • Shortest operating time.

Planning Schedules• Planning sheets state an objective and list the

sequence of activities required to meet the objective, when each activity will begin and end, and who will complete each activity.

• Gantt charts use bars to graphically illustrate a schedule and progress toward the objective over a period of time.

Performance Evaluation & Review Technique (PERT)• PERT is a network scheduling technique that illustrates

the interdependence of activities.• Activities• Events• Times• Critical path

How a PERT network is completed1. List all the activities/events that must be completed to

reach the specific objective.2. Determine the time it will take to complete each

activity/event.3. Arrange the tasks on the diagram in the sequence in

which they must be completed. 4. Determine the critical path.

PERT Network

Inventory Control• The stock of materials held for future use.

• Raw materials• Work-in-process• Finished goods• In-transit goods

Types of Inventory Control• Retailing and Services Inventory: Retail inventory

control, including purchasing, is concerned almost exclusively with finished goods for resale as is.

• Just-in-time (JIT) inventory: Necessary parts and raw materials are delivered shortly before they are needed.

• Materials requirement planning (MRP): Integrates operations and inventory control with complex ordering and scheduling. MRP is commonly used by firms that have different delivery systems and lead times.

Economic Order Quantity (EOQ)• The EOQ is the optimal quantity of a product to order,

determined on the basis of a mathematical model. • EOQ is a balance of ordering costs and holding costs.

Supply Chain Management• Supply chain management is the process of

coordinating all the activities involved in producing a product and delivering it to the customer.• Radio-frequency identification (RFID): automatic

identification method, relying on storing and remotely retrieving data using devices called RFID tags.

Quality Control• Quality control is the process of ensuring that all types

of inventory meet standards. • Focus on delivering customer value• Continually improve systems and processes• Focus on managing processes rather than people• Use teams to continually improve

Statistical Quality Control (SPC)• SPC is a management science technique that uses a

variety of statistical tests based on probability to improve the quality of decision making.

• SPC aids in determining whether quality is within an acceptable standard range.

Measuring and Increasing Productivity• Productivity is a performance measure relating outputs

to inputs. It allows you to:• Calculate Productivity• Calculate Productivity Percentage Changes• Compare Production and Productivity. • Increase Productivity