Designing Operations Systems - Cengage
3
CHAPTER 21 Managing Operations, Quality, and Productivity 689 concept CHECK Distinguish between manufacturing and production operations and service operations. Why do you think the manufacturing sector of the U.S. economy has declined while the service sector has grown? The problems, challenges, and opportunities faced by operations managers revolve around the acquisition and utilization of resources for conversion. Their goals include both efficiency and effectiveness. A number of issues and decisions must be addressed as operations systems are designed. The most basic ones are product- service mix, capacity, and facilities. Determining Product-Service Mix A natural starting point in designing operations systems is determining the product-service mix. This decision flows from corporate, business, and marketing strategies. Managers have to make a number of decisions about their products and services, starting with how many and what kinds to offer. 4 Procter & Gamble, for example, makes regular, tartar-control, gel, and various other formulas of Crest toothpaste and packages them in several different sizes of tubes, pumps, and other dispensers. Similarly, work- ers at Subway sandwich shops can combine different breads, vegetables, meats, and condi- ments to create hundreds of different kinds of sandwiches. Decisions also have to be made regarding the level of quality desired, the opti- mal cost of each product or service, and exactly how each is to be designed. GE, for example, recently reduced the number of parts in its industrial circuit breakers from 28,000 to 1,275. This whole process was achieved by carefully analyzing product design and production methods. Capacity Decisions The capacity decision involves choosing the amount of products, services, or both that can be produced by the organization. Determining whether to build a factory capable of making 5,000 or 8,000 units per day is a capacity decision. So, too, is decid- ing whether to build a restaurant with 100 or 150 seats, or a bank with five or ten teller stations. The capacity decision is truly a high-risk one because of the uncertainties of Designing Operations Systems Facilities decisions can play a key role in the effectiveness of a firm’s opera- tions management systems. This com- pany, Camden International, imports cocoa beans from West Africa. By plac- ing its warehouse near ship terminals and efficiently designing the facility, a forklift operator can quickly move a load of beans from the dock receiving area into temporary storage inside the ware- house—or even move it directly through the facility and load it onto a truck. product-service mix How many and what kinds of products or services (or both) to offer capacity The amount of products, services, or both that can be pro- duced by an organization 335020_ch21_684-715 1.14.04 4:48 PM Page 689 RKAUL-15 RKUAL-15:Desktop Folder:TEMPWORK:GRIFFIN DON'DEL:gri8ch21:
Transcript of Designing Operations Systems - Cengage
CHAPTER 21 Managing Operations, Quality, and Productivity 689
conceptC H E C K Distinguish between
manufacturing andproduction operationsand service operations.
Why do you think themanufacturing sector of the U.S.economy has declined while theservice sector has grown?
The problems, challenges, and opportunities faced by operations managers revolvearound the acquisition and utilization of resources for conversion. Their goalsinclude both efficiency and effectiveness. A number of issues and decisions mustbe addressed as operations systems are designed. The most basic ones are product-service mix, capacity, and facilities.
Determining Product-Service MixA natural starting point in designing operations systems is determining theproduct-service mix. This decision flows from corporate, business, and marketingstrategies. Managers have to make a numberof decisions about their products and services,starting with how many and what kinds tooffer.4 Procter & Gamble, for example, makesregular, tartar-control, gel, and various otherformulas of Crest toothpaste and packagesthem in several different sizes of tubes,pumps, and other dispensers. Similarly, work-ers at Subway sandwich shops can combinedifferent breads, vegetables, meats, and condi-ments to create hundreds of different kinds ofsandwiches. Decisions also have to be maderegarding the level of quality desired, the opti-mal cost of each product or service, andexactly how each is to be designed. GE, forexample, recently reduced the number ofparts in its industrial circuit breakers from28,000 to 1,275. This whole process was achieved by carefully analyzing productdesign and production methods.
Capacity DecisionsThe capacity decision involves choosing the amount of products, services, or boththat can be produced by the organization. Determining whether to build a factorycapable of making 5,000 or 8,000 units per day is a capacity decision. So, too, is decid-ing whether to build a restaurant with 100 or 150 seats, or a bank with five or ten tellerstations. The capacity decision is truly a high-risk one because of the uncertainties of
Designing Operations Systems
Facilities decisions can play a key rolein the effectiveness of a firm’s opera-tions management systems. This com-pany, Camden International, importscocoa beans from West Africa. By plac-ing its warehouse near ship terminalsand efficiently designing the facility, aforklift operator can quickly move a loadof beans from the dock receiving areainto temporary storage inside the ware-house—or even move it directly throughthe facility and load it onto a truck.
product-service mix How many andwhat kinds of products or services(or both) to offer
capacity The amount of products,services, or both that can be pro-duced by an organization
335020_ch21_684-715 1.14.04 4:48 PM Page 689 RKAUL-15 RKUAL-15:Desktop Folder:TEMPWORK:GRIFFIN DON'DEL:gri8ch21:
690 PART 6 The Controlling Process
future product demand and the large monetary stakes involved. An organization thatbuilds capacity exceeding its needs may commit resources (capital investment) thatwill never be recovered. Alternatively, an organization can build a facility with asmaller capacity than expected demand. Doing so may result in lost market oppor-tunities, but it may also free capital resources for use elsewhere in the organization.
A major consideration in determining capacity is demand. A company operatingwith fairly constant monthly demand might build a plant capable of producing anamount each month roughly equivalent to its demand. But, if its market is characterizedby seasonal fluctuations, building a smaller plant to meet normal demand and thenadding extra shifts staffed with temporary workers or paying permanent workers extrato work more hours during peak periods might be the most effective choice. Likewise, arestaurant that needs 150 seats for Saturday night but never needs more than 100 at anyother time during the week would probably be foolish to expand to 150 seats. During therest of the week, it must still pay to light, heat, cool, and clean the excess capacity.
Facilities DecisionsFacilities are the physical locations where products or services are created, stored,and distributed. Major decisions pertain to facilities location and facilities layout.
Location Location is the physical positioning or geographic site of facilities andmust be determined by the needs and requirements of the organization. A com-pany that relies heavily on railroads for transportation needs to be located close torail facilities. GE decided that it did not need six plants to make circuit breakers, soit invested heavily in automating one plant and closed the other five. Differentorganizations in the same industry may have different facilities requirements.Benetton uses only one distribution center for the entire world, whereas Wal-Marthas several distribution centers in the United States alone. A retail business mustchoose its location very carefully to be convenient for consumers.
Layout The choice of physical configuration, or the layout, of facilities is closelyrelated to other operations decisions. The three entirely different layout alternativesshown in Figure 21.1 help demonstrate the importance of the layout decision. Aproduct layout is appropriate when large quantities of a single product are needed. Itmakes sense to custom-design a straight-line flow of work for a product when a spe-cific task is performed at each workstation as each unit flows past. Most assembly linesuse this format. For example, Dell’s personal computer factories use a product layout.
Process layouts are used in operations settings that create or process a varietyof products. Auto repair shops and health-care clinics are good examples. Each carand each person is a separate “product.” The needs of each incoming job are diag-nosed as it enters the operations system, and the job is routed through the uniquesequence of workstations needed to create the desired finished product. In aprocess layout, each type of conversion task is centralized in a single workstationor department. All welding is done in one designated shop location, and any carthat requires welding is moved to that area. This setup is in contrast to the productlayout, in which several different workstations may perform welding operations ifthe conversion task sequence so dictates. Similarly, in a hospital, all X-rays are
facilities The physical locationswhere products or services are cre-ated, stored, and distributed
layout The physical configuration offacilities, the arrangement of equip-ment within facilities, or both
product layout A physical configura-tion of facilities arranged around theproduct; used when large quantitiesof a single product are needed
process layout A physical configura-tion of facilities arranged aroundthe process; used in facilities thatcreate or process a variety ofproducts
location The physical positioning orgeographic site of facilities
335020_ch21_684-715 1.14.04 4:48 PM Page 690 RKAUL-15 RKUAL-15:Desktop Folder:TEMPWORK:GRIFFIN DON'DEL:gri8ch21:
CHAPTER 21 Managing Operations, Quality, and Productivity 691
done in one location, all surgeries in another, and all physical therapy in yetanother. Patients are moved from location to location to get the services they need.
The fixed-position layout is used when the organization is creating a few verylarge and complex products. Aircraft manufacturers like Boeing and shipbuilderslike Newport News use this method. An assembly line capable of moving a 747would require an enormous plant, so instead the airplane itself remains stationary,and people and machines move around it as it is assembled.
The cellular layout is a relatively new approach to facilities design. Cellular lay-outs are used when families of products can follow similar flow paths. A clothingmanufacturer, for example, might create a cell, or designated area, dedicated tomaking a family of pockets, such as pockets for shirts, coats, blouses, and slacks.Although each kind of pocket is unique, the same basic equipment and methodsare used to make all of them. Hence, all pockets might be made in the same areaand then delivered directly to different product layout assembly areas where theshirts, coats, blouses, and slacks are actually being assembled.
Figure 21.1
Approaches to FacilitiesLayoutWhen a manufacturer produces largequantities of a product (such as carsor computers), it may arrange its facili-ties in an assembly line (productlayout). In a process layout, the work(such as patients in a hospital orcustom pieces of furniture) movesthrough various workstations. Locomo-tives and bridges are both manufac-tured in a fixed-position layout.
All incomingjobs and materials
Product Layout
Fixed-Position Layout
Incomingjob 1
Finishedproduct 1
Finishedproduct
Finishedproduct 2
Incomingjob 2
Process Layout
Workstation
Product
cellular layout A physical configura-tion of facilities used when familiesof products can follow similar flowpaths
conceptC H E C K What are the three basic
components in designingoperations systems? Identifythe basic decisions thatrelate to each.
Think of three local restaurants orother establishments that you havevisited recently. Characterize thethree components of the operationssystems used by each.
fixed-position layout A physical con-figuration of facilities arrangedaround a single work area; used forthe manufacture of large and com-plex products such as airplanes
335020_ch21_684-715 1.14.04 4:48 PM Page 691 RKAUL-15 RKUAL-15:Desktop Folder:TEMPWORK:GRIFFIN DON'DEL:gri8ch21:
