Management 11e John Schermerhorn

Management 11e John Schermerhorn

Chapter 19Chapter 19

Operations andOperations andServices ManagementServices Management

Planning Ahead — Chapter 19 Study Questions

What are the essentials of operations and services management?

What is value chain management? How do organizations manage service

and product quality? How can work processes be designed for

productivity?

Management 11e Chapter 19 2

Study Question 1: What are the essentials of operations and services management?

Operations management Managing productive systems that transform

resources into finished products, goods, and services for customers.

Typical operations management decisions include: Resource acquisition Inventories Facilities Workflows and technologies Product quality



Manufacturing Organizations Produce physical

goods

Service Organizations Produce services



Productivity Quantitative measure of the efficiency with which inputs are

transformed into outputs. Productivity = Output / Input.

Competitive advantage A core competency that clearly sets an organization apart from

competitors and gives it an advantage over them in the marketplace. Companies may achieve competitive advantage in many ways, including:

Product innovations Customer service Speed to market Manufacturing flexibility Product/service quality



Technology The combination of knowledge, skills,

equipment, computers, and work methods used to transform resource inputs into organization outputs. Manufacturing technology. Service technologies.



Core manufacturing technologies:



Manufacturing technology trends Robotics Flexible manufacturing systems Mass customization Cellular layouts Computer-integrated manufacturing Lean production Design for disassembly Remanufacturing

Service-Profit chain All activities involved in the direct link between an organization’s

service providers and customers or clients Should produce

Satisfied and loyal customers Efficient and productive use of resources



Core service technologies:


Study Question 2: What is value chain management?

Value chain Sequence of step-by-step activities resulting

in finished goods or services with customer value.

Supply chain management Supply chain management is the strategic

management of all operations relating to an organization’s resource suppliers.


Figure 19.1 Elements in an organization’s value chain.



Inventory management Goal is to ensure that inventory is just the right size to meet

performance needs, thus minimizing the cost. Methods of inventory control:

Economic order quantity Just-in-time scheduling

Inventory control Economic order quantity (EOQ)

Inventory replenished with fixed quantity order when inventory falls to predetermined level.

Just-in-time scheduling Materials arrive at workstation or facility ‘just-in-time’ for use.

Virtually eliminates carrying costs of inventories.Management 11e Chapter 19 12

Figure 19.2 Inventory control by economic order quantity (EOQ).



Break-even analysis Determination of the point at which

sales revenues are sufficient to cover costs. Break-Even Point =

Fixed Costs / (Price – Variable Costs) Used in evaluating:

New products New program initiatives


Figure 19.3 Graphical approach to break-even analysis.


Study Question 3: How do organizations manage service and product quality?

Customer relationship management Establishes and maintains high standards of customer service in order

to strategically build lasting relationships with and add value to customers. External customers purchase the organization’s goods or utilize its

services. Internal customers are the persons and groups within an

organization who depend on the results of others' work to do their own jobs.

Customer Relationship Management (CRM) Uses latest technologies for intensive customer communication and

collection of data regarding customer needs and desires. Establishes and maintains high standards of customer service.


Figure 19.4 The importance of external and internal customers.



Total quality management (TQM) Quality principles are an integral part of

organization’s strategic objectives. Applying them to all aspects of operations. Committing to continuous improvement. Striving to meet customers’ needs by doing things

right the first time.



ISO (International Standards Organization) certification Adopted by many countries as quality

benchmark. Companies undergo rigorous audit to

determine if ISO requirements are met. Focus is on customer service and product

quality.



Quality and Continuous Improvement W. Edwards Deming emphasized:

Constant innovation. Use of Statistical methods. Training in the fundamentals of quality assurance.

Continuous improvement Quality circles

Continuous improvement Constant search for new ways to improve current performance. Reduce cycle time between order receipt and delivery.

Quality circle Small group of workers who meet to improve quality Assumes responsibility for quality Taps into members’ creativityManagement 11e Chapter 19 20


Statistical quality control Uses rigorous statistical analysis for

checking processes, materials, products, and services to ensure that they meet high standards. Takes random work samples Measures quality in samples Determines acceptability Unacceptable quality results in corrective action “Six Sigma” common example of SQC


Figure 19.5 Sample control chart showing upper and lower control limits.


Study Question 4: How can work processes be designed for productivity?

Process reengineering Systematic and complete analysis of work

processes. Design of new and better work processes.

Work process “A related group of tasks that create a result of value

for the customer.” (Michael Hammer)

Workflow Movement of work from one point to another in the

manufacturing or service delivery process.



Process value analysis Core processes are identified and evaluated

for their performance contributions. Each step in workflow is examined Step is eliminated if not found to be important,

useful, and contributing to the value added



Steps in reengineering core processes: Identify core processes. Map core processes in respect to workflows. Evaluate all tasks for core processes. Search for ways to eliminate unnecessary tasks or

work. Search for ways to eliminate delays, errors, and

misunderstandings. Search for efficiencies in how work is shared and

transferred among people and departments.


Figure 19.6 How reengineering can streamline work processes.


Management 11e John Schermerhorn

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