Chapter 21 Operations and Service Management Operations and Service Management  Strategic success depends on efficient operations  Operational concerns take on even greater importance in today’s competitive environment where consumers often want customized products and services delivered immediately Manager’s Challenge: Donnelley Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Operations and Service Management Topics Chapter 21  Management and control of production operations  Define operations management  How to bring operations into strategic decision making  Overview of integrated operations activities  Specific operations design issues  How managers measure and improve productivity Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Operations Management  The field of management that specializes in the physical production of goods or services and uses quantitative techniques for solving manufacturing problems Technical core = heart of the organization’s production of its product or service Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved The Organization as an Operations Management System Feedback Operations Strategy Inputs Raw materials Human resources Land, buildings Information Technology Operations Management Products & Facilities Structure Product design Reporting relationships Facilities layout Teams Capacity planning Facilities location Control Processes Inventory management Productivity Quality The Technical Core Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Outputs Products Services Manufacturing and Service Organizations Source: Based on Richard L Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and Byron J Finch and Richard L Luebbe, Operations Management (Fort Worth, Texas: The Dryden Press, 1995), 50 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Operational Concerns for Manufacturing and Service Organizations  Scheduling  Must obtain materials and supplies  Both must be concerned with quality and productivity Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Four Stages of Operations Strategy Stage No Involvement • No positive contribution to strategy formulation • Concerns: Cost Labor efficiency Stage Industry Current • Goals set according to industry practice • Concerns: Capital investment Quality control Inventory management Capacity Stage Organizationally Supportive • Organization’s competitive strategy closely followed and supported • Concerns: Advanced process technologies New plants What to make for the United States Stage Initiates Competitive Advantage • Advanced capabilities developed and significant input to strategic process provided • Concerns: New products New services New technologies International Source: Based on R.H Hayes and S.C Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984) Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved The Integrated Enterprise  Supply chain management = managing the sequence of suppliers and purchasers, covering all stages of processing from obtaining raw materials to distributing finished goods to final consumers Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved The E-Supply Chain Customer Supplier Extranet Data Exchange Manufacturer Extranet Data Exchange Retail Chain Retail Store Intranet Data Exchange Partnership approach to the supply chain optimizes inventory levels and enables rapid response to customer needs 10 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Product Design Objectives 13 Producibility Cost Quality Reliability Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Service Design Objectives Producibility Cost Quality Reliability Timing Ethical Dilemma: A Friend for Life? 14 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Procurement  Purchasing supplies, services, and raw materials for use in the production process 15 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Facilities Layout  Process Layout  Product Layout  Cellular Layout  Fixed-position Layout 16 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Technology Automation  Service Technology  Restaurants – calculate exact cost and ingredient needs for each menu item  Banking – ATMs  Gas stations – pay-at-pump systems  Retailing = RFID – radio-frequency identification (high-tech barcode) 17 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Technology Automation  Flexible Manufacturing Systems, the use of automated production lines that can be quickly adapted to produce more than one kind of product  CAD/CAM ● ● ● 18 CAD = computer aided design CAM = computer aided manufacturing PLM = Product-life cycle management Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Facility Location  Cost-benefit analysis – most common approach to selecting a site for a new location  New location scouting software is helping managers turn facilities location into a science 19 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Capacity Planning  Determination and adjustment of the organization’s ability to produce products and services to match customer demand 20 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Inventory Management Finished goods inventory Work-in-process inventory Raw materials inventory 21 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Techniques for Inventory Management Economic order quantity Material requirements planning Just-in-Time inventory systems Logistics & Distribution management 22 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Logistics and Distribution Management  Logistics = activities required to physically move materials into the company’s operations facility and to move finished products to customers  Distribution = moving finished products to customers (order fulfillment) 23 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Material Requirements Planning - MRP 24  Dependent demand inventory planning and control system  Schedules exact materials required  Is computer based  Based on precise estimates of future needs for production Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Lean Manufacturing and Productivity  Lean manufacturing = process using highly trained employees at every stage of the production process to cut waste and improve quality – employee involvement is key 25 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Measuring Productivity  Productivity = organization’s output of products and services divided by its inputs  Total factor  Productivity =  Labor  Productivity 26 = Output Labor + Capital + Materials + Energy Output Labor dollars Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Improving Productivity Technological productivity Employee productivity Managerial productivity Experiential Exercise: What Is Your Attitude Toward Productivity? 27 Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved ... Management Topics Chapter 21  Management and control of production operations  Define operations management  How to bring operations into strategic decision making  Overview of integrated operations. .. Source: Based on Richard L Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and Byron J Finch and Richard L Luebbe, Operations Management (Fort... products and services delivered immediately Manager’s Challenge: Donnelley Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved Operations and Service Management