Introduction to Business

1. Introduction to Business Managing Processes

2. Module Learning Outcomes 12.1: Explain operations management in the production of goods and services 12.2: Describe the main categories of production processes 12.3: Explain the components involved in planning and scheduling the production process 12.4: Identify existing and emerging technologies that are changing the way goods are produced and delivered 12.5: Explain the importance of supply chain management 12.6: Summarize common management techniques used to ensure high-quality goods and services

3. Operational Management

4. Learning Outcomes: Operational Management 12.1: Explain operations management in the production of goods and services 12.1.1: Define operations management 12.1.2: Explain the role of operations manager 12.1.3: Explain how operations management relates to the service industry

5. Production Production, the creation of products and services, is an essential function in every firm. Production turns inputs, such as natural resources, raw materials, human resources, and capital, into outputs, which are products and services. This process is shown below. Managing this conversion process is the role of operations management.

6. What does an Operations Manager do? An Operations Manager is charged with managing and supervising the conversion process. They control about three-fourths of a firm’s assets, including inventories, wages, and benefits. They also work closely with other major divisions of the firm, such as marketing, finance, accounting, and human resources, to ensure that the firm produces its goods profitably and satisfies its customers. Marketing personnel help them decide which products to make or which services to offer. Accounting and human resources help them face the challenge of combining people and resources to produce high-quality goods on time and at reasonable cost. They are involved in the development and design of goods and determine what production processes will be most effective.

7. Three Stages of Operations Management Production and operations management involve three main types of decisions, typically made at three different stages: • Production planning. The first decisions facing operations managers come at the planning stage. At this stage, managers decide where, when, and how production will occur. They determine site locations and obtain the necessary resources. • Production control. At this stage, the decision-making process focuses on controlling quality and costs, scheduling, and the actual day-to-day operations of running a factory or service facility. • Improving production and operations. The final stage of operations management focuses on developing more efficient methods of producing the firm’s goods or services.

8. Operations Management in the Service Industry Operations management is about taking inputs and transforming them into outputs; this applies not only to producing tangible goods, but also in the service industry. Example: in a theme park, a few examples of issues facing an operations manager might be: • How to control crowds • How many cars to attach to a rollercoaster to maximize number of riders but ensure safety • How many tons of icecream to order to 4th of July weekend • How to staff entrances and exits

9. Practice Question 1 By definition, Operations is primarily concerned with: A. Production B. Profitability C. Customer satisfaction D. Distribution

10. Practice Question 2 You have assumed a VP Operations position at a medium-sized frozen foods company. Your job would focus on: A. Ensuring working capital is available to fund operations B. Planning adequate production capability to meet the forecasts from sales C. Managing data collection from your online sources to estimate demand D. Forecasting revenue versus the six-month plan

11. Practice Question 3 You are the operations manager for a large auto dealership services department. Which of the following would you be most concerned with? A. Coordinating prices with other dealerships carrying the same brand. B. Number of cars on the lot for July 4 sale. C. Mechanic staff availability to ensure most services are complete in one working day. D. Customer outreach to track satisfaction levels of purchases

12. Production Processes

13. Learning Outcomes: Production Processes 12.2: Describe the main categories of production processes 12.2.1: Describe project- or job-based production 12.2.2: Describe batch production 12.2.3: Describe mass production

14. Understanding Production Processes Operations management includes decisions about the way in which production will proceed. Four common production processes include: • Project-based • Batch • Mass • Continuous production

15. Project- and Job-based Production Project- or Job-based production is one-of-a-kind production in which only one unit is manufactured at a time. This is often used for very large projects or for individual customers. Examples • Custom home construction • Haircut • Yachts

16. Advantages and Disadvantages to Project- and Job-based Production Advantages Disadvantages • Unique, high-quality products are made • Workers are often more motivated and take pride in their work • Products are made according to individual customer needs and and improve customer satisfaction • Production is easy to organize • Very labor-intensive, so selling prices are usually higher • Production can take a long time and can have higher production costs (e.g., if special materials or tools are required)

17. Batch Production Batch production is a method used to produce similar items in groups, stage by stage. The product goes through each stage of the process together before moving on to the next stage. Examples: • Bakeries • Textiles • Furniture

18. Advantages and Disadvantages of Batch Production Advantages Disadvantages • Since large numbers are made, unit costs are lower • Offers the customer some variety of choice • Materials can be bought in bulk, so they are cheap • Production is flexible since different batches are made • Workers specialize in one process • Workers are often less motivated because the work becomes repetitive • Initial set-up costs are high • Expensive to move products around the workplace • Storage space will be needed to store raw materials

19. Mass Production Mass production,manufacturing many identical goods at once, was a product of the Industrial Revolution. Henry Ford’s Model-T automobile is a good example of early mass production. Other examples: • Canned goods • Over-the-counter drugs • Household appliances

20. Advantages and Disadvantages of Mass Production Advantages Disadvantages • Labor costs are usually lower • Materials can be purchased in large quantities, so they are often cheaper • Large number of goods are produced, lowering unit cost • Machinery is very expensive to buy, so production lines are very expensive to set up • Workers are not very motivated since their work is very repetitive • Production lines are Not very flexible and are difficult to change • If one part of the line breaks, the whole production process will have to stop • Maintenance costs are very high

21. Discussion Question What would be the best facility layout and production process to produce candles? Why?

22. Production Planning

23. Learning Outcomes: Production Planning 12.3: Explain the components involved in planning and scheduling the production process 12.3.1: Explain facility location 12.3.2: Explain facility layout 12.3.3: Explain materials-requirement planning (MRP) 12.3.4: Explain just-in-time inventory control (JIT) 12.3.5: Differentiate between Gantt charts, PERT, and the critical path method

24. Understanding Production Planning Depending on the product being manufactured, operations planning needs to decide: • Facility Location: Where will the facility will be located? • Facility Layout: How will the facility will be organized? • Material-requirements Planning (MRP): What materials are needed for production? • Inventory control: How will the various activities that go into the production process will be scheduled?

25. Considerations for Facility Location Facility locations is the most strategic and critical • Proximity to customers, suppliers, and skilled labor • Environmental regulations • Financial incentives offered by state and local development authorities • Quality-of-life considerations • Potential for future expansion

26. Facility Layout The primary aim of facility layout is to design a workflow that maximizes worker and production efficiency. The layout of a facility is most often determined by the product being manufactured. Types of layouts • Process layout: arrange equipment according to its function. • Product layout: a series of workstations at which already-made parts are assembled. • Fixed position layout: large products stay in place and workers and equipment go to them. • Cellular layout: each cell is designed for a specific process, part, or a complete product.

27. Process Layout The process layout arranges workflow around the production process. All workers performing similar tasks are grouped together. Products pass from one workstation to another (but not necessarily to every workstation). Best for firms that produce small numbers of a wide variety of products.

28. Product Layout Products that require a continuous or repetitive production process use the product (or assembly-line) layout. When large quantities of a product must be processed on an ongoing basis, the workstations or departments are arranged in a line with products moving along the line. Automobile and appliance manufacturers, as well as food-processing plants, usually use a product layout.

29. Fixed Position Layout Some products cannot be put on an assembly line or moved about in a plant. A fixed-position layout lets the product stay in one place while workers and machinery move to it as needed. Products that are impossible to move—ships, airplanes, and construction projects—are typically produced using a fixed-position layout.

30. Material-requirements planning (MRP) Materials requirement planning (MRP) is one type of computerized systems to control the flow of resources and inventory. MRP helps ensure a smooth flow of finished products by using a master schedule to ensure that the materials, labor, and equipment needed for production are at the right places in the right amounts at the right times.

31. MRP Scheduling The MRP schedule • Is based on forecasts of demand for the company’s products • Says exactly what will be manufactured during the next few weeks or months • Says when the work will take place. Sophisticated computer programs coordinate all the elements of MRP. The computer comes up with materials requirements by comparing production needs to the materials the company already has on hand. Orders are placed so items will be on hand when they are needed for production, while maintaining the lowest possible amount of materials and product to remain in house.

32. ERP Systems Some manufacturing firms have moved beyond MRP systems and are now using enterprise resource planning (ERP) systems which • provide an integrated and continuously updated view of core business processes using shared databases • track business resources and the status of business commitments • facilitate information flow between all business functions and manages connections to outside stakeholders

33. Just-in-time (JIT) manufacturing Just-in-time (JIT) manufacturing is a strategy companies employ to increase efficiency and decrease waste by receiving goods only when they are needed. Operations managers must accurately forecast the need for materials, since even the slightest deviation can result in a slowdown of production. Unexpected events like the shutdown of ports due to Hurricane Harvey and the devastation and flooding caused by Hurricane Maria in Puerto Rico can cause chaos in the supply chains of manufacturers, resulting in problems for firms relying on JIT

34. Scheduling Tools Three tools that are used by operations managers to ensure that projects and tasks are completed on time are: • Gantt charts • Critical path method (CPM) • PERT

35. Gantt Charts • A Gantt chart is a timeline • Multiple projects can be added to the timeline with start and finish dates and milestones and deadlines • The chart is used to determine: • How long a project will take to complete • The resources needed for the project • The order in which the tasks need to be completed

36. Gantt Chart Example

37. Critical Path Method (CPM) In the critical path method (CPM), the manager identifies all of the activities required to complete the project, the relationships between these activities, and the order in which they need to be completed. Then, the manager develops a diagram that uses arrows to show how the tasks are dependent on each other. The longest path through these linked activities is called the critical path. If the tasks on the critical path are not completed on time, the entire project will fall behind schedule.

38. Critical Path Method Figure

39. Program Evaluation and Review Technique (PERT) • Program evaluation and review technique (PERT) identifies critical tasks and assess how delays in certain activities will affect operations or production • In both PERT and CRM, managers use diagrams to see how operations and production will flow • Important difference between PERT and CPM • CPM assumes that the amount of time needed to finish a task is known with certainty • PERT assigns three time estimates for each activity: an optimistic time for completion, the most probable time, and a pessimistic time

40. Practice Question 4 The following are all important criteria in determining a facility location EXCEPT: A. Natural resource abundance B. Expansion potential C. Environmental regulations D. Financial incentives

41. Practice Question 5 You are the Operations Manager for a high-end furniture manufacturer. Your marketing department has introduced a line of custom, made-to-order products that vary in style and will be sold in small quantities due to the high cost of the products. You decide to use this type of facility layout for the production: A. Product (assembly line) layout B. Fixed position layout C. Process layout D. Modular layout

42. Practice Question 6 The major difference in usage between Gantt, PERT, and CPM is: A. Whether the project is for military or civilian purposes B. The degree of complexity of the project C. Gantt uses tables, PERT uses squares, and CPM uses circles to represent work D. Gantt and PERT are used for non-mission critical projects

43. Practice Question 7 Just-in-time inventory controls (JIT) compare with MRP systems in this way: A. JIT systems are focused on trimming employee tardiness B. MRP systems focus on manufacturing retail products (MRP) C. Both are systems focused on reducing inventory costs while making materials available for on-time production D. Both are systems utilize by Operations Managers to provide reports to senior management

44. New Technologies

45. Learning Outcomes: New Technologies 12.4: Identify existing and emerging technologies that are changing the way goods are produced and delivered 12.4.1: Describe CAD 12.4.2: Describe CAM 12.4.3: Describe 3D printing 12.4.4: Describe flexible manufacturing

46. Understanding New Technologies Companies can manufacture products faster and more efficiently using new technologies: • CAD (computer-aided design) • CAM (computer-aided manufacturing) • Flexible manufacturing • 3D printing • CIM (computer-integrated manufacturing)

47. CAD (Computer-aided Design) In Computer-aided design (CAD), computers are used to design and test new products and modify existing ones. Engineers use these systems to draw products and look at them from different angles. They can • analyze the products • make changes • test prototypes before manufacturing a single item

48. CAM (Computer-aided Manufacturing) Computer-aided manufacturing (CAM) is the use of software to control machine tools in the manufacturing of workpieces. Its primary purpose is to speed the production process and produce components and tooling with more precise dimensions and material consistency. CAD/CAM systems combine the advantages of CAD and CAM by integrating design, testing, and manufacturing control into one linked computer system. The system helps design the product, control the flow of resources needed to produce the product, and operate the production process.

49. 3D Printing 3D printing (or additive manufacturing, AM) is any of various processes used to make a three-dimensional object. In 3D printing, additive processes are used, in which successive layers of material are laid down under computer control. Specialized printers can create products or parts for use in early prototypes, and some industries print certain components on site rather than shipping them. These objects can be of almost any shape or geometry, and are produced from a 3D model or other electronic data source. A 3D printer is a type of industrial robot. The printers were originally large, expensive, and highly limited in what they could produce; today they are much cheaper and more versatile.

50. FMS (Flexible manufacturing systems) A flexible manufacturing system (FMS) offers flexibility in the way the production system reacts to change, whether planned or unplanned. The flexibility is typically built into one of the following: • Machine flexibility: the system can be changed to produce new product types or alter the order of operations executed on a part • Routing flexibility: the system has multiple machines than can perform the same operation on a part, or the system can absorb large-scale changes in volume, capacity, or capability An FMS has immense advantages over traditional production lines. When the firm needs to switch a production line to manufacture a new product, substantial time and money are often spent modifying the equipment. An FMS makes it possible to change equipment set-ups merely by reprogramming computer-controlled machines.