Chapter Twelve

2. McGraw-Hill/Irwin Introduction to Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Twelve Operations and Materials Management

3. Learning Objectives • Describe the nature of the operations and materials management process and explain how it can create a competitive advantage for a company. • Identify the five main components of operations and materials management costs and the methods companies use to reduce them. • Differentiate between the three major kinds of operating systems companies use to produce goods and services.

4. Learning Objectives • Understand the way total quality management can significantly improve both quality and productivity. • Describe three materials management methods companies use to improve the flow of resources into and out of production and increase operations efficiency.

5. The Nature of Operations and Materials Management • Operations • a company’s system of value-creation activities used to transform inputs into finished goods and services • Materials management • the set of activities that control the flow of resources into and out of a firm’s operating system

6. The Operations and Materials Management Process • Input • Operations • Output

7. The Operations and Materials Management Process Figure 12.1

8. Operations, Materials Management, and Competitive Advantage Figure 12.2

9. Productivity • Quality • Innovation • Responsiveness to customers • Balancing costs versus revenues

10. Five Major Components of OMM Costs Figure 12.3

11. Operations and Materials Management Costs • Raw Materials and Component Costs • Plant Costs • Labor Costs • Inventory Costs • Distribution Costs

12. Question? Which cost is the cost of getting products to customers? • Plant cost • Distribution cost • Inventory cost • Labor cost

13. Operations and Materials Management Costs • Raw Materials and Component Costs • comprise a significant percentage of companies’ total operating costs, particularly companies that make physical products

14. Operations and Materials Management Costs • Plant Costs • cost of the machinery, computers, tools, buildings, and equipment needed to transform inputs into finished products

15. Operations and Materials Management Costs • Labor Costs • number of employees needed to produce a given quantity of outputs • amount each employee must be paid • health and social insurance benefits each employee is given

16. Labor Costs • Maquiladoras • U.S. companies’ manufacturing plants in cities along the Mexican border

17. Operations and Materials Management Costs • Inventory • the resources – materials, supplies, and goods – a company holds in stock • Work-in-process goods • the semifinished goods that move through a company’s production process

18. Three Types of Inventory Figure 12.4

19. Operations and Materials Management Costs • Distribution Costs • the cost of getting products to customers Find some small business distribution solutions at ups.com

20. Types of Operating Systems • Small-Batch Production • Mass Production • Flexible Production • Total Quality Management

21. Three Types of Operating Systems Figure 12.5

22. Question? What is an operating system based on the use of automated machines and standard operating procedures? • Flexible production • Mass production • Small-batch production • Elastic production

23. Types of Operating Systems • Small-batch production • an operating system designed to make one-of-a-kind or small quantities of customized products • Customized products • products designed to match the need of individual customers

24. Types of Operating Systems • Mass production • an operating system based on the use of automated machines and standard operating procedures to make work routine and create a large number of standardized products • Standardized products • products that are identical

25. Types of Operating Systems • Flexible production • an advanced operating system that combines the benefits of mass production with the benefits of small-batch production

26. Flexible Production • Computer-integrated manufacturing • a manufacturing technique that controls the changeover of machines from one operation to another via computer software

27. Flexible Employees and Work Groups • Flexible work team • a team of self-managed employees who assume responsibility for performing the operating tasks necessary to make a part, or all, of a product

28. The Use of Flexible Work Teams to Assemble Cars Figure 12.6

29. Flexible Employees and Work Groups • Production layout • the way teams of employees are physically grouped into work cells or pods to assemble a product

30. Improving Operations Quality • Total quality management • an operations technique to continuously improve the production process, increase the quality of products, and help companies lower their operating costs

31. Improving Operations Quality • Quality control circles • team meetings in which production employees discuss ways to improve operating quality and productivity

32. Advanced MaterialsManagement Methods • Computer-Aided Materials Management • Computer-Based Global Supply Chain Management • Just-in-Time Inventory System

33. Advanced Materials and Management Methods • Computer-aided materials management • a technique that relies on computers to manage the flow of raw materials and component parts into and out of a company’s operating system

34. Advanced MaterialsManagement Methods • Global supply chain management • the coordination of the flow of raw materials, semifinished goods, and finished products around the world

35. Advanced MaterialsManagement Methods • Just-in-Time Inventory System • an inventory management system whereby inputs are delivered to the firm just when they are needed rather than being purchased and warehoused prior to their use

36. Just-in-Time Inventory Systems Figure 12.7

37. Video: Jet Blue • Jet Blue defines itself as a “customer service company.” From its innovative mission statement to the teamwork displayed by its employees, Jet Blue is focused on its customers. • How does Jet Blue differentiate its service from that of its competitors?