Operations and Service Management

1. Operations and Service Management Chapter 21

2. 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

3. 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

4. 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

5. Feedback Operations Strategy Inputs Raw materials Human resources Land, buildings Information Technology Outputs Products Services Operations Management The Organization as an Operations Management System Products & Facilities Product design Facilities layout Capacity planning Facilities location Control Processes Inventory management Productivity Quality Structure Reporting relationships Teams The Technical Core

6. 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.

7. Operational Concerns for Manufacturing and Service Organizations • Scheduling • Must obtain materials and supplies • Both must be concerned with quality and productivity

8. Four Stages of Operations Strategy • Stage 4 • Initiates Competitive Advantage • Advanced capabilities developed and significant input to strategic process provided • Concerns: • New products • New services • New technologies • International • Stage 1 • No Involvement • No positive contribution to strategy formulation • Concerns: • Cost • Labor efficiency • Stage 2 • Industry Current • Goals set according to industry practice • Concerns: • Capital investment • Quality control • Inventory management • Capacity • Stage 3 • Organizationally Supportive • Organization’s competitive strategy closely followed and supported • Concerns: • Advanced process technologies • New plants • What to make for the United States Source: Based on R.H. Hayes and S.C. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984).

9. 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

10. The E-Supply Chain Customer Extranet Data Exchange Extranet Data Exchange Retail Store Retail Chain Supplier Manufacturer Intranet Data Exchange Partnership approach to the supply chain optimizes inventory levels and enables rapid response to customer needs

11. How to Win Customers? • Better price • Quality • Performance • Delivery • Responsiveness to customer demand

12. Design for Manufacturabilityand Assembly - DFMA • Often requires • Restructuring operations • Creating teams of designers, manufacturers, and assemblers to meet objectives of design

13. Product Design Objectives Producibility 1 Cost 2 Quality 3 Reliability 4

14. Service Design Objectives Producibility 1 Cost 2 Quality 3 Reliability 4 Timing 5 Ethical Dilemma: A Friend for Life?

15. Procurement • Purchasing supplies, services, and raw materials for use in the production process

16. Facilities Layout • Process Layout • Product Layout • Cellular Layout • Fixed-position Layout

17. 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)

18. 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 • CAD = computer aided design • CAM = computer aided manufacturing • PLM = Product-life cycle management

19. 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

20. Capacity Planning • Determination and adjustment of the organization’s ability to produce products and services to match customer demand

21. Inventory Management Finished goods inventory Work-in-process inventory Raw materials inventory

22. Techniques for Inventory Management Economic order quantity Material requirements planning Just-in-Time inventory systems Logistics & Distribution management

23. 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)

24. Material Requirements Planning - MRP • Dependent demand inventory planning and control system • Schedules exact materials required • Is computer based • Based on precise estimates of future needs for production

25. 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

26. Measuring Productivity • Productivity = organization’s output of products and services divided by its inputs • Total factor • Productivity • Labor • Productivity Output Labor + Capital + Materials + Energy = Output Labor dollars =

27. Improving Productivity • Technological productivity • Employee productivity • Managerial productivity Experiential Exercise: What Is Your Attitude Toward Productivity?