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Chapter 09



           Production
              and
           Operations
          Management




McGraw-Hill/Irwin       Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Nine
                  LEARNING GOALS

     1. Describe the current state of U.S. manufacturing
        and what manufacturers have done to become
        more competitive.

     2. Describe the evolution from production to
        operations management.

     3. Identify various production processes and describe
        techniques that improve productivity, including
        computer-aided design and manufacturing, flexible
        manufacturing, lean manufacturing and mass
        customization.
                                                             9-2
Chapter Nine
                   LEARNING GOALS


     4. Describe operations management planning issues
        including facility location, facility layout, materials
        requirement planning, purchasing, just-in-time
        inventory control and quality control.

     5. Explain the use of PERT and Gantt charts to
        control manufacturing processes.




                                                                  9-3
Profile
              SAMUEL J. PALMISANO
                             IBM


      • Palmisano, CEO and President of IBM, started in
        the company in 1973.
      • The company’s earnings have quadrupled under
        Palmisano.
      •Switching the company’s




                                                          9-4
Chapter Nine
                NAME that COMPANY


     This company’s robots manufacture, test, and
        package motor starters - all untouched by
        human hands. The machines can fill special
        orders, even for a single item, without slowing
        down the process.


     Name that company!



                                                          9-5
Manufacturing
and Services in
Perspective
                  MANUFACTURING in the U.S.
     LG1


     • The U.S. is still the world’s leading
       manufacturer.
     • Manufacturing has continued to grow since
       1970. In fact, U.S. manufacturing is 2x bigger
       than in 1970.
     • Almost 25% of all
       goods produced each
       year come from the
       U.S.

                                                        9-6
Manufacturing
and Services in
Perspective            WHAT’S MADE in the USA?
     LG1                               Leading U.S. Manufactured Goods




           Source: Parade Magazine, www.parade.com, accessed June 2011.

                                                                          9-7
Manufacturing
and Services in
Perspective                 Exporters Extraordinaire
     LG1               Top Ten States that Manufacture Goods for Export




           Source: CNBC, www.cnbc.com, accessed June 2011.

                                                                          9-8
Manufacturing
and Services in
Perspective          MASSIVE MANUFACTURERS
     LG1                                    The Top Ten U.S. Manufacturers




           Source: Industry Week, www.industryweek.com, accessed June 2011.

                                                                              9-9
KEY WORD:
              SUSTAINABILITY
                     (Thinking Green)

• The market for new green products and services
  is almost endless.
• Given the rate of population growth, it’s important
  to plan ahead for a world with limited resources.
• Companies like DuPont, Michelin, Chevron and
  Nokia are working on sustainability projects.
• Procter & Gamble and Kaiser Permanente issue
  their own mandatory sustainability scorecards to
  their supply chains.

                                                        9-10
Manufacturing
and Services in
Perspective
                  TOP-PAYING SERVICE JOBS
     LG1



     • The U.S. economy is no longer manufacturing
       based.
     • 85% of jobs are in the service sector.
     • The top-paying service jobs in the U.S. are in:
           -   Legal services
           -   Medical services
           -   Entertainment
           -   Accounting
           -   Finance
           -   Management consulting
                                                         9-11
Manufacturers
and Service
Organizations
Become More
                REMAINING COMPETITIVE in
Competitive
     LG1            GLOBAL MARKETS

     • U.S. is still the leader in nanotechnology and
       biotechnology.
     • How can U.S. businesses maintain a competitive
       edge?
     -   Focusing on customers
     -   Maintaining close relationships with suppliers
     -   Practicing continuous improvement
     -   Focusing on quality
     -   Saving on costs through site selection
     -   Relying on the Internet to unite companies
     -   Adopting new production techniques

                                                          9-12
LEARNING from GERMANY
                 (Reaching Beyond Our Borders)


• Ten years ago, Germany’s economy was much like
  ours today.
• Stihl invested in highly trained workers.
• Stihl remained competitive
  in the manufacturing
  world.
• German companies
  poured money into
  research and stayed away
  from high tech products.
                                                   9-13
From Production
to Operations
Management
                  PRODUCTION and
     LG2      PRODUCTION MANAGEMENT

     • Production -- The creation of goods using land,
         labor, capital, entrepreneurship and knowledge (the
         factors of production).

     • Production
       Management -- All the
         activities managers do to
         help firms create goods.



                                                               9-14
From Production
to Operations
Management
                  OPERATIONS MANAGEMENT
     LG2




     • Operations Management -- A specialized area
         in management that converts or transforms resources
         into goods and services.

     • Operations management includes:
           -   Inventory management
           -   Quality control
           -   Production scheduling
           -   Follow-up services


                                                               9-15
Operations
Management in
the Service Sector   OPERATIONS MANAGEMENT
      LG2              in the SERVICE SECTOR

      • All about creating a good experience for those
        who use the service.
      • In hotels, like Ritz-
        Carlton, operation
        management
        includes fine dining,
        fresh flowers, and
        training for every
        employee.

                                                         9-16
Operations
Management in
the Service Sector         THERE’S an APP for THAT
      LG2                                          Top Productivity Apps for iPad




            Source: Entrepreneur, February 2011.

                                                                                    9-17
Progress
Assessment   PROGRESS ASSESSMENT


    • What have U.S. manufacturers done to regain a
      competitive edge?

    • What must U.S. companies do to continue to
      strengthen the country’s manufacturing base?

    • What led companies to focus on operations
      management rather than production?



                                                      9-18
Production
Processes    The PRODUCTION PROCESS
     LG3




                                      9-19
Production
Processes            FORM UTILITY
     LG3




     • Form Utility --
        The value producers
        add to materials in the
        creation of finished
        goods and services.




                                    9-20
Production
Processes    GROVE’S BASIC PRODUCTION
     LG3
                  REQUIREMENTS


     1. To build and deliver products in response to the
        demands of the customer at the scheduled
        delivery time.
     2. To provide an acceptable quality level.
     3. To provide everything at the lowest possible
        cost.



                                                           9-21
Production
Processes    PROCESS and ASSEMBLY in
     LG3          PRODUCTION

     • Process
       Manufacturing --
        The part of production
        that physically or
        chemically changes
        materials.
     • Assembly Process
       -- The part of the
        production process that
        puts together
        components.
                                       9-22
Production
Processes    KEY PRODUCTION PROCESSES
     LG3




     • Production processes are either continuous or
       intermittent.

     • Continuous Process -- Long production runs
       turn out finished goods over time.

     • Intermittent Process -- Production runs are
        short and the producer adjusts machines frequently
        to make different products.


                                                             9-23
Production
Processes
                       MINUTE MADE
     LG3     Production of Some of America’s Favorite Products




                                                                 9-24
The Need to
Improve Production
Techniques andDEVELOPMENTS MAKING U.S.
Cut Costs
      LG3    COMPANIES MORE COMPETITIVE


      1. Computer-aided design
         and manufacturing

      2. Flexible manufacturing

      3. Lean manufacturing

      4. Mass customization



                                          9-25
Computer-Aided
Design and
Manufacturing
             COMPUTER-AIDED DESIGN and
     LG3         MANUFACTURING

     • Computer-Aided
       Design (CAD) -- The
        use of computers in the
        design of products.

     • Computer-Aided
       Manufacturing (CAM)
       -- The use of computers in
        the manufacturing of
        products.

                                         9-26
Computer-Aided
Design and
Manufacturing
                 COMPUTER-INTEGRATED
     LG3           MANUFACTURING

     • Computer-Integrated
       Manufacturing (CIM) --
        The uniting of computer-
        aided design with computer-
        aided manufacturing.

     • CIM is expensive but it cuts
       as much as 80% of the time
       needed to program machines
       to make parts.


                                       9-27
Flexible
Manufacturing   FLEXIBLE MANUFACTURING
    LG3




     • Flexible Manufacturing -- Designing machines
        to do multiple tasks so they can produce a variety of
        products.

     • Allen-Bradley uses flexible manufacturing to build
       motor starters.

     • 26 machines and robots build, test and package
       parts.


                                                                9-28
Lean
Manufacturing      LEAN MANUFACTURING
    LG3




     • Lean Manufacturing -- Using less of everything
        than in mass production.

     • Compared to others, lean companies:
          -   Take half the human effort.
          -   Have half the defects in finished products.
          -   Require one-third the engineering effort.
          -   Use half the floor space.
          -   Carry 90% less inventory.



                                                            9-29
Mass
Customization   MASS CUSTOMIZATION
    LG3



     • Mass Customization -- Tailoring products to
        meet the needs of a large number of individual
        customers.
     • More manufacturers are
       learning to customize.

     • Mass customization
       exists in the service
       sector too.


                                                         9-30
MASS CUSTOMIZATION
              of CANDY
                (Spotlight on Small Business)

• Chocomize lets customers customize their
  chocolate bars.
• Co-founder, Eric Heinbockel, sought funding help
  from his family.
• Chocomize now has three full-time chocolate
  makers and is expected to be a success.




                                                     9-31
Progress
Assessment   PROGRESS ASSESSMENT


    • What’s form utility?

    • Define and differentiate the following: process
      manufacturing, assembly process, continuous
      process and intermittent process.

    • What do you call the integration of CAD and
      CAM?

    • What’s mass customization?

                                                        9-32
Operations
Management
Planning
              OPERATIONS MANAGEMENT
    LG4



    • Operations management planning helps solve
      problems like:
          - Facility location
          - Facility layout
          - Materials requirement planning
          - Purchasing
          - Inventory control
          - Quality control

                                                   9-33
Facility
Location           FACILITY LOCATION
     LG4




     • Facility Location
       -- The process of
           selecting a geographic
           location for a
           company’s operations.


     • Rising numbers of Internet businesses means
       brick-and-mortar retailers must find great
       locations.

                                                     9-34
STAY or LEAVE
                (Making Ethical Decisions)



• Potential of low-cost labor is very attractive to
  companies hoping to remain competitive.

• However, shuttering operations and moving can
  often cause severe economic problems in
  dependent areas.

• What would you do if you were the CEO of
  ChildrenWear Industries faced with this problem?


                                                      9-35
Taking
Operations
            OPERATIONS MANAGEMENT
Management to
the Internet
    LG4         on the INTERNET

    • Sometimes businesses outsource engineering,
      design and manufacturing to other companies.

    • Often these relationships are managed through
      the Internet.

    • Many companies are developing Internet-focused
      strategies.



                                                       9-36
Facility Location
in the Future  FUTURE FACILITY LOCATION
      LG4



      • Information technology gives firms increased
        flexibility in terms of location.

      • Telecommuting -- Working from home via
          computer.




                                                       9-37
Facility Layout
                  SETTING UP the FACILITY
     LG4




     • Facility Layout -- The physical arrangement of
         resources, including people, to most efficiently
         produce goods and provide services.

     • Facility layout depends on the processes
       performed:
           - Service: Help customers find products
           - Manufacturing: Improve efficiency



                                                            9-38
Facility Layout
                  FACILITY LAYOUT OPTIONS
     LG4



     1. Assembly Line Layout – Workers do only a few
           tasks at a time.

     2. Modular Layout – Teams of workers produce more
           complex units of the final product.

     3. Fixed-Position Layout – Allows workers to
           congregate around the product.

     4. Process Layout – Similar equipment and functions
           are grouped together.

                                                           9-39
Facility Layout
                  ASSEMBLY LINE LAYOUT
     LG4




                                         9-40
Facility Layout
                  MODULAR LAYOUT
     LG4




                                   9-41
Facility Layout
                  PROCESS LAYOUT
     LG4




                                   9-42
Facility Layout
                  FIXED-POSITION LAYOUT
     LG4




                                          9-43
Materials
Requirement
Planning
                    MRP and ERP
    LG4




    • Materials Requirement Planning (MRP) --
       A computer-based operations management system
       that uses sales forecasts to make sure parts and
       materials are available when needed.

    • Enterprise Resource Planning (ERP) -- A
       newer version of MRP, combines computerized
       functions into a single integrated software program
       using a single database.



                                                             9-44
Purchasing
                    PURCHASING
    LG4



    • Purchasing -- The
        function that searches for
        high-quality material
        resources, finds the best
        suppliers and negotiates the
        best price for goods and
        services.

    • The Internet has
      transformed purchasing.

                                       9-45
Just-in-Time
Inventory Control   INVENTORY CONTROL
     LG4




     • Just-in-Time (JIT) Inventory Control -- The
         production process in which a minimum of inventory
         is kept and parts, supplies and other needs are
         delivered just in time to go on the assembly line.

     • To work effectively, the process requires
       excellent coordination with suppliers.




                                                              9-46
Quality Control
                  QUALITY CONTROL
     LG4




     • Quality -- Consistently
         producing what the customer
         wants while reducing errors
         before and after delivery.

     • Six Sigma Quality -- A
         quality measure that allows    Photo Courtesy of: Argonne National Laboratory

         only 3.4 defects per million
         opportunities.


                                                                                         9-47
Quality Control
                  STATISTICAL QUALITY CONTROL
                     & STATISTICAL PROCESS
     LG4
                            CONTROL
     • Statistical Quality Control -- A process used
         to continually monitor all phases of the production
         process.

     • Statistical Process Control -- A process of
         testing statistical samples of product components at
         each stage of production.

     • Measuring quality along the production process
       reduces the need for quality control at the end.

                                                                9-48
The Baldrige
Awards          The BALDRIGE AWARDS
     LG4



     • Companies can apply for awards in these areas:
           - Manufacturing
           - Services
           - Small Businesses
           - Non-Profit/Government
           - Education
           - Healthcare


                                                        9-49
The Baldrige
Awards
                                THE WINNERS ARE…
     LG4                                  2010 Baldrige Award Recipients




           Source: National Institute of Standards and Technology, www.quality.nist.gov, accessed June 2011.

                                                                                                               9-50
ISO 9000 and
ISO 14000
Standards           WHAT is ISO?
    LG4



    • The International Organization for Standardization
      (ISO) is a worldwide federation of national
      standards bodies.

    • ISO 9000 -- The common name given to quality
       management and assurance standards.

    • ISO 14000 -- A collection of the best practices for
       managing an organization’s impact on the
       environment.


                                                            9-51
Progress
Assessment   PROGRESS ASSESSMENT


    • What are the major criteria for facility location?

    • What’s the difference between MRP and ERP?

    • What’s just-in-time inventory control?

    • What are Six Sigma quality, the Baldrige Award,
      ISO 9000 and ISO 14000?



                                                           9-52
Control
Procedures:
PERT and Gantt
Charts
                            PERT
    LG5




     • Program Evaluation and Review Technique
       (PERT) -- A method for analyzing the tasks involved
        in completing a given project and estimating the time
        needed.




                                                                9-53
Control
Procedures:
PERT and Gantt
Charts
                 STEPS INVOLVED in PERT
    LG5



     1. Analyzing and sequencing tasks
     2. Estimating the time needed to complete each
        task
     3. Drawing a PERT network illustrating the first two
        steps
     4. Identifying the critical path

     •    Critical Path -- The sequence of tasks that
          takes the longest time to complete.
                                                            9-54
Control
Procedures:
            PERT CHART for a MUSIC VIDEO
PERT and Gantt
Charts
    LG5




                                           9-55
Control
Procedures:
PERT and Gantt
Charts
                   GANTT CHARTS
    LG5




     • Gantt Chart – A bar graph that shows what
        projects are being worked on and how much has been
        completed.




                                                             9-56
Control
Procedures:
PERT and Gantt   GANTT CHART for a
Charts
    LG5            DOLL FACTORY




                                     9-57
Progress
Assessment   PROGRESS ASSESSMENT


    • Draw a PERT chart for making breakfast of three-
      minute eggs, buttered toast and coffee. Define
      the critical path.

    • How could you use a Gantt chart to keep track of
      production?




                                                         9-58

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Chap009

  • 1. Chapter 09 Production and Operations Management McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 2. Chapter Nine LEARNING GOALS 1. Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. 2. Describe the evolution from production to operations management. 3. Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing and mass customization. 9-2
  • 3. Chapter Nine LEARNING GOALS 4. Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control and quality control. 5. Explain the use of PERT and Gantt charts to control manufacturing processes. 9-3
  • 4. Profile SAMUEL J. PALMISANO IBM • Palmisano, CEO and President of IBM, started in the company in 1973. • The company’s earnings have quadrupled under Palmisano. •Switching the company’s 9-4
  • 5. Chapter Nine NAME that COMPANY This company’s robots manufacture, test, and package motor starters - all untouched by human hands. The machines can fill special orders, even for a single item, without slowing down the process. Name that company! 9-5
  • 6. Manufacturing and Services in Perspective MANUFACTURING in the U.S. LG1 • The U.S. is still the world’s leading manufacturer. • Manufacturing has continued to grow since 1970. In fact, U.S. manufacturing is 2x bigger than in 1970. • Almost 25% of all goods produced each year come from the U.S. 9-6
  • 7. Manufacturing and Services in Perspective WHAT’S MADE in the USA? LG1 Leading U.S. Manufactured Goods Source: Parade Magazine, www.parade.com, accessed June 2011. 9-7
  • 8. Manufacturing and Services in Perspective Exporters Extraordinaire LG1 Top Ten States that Manufacture Goods for Export Source: CNBC, www.cnbc.com, accessed June 2011. 9-8
  • 9. Manufacturing and Services in Perspective MASSIVE MANUFACTURERS LG1 The Top Ten U.S. Manufacturers Source: Industry Week, www.industryweek.com, accessed June 2011. 9-9
  • 10. KEY WORD: SUSTAINABILITY (Thinking Green) • The market for new green products and services is almost endless. • Given the rate of population growth, it’s important to plan ahead for a world with limited resources. • Companies like DuPont, Michelin, Chevron and Nokia are working on sustainability projects. • Procter & Gamble and Kaiser Permanente issue their own mandatory sustainability scorecards to their supply chains. 9-10
  • 11. Manufacturing and Services in Perspective TOP-PAYING SERVICE JOBS LG1 • The U.S. economy is no longer manufacturing based. • 85% of jobs are in the service sector. • The top-paying service jobs in the U.S. are in: - Legal services - Medical services - Entertainment - Accounting - Finance - Management consulting 9-11
  • 12. Manufacturers and Service Organizations Become More REMAINING COMPETITIVE in Competitive LG1 GLOBAL MARKETS • U.S. is still the leader in nanotechnology and biotechnology. • How can U.S. businesses maintain a competitive edge? - Focusing on customers - Maintaining close relationships with suppliers - Practicing continuous improvement - Focusing on quality - Saving on costs through site selection - Relying on the Internet to unite companies - Adopting new production techniques 9-12
  • 13. LEARNING from GERMANY (Reaching Beyond Our Borders) • Ten years ago, Germany’s economy was much like ours today. • Stihl invested in highly trained workers. • Stihl remained competitive in the manufacturing world. • German companies poured money into research and stayed away from high tech products. 9-13
  • 14. From Production to Operations Management PRODUCTION and LG2 PRODUCTION MANAGEMENT • Production -- The creation of goods using land, labor, capital, entrepreneurship and knowledge (the factors of production). • Production Management -- All the activities managers do to help firms create goods. 9-14
  • 15. From Production to Operations Management OPERATIONS MANAGEMENT LG2 • Operations Management -- A specialized area in management that converts or transforms resources into goods and services. • Operations management includes: - Inventory management - Quality control - Production scheduling - Follow-up services 9-15
  • 16. Operations Management in the Service Sector OPERATIONS MANAGEMENT LG2 in the SERVICE SECTOR • All about creating a good experience for those who use the service. • In hotels, like Ritz- Carlton, operation management includes fine dining, fresh flowers, and training for every employee. 9-16
  • 17. Operations Management in the Service Sector THERE’S an APP for THAT LG2 Top Productivity Apps for iPad Source: Entrepreneur, February 2011. 9-17
  • 18. Progress Assessment PROGRESS ASSESSMENT • What have U.S. manufacturers done to regain a competitive edge? • What must U.S. companies do to continue to strengthen the country’s manufacturing base? • What led companies to focus on operations management rather than production? 9-18
  • 19. Production Processes The PRODUCTION PROCESS LG3 9-19
  • 20. Production Processes FORM UTILITY LG3 • Form Utility -- The value producers add to materials in the creation of finished goods and services. 9-20
  • 21. Production Processes GROVE’S BASIC PRODUCTION LG3 REQUIREMENTS 1. To build and deliver products in response to the demands of the customer at the scheduled delivery time. 2. To provide an acceptable quality level. 3. To provide everything at the lowest possible cost. 9-21
  • 22. Production Processes PROCESS and ASSEMBLY in LG3 PRODUCTION • Process Manufacturing -- The part of production that physically or chemically changes materials. • Assembly Process -- The part of the production process that puts together components. 9-22
  • 23. Production Processes KEY PRODUCTION PROCESSES LG3 • Production processes are either continuous or intermittent. • Continuous Process -- Long production runs turn out finished goods over time. • Intermittent Process -- Production runs are short and the producer adjusts machines frequently to make different products. 9-23
  • 24. Production Processes MINUTE MADE LG3 Production of Some of America’s Favorite Products 9-24
  • 25. The Need to Improve Production Techniques andDEVELOPMENTS MAKING U.S. Cut Costs LG3 COMPANIES MORE COMPETITIVE 1. Computer-aided design and manufacturing 2. Flexible manufacturing 3. Lean manufacturing 4. Mass customization 9-25
  • 26. Computer-Aided Design and Manufacturing COMPUTER-AIDED DESIGN and LG3 MANUFACTURING • Computer-Aided Design (CAD) -- The use of computers in the design of products. • Computer-Aided Manufacturing (CAM) -- The use of computers in the manufacturing of products. 9-26
  • 27. Computer-Aided Design and Manufacturing COMPUTER-INTEGRATED LG3 MANUFACTURING • Computer-Integrated Manufacturing (CIM) -- The uniting of computer- aided design with computer- aided manufacturing. • CIM is expensive but it cuts as much as 80% of the time needed to program machines to make parts. 9-27
  • 28. Flexible Manufacturing FLEXIBLE MANUFACTURING LG3 • Flexible Manufacturing -- Designing machines to do multiple tasks so they can produce a variety of products. • Allen-Bradley uses flexible manufacturing to build motor starters. • 26 machines and robots build, test and package parts. 9-28
  • 29. Lean Manufacturing LEAN MANUFACTURING LG3 • Lean Manufacturing -- Using less of everything than in mass production. • Compared to others, lean companies: - Take half the human effort. - Have half the defects in finished products. - Require one-third the engineering effort. - Use half the floor space. - Carry 90% less inventory. 9-29
  • 30. Mass Customization MASS CUSTOMIZATION LG3 • Mass Customization -- Tailoring products to meet the needs of a large number of individual customers. • More manufacturers are learning to customize. • Mass customization exists in the service sector too. 9-30
  • 31. MASS CUSTOMIZATION of CANDY (Spotlight on Small Business) • Chocomize lets customers customize their chocolate bars. • Co-founder, Eric Heinbockel, sought funding help from his family. • Chocomize now has three full-time chocolate makers and is expected to be a success. 9-31
  • 32. Progress Assessment PROGRESS ASSESSMENT • What’s form utility? • Define and differentiate the following: process manufacturing, assembly process, continuous process and intermittent process. • What do you call the integration of CAD and CAM? • What’s mass customization? 9-32
  • 33. Operations Management Planning OPERATIONS MANAGEMENT LG4 • Operations management planning helps solve problems like: - Facility location - Facility layout - Materials requirement planning - Purchasing - Inventory control - Quality control 9-33
  • 34. Facility Location FACILITY LOCATION LG4 • Facility Location -- The process of selecting a geographic location for a company’s operations. • Rising numbers of Internet businesses means brick-and-mortar retailers must find great locations. 9-34
  • 35. STAY or LEAVE (Making Ethical Decisions) • Potential of low-cost labor is very attractive to companies hoping to remain competitive. • However, shuttering operations and moving can often cause severe economic problems in dependent areas. • What would you do if you were the CEO of ChildrenWear Industries faced with this problem? 9-35
  • 36. Taking Operations OPERATIONS MANAGEMENT Management to the Internet LG4 on the INTERNET • Sometimes businesses outsource engineering, design and manufacturing to other companies. • Often these relationships are managed through the Internet. • Many companies are developing Internet-focused strategies. 9-36
  • 37. Facility Location in the Future FUTURE FACILITY LOCATION LG4 • Information technology gives firms increased flexibility in terms of location. • Telecommuting -- Working from home via computer. 9-37
  • 38. Facility Layout SETTING UP the FACILITY LG4 • Facility Layout -- The physical arrangement of resources, including people, to most efficiently produce goods and provide services. • Facility layout depends on the processes performed: - Service: Help customers find products - Manufacturing: Improve efficiency 9-38
  • 39. Facility Layout FACILITY LAYOUT OPTIONS LG4 1. Assembly Line Layout – Workers do only a few tasks at a time. 2. Modular Layout – Teams of workers produce more complex units of the final product. 3. Fixed-Position Layout – Allows workers to congregate around the product. 4. Process Layout – Similar equipment and functions are grouped together. 9-39
  • 40. Facility Layout ASSEMBLY LINE LAYOUT LG4 9-40
  • 41. Facility Layout MODULAR LAYOUT LG4 9-41
  • 42. Facility Layout PROCESS LAYOUT LG4 9-42
  • 43. Facility Layout FIXED-POSITION LAYOUT LG4 9-43
  • 44. Materials Requirement Planning MRP and ERP LG4 • Materials Requirement Planning (MRP) -- A computer-based operations management system that uses sales forecasts to make sure parts and materials are available when needed. • Enterprise Resource Planning (ERP) -- A newer version of MRP, combines computerized functions into a single integrated software program using a single database. 9-44
  • 45. Purchasing PURCHASING LG4 • Purchasing -- The function that searches for high-quality material resources, finds the best suppliers and negotiates the best price for goods and services. • The Internet has transformed purchasing. 9-45
  • 46. Just-in-Time Inventory Control INVENTORY CONTROL LG4 • Just-in-Time (JIT) Inventory Control -- The production process in which a minimum of inventory is kept and parts, supplies and other needs are delivered just in time to go on the assembly line. • To work effectively, the process requires excellent coordination with suppliers. 9-46
  • 47. Quality Control QUALITY CONTROL LG4 • Quality -- Consistently producing what the customer wants while reducing errors before and after delivery. • Six Sigma Quality -- A quality measure that allows Photo Courtesy of: Argonne National Laboratory only 3.4 defects per million opportunities. 9-47
  • 48. Quality Control STATISTICAL QUALITY CONTROL & STATISTICAL PROCESS LG4 CONTROL • Statistical Quality Control -- A process used to continually monitor all phases of the production process. • Statistical Process Control -- A process of testing statistical samples of product components at each stage of production. • Measuring quality along the production process reduces the need for quality control at the end. 9-48
  • 49. The Baldrige Awards The BALDRIGE AWARDS LG4 • Companies can apply for awards in these areas: - Manufacturing - Services - Small Businesses - Non-Profit/Government - Education - Healthcare 9-49
  • 50. The Baldrige Awards THE WINNERS ARE… LG4 2010 Baldrige Award Recipients Source: National Institute of Standards and Technology, www.quality.nist.gov, accessed June 2011. 9-50
  • 51. ISO 9000 and ISO 14000 Standards WHAT is ISO? LG4 • The International Organization for Standardization (ISO) is a worldwide federation of national standards bodies. • ISO 9000 -- The common name given to quality management and assurance standards. • ISO 14000 -- A collection of the best practices for managing an organization’s impact on the environment. 9-51
  • 52. Progress Assessment PROGRESS ASSESSMENT • What are the major criteria for facility location? • What’s the difference between MRP and ERP? • What’s just-in-time inventory control? • What are Six Sigma quality, the Baldrige Award, ISO 9000 and ISO 14000? 9-52
  • 53. Control Procedures: PERT and Gantt Charts PERT LG5 • Program Evaluation and Review Technique (PERT) -- A method for analyzing the tasks involved in completing a given project and estimating the time needed. 9-53
  • 54. Control Procedures: PERT and Gantt Charts STEPS INVOLVED in PERT LG5 1. Analyzing and sequencing tasks 2. Estimating the time needed to complete each task 3. Drawing a PERT network illustrating the first two steps 4. Identifying the critical path • Critical Path -- The sequence of tasks that takes the longest time to complete. 9-54
  • 55. Control Procedures: PERT CHART for a MUSIC VIDEO PERT and Gantt Charts LG5 9-55
  • 56. Control Procedures: PERT and Gantt Charts GANTT CHARTS LG5 • Gantt Chart – A bar graph that shows what projects are being worked on and how much has been completed. 9-56
  • 57. Control Procedures: PERT and Gantt GANTT CHART for a Charts LG5 DOLL FACTORY 9-57
  • 58. Progress Assessment PROGRESS ASSESSMENT • Draw a PERT chart for making breakfast of three- minute eggs, buttered toast and coffee. Define the critical path. • How could you use a Gantt chart to keep track of production? 9-58

Editor's Notes

  1. Company: Allen-Bradley
  2. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Students are often surprised to read that the United States is the world ’s leading manufacturer, producing 25 percent of all goods produced worldwide. To start a discussion ask students: What items do companies in the United States produce?
  3. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. What ’s Made in the USA? This slide presents the leading goods manufactured in the United States. Ask students: Why are the goods on the slide manufactured in the United States? (Student s’ answers will vary but should focus on the abundance of certain factors of production and the United States’ comparative advantage in the production of capital intensive products, topics that were covered earlier in the text.) To determine what goods are manufactured in a particular state use the Bureau of Economic Analysis website (www.bea.gov).
  4. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Leading U.S. Manufacturing States This slide identifies the ten leading manufacturing states in terms of amount of products made in the U.S for exports. Ask the students if they are surprised about any of the states listed being among the largest employers in manufacturing. 3. As mentioned in the previous slide, it might be useful to explore what items are being produced in each of the states mentioned in this slide by visiting www.bea.gov.
  5. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Top Ten Manufacturers This slide presents the top ten manufacturers (based on revenues) according to Industry Week ’s list of the 500 largest publicly held U.S. manufacturing companies. One quick observation from this slide – it is dominated by oil and energy companies. Ask the students: How much do you pay per gallon of gas? Does that have any impact on this listing? (Answer is obvious – the higher the gas price, the more money the oil companies make in both revenues and profits.)
  6. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive.
  7. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive.
  8. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. The famous economist Joseph Schumpeter believed in continuous improvement and discussed capitalism as a force for creative destruction. If the United States is to remain competitive, the nation as a whole must continually innovate eschewing old inefficient industries in favor of capital-intensive knowledge-driven industries.
  9. See Learning Goal 1: Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive.
  10. See Learning Goal 2: Describe the evolution from production to operations management.
  11. See Learning Goal 2: Describe the evolution from production to operations management.
  12. See Learning Goal 2: Describe the evolution from production to operations management.
  13. See Learning Goal 2: Describe the evolution from production to operations management. There’s an App for That This slide shows the top iPad apps that help service businesses increase productivity.
  14. Manufacturers have regained a competitive advantage by focusing on the following: The needs of customers , maintaining a close relationship with suppliers to make sure they are meeting customer needs, practicing continuous improvement, focusing on quality, saving on costs through better site selection, using new technologies, adopting new production techniques. To strengthen the nation ’s manufacturing base will require an adjustment and recognition of the new realities in manufacturing. This will require focusing on new technologies, such as the green ventures discussed in your textbook. The nature of business has changed dramatically in the past twenty years forcing companies to focus on operations management. One change is the shift from a manufacturing economy to one dominated by the service industry. Operations management is a more specialized area of management that converts resources into useful outputs.
  15. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  16. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  17. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization. Andrew Grove is the former chairman of computer chip manufacturer Intel.
  18. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  19. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  20. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization. Minute Made This slide presents the production efficiency of various products. Before introducing this slide, it would be interesting to ask the students to take a guess: How many Krispy Kreme Doughnuts or Chips Ahoy! Cookies are made every minute? Again it is important to reinforce the point that production efficiency directly translates into cost savings and therefore profits.
  21. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  22. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  23. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  24. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  25. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  26. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  27. See Learning Goal 3: Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.
  28. Form utility is the value producers add to materials in the creation of finished goods and services. For example, when a company transforms raw steel into the body of an automobile they are creating form utility. Process manufacturing physically or chemically changes materials, such as turning sand into glass or computer chips. The assembly process puts together components to create a product. For example, cars are made through an assembly process that puts together the frame, engine and other parts. Continuous process involves long production runs turning out finished goods over time. For example, a plant that makes plastic cups is run on a continuous process. Rather than using long runs, an intermittent process involves short runs that respond directly to specific customer orders. An example of this process would include manufacturers of men ’s custom business suits. The integration of CAD and CAM is referred to as computer-integrated manufacturing or CIM. Mass customization is the process of tailoring products to meet the demands of a large number of individual customers. One example of this process is NIKEiD which allows customers to design athletic shoes by choosing from a variety of colors and designs. For more information on this process go to www.nikeid.nike.com.
  29. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  30. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  31. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  32. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  33. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  34. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  35. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  36. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  37. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  38. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  39. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  40. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  41. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  42. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. A JIT system makes sure the right materials are at the right place at the right time at the cheapest cost to meet both customer and production needs. To start a discussion with students ask the following question: While the benefits of the JIT system are obvious what are some of the drawbacks?
  43. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  44. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  45. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control.
  46. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Baldrige Award Recipients This slide presents the 2010 Baldrige National Quality Award recipients. Awardees included two manufacturers, three small businesses, one health care system, and one school system. 3. To better understand the process have students spend time reviewing the www.nist.gov website.
  47. See Learning Goal 4: Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. ISO is the world ’s largest developer and publisher of international standards. The purpose of ISO is to form a bridge between the public and private sectors. ISO is based in Switzerland.
  48. Managers must always consider the customer and the impact on customers’ ability to use the company ’s services and to communicate about their needs. Other criteria that need to be considered include: labor costs, availability of resources, access to transportation, proximity to customers, suppliers, crime rates, quality of life for employees and the cost of living, to mention but a few. Materials requirement planning or (MRP) is a computer-based operations management system that uses sales forecasts to make sure needed parts and materials are available at the right time and place. Enterprise resource planning (ERP), a newer version of MRP, combines the computerized functions of all the divisions and subsidiaries of the firm into a single integrated software program that uses a single database. One major expense in the production process is the holding of parts. The goal of just-in-time inventory is to eliminate or reduce that cost. Just-in-time inventory systems keep a minimum of inventory on the premises and only deliver parts just as they are needed on the factory floor. Six Sigma is a quality-control standard which sets a benchmark of no more than 3.4 defects per million opportunities. The Baldrige Award was created in 1987 to promote a standard for overall quality in the following areas: manufacturing, services, small business, education, and health care. The award was named after Malcolm Baldrige, the late U.S. secretary of commerce. The International Organization for Standardization or ISO is a worldwide federation of national standards bodies from more than 140 countries. This nongovernmental organization establishes global measures for the quality of individual products. ISO 9000 is the common name given to quality management and assurance standards, while ISO 14000 is a collection of the best practices for managing an organization ’s environmental impact.
  49. See Learning Goal 5: Explain the use of PERT and Gantt charts to control manufacturing processes. The Program Evaluation and Review Technique (PERT) was developed in the 1950s with the construction of the Navy ’s Polaris submarine project.
  50. See Learning Goal 5: Explain the use of PERT and Gantt charts to control manufacturing processes.
  51. See Learning Goal 5: Explain the use of PERT and Gantt charts to control manufacturing processes.
  52. See Learning Goal 5: Explain the use of PERT and Gantt charts to control manufacturing processes. Henri Gantt created the Gantt Chart which allows management to chart workflow and improve worker productivity. The Gantt Chat is the forerunner to PERT.
  53. See Learning Goal 5: Explain the use of PERT and Gantt charts to control manufacturing processes.
  54. To answer this question please refer to figure 9.3 in the textbook. A Gantt chart is a scheduling mechanism used by manufacturers for measuring production progress. This chart will give management a clear idea as to the status of the project and how much has been completed at any given time.