managing operations

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managing operations

  1. 1. Chapter 14 Managing Service and Manufacturing Operations
  2. 2. What Would You Do? <ul><li>Newsday operates in a highly competitive environment </li></ul><ul><li>Some customers are unhappy that late-breaking stories are not covered </li></ul><ul><li>Stories have to be finalized and filed between 9:00 and 11:00 p.m. </li></ul><ul><li>How can Newsday improve its processes to give better coverage of late-breaking stories? </li></ul>
  3. 3. Learning Objectives: Managing for Productivity and Quality <ul><li>After reading these next two sections, you should be able to: </li></ul><ul><li>1. discuss the kinds of productivity and their importance in managing operations </li></ul><ul><li>2. explain the role that quality plays in managing operations </li></ul>
  4. 4. Productivity <ul><li>A measure of performance that indicates how many inputs it takes to produce or create an output </li></ul><ul><ul><li>why productivity matters </li></ul></ul><ul><ul><li>kinds of productivity </li></ul></ul>
  5. 5. Why Productivity Matters <ul><li>Higher productivity </li></ul><ul><li>Lower costs </li></ul><ul><li>Lower prices </li></ul><ul><li>Higher market share </li></ul><ul><li>Higher profits </li></ul><ul><li>Higher standard of living </li></ul>
  6. 6. Kinds of Productivity <ul><li>Partial productivity = Outputs </li></ul><ul><li>_________________ </li></ul><ul><li>Single Kind of Input </li></ul><ul><li>Multifactor productivity = Outputs </li></ul><ul><li>________________________________ </li></ul><ul><li>Labour + Capital + Materials + Energy </li></ul>
  7. 7. Multifactor Productivity Growth Across Industries Exhibit 14.1
  8. 8. Quality <ul><li>Quality-related product characteristics </li></ul><ul><li>Quality-related service characteristics </li></ul><ul><li>ISO 9000 </li></ul><ul><li>Total quality management </li></ul>
  9. 9. Quality-Related Product Characteristics <ul><li>Reliability </li></ul><ul><ul><li>the average time between breakdowns </li></ul></ul><ul><li>Serviceability </li></ul><ul><ul><li>how easy or difficult it is to fix a product </li></ul></ul><ul><li>Durability </li></ul><ul><ul><li>the mean time to failure </li></ul></ul>
  10. 10. Quality-Related Service Characteristics <ul><li>Quality service </li></ul><ul><li>Reliability </li></ul><ul><li>Tangibles </li></ul><ul><li>Responsiveness </li></ul><ul><li>Assurance </li></ul><ul><li>Empathy </li></ul>
  11. 11. ISO 9000 <ul><li>A series of five international standards </li></ul><ul><li>Certifies quality processes </li></ul><ul><li>Managers often want this to improve customer satisfaction </li></ul>
  12. 12. Total Quality Management <ul><li>An integrated, principle-based, organization-wide strategy for improving product and service quality </li></ul><ul><li>Customer focus </li></ul><ul><li>Customer satisfaction </li></ul><ul><li>Continuous improvement </li></ul><ul><li>Variation </li></ul><ul><li>Teamwork </li></ul>
  13. 13. Learning Objectives: Managing Operations <ul><li>After reading these next three sections, you should be able to: </li></ul><ul><li>3. explain the essentials of managing a service business </li></ul><ul><li>4. describe the different kinds of manufacturing operations </li></ul><ul><li>5. describe why and how companies should manage inventory levels </li></ul>
  14. 14. Service Operations <ul><li>The service-profit chain </li></ul><ul><li>Service recovery and empowerment </li></ul>
  15. 15. Service-Profit Chain Exhibit 14.2
  16. 16. Service Recovery and Empowerment <ul><li>Restoring customer satisfaction to strongly dissatisfied customers </li></ul><ul><li>Empowering workers is one way to speed up service recovery </li></ul>
  17. 17. Benefits of Empowering Service Workers for Service Recovery <ul><li>1. Quicker responses to customer complaints and problems </li></ul><ul><li>2. Employees feel better about their jobs and themselves </li></ul><ul><li>3. Employee interaction with customers will be warm and enthusiastic </li></ul><ul><li>4. Employees are more likely to offer ideas for improving service or preventing problems </li></ul>Adapted from Exhibit 14.3
  18. 18. Costs of Empowering Service Workers for Service Recovery <ul><li>1. Increased selection costs to find capable workers </li></ul><ul><li>2. Increased training costs </li></ul><ul><li>3. Higher wages to attract and keep talented service workers </li></ul><ul><li>4. Focus on recovery might lead to less focus on reliability </li></ul><ul><li>5. Empowered workers may cost the company money by providing too many “giveaways” </li></ul><ul><li>6. Workers may unintentionally treat customers unfairly to make up for slow service </li></ul>Adapted from Exhibit 14.3
  19. 19. Manufacturing Operations <ul><li>Amount of processing in manufacturing operations </li></ul><ul><li>Flexibility of manufacturing operations </li></ul>
  20. 20. Amount of Processing in Manufacturing Operations <ul><li>Make-to-order operation </li></ul><ul><ul><li>manufacturing does not begin until an order is received </li></ul></ul><ul><li>Assemble-to-order operation </li></ul><ul><ul><li>used to create semi-customized products </li></ul></ul><ul><li>Make-to-stock operation </li></ul><ul><ul><li>manufacture standardized products </li></ul></ul>
  21. 21. Manufacturing Operations <ul><li>Continuous-flow production </li></ul><ul><ul><li>produces goods at a continuous rate </li></ul></ul><ul><li>Line-flow production </li></ul><ul><ul><li>Pre-established linear processes that produce one type of product </li></ul></ul>
  22. 22. Manufacturing Operations <ul><li>Batch production </li></ul><ul><ul><li>operation that produces goods in large batches in standard lot sizes </li></ul></ul><ul><li>Job shops </li></ul><ul><ul><li>operation that handles customer orders or small batch jobs </li></ul></ul><ul><li>Project manufacturing </li></ul><ul><ul><li>operation that produces large, expensive, specialized products </li></ul></ul>
  23. 23. Flexibility of Manufacturing Operations Exhibit 14.4
  24. 24. Inventory <ul><li>Types of inventory </li></ul><ul><li>Measuring inventory </li></ul><ul><li>Costs of maintaining inventory </li></ul><ul><li>Managing inventory </li></ul>
  25. 25. Types of Inventory <ul><li>Raw materials inventories </li></ul><ul><li>Component parts inventories </li></ul><ul><li>Work-in-process inventories </li></ul><ul><li>Finished goods inventories </li></ul>
  26. 26. Measuring Inventory <ul><li>Average aggregate inventory </li></ul><ul><ul><li>the average overall inventory during a particular time period </li></ul></ul><ul><li>Stockout </li></ul><ul><ul><li>situation in which a company runs out of finished product </li></ul></ul><ul><li>Inventory turnover </li></ul><ul><ul><li>the number of times per year that a company sells its average inventory </li></ul></ul>
  27. 27. Costs of Maintaining an Inventory <ul><li>Ordering cost </li></ul><ul><ul><li>costs associated with ordering inventory </li></ul></ul><ul><li>Setup cost </li></ul><ul><ul><li>downtime and lost efficiency when changing goods produced </li></ul></ul><ul><li>Holding cost </li></ul><ul><ul><li>cost of keeping inventory until used or sold </li></ul></ul><ul><li>Stockout costs </li></ul><ul><ul><li>cost of running out of inventory </li></ul></ul>
  28. 28. Managing Inventory <ul><li>Economic order quantity (EOQ) </li></ul><ul><ul><li>formulas that help determine how much and how often inventory should be ordered </li></ul></ul><ul><li>Just-in-time inventory system (JIT) </li></ul><ul><ul><li>parts arrive just as needed at each stage of production </li></ul></ul><ul><li>Kanban </li></ul><ul><ul><li>ticket-based system that indicate when to reorder </li></ul></ul><ul><li>Materials requirement planning (MRP) </li></ul><ul><ul><li>determines production schedule, batch sizes and inventories </li></ul></ul>
  29. 29. Inventory Systems <ul><li>Independent demand systems </li></ul><ul><ul><li>the level of one kind of inventory does not depend on another, for example EOQ </li></ul></ul><ul><li>Dependent demand system </li></ul><ul><ul><li>the level of inventory depends on the number of finished goods to be produced, for example, JIT or MRP </li></ul></ul>
  30. 30. What Really Happened? <ul><li>Extended deadlines for sports score from 11:20 p.m. to 11:55 p.m. </li></ul><ul><li>Moved delivery times from 6:00 a.m. to 5:30 a.m. </li></ul><ul><li>Offered a money-back guarantee for 5:30 a.m. delivery </li></ul><ul><li>Improved printing room processes </li></ul><ul><li>Improved flexibility </li></ul><ul><li>Used JIT and MRP to improve handling of “inventory” </li></ul>

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