This document provides an overview of chapter 18 from the textbook "Managing Operations" by Stephen P. Robbins and Mary Coulter. It covers the key topics in operations management including defining operations management, the role of operations managers in improving productivity, value chain management, quality initiatives like ISO 9000 and Six Sigma, and current issues like the role of technology and mass customization. The learning outcomes at the start list the main sections and key concepts covered in the chapter.

1. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
18–1
ManagingManaging
OperationsOperations
ChapterChapter
1818
Management
Stephen P. Robbins Mary Coulter
tenth edition

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18–2
Learning OutcomesLearning Outcomes
Follow this Learning Outline as you read and studyFollow this Learning Outline as you read and study
this chapter.this chapter.
18.118.1 The Role of Operations ManagementThe Role of Operations Management
• Define operations management.Define operations management.
• Contrast manufacturing and services organizations.Contrast manufacturing and services organizations.
• Describe managers’ role in improving productivity.Describe managers’ role in improving productivity.
• Discuss the strategic role of operations management.Discuss the strategic role of operations management.
18.218.2 What Is Value Chain Management and Why Is ItWhat Is Value Chain Management and Why Is It
Important?Important?
• Define value chain and value chain management.Define value chain and value chain management.
• Describe the goal of value chain management.Describe the goal of value chain management.
• Describe the benefits of successful value chainDescribe the benefits of successful value chain
management.management.

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Learning OutcomesLearning Outcomes
18.3 Managing Operations by Using Value Chain18.3 Managing Operations by Using Value Chain
ManagementManagement
• Discuss the requirements for successful value chain
management.
• Explain the obstacles to value chain management.
18.418.4 Current Issues in Operations ManagementCurrent Issues in Operations Management
• Discuss technology’s role in manufacturing.Discuss technology’s role in manufacturing.
• Explain ISO 9000 and Six Sigma.Explain ISO 9000 and Six Sigma.
• Describe mass customization and how operationsDescribe mass customization and how operations
management contributes to it.management contributes to it.

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What Is OperationsWhat Is Operations
Management?Management?
• Operations ManagementOperations Management
 The design, operation, and control of theThe design, operation, and control of the
transformation process that converts such resourcestransformation process that converts such resources
as labor and raw materials into goods and servicesas labor and raw materials into goods and services
that are sold to customers.that are sold to customers.
• The Importance of Operations ManagementThe Importance of Operations Management
 It encompasses both services and manufacturing.It encompasses both services and manufacturing.
 It is important in effectively and efficiently managingIt is important in effectively and efficiently managing
productivity.productivity.
 It plays a strategic role in an organization’sIt plays a strategic role in an organization’s
competitive success.competitive success.

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Exhibit 18–1Exhibit 18–1 The Operations SystemThe Operations System

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Manufacturing and ServicesManufacturing and Services
• Manufacturing OrganizationsManufacturing Organizations
 Use operations management in the transformationUse operations management in the transformation
process of turning raw materials into physical goods.process of turning raw materials into physical goods.
• Service OrganizationsService Organizations
 Use operations management in creating nonphysicalUse operations management in creating nonphysical
outputs in the form of services (the activities ofoutputs in the form of services (the activities of
employees interacting with customers).employees interacting with customers).

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Managing ProductivityManaging Productivity
• ProductivityProductivity
 The overall output of goods or services producedThe overall output of goods or services produced
divided by the inputs needed to generate that output.divided by the inputs needed to generate that output.
 A composite of people and operations variables.A composite of people and operations variables.
• Benefits of Increased ProductivityBenefits of Increased Productivity
 Economic growth and developmentEconomic growth and development
 Higher wages and profits without inflationHigher wages and profits without inflation
 Increased competitive capability due to lower costsIncreased competitive capability due to lower costs

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Exhibit 18–2Exhibit 18–2 Deming’s 14 Points for ImprovingDeming’s 14 Points for Improving
ProductivityProductivity
• Plan for the long-term future.Plan for the long-term future.
• Never be complacent concerning theNever be complacent concerning the
quality of your product.quality of your product.
• Establish statistical control overEstablish statistical control over
your production processes andyour production processes and
require your suppliers to do so asrequire your suppliers to do so as
well.well.
• Deal with the best and fewestDeal with the best and fewest
number of suppliers.number of suppliers.
• Find out whether your problems areFind out whether your problems are
confined to particular parts of theconfined to particular parts of the
production process or stem from theproduction process or stem from the
overall process itself.overall process itself.
• Train workers for the job that youTrain workers for the job that you
are asking them to perform.are asking them to perform.
• Raise the quality of your lineRaise the quality of your line
supervisors.supervisors.
• Drive out fear.Drive out fear.
• Encourage departments to workEncourage departments to work
closely together rather than toclosely together rather than to
concentrate on departmental orconcentrate on departmental or
divisional distinctions.divisional distinctions.
• Do not adopt strictly numericalDo not adopt strictly numerical
goals.goals.
• Require your workers to do qualityRequire your workers to do quality
work.work.
• Train your employees to understandTrain your employees to understand
statistical methods.statistical methods.
• Train your employees in new skillsTrain your employees in new skills
as the need arises.as the need arises.
• Make top managers responsible forMake top managers responsible for
implementing these principles.implementing these principles.
Source: W.E. Deming, “Improvement of Quality and Productivity Through
Action by Management,” National Productivity Review, Winter 1981–1982,
pp. 12–22. With permission. Copyright 1981 by Executive Enterprises, Inc.,
22 West 21st St., New York, NY 10010-6904. All rights reserved.

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Strategic Role ofStrategic Role of
Operations ManagementOperations Management
• The era of modern manufacturing began in the U.S. overThe era of modern manufacturing began in the U.S. over
100 years ago.100 years ago.
• After WWII, U.S. manufacturers focused on functionalAfter WWII, U.S. manufacturers focused on functional
areas other than manufacturing.areas other than manufacturing.
• By the 1970’s, foreign competitors integratedBy the 1970’s, foreign competitors integrated
manufacturing technologies were producing qualitymanufacturing technologies were producing quality
goods at lower costs.goods at lower costs.
• U.S manufacturers responded by investing in updatedU.S manufacturers responded by investing in updated
technology, restructuring organizations, and includingtechnology, restructuring organizations, and including
production requirements in their strategic planning.production requirements in their strategic planning.

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Value Chain ManagementValue Chain Management
• ValueValue
 The performance characteristics, features andThe performance characteristics, features and
attributes, and any other aspects of goods andattributes, and any other aspects of goods and
services for which customers are willing to give upservices for which customers are willing to give up
resources (i.e., spend money).resources (i.e., spend money).
• The Value ChainThe Value Chain
 The entire series of organizational work activities thatThe entire series of organizational work activities that
add value at each step beginning with the processingadd value at each step beginning with the processing
of raw materials and ending with the finished productof raw materials and ending with the finished product
in the hands of end users.in the hands of end users.

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Value Chain ManagementValue Chain Management
(cont’d)(cont’d)
• What is Value Chain Management?What is Value Chain Management?
 The process of managing the entire sequence ofThe process of managing the entire sequence of
integrated activities and information about productintegrated activities and information about product
flows along the entire value chain.flows along the entire value chain.
• Goal of Value Chain ManagementGoal of Value Chain Management
 To create a value chain strategy that fully integratesTo create a value chain strategy that fully integrates
all members into a seamless chain that meets andall members into a seamless chain that meets and
exceeds customers’ needs and creates the highestexceeds customers’ needs and creates the highest
value for the customer.value for the customer.

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Exhibit 18–3Exhibit 18–3 Value Chain Strategy RequirementsValue Chain Strategy Requirements

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Value Chain ManagementValue Chain Management
(cont’d)(cont’d)
• Requirements for Value Chain ManagementRequirements for Value Chain Management
 A new business model incorporating:A new business model incorporating:
 Coordination and collaborationCoordination and collaboration
 Investment in information technologyInvestment in information technology
 Changes in organizational processesChanges in organizational processes
 Committed leadershipCommitted leadership
 Flexible jobs and adaptable, capable employeesFlexible jobs and adaptable, capable employees
 A supportive organizational culture and attitudesA supportive organizational culture and attitudes

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Benefits of Value ChainBenefits of Value Chain
ManagementManagement
ImprovedImproved
ProcurementProcurement
ImprovedImproved
ProcurementProcurement
ImprovedImproved
LogisticsLogistics
ImprovedImproved
LogisticsLogistics
EnhancedEnhanced
Customer OrderCustomer Order
ManagementManagement
EnhancedEnhanced
Customer OrderCustomer Order
ManagementManagement
ImprovedImproved
ProductProduct
DevelopmentDevelopment
ImprovedImproved
ProductProduct
DevelopmentDevelopment
Benefits ofBenefits of
Value ChangeValue Change
ManagementManagement
Benefits ofBenefits of
Value ChangeValue Change
ManagementManagement

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Exhibit 18–4Exhibit 18–4 Obstacles to Successful Value ChainObstacles to Successful Value Chain
ManagementManagement

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Value Chain ManagementValue Chain Management
(cont’d)(cont’d)
• Obstacles to Value Chain ManagementObstacles to Value Chain Management
 Organizational barriersOrganizational barriers
 Refusal or reluctance to share informationRefusal or reluctance to share information
 Reluctance to shake up the status quoReluctance to shake up the status quo
 Security issuesSecurity issues
 Cultural attitudesCultural attitudes
 Lack of trust and too much trustLack of trust and too much trust
 Fear of loss of decision-making powerFear of loss of decision-making power
 Required capabilitiesRequired capabilities
 Lacking or failing to develop the requisite value chainLacking or failing to develop the requisite value chain
management skillsmanagement skills

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Value Chain ManagementValue Chain Management
• Obstacles to Value Chain Management (cont’d)Obstacles to Value Chain Management (cont’d)
 PeoplePeople
 Lacking commitment to do whatever it takesLacking commitment to do whatever it takes
 Refusing to be flexible in meeting the demands of a changingRefusing to be flexible in meeting the demands of a changing
situationsituation
 Not being motivated to perform at a high levelNot being motivated to perform at a high level
 Lack of trained managers to lead value chain initiativesLack of trained managers to lead value chain initiatives

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18–18
Current Issues in ManagingCurrent Issues in Managing
OperationsOperations
• Technology’s Role in ManufacturingTechnology’s Role in Manufacturing
 Increased automation and integration of productionIncreased automation and integration of production
facilities with business systems to control costs.facilities with business systems to control costs.
 Predictive maintenance, remote diagnostics, and utility costPredictive maintenance, remote diagnostics, and utility cost
savingssavings
• The Concept of QualityThe Concept of Quality
 The ability of a product or service to reliably do whatThe ability of a product or service to reliably do what
it’s supposed to do and to satisfy customerit’s supposed to do and to satisfy customer
expectations.expectations.

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Current Issues in ManagingCurrent Issues in Managing
OperationsOperations
• Quality InitiativesQuality Initiatives
 Planning for qualityPlanning for quality
 Organizing and leading for qualityOrganizing and leading for quality
 Controlling for qualityControlling for quality
• Quality GoalsQuality Goals
 ISO 9000 certificationISO 9000 certification
 Six Sigma standardsSix Sigma standards

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Exhibit 18–5Exhibit 18–5 Product Quality DimensionsProduct Quality Dimensions
1.1. Performance—Operating characteristicsPerformance—Operating characteristics
2.2. Features—Important special characteristicsFeatures—Important special characteristics
3.3. Flexibility—Meeting operating specifications over some periodFlexibility—Meeting operating specifications over some period
of timeof time
4.4. Durability—Amount of use before performance deterioratesDurability—Amount of use before performance deteriorates
5.5. Conformance—Match with preestablished standardsConformance—Match with preestablished standards
6.6. Serviceability—Ease and speed of repair or normal serviceServiceability—Ease and speed of repair or normal service
7.7. Aesthetics—How a product looks and feelsAesthetics—How a product looks and feels
8.8. Perceived quality—Subjective assessment of characteristicsPerceived quality—Subjective assessment of characteristics
(product image)(product image)
Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN:
West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press,
1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt,
R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.

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Exhibit 18–5 (cont’d)Exhibit 18–5 (cont’d) Service Quality DimensionsService Quality Dimensions
1.1. Timeliness—Performed in promised period of timeTimeliness—Performed in promised period of time
2.2. Courtesy—Performed cheerfullyCourtesy—Performed cheerfully
3.3. Consistency—Giving all customers similar experiences eachConsistency—Giving all customers similar experiences each
timetime
4.4. Convenience—Accessibility to customersConvenience—Accessibility to customers
5.5. Completeness—Fully serviced, as requiredCompleteness—Fully serviced, as required
6.6. Accuracy—Performed correctly each timeAccuracy—Performed correctly each time
Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN:
West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press,
1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt,
R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.

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Current Issues in ManagingCurrent Issues in Managing
OperationsOperations
• Mass CustomizationMass Customization
 Is a design-to-order concept that provides consumersIs a design-to-order concept that provides consumers
with a product when, where, and how they want it.with a product when, where, and how they want it.
 Makes heavy use of technology (flexible manufacturingMakes heavy use of technology (flexible manufacturing
techniques) and engages in a continual dialogue withtechniques) and engages in a continual dialogue with
customers.customers.
• Benefits of Mass CustomizationBenefits of Mass Customization
 Creates an important relationship between the firm andCreates an important relationship between the firm and
the customer in providing loyalty-building value to thethe customer in providing loyalty-building value to the
customer and in garnering valuable market informationcustomer and in garnering valuable market information
for the firm.for the firm.

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Terms to KnowTerms to Know
• operations managementoperations management
• manufacturing organizationsmanufacturing organizations
• service organizationsservice organizations
• productivityproductivity
• valuevalue
• value chainvalue chain
• value chain managementvalue chain management
• organizational processesorganizational processes
• RFIDRFID
• intellectual propertyintellectual property
• qualityquality
• ISO 9000ISO 9000
• Six SigmaSix Sigma
• mass customizationmass customization
• Cellular manufacturingCellular manufacturing

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All rights reserved. No part of this publication may be reproduced,All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, in any form or bystored in a retrieval system, or transmitted, in any form or by
any means, electronic, mechanical, photocopying, recording, orany means, electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of the publisher.otherwise, without the prior written permission of the publisher.
Printed in the United States of America.Printed in the United States of America.