BMGT REVIWER

2. Quality Management
CHAPTER 1 – OPERATIONS AND
PRODUCTIVITY
 Production – creation of goods
and services.
 Operations Management (OM) –
Set of activities that creates value
in the form of goods and services
by transforming inputs into
outputs.
Input ->Process->Output
|_____________|______________|
Feedback
- Act of overseeing all activities
and tasks that must
accomplish to maintain a
desired level of excellence.
This includes the
determination of a quality
policy, creating and
implementing quality
planning and assurance, and
quality control and quality
improvement.
- How do we define quality?
- Who is responsible for
quality?

Essential Functions 3. Process and capacity design

1. Management – generates - What process and what
demand capacity will these products
2. Production/operations – creates require?
the product - What equipment and
3. Finance/Accounting – Tracks technology is necessary for
how well the organization is these processes?
doing, pays bills, collects the
money. 4. Location
- Where should we put the
Support Services facility?
1. Accounting - On what criteria should we
2. Purchasing base the location decision?
3. Human resources
4. Engineering 5. Layout design
- How should we arrange the
What Operations Managers Do? facility and material flow?
Basic Management Functions - How large must the facility be
to meet our plan?
1. Planning 6. Human resources and job design
2. Organizing - How do we provide a
3. Staffing reasonable work
4. Leading environment?
5. Controlling - How much can we expect our
6. employees to produce?
The Critical Decisions
1. Service and Product Design 7. Supply-chain management
- What good or services should - Should we make or buy this
we offer?
component?
- How should we design these
products and services?
 - Who are our suppliers and
who can integrate into our e-
commerce program?
8. Inventory, material requirements
planning, and JIT
- How much inventory of each
item should we have?
- When do we re-order?
9. Intermediate and short–term
scheduling
- Are we better off keeping
people on the payroll during
slowdowns?
- Which jobs do we perform
next?
10. Maintenance
- Who is responsible for
maintenance?
- When do we do maintenance?
Operations Manager’s Jobs
1. Plants Manager
- Experienced in plant
management including
expertise in production
planning, purchasing, and
inventory management
2. Quality Manager
- Extensive use of statistical
tool to monitor all aspects of
service timeliness and
workload measurement
3. Process Improvement
Consultants
- Designing and implementing
lean production and cycle
time processes
4. Purchasing Director
- Must have thorough
knowledge of day-to-day
acquisition functions, ability
to review vendor programs,
establish operating par level
and coordinate activities with
operations.
5. Supply Chain Manager
- Negotiating contracts and
establishing long-term
relationships with supplier
Where are the operations
manager’s Jobs?
1. Technology/methods
2. Facilities/space
utilization
3. Strategic issues
4. Response time
5. People/team
development
6. Customer service
7. Quality
8. Cost reduction
9. Inventory reduction
10. Productivity
improvement
Characteristics of Goods
- Tangible product
- Consistent product definition
- Production usually separate
from consumption
- Can be inventoried
- Low customer interaction
Characteristics of Services
- Intangible product
- Produced and consumed at
same time
- Often unique
 - High customer interaction Changing
- Inconsistent product socioculture Empowered
definition milieu; employees,
- Often knowledge-based Job increasingly a teams, and
specialization knowledge and lean
- Frequently dispersed
information production
society
Attributes of
Attributes of Goods
Services
(Tangible Products) Environmenta
(Intangible Product)
lly sensitive
Can be resold Reselling unusual
Environmental production,
Can be inventories Difficult to inventory
issues, ISO green
Some aspects of Quality difficult to
Low-cost 14000, manufacturin
quality measurable measure
focus increasing g, recycled
Selling is distinct Selling is part of
disposal costs materials,
from production service
remanufacturi
Product is Provider, not ng
transportable product, is often
transportable
Site of facility Site of facility
important for cost important for CHAPTER 2 – THE PRODUCTIVITY
customer contact
Often easy to Often Difficult to
automate automate  Services - Economic activities that
Revenue generated Revenue generated typically produce an intangible
primarily from primarily from product (such as education,
tangible product intangible service entertainment, lodging, government,
financial, and health services).
Past Causes Future  Productivity -Economic activities
Shorter life that typically produce an intangible
cycles, product (such as education,
Internet, rapid entertainment, lodging, government,
Rapid product
international financial, and health services). The
development,
Lengthy communicatio objective is to improve this measure
alliances,
Product n, computer-
collaborative of efficiency
Development aided design,
designs  Production - A measure of output
and
international only and not a measure of efficiency.
collaboration  Efficiency – means doing the job well
—with a minimum of resources and
Affluence and waste (productivity)
worldwide Mass
 Effective - means doing the right
markets; customization
Standardized increasingly with added thing, such as developing and using
products flexible emphasis on the correct strategy.
production quality  EFFICIENT means doing a job well
processes done, such as applying the various
decisions of operations
 management, whereas EFFECTIVE - Only through productivity
means doing the right thing, such as increases can our standard of
developing and using the correct living improve
strategy.
Units Produced
Productivity =
Input Used
Example: Increasing Productivity – The
La Motor Pool
Multifactor Productivity
Before: - Also known as total factor
 Cost $120 million annually productivity
 21,000 vehicles - Output and inputs are often
 30% of the 900 trash trucks were expressed in dollars, peso
in repair (any monetary value)
 11% of police cars were in repair

Actions: Productivity:
 Created team assignments Output
 Assigned parking places for Labor+ Material+ Energy+Capital + Miscellaneou
trucks
 Tires checked and trucks
LABOR PRODUCTIVITY
emptied each night
 Standard customer pickups Old System:
established
 Computerized fleet management  Staff of 4 works 8 hrs/day
 Mechanics moved to night shift  Payroll cost = $640/day
 8 titles/day
Results:  Overhead cost = $400/day
 Total fleet reduced by 500
8 titles /day
vehicles Old Labor Productivity =
32labor−hrs
 Parts inventory dropped 20%
reducing cost by $5.4 million = .25
annually titles/labor-hr
 Standardized pickups reduced
costs by $12 million annually New System
 Out of service garbage trucks
 14 titles/day
dropped to 18%

 Overhead cost = $800/day

Productivity
- Measure of process 14 titles /day
improvement New Labor Productivity =
32labor−hrs
- Represents output relative to
input = .4375
titles/labor-hr
MULTIFACTOR PRODUCTIVITY Old Multifactor Productivity =
Old System: 8 titles /day
 Staff of 4 works 8 hrs/day $ 640+ $ 400
 Payroll cost = $640/day
 8 titles/day = .0077
 Overhead cost = $400/day titles/dollar

New System: New Multifactor Productivity =

 14 titles/day 14 titles /day
 Overhead Cost = $800/day $ 640+ $ 800

= .0097
titles/dollar

Computation
Percentage
Old System New System (New/Old)
Increse
Productivity
= 0.4375
0.25 titles/labor- 0.4375 1.75 or 175%
Labor 0.25
hr titles/labor-hr increase
Productivity = 1.75

0.0077 = 0.0097
0.0097 1.26 or 126%
Multifactor titles/dollar 0.0077
titles/dollar increase
Productivity = 1.26

 Percentage increase states 2. Capital - contributes about 32%

you the increase of
productivity from old system
to new system.
 Divide the new system
productivity by old system
productivity
 It will also state about the
improvement of productivity
from old to new system
Productivity Variables
1. Labor - contributes about 10% of
the annual increase
of the annual increase
3. Management - contributes about
52% of the annual increase
Key Variables for Improved Labor
Productivity
 Basic education appropriate for
the labor force
 Diet of the labor force
 Social overhead that makes labor
available such as transportation
and sanitation
 Maintaining and enhancing skills
in the midst of rapidly changing
technology and knowledge

Service Productivity
 Typically labor intensive
 Frequently focused on unique
individual attributes or desires
 Often an intellectual task
performed by professionals
 Often difficult to mechanize
 Often difficult to evaluate for
quality
Ethics and Social Responsibility
Challenges facing operations managers
1. Developing safe quality products
2. Maintaining a clean environment
3. Providing a safe workplace
4. Honoring community
commitments
Productivity Graph
- The higher the investment,
the higher the productivity.
- The lower the investment, the
lower the productivity.
- Those who have lesser
investment but higher
productivity means they
perform better than those
with higher investment but
lower productivity.
CHAPTER 3 – GLOBALIZATION AND
PRODUCTION STRATEGY
Mission and Strategies
- A strategic plan starts with a
clearly defined business
mission.
- “A mission describes the
organization's basic function
in society, in terms of the
products and services it
produces for its customers”.
(Mintzberg)
Factors Affecting Mission
1. Philosophy and Values
2. Profitability
3. Public Image
4. Customer
5. Environment
Result of Mission: Benefit to Society
A good mission should contain:
1. Purpose
- The reason why the business
is existing.
- Why the business exists
- Is it to create wealth for
shareholders?
- Does it exist to satisfy the
needs of all stakeholders
(including employees, and
society at large?)
2. Strategy and Scope
- Define the boundaries of its
operations
- A mission statement provides
the commercial logic for the
business and so defines two
things:
o The products or
services it offers (and
therefore its
competitive position)
o The competences
through which it tries
to succeed and its
method of competing
- A business’ strategic scope
defines the boundaries of its
operations. These are set by
management. For example,
 these boundaries may be set the business
in terms of geography, demonstrate a high
market, business method, level of commitment
product etc. The decisions and loyalty to its
management make about staff?)
strategic scope define the o Guidance on expected
nature of the business. behavior – a strong
- sense of mission helps
3. Policies and Standards of create a work
Behavior environment where
- This are documents that there is a common
should be abided by everyday purpose
actions.
- A mission needs to be
translated into everyday
actions. For example, if the
business mission includes
delivering “outstanding
customer service”, then
policies and standards should
be created and monitored
that test delivery.

4. Values and Culture

- The basic, often unstated,
beliefs of people who work in 1. VISION is a big picture what you
the business. want to achieve
- The values of a business are 2. MISSION is a general statement of
the basic, often un-stated, how you will achieve your vision.
beliefs of the people who 3. STRATEGIES are a series of ways of
work in the business. These using the mission to achieve the
would include: vision.
o Business principles 4. GOALS are statements of what needs
(e.g. social policy, to be accomplished to implement
commitments to the strategy.
customers) 5. OBJECTIVES are specific actions and
o Loyalty and timelines for achieving the goal.
commitment (e.g. are
employees inspired to Goals Should be SMART
sacrifice their S – Specific
personal goals for the M - Measurable
good of the business A - Attainable
as a whole? And does R - Realistic
T – Time bound
Operations Decisions
- Operational decisions or
Operating decisions are decisi
ons made to manage day to
day business. Any firm which
is into any kind of business is
faced with 100 decisions they
have to take in a day. These
will be as mundane as
refilling the water cooler, to
as stressful as fulfilling a
customers order within
minutes.
Levels of Operations Decisions
1. Strategic Decisions
- Decisions that set the
direction for the entire
company; they are broad in
scope and long-term in
nature.
2. Tactical Decisions
- Decisions that are specific
and short-term in nature and
are bound by strategic
decisions.
- Short-term decisions that
focus on specific departments
and tasks.
Tactical Decisions VS. Strategic
Decisions
Tactical decisions focus on more
specific day-to-day issues, such as the
quantities and timing of specific
resources. Strategic decisions are made
first and determine the direction of
tactical decisions, which are made more
frequently and routinely. Therefore, we
have to start with strategic decisions
and then move on to tactical decisions.
Tactical decisions must be
aligned with strategic decisions because
they are the key to the company's
effectiveness in the long run. Tactical
decisions provide feedback to strategic
decisions, which can be modified
accordingly.
Operations Strategy Issues
- Without consistent alignment
of operations and strategy,
business will face problems
executing the core mission of
the organization.
Key Areas to be taken into consideration
in Operations Strategy Issues:
1. Strategy Development
2. Communication
3. Resources
4. On-going Assessment
RESOURCES
- One significant problem with
operational strategy is the
lack of available resources to
implement the strategy.
- In this context, "resources"
does not necessarily mean
supplies or funding, although
it can be both those things.
People are the most critical
resource essential for
successful execution. Failure
to recruit and retain qualified
workers will result in a
significant hardship for the
organization.
ON-GOING ASSESSMENT
 - Follow up to ensure the
execution is taking place as
planned. Seek input from staff
at all levels and throughout
various divisions of the
company.
- Continuous assessment and
follow-up is essential to
maintain a competitive
advantage. Frequently adjust
the operational strategy in
response to significant
internal and external
opportunities and threats.
Strategy Implementation
- Strategy Implementation
refers to the execution of the
plans and strategies, so as to
accomplish the long-term
goals of the organization. It
converts the opted strategy
into the moves and actions of
the organization to achieve
the objectives.
Process of Strategy Implementation
1. Building an organization, that
possess the capability to put the
strategies into action
successfully.
2. Supplying resources, in sufficient
quantity, to strategy-essential
activities.
3. Developing policies which
encourage strategy.
4. Such policies and programs are
employed which helps in
continuous improvement.
5. Combining the reward structure,
for achieving the results.
6. Using strategic leadership.
Identifying Critical Success Factors
(CSF)
- Identifying Critical Success
Factors enable you to track
and measure your progress
toward achieving strategic
goals - and, ultimately, to
fulfilling your organization's
mission.
- It also provide a common
point of reference so that
everyone knows exactly
what's most important,
ensuring that tasks and
projects are aligned across
teams and departments.
- The CSF is also known as Key
Results Areas, or KRAs was
first developed by D. Ronald
Daniel.
Key Result Areas (KRAs)
- refers to a short list of overall
goals that guide how an
individual does their job, or
general achievement and
progress goals for an
organization or one of its
divisions.
4 types of CSF
1. Industry factors result from the
specific characteristics of your
industry. These are the things
that you must do to remain
competitive within your sector.
For example, a tech start-up
might identify innovation as a
CSF.
2. Environmental factors result
from macro-environmental
influences on your organization:
the business climate, the
economy, your competitors, and
technological advancements, for
 example. A PESTLE Analysis can
help you to understand
environmental factors better.
- P - Political
- E - Economic
- S - Social
- T - Technological
- L - Legal
- E – Environment
3. Strategic factors result from the
specific competitive strategy that
your organization follows. This
could include the way your
organization chooses to position
and market itself, and whether
it's a high-volume, low-cost
producer, or a low-volume, high-
cost one.
4. Temporal factors result from the
organization's internal changes
and growth and are usually
short-lived. Specific barriers,
challenges, directions, and
influences will determine these
CSFs. For example, a rapidly
expanding business might have a
CSF of increasing its
international sales.
Six steps to identify and develop
your CFS
1. Establish your
organization's mission and
strategic goals
2. For each strategic goal, ask,
"Success in what area of business
or project activity is essential to
achieve this goal?"
3. Evaluate your list of candidate
CSFs to identify the ones that are
truly essential for achieving the
goals – these are your Critical
Success Factors.
4. Work out how to monitor and
measure each of the CSFs.
5. Clearly communicate the CSFs to
those responsible for delivering
them and to rest of the business.
6. Continually monitor and reassess
your CSFs to make sure that you
stay on track toward your goals.
Building and Staffing the Organization
- Staffing
- the process of hiring eligible
candidates in
the organization or company
for specific positions. In
management, the meaning of
staffing is an operation of
recruiting the employees by
evaluating their skills,
knowledge and then offering
them specific job roles
accordingly.
- Human Resource
- is one of the greatest for
every organization because in
any organization all other
resources like- money,
material, machine etc. can be
utilized effectively and
efficiently by the positive
efforts of human resource.
Every person should get the job
according to: This will help the
organization achieve the pre-set
goals in the proper way by the
100% contribution of manpower.
1. Ability
2. Talent
3. Aptitude
4. Specializations

Functions of Staffing
1. To obtain qualified personnel for
different jobs position in the
organization.
2. Maximize productivity and
increase performance.
3. Promote the optimum utilization
of human resource through
various aspects
4. Increase job satisfaction and
morale of the workers through
recruitment of the right person
5. Helps to ensure better utilization
of human resource
6. To ensure continuity and growth
of the organization, through
development managers
Characteristics of Staffing
1. People-Centered. Staffing can
broadly view as people-centered
function and therefore it is
relevant for all types of
organization.
2. Responsibility of Manager.
Staffing is the basic function of
management which involves that
the manager is continuously
engaged in performing the
staffing function. They are
actively associated with the
recruitment, selection, training,
and appraisal of his
subordinates.
3. Human Skills. Staffing function is
mainly concerned with different
types of training and
development of human resource
and therefore the managers
should use human relation skill
in providing guidance and
training to the subordinates.
4. Continuous Function. Staffing
function is to be performed
continuously which is equally
important for a new and well-
established organization. There
has to be recruitment, selection,
and training of personnel.
CHAPTER 4 – GLOBALIZATION
AND PRODUCTION STRATEGY
STRATEGY
Globalization
- describes businesses’
deployment of facilities and
operations around the world.
- a process in which
geographic distance becomes
a factor of diminishing
importance in the
establishment and
maintenance of cross border
economic, political and socio-
cultural relations.
- worldwide drive toward a
globalized economic system
dominated by supranational
corporate trade and banking
institutions that are not
accountable to democratic
processes or national
governments.
Reasons to globalize opertions
1. Reduce costs (labor, taxes, tariffs,
etc.)
- Foreign locations with lower
wage rates can lower direct
and indirect costs
o Examples:
Maquiladoras, World
Trade Organization
 (WTO), North manufacturer,
American Free Trade Equipment and layout
Agreement (NAFTA), have been improved
APEC, SEATO, using Scandinavian
MERCOSUR, European ergonomic
Union (EU) competence
6. Attract and retain global talent
2. Improve supply chain - Offer better employment
- Locating Facilities closer to opportunities
unique resources o Examples: Better growth
o Examples: Auto design opportunities and
to California, Athletic insulation against
shoe production to unemployment, Relocate
China, Perfume unneeded personnel to
manufacturing in more prosperous
France locations, Incentives for
people who like to travel
3. Provide better goods and
services International Operations Strategies
- Objective and Subjective Business that are highly locally
characteristics of foods and responsive have as extra objective to
services adapt products and services to specific
o Examples: On-time local needs. It seems that these strategic
deliveries, Cultural options are mutually exclusive, but
variables, Improve there are companies trying to be both
customer service globally integrated and locally
responsive.
4. Understand markets Together these two factors
- Interacting with foreign generate four types of strategies that
customers and suppliers can internationally operating businesses can
lead to new opportunities. pursue: Multidomestic, Global,
o Examples: Cellphone Transnational and International
design from Europe, strategies
Cellphone fads from
Japan, Extend the 1. Global Strategy
product life cycle o Standardized product
o Economies of scale
5. Learn to improve operations o Cross-cultural learning
- Remain open to the free flow o “LOW RESPONSIVENESS,
of ideas HIGH GLOBAL
o Example: General INTEGRATION
Motors partnered with 2. Transnational Strategy
Japanese auto
 o Move material, process, ideas
across national boundaries
o Economies of Scale
o Cross-cultural learning
o “HIGH RESPONSIVENESS, HIGH
GLOBAL INTEGRATION”
3. International Strategy
- Import/export or license existing
product
- “LOW RESPONSIVENESS, LOW
GLOBAL INTEGRATION”
4. Multidomestic Strategy
- Use existing domestic model
globally
- Franchise, joint ventures,
subsidiaries
- “HIGH RESPONSIVENESS, LOW
GLOBAL INTEGRATION”
Operation Strategies in Business
1. International business - engages
in cross-border transactions
2. Multinational Corporation - has
extensive involvement in
international business, owning or
controlling facilities in more than
one country
3. Global company - integrates
operations from different
countries, and views world as a
single marketplace
4. Transnational company - seeks
to combine the benefits of global-
scale efficiencies with the
benefits of local responsiveness
Global Impact of Culture and Ethics
Example:
Google has been an icon in terms
of examples of company culture for
years. They have single-handily set the
tone for thousands of companies today.
What does Google do differently?
Well, the perks and benefits
begin with free meals, employee social
gatherings, financial bonuses and open
presentations by high-level executives.
Other admirable quirks include gyms, a
dog-friendly environment, and parks.
Employees are thought to be driven,
talented and among the cream of the
crop. The message? Care about your
employees and they will care for you.
Culture
- impacts how local values
influence the concept of global
business ethics. Each
professional is influenced by the
values, social programming, and
experiences he or she has
absorbed since childhood. These
collective factors impact how a
person perceives an issue and
the related correct or incorrect
behavior. For some cultures, the
evolution of international
business and culture sometimes
creates a conflict, such as what is
seen in gift-giving practices or
views on women in the
workplace.
Ethics
- Ethics impacts global business in
the areas of management,
corruption, and corporate social
responsibility