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chapter Operations Management and Quality

Introduction to Business Administration

Instructor Lecture PowerPoints

 LL EE AA RR NN II NN GG OO BB JJ EE CC TT II VV EE SS

After reading this chapter, you should be able to:

1. Explain the meaning of the term production or operations.
2. Describe the three kinds of utility that operations processes
provide for adding customer value.
3. Explain how companies with different business strategies
are best served by having different operations capabilities.
4. Identify the major factors that are considered in operations
planning and in operations control.

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 LL EE AA RR NN II NN GG OO BB JJ EE CC TT II VV EE SS (cont.)
(cont.)
After reading this chapter, you should be able to:
5. Discuss the information contained in four kinds of
operations schedules—the master production
schedule, detailed schedule, staff schedule, and
project schedule.
6. Identify the activities and underlying objectives
involved in total quality management.
7. Explain how a supply chain strategy differs from
traditional strategies for coordinating operations
among firms.

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 What Does Operations Mean Today?
• Operations (Production)
– All the activities involved in making products (goods
and services) for customers
• Service Operations (Service Production)
– Provide intangible and tangible service products
• Goods Operations (Goods Production)
– Produce tangible products
• Operations managers create utility for customers
through production, inventory, and quality control.

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 Creating Value Through Operations
• Utility
– The ability of a product to satisfy a want or need
• Form utility
• Time utility
• Place utility

• Operations (Production) Management

– Systematic direction and control of processes that
transform resources into finished services and goods that
create value for and provide benefits to customers

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 Differences Between Service and Goods
Manufacturing Operations
• Goods are produced, services are performed
• Service operations:
1. Involve interacting with consumers
2. Are sometimes intangible and unstorable
3. Involve a customer’s presence in the process
4. Involve certain service quality considerations

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 Operations Processes
• Operations Process
– Methods and technologies used to produce a good or
service
• Goods Production Processes
– Make-to-order or make-to-stock processes
• Service Production Processes
– Extent of Customer Contact
• Low-contact systems: low customer involvement
• High-contact systems: high customer involvement

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 Business Strategy as the
Driver of Operations

• Companies design their operations based on

business strategy.

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TABLE 7.1 Business Strategies That Win
Customers for Four Companies

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 Operations Planning
• Capacity Planning
– Determining the amount of a product that a
company can produce under normal conditions
• Location Planning
– Determining where production will happen based
on costs and flexibility

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 Operations Planning (cont.)
• Layout Planning
– Planning for the layout of machinery, equipment,
and supplies
– Determines whether a company can respond
to demand for more and different products or
it finds itself unable to match competitors’
speed and convenience
• Process layouts
• Product layouts

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FIGURE 7.1 Operations Planning and Control

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 Quality Planning
• What Is Quality?
– The combination of “characteristics of a product
or service that bear on its ability to satisfy stated
or implied needs” (American Society for Quality)
– Begins when products are designed: goals are set
for performance and consistency
– Includes deciding what constitutes a high-quality
product and determining how to measure these
quality characteristics

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 Methods Planning

• Managers identify each production step and

methods for performing it.
• They reduce waste and inefficiency through methods
improvement and improving process flows.
– A detailed description, often a process flowchart, helps
managers organize and record information.
• They attempt to improve customer service.

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 Operations Scheduling

• Operations Scheduling
– Times when specific production activities will occur
• Kinds of Planning Schedules
– Master schedule: Shows which products will be
produced, and when
– Detailed schedule: Shows day-to-day activities
– Staff schedules: Show who and how many
employees will be working, and when
– Project schedules: Coordinate completion of large-
scale projects

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 FIGURE 7.3 Example Partial Master Production
Schedule (Tons of Each Product to be Produced)

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 Project Scheduling

• Gantt Chart
– Breaks down projects into steps to be performed
– Specifies the time required to complete each step
– A Project Manager uses the Gantt chart to:
• List all activities to be performed
• Estimate the time required for each step
• Record the progress on the chart
• Check the progress against the time scale on the report

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Figure 7.4 Gantt Chart

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 Operations Control
• Operations Control
– Requires managers to monitor performance by
comparing results with detailed plans and
schedules.
– Follow-up: Checking to ensure that production
decisions are being implemented; critical,
ongoing facet of operations.

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 Materials Management
• Materials Management
– The process by which managers plan, organize,
and control the flow of materials from sources of
supply through distribution of finished goods
• Materials Management Activities
– Supplier selection
– Purchasing
– Transportation
– Warehousing
– Inventory control

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 Lean Production Systems:
Just-in-Time Operations

• Lean Production Systems Goals

– Smooth production flows avoid inefficiencies
– Elimination of unnecessary inventories
– Continuous improvement in production processes
• Just-in-Time (JIT) Production
– Bringing together all needed materials only when
they are required, creating fast and efficient
responses to customer orders
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 Benefits of Just-in-Time Production

1. Reduces the number of goods in process

(goods not yet finished)
2. Minimizes inventory costs
3. Reduces inventory storage space requirements
4. Replaces stop-and-go production
5. Disruptions are visible and get resolved quickly
6. Continuous improvement of the process

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 Quality Control

• Quality Control
– Taking action to ensure that operations produces
products that meet specific quality standards
– Requires establishment of specific standards and
measurements

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Quality Improvement and Total Quality Management
• Quality Improvement
– Building quality into products and services rather than
trying to control quality by inspection
• Total Quality Management (TQM)
– All of the activities necessary for getting high-quality goods
and services into the marketplace
• Quality Ownership
– Quality belongs to each person who creates it while
performing a job and it requires a focus on quality by all
parts of an organization

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 Total Quality Management

• Always Delivering High Quality

– Planning for quality
– Organizing for quality
– Directing for quality
– Controlling for quality

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 Tools for Total Quality Management
• Competitive Product Analysis
– Analyzing competitors’ products to identify improvements
• Value-Added Analysis
– Eliminating wasteful and unnecessary activities
• Quality Improvement Teams
– Adopting quality circles
• Getting Closer to the Customer
– Identifying internal and external customers
• ISO 9000 and ISO 14000
– Ensuring certification of quality management in processes
• Business Process Reengineering
– Starting over from scratch to improve processes

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 Adding Value Through Supply Chains

• Supply Chain (or Value Chain)

– The flow of information, materials, and services
that starts with raw-materials suppliers and
continues adding value through other stages in
the network of firms until the product reaches the
end customer

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FIGURE 7.5 Supply Chain for Baked Goods

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 The Supply Chain Strategy

• Supply Chain Management (SCM)

– Working with the supply chain to improve overall
flow by companies working together
• Supply Chain Reengineering
– Improving the process for better results:
• Lower costs, speedier service, and coordinated flows of
information and material
• Outsourcing and Global Supply Chains
– Paying suppliers and distributors to perform
certain business processes or to provide needed
materials or services
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 Key Terms
ISO 14000
assembly line ISO 9000
business process reengineering just-in-time (JIT) production
capacity lean production system
competitive product analysis low-contact system
consistency (in quality) make-to-order operations
detailed schedule make-to-stock operations
follow-up master production schedule (MPS)
Gantt chart materials management
goods operations (goods production) operations (production)
high-contact system operations (production)
inventory control management

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 Key Terms (cont.)

operations (production) manager service operations (service

operations capability production)
operations control staff schedule
supplier selection
operations process
performance (in quality) supply chain (value chain)
process layout supply chain management (SCM)
product layout total quality management (TQM)
purchasing transportation
quality utility
quality control value-added analysis
quality improvement team warehousing
quality ownership

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