What Does Operations Mean Today?

 Operations (Production)
– All the activities involved in making products—goods and services—for
customers

1) Service Operations (Service Production) include all the activities

producing intangible and tangible products, such as entertainment,
transportation, and education
2) Goods Operations (Goods Production) include all the activities producing
tangible products, such as radios, newspapers, buses, and textbooks

• Operations managers create utility for customers through production,

inventory and quality control.
 Creating Value Through Operations
 Utility
└ product’s ability to satisfy a human want or need

1) Form Utility, which occurs when production makes products available by

converting raw materials and human skills into finished goods and
services.
2) Time Utility, which occurs when production adds customer value by
making products available when consumers want them.
3) Place Utility, which occurs when production makes products available
where they are convenient for consumers.
 Creating Value Through Operations

 Operations (Production) Management

└ It involves the systematic direction and control of
the activities that transform resources into finished
products that create value for and provide benefits
to customers.

 Operations (Production) Managers

└ It refers to the managers responsible for ensuring
that operations activities create value and provide
benefits to customers
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The Resource Transformation Process

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Differences between Service and
Goods Manufacturing Operations

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 Operations Processes

 Operations Process
└ It involves the set of methods and technologies
used to produce a good or a service.

 Make-to-Order • Make-to-Stock
Operations Operations
└ activities for one-of- – activities for
a-kind or custom- producing
made production standardized
products for mass
consumption 7-6
 Service Production Processes: Extent
of Customer Contact
 Low-Contact System
└ level of customer contact in which the customer
need not be part of the system to receive the
service

 High-Contact System
└ level of customer contact in which the customer is
part of the system during service delivery

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 Business Strategies That Win
Customers for Four Companies

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 Business Strategy Determines
Operations Capabilities
 Operations Capability (Production Capability)
└ special ability that production does especially well
to outperform the competition

 Excellent firms learn, over time, how to

achieve more than just one competence

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Operations Planning and Control

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Operations Planning

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 Operations Planning
 Capacity Planning
└ determining the amount of a product that a company can produce under normal
conditions. It determines how much can be produced

 Location Planning
└ Location affects production costs and flexibility
└ Planning deals with determining where it will be produced

 Layout Planning
└ planning for the layout of machinery, equipment, and supplies. It determines
whether a company can respond efficiently to demand for more and different
products or whether it finds itself unable to match competitors’ speed and
convenience. It deals with determining how the product will be produced
• Process layouts
• Product layouts
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 Operations Planning
 Quality Planning
└ deciding what constitutes a high-quality product and determining how to
measure these quality characteristics

 Methods Planning
└ managers must identify each production step and the specific methods for
performing it.
└ It can reduce waste and inefficiency by examining procedures on a step-
by-step basis in an approach called Methods Improvement. They reduce
waste and inefficiency by improving process flows, which helps managers
organize and record information. They attempt to improve customer
service.

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 Layout Planning

 Custom-Products Layout
└ physical arrangement of production activities that
groups equipment and people according to function
 Same-Steps Layout
└ physical arrangement of production steps designed
to make one type of product in a fixed sequence of
activities according to its production requirements
└ assembly line

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 Quality Planning
 Quality
└ combination of “characteristics of a product or service that bear on its
ability to satisfy stated or implied needs”. Quality planning begins when
products are designed: goals are set for performance and consistency.
Quality planning includes deciding what constitutes a high-quality product
and determining how to measure these quality characteristics.

 Performance
└ dimension of quality that refers to how well a product does what it is
supposed to do.

 Consistency
└ dimension of quality that refers to sameness of product quality from unit
to unit.
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Flowchart of Traditional Guest Checkout

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 Operations Scheduling

 Master Schedule  Detailed Schedules

└ “the game plan” for └ show day-to-day
upcoming production. activities that will
It shows which occur in production
products will be
produced, and when,
in upcoming time
periods.

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 Operations Scheduling

 Staff Schedules  Project Schedules

└ identify who and how └ provide coordination
many employees will for completing large-
be working, and when scale projects

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 Project Scheduling

 Gantt Chart
└ production schedule that breaks down large projects into steps to be
performed and specifies the time required to perform each step. The project
manager lists all activities needed to complete the work, estimates the time
required for each step. It records the progress on the chart, and checks the
progress against the time scale on the chart to keep the project moving on
schedule.

 Program Evaluation & Review Technique (PERT) Chart

└ production schedule specifying the sequence of activities, time requirements,
and critical path for performing the steps in a project. It shows the times
required to complete each activity. The arrows are positioned to show the
required sequence for performing the activities.
Gantt Chart

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PERT Chart

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 Operations Control

 Operations Control
└ process of monitoring production performance by
comparing results with plans and schedules, and
taking corrective action when needed

 Follow-Up
└ operations control activity for ensuring that
production decisions are being implemented. It is
a key and 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.
└ It involves the following activities:
– Supplier selection
– Purchasing
– Transportation
– Warehousing
– Inventory control
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 Materials Management

 Lean Production  Just-in-Time (JIT)

System Production
└ production system └ type of lean production
designed for smooth system that brings
production flows that together all materials at
avoid inefficiencies, the precise time they
eliminate unnecessary are required at each
inventories, and production stage,
continuously improve creating fast and
production processes. 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 with
smooth movement.
5. Disruptions are more visible and get resolved
more quickly.
6. Continuous improvement of the process.
Materials Management Activities

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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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 Total Quality Management

 Total Quality Management (TQM)

└ all activities involved in getting high-quality goods
and services into the marketplace including
planning, organizing, directing and controlling for
quality.

 Quality Ownership
└ principle of total quality management that holds
that quality belongs to each person who creates it
while performing a job
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 Tools for Total Quality Management

 Competitive Product  Value-Added Analysis

Analysis └ process of evaluating
└ process by which a all work activities,
company analyzes a materials flows, and
competitor’s products paperwork to
to identify desirable determine the value
improvements that they add for
customers

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 Tools for Total Quality Management

 Quality Improvement Team

└ TQM tool in which collaborative groups of
employees from various work areas work together
to improve quality by solving common shared
production problems
 ISO 9000
└ program certifying that a factory, laboratory, or
office has met the quality management standards
set by the International Organization for
Standardization
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 Tools for Total Quality Management

 ISO 14000
└ certification program attesting to the fact that a
factory, laboratory, or office has improved its
environmental performance
 Business Process Reengineering
└ rethinking and radical redesign of business
processes to improve performance, quality, and
productivity

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 Adding Value Through Supply Chains

 Supply Chain (Value Chain)

└ 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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Supply Chain for Baked Goods

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 The Supply Chain Strategy

• Supply Chain Management (SCM)

– Working with the supply chain as a whole to improve
overall flow through a system composed of 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
© 2009 Pearson Education, Inc.