chapter 11 1 achieving world-class operations management prepared by norm althouse university of...

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Achieving World-Class Operations ManagementAchieving World-Class Operations Management

Prepared byNorm Althouse

University of Calgary

Prepared byNorm Althouse

University of Calgary

Copyright © 2011 by Nelson Education Ltd.

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Learning Outcomes

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1 Discuss why production and operations management is important in both manufacturing and service firms.

2 List the types of production processes used by manufacturers and service firms.

3 Describe how organizations decide where to put their production facilities and what choices must be made in designing the facility.

4 Explain why resource-planning tasks like inventory management and supplier relations are critical to production.

5 Discuss how operations managers schedule and control production.

6 Evaluate how quality management and lean-manufacturing techniques help firms improve production and operations management.

7 Identify the roles that technology and automation play in manufacturing and service industry operations management.

8 List some of the key trends affecting the way companies manage production and operations.


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Operations Management

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changes in consumer

expectations, technology, and

competition

finding the most efficient and effective methods of

producing the goods or services

rethinking where, when and how the organization

will produce products and services


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The creation of products and services by turning inputs into outputs, which are products

and services

The creation of products and services by turning inputs into outputs, which are products

and servicesProductionProduction

Management of the production processManagement of the production processOperations Management

Operations Management


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Main Types ofDecisions

Main Types ofDecisions

1. Production Planning

3. Improving production and operations


2. Production Control

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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 6

The Production Process

Raw materials

Raw materials

Natural resources

Natural resources

Human resources

Human resources CapitalCapital

Inputs Outputs

Conversionprocess

Conversionprocess

ProductsProducts

ServicesServices

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Production and Operations Management

Main Main Types ofTypes of

DecisionsDecisions

Main Main Types ofTypes of

DecisionsDecisions

1. Production Planning

2. Production Control

3. Improving production and operations

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Site selectionSite selection

Facility layoutFacility layout

Resource planningResource planning

Type of Production ProcessType of Production Process

DecisionsDecisionsin in

ProductionProductionPlanningPlanning

DecisionsDecisionsin in

ProductionProductionPlanningPlanning

Long-TermMedium-TermShort-Term1 Year1 Year 2 Years2 Years 3-5 Years3-5 Years


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Classification of Production Types

9Copyright © 2011 by Nelson Education Ltd.

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Converting Inputs to Outputs

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Assembly ProcessAssembly Process The basic inputs are combined or transformed into the output.

The basic inputs are combined or transformed into the output.

Process ManufacturingProcess Manufacturing The basic input is broken down into one or more outputs.

The basic input is broken down into one or more outputs.


Production involves converting inputs (raw materials, parts, human resources) into outputs (products or services)

Production involves converting inputs (raw materials, parts, human resources) into outputs (products or services)

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Production Timing

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Intermittent ProcessIntermittent Process A production process that uses short production runs to make batches of different products.

A production process that uses short production runs to make batches of different products.

Continuous ProcessContinuous Process A production process that uses long production runs without equipment shutdowns.

A production process that uses long production runs without equipment shutdowns.


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Manufacturing to order, or for inventory

Manufacture to order

Manufacture to order

A product is not made until a customer has placed an order for it.

E.g. Dell Computers, Burger King

A product is not made until a customer has placed an order for it.

E.g. Dell Computers, Burger King

Manufacture for inventory

Manufacture for inventory

A product is made in advance of a customer ordering it. E.g. Hewlett

Packard, McDonalds

A product is made in advance of a customer ordering it. E.g. Hewlett

Packard, McDonalds

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Factors in Facility Location Decisions

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Marketing factorsMarketing factors

Manufacturing environmentManufacturing environment

Local incentivesLocal incentives

Availability of production inputsAvailability of production inputs

International location considerations

International location considerations


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Production location problem

Where should the factory be built in Outlandia? …near to the source of supply? … or near to the consumers?

Location of main supply inputs

Location of main consumption market

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Physical weight loss Supply Smelters; sawmills Physical weight gain Consumer Soft-drink bottling; manufacture of

cement blocks Bulk loss Supply Compressing cotton into high-

density bales Bulk gain Consumer Manufacturing containers; sheet-

metal work Perishability loss Supply Fish processing Perishability gain Consumer Newspaper (and job) printing;

baking bread Fragility loss Supply Packing goods for shipment Fragility gain Consumer Coking of coal Hazard loss Supply Deodorizing captured skunks Hazard gain Consumer Manufacturing explosives;

distilling moonshine whiskey

Process characteristic

…implies locating close to Examples

Source: The Dynamics of Industrial Location: The Factory, the Firm and the Production Systemby Roger Hayter, Department of Geography, Simon Fraser University, Burnaby, 2004(http://www.sfu.ca/geography/people/faculty/Faculty_sites/RogerHayter/books.htm)

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Where should the factory be built in Outlandia? A centre of gravity model might be the answer when there are multiple consumption areas.

Consumer market B

Consumer market A

Consumer market C

Location of main supply inputs

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Designing the Facility

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Fixed-Position LayoutFixed-Position Layout The product stays in one place and workers and machinery move to it as needed

The product stays in one place and workers and machinery move to it as needed


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Make-or-Buy Decisions

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FactorsFactors Size of componentsSize of components

Standard or nonstandard items

Standard or nonstandard items

Quantity of items neededQuantity of items needed

Special design featuresSpecial design features

Quality and reliability of suppliersQuality and reliability of suppliers


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Inventory Management

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Perpetual InventoryPerpetual Inventory A continuously updated list of inventory levels, orders, sales, and receipts

A continuously updated list of inventory levels, orders, sales, and receipts


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Computerized Resource Planning

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Enterprise resource planning (ERP)

Enterprise resource planning (ERP)

A computerized resource-planning system that incorporates information about the firm’s suppliers and customer with its internally

generated data

A computerized resource-planning system that incorporates information about the firm’s suppliers and customer with its internally

generated data


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Supply Chain Management

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Goal:Satisfying customers with quality

products and services from their suppliers


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Production Control


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Gantt Chart

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Critical Path Method

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The Experience Curve

10 10 10 10 10 101 2 3 4 5 6

CostperUnitmade

Total Accumulated Production

Slope of .2 to .3, meaning a 20% to 30%reduction in unit manufacturing

costs for each doublingof production

As Boeing originally discovered with the 707, manufacturing cost continues to decline as you accumulate more production experience.

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Improving Production and Operations


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Lean Manufacturing


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Technology and Automation at Your Service

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Computer-Integrated ManufacturingComputer-Integrated Manufacturing

Flexible Manufacturing SystemsFlexible Manufacturing Systems

RoboticsRobotics

Computer-Aided Design andManufacturing Systems

Computer-Aided Design andManufacturing Systems

POS, ATMs, etc. POS, ATMs, etc.


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Trends in Operations Management

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Modular productionModular production

Designs for production efficiencyDesigns for production efficiency

Asset managementAsset management


chapter 11 1 achieving world-class operations management prepared by norm althouse university of...

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