chapter 15 managing service and manufacturing operations

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Chapter 15 Managing Service and Manufacturing Operations

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Page 1: Chapter 15 Managing Service and Manufacturing Operations

Chapter 15

Managing Service and Manufacturing Operations

Page 2: Chapter 15 Managing Service and Manufacturing Operations

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What Would You Do? Productivity at Huffman Corporation Sales in the machine tool industry are off by 60

percent Huffman wants to increase productivity How do you measure and improve productivity? Will improved productivity really matter to the

customers?

Page 3: Chapter 15 Managing Service and Manufacturing Operations

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After discussing this section, you should be able to:

Learning ObjectivesManaging for Productivity and Quality

1. discuss the kinds of productivity and their importance in managing operations.

2. explain the role that quality plays in managing operations.

Page 4: Chapter 15 Managing Service and Manufacturing Operations

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A measure of performance that indicates how many inputs it takes to produce or create an output

Productivity

Why Why Productivity Productivity

MattersMatters

Kinds of Kinds of ProductivityProductivity

ProductivityProductivity

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Why Productivity Matters

HigherProductivity

LowerCosts

LowerPrices

HigherMarketShare

HigherProfits

HigherStandard

of Living

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Kinds of Productivity Partial productivity =

OutputsSingle Kind of Input

Multifactor productivity =

OutputsLabor + Capital + Materials + Energy

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Quality

Quality-Related Service CharacteristicsQuality-Related Service Characteristics

Quality-Related Product CharacteristicsQuality-Related Product Characteristics

ISO 9000ISO 9000

Baldrige National Quality AwardBaldrige National Quality Award

Total Quality ManagementTotal Quality Management

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Quality-Related Product Characteristics Reliability

the average time between breakdowns Serviceability

the ease with which a product is fixed Durability

mean time to failure

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Quality-Related Service Characteristics

ResponsivenessResponsiveness

Reliability

TangiblesEmpathy

Assurance

QualityQualityServiceService

Adapted from Exhibit 15.4

Page 10: Chapter 15 Managing Service and Manufacturing Operations

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ISO 9000

A series of five international standards Certifies quality processes Managers often want this to improve

customer satisfaction

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Baldrige National Quality Award Given to U.S. companies Recognizes achievement in quality Winners have been financially successful

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Criteria for the Baldrige National Quality Award Leadership Strategic Planning Customer and Market Focus Information and Analysis Human Resource Focus Process Management Business Results

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Total Quality Management

Customer Focus and SatisfactionCustomer Focus and Satisfaction

Continuous ImprovementContinuous Improvement

TeamworkTeamwork

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Defects at Six Sigma Quality

50 150 250 350 450 550 650 750

Defects Per Million Parts (000)Defects Per Million Parts (000)

Sig

ma

Qu

alit

y L

evel

Sig

ma

Qu

alit

y L

evel

6 Sigma

5 Sigma

4 Sigma

3 Sigma

2 Sigma

1 Sigma 690,000 defects per million

3.4 defects per million

230 defects per million

6,210 defects per million

66,800 defects per million

308,538 defects per million

Adapted from Exhibit 15.7

Page 15: Chapter 15 Managing Service and Manufacturing Operations

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After discussing this section, you should be able to:

Learning ObjectivesManaging Operations

3. explain the essentials of managing a service business.4. describe the different kinds of manufacturing operations.5. describe why and how companies should manage inventory

levels.

Page 16: Chapter 15 Managing Service and Manufacturing Operations

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Service Operations

Service-ProfitChain

ServiceRecovery andEmpowerment

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Service-Profit Chain

Internal Service QualityInternal Service Quality

Employee SatisfactionEmployee Satisfaction Service CapabilityService Capability

High Value ServiceHigh Value Service

Customer SatisfactionCustomer Satisfaction

Customer LoyaltyCustomer Loyalty

Profit and GrowthProfit and Growth

Adapted From Figure 15.8

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Do service employees have tools needed?

Are good performers rewarded/recognized?

Does management aid or hinder employees?

Is there teamwork among individuals and departments?

Do they facilitate serving customers?

Is job-specific training available?

Both vertical and horizontal communication?

Are goals of senior management and frontline service employees aligned?

Components of Internal Service QualityPolicies and

Procedures

Tools

Effective Training

Rewards and Recognition

Communication

Management Support

Goal Alignment

Teamwork

Adapted from Exhibit 15.9

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Service Recovery and Empowerment Service recovery is restoring customer

satisfaction to strongly dissatisfied customers Empowering workers is one way to speed up

service recovery

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Costs of Empowering Service Workers for Service Recovery

Increased costs of selection Increased training costs Higher wages Less emphasis on service reliability Overly eager, empowered service workers

may provide “giveaways” Empowered service workers may be overly

eager to make up for poor service

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Benefits of Empowering Service Workers for Service Recovery

Quicker response to customer complaints and problems

Employees feel better about their jobs Employee interaction with customers will be

warm and friendly Employees more likely to offer ideas for

improving service and preventing problems

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Manufacturing Operations

Amount of Amount of ProcessingProcessing

in Manufacturingin ManufacturingOperationsOperations

Amount of Amount of ProcessingProcessing

in Manufacturingin ManufacturingOperationsOperations

Flexibility ofFlexibility ofManufacturingManufacturing

OperationsOperations

Flexibility ofFlexibility ofManufacturingManufacturing

OperationsOperations

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Amount of Processing in Manufacturing Operations Make-to-order operations

manufacturing doesn’t begin until an order is placed

Assemble-to-order operations used to create semi-customized products

Make-to-stock operations manufacture standardized products

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Flexibility of Manufacturing Operations

Least FlexibleLeast Flexible Most FlexibleMost Flexible

Continuous-Continuous-FlowFlowProductionProduction

Line-Line-FlowFlowProductionProduction

BatchBatchProductionProduction

JobJobShopsShops

ProjectProjectManufacturingManufacturing

Adapted From Figure 15.12

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Inventory

Types of InventoryTypes of Inventory

Managing InventoryManaging Inventory

Costs of Maintaining an InventoryCosts of Maintaining an Inventory

Measuring InventoryMeasuring Inventory

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Types of InventoryRaw

Materials

DistributionCenters

FieldWarehouses

Wholesalers

Retailers

ComponentPartsFabrication

Work-in-ProgressInitial Assembly

Finished Goods

Final Assembly

Adapted From Figure 15.4

VendorsPurchasing

Customers

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Measuring Inventory

Average aggregate inventory the average overall inventory for a certain time

period Stockout

running out of inventory Inventory turnover

the number of times a year that a company sells its average inventory

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Inventory Turn Rates Across Industries

Aerosp

ace

Autom

otive

Chemic

als

Constru

ctio

n

Consum

er P

acka

ted G

oods/Nondura

bles

Consum

er P

roduct

Dura

bles

High T

ech

Indust

rial E

quipm

ent &

Mac

hiner

y

Pharm

aceu

tical

s

Printin

g and P

ublishin

g

Avera

ge0

5

10

15

20

25

30

Average Inventory Turn Rate

75th Percentile Inventory Turn

Rate

Adapted from Exhibit 15.14

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Blast From The PastGuns, Geometry, and Fire Whitney and standardized parts

interchangeable parts fewer defects

Monge’s 3-dimensional drawings more precise designs

Fire led to just-in-time at Oldsmobile

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Costs of Maintaining an Inventory Ordering costs

all associated costs with ordering goods Setup costs

changing goods produced Holding costs

carrying inventory Stockout costs

running out of inventory

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Managing Inventory

Economic OrderEconomic OrderQuantityQuantity

KanbanKanban

Just-in-TimeJust-in-Time

Materials RequirementMaterials RequirementPlanningPlanning

Independent DemandIndependent DemandSystemsSystems

Dependent DemandDependent DemandSystemsSystems

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Been There, Done That

Wiremold has used continuous improvement and just-in-time inventory systems

Quality has increased and costs have been reduced

The more inventory is turned, the better customer service gets

Lean Manufacturing at Wiremold

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What Really Happened?Productivity at Huffman Corporation Labor hours to produce a machine tool is 33 percent

less, allowing a 20 percent price drop Ended most recent year with record sales and

profits Results find their way to customer performance, for

example some medical machines that improve productivity of doctors