Marketing Manager Course - Chapter 17
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Chapter
17
Operations Management
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should be able to:
Define operations management and its three stages:
inputs, transformation and disposition.
Describe how operations management ensures supplies
of inputs and an efficient production system.
Use tools of operations management, including Gantt
charts, PERT networks, and statistical process tools.
Explain the role of quality management in the
operations management process.
Understand and apply the principles of quality
management, kaizen, just-in-time manufacturing, and
kanban to the production process.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
What is Operations Management?
Operations management is the process an
organization uses to:
Obtain the materials or ideas for the product it provides.
Transform the materials or ideas into the product.
Provide the final product to a user.
Operations management is closely linked to:
Strategic Management (Chapter 7)
Planning (Chapter 5)
Information Systems Management (Chapter 18)
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Skills for Operations Management
Organization Skills
Analytical Problem Communication
Solving Skills Skills
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Operations Management
Process
Inputs C onversi
on O ut s
put
Raw materials Facility
Goods
Labor Capacity
Services
Energy Process
Information
Knowledge Control
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Planning in Operations
Management
Planning is the foundation of operations
management.
Planning – the management function that assesses
the management environment to set future
objectives and map out activities necessary to
achieve those objectives.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Strategic Planning
Strategic management decisions involved in
operations management:
Make-buy analysis: whether to produce an item or
to purchase it.
Capacity: firm’s ability to produce the product
during a given period.
Facilities: design and location of an operations
facility.
Process: how a product or a service will be
produced.
Facilities layout design: physical arrangement that
allows for efficient production.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Acquiring Inputs
Inputs are the supplies needed to create a product.
Materials requirements planning: analyzing a design to
determine the materials and parts required in the
production process.
Inventory: the stock of raw materials, inputs, and
component parts that the firm keeps on hand.
Reordering systems: the process used to help keep inventory
levels more or less consistent.
Fixed point reordering system
Fixed interval reordering system
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Conversion Process
Conversion process: the stage in which the
product’s inputs are converted to the final product.
An effective conversion process:
Works to lower the cost of creating the product; or to
Create a better product for the same cost.
Key decision areas:
Designing the process
Monitoring the process
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Designing the Process
Process design begins with analyzing the general
operation and identifying:
Every major step that needs to be done.
The order that the steps must take.
The flow of the steps from start to finish (including their
relationship to each other).
The amount of time each individual step requires.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Example of Process Analysis Information
Step Order Relation to Other Steps Time
A. Get permit 1 None 4 weeks
B. Order equipment 1 None 1 week
C. Paint interior 2 None 2 weeks
D. Install electrical 3 Following C 1 week
fixtures
E. Install floors 4 Following C 1 week
F. Install equipment 5 Following B, E 1 week
G. Test equipment 6 Following F 1 week
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Process Design Tools
Gantt Charts: provide a visual sequence of
the process steps.
Load Charts: type of Gantt chart based on
departments or specific resources that are
used in the process.
Program Evaluation and Review Technique
(PERT) Network: tool for analyzing the
conversion process.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Example of a Gantt Chart
WEEKS
Start 1 2 3 4 5
Get permit ----------------------------------------------------
Order baking equipment -------------------
Paint interior -----------------------------
Install electrical fixtures ------------
Install floors ------------
Install baking equipment -----------
Test equipment -----------
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Example of a Load Chart
WEEKS
Start 1 2 3 4 5
Office Staff -------------------
Order department -------------------
Painter -----------------------------
Electrician ----------------------------------
Carpenter ------------
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Example of a PERT Network
Get permit
1
4
1
Start 1
Order baking equipment Install baking equipment Test equipment
1
1
1 1 1
Paint interior Install electrical Install floors
fixtures
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Facilities Layout
Facilities layout - the grouping and organization of
equipment and employees
Product layout - where each function is performed in a
fixed sequence
Process layout - where each work station is relatively self-
contained
Fixed position layout - where remote work stations
assemble components, and they are then brought to a final
assembly area
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Flexible Manufacturing
Flexible manufacturing – techniques that
help reduce the setup costs associated with
the production system
computer aided design, engineering, and
manufacturing tools make the work process
more flexible
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Process Monitoring Tools
A cceptance St i i
atstcal
Sam plng
i Process C ontrol
Tot Fact
al or Partal
i
Productviy
i t Productviy
i t
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Statistical Process Control Tools
C heck Sheets
Paret A nal s
o ysi
Process Flow
A nal s
ysi
C ause- and-
Ef ectD i
f agram s
Process
C apabiiy
lt
C ont C hart
rol s M easures
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
