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Production

andOperations

Management

Chapter 09

McGraw-Hill/Irwin Copyri ght 2013 by The McGraw-H il l Companies, Inc. Al l r ights reserved.

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1. Describe the current state of U.S. manufacturingand what manufacturers have done to becomemore competitive.

2. Describe the evolution from production tooperations management.

3. Identify various production processes and describe

techniques that improve productivity, includingcomputer-aided design and manufacturing, flexiblemanufacturing, lean manufacturing and masscustomization.

LEARNING GOALSChapter Nine

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4. Describe operations management planning issuesincluding facility location, facility layout, materials

requirement planning, purchasing, just-in-timeinventory control and quality control.

5. Explain the use of PERT and Gantt charts to

control manufacturing processes.

LEARNING GOALSChapter Nine

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Profile

Palmisano, CEO and President of IBM, started inthe company in 1973.

The companys earnings have quadrupled underPalmisano.

SAMUEL J. PALMISANOIBM

Switching the companys

focus from production toservice, Palmisano ledIBM to enter the emergingglobal market.

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This companys robots manufacture, test, andpackage motor starters - all untouched by

human hands. The machines can fill specialorders, even for a single item, without slowingdown the process.

Name that company!

NAME that COMPANYChapter Nine

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Manufacturing

and Services in

Perspective

The U.S. is still the worlds leadingmanufacturer.

Manufacturing has continued to grow since1970. In fact, U.S. manufacturing is 2x biggerthan in 1970.

MANUFACTURING in the U.S.

Almost 25% of all

goods produced eachyear come from theU.S.

LG1

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Source: Parade Magazine, www.parade.com, accessed June 2011.

WHATS MADE in the USA?Leading U.S. Manufactured GoodsLG1

Manufacturing

and Services in

Perspective

Products Value Number of Employees

ChemicalsPharmaceuticals,cosmetics, soaps, paints, fertilizers

$250 Billion 830,000 Americans

Transportation EquipmentCars, planes, trains, ships

$195 Billion Over 1.4 MillionAmericans

Processed Foods, Beveragesand TobaccoCookies, coffee,cigarettes, prepared meals

$175 Billion 1.7 Million Americans

Computers and Electronics

Computers and communicationequipment

$146 Billion 1.2 Million Americans

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Source: CNBC, www.cnbc.com, accessed June 2011.

Exporters ExtraordinaireTop Ten States that Manufacture Goods for ExportLG1

Manufacturing

and Services in

Perspective

Rank State Amount Exported

1 California $142.61 billion

2 Texas $130.66 billion

3 New York $72.58 billion

4 Michigan $67.94 billion

5 Washington $61.99 billion

6 Illinois $57.92 billion

7 Ohio $42.59 billion

8 Florida $41.58 billion

9 New Jersey $36.77 billion

10 Pennsylvania $34.57 billion

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Source: Industry Week, www.industryweek.com, accessed June 2011.

MASSIVE MANUFACTURERSThe Top Ten U.S. ManufacturersLG1

Manufacturing

and Services in

Perspective

Rank Company Industry

1 Exxon Mobil Petroleum and Coal

2 Chevron Petroleum and Coal

3 General Electric Electrical Equipment and Appliances4 ConocoPhillips Petroleum and Coal

5 Ford Motor Company Automobiles

6 Hewlett-Packard Computers

7 IBM Computers

8 Procter & Gamble Chemicals

9 Archer-Daniels-Midland Food

10 Boeing Aerospace

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The market for new green products and servicesis almost endless.

Given the rate of population growth, it

simportant to plan ahead for a world with limitedresources.

Companies like DuPont, Michelin, Chevronand

Nokiaare working on sustainability projects.

Procter & Gambleand Kaiser Permanenteissuetheir own mandatory sustainability scorecards to

their supply chains.

KEY WORD:SUSTAINABILITY

(Thinking Green)

9-10

http://www2.dupont.com/Sustainable_Solutions/en_US/index.htmlhttp://www.michelin.com/corporate/EN/group/sustainable-mobility/challengeshttp://www.chevron.com/globalissues/energyefficiencyconservation/http://www.nokiasiemensnetworks.com/about-us/sustainabilityhttp://www.pg.com/en_US/sustainability/overview.shtmlhttp://xnet.kp.org/newscenter/aboutkp/green/index.htmlhttp://xnet.kp.org/newscenter/aboutkp/green/index.htmlhttp://www.pg.com/en_US/sustainability/overview.shtmlhttp://www.nokiasiemensnetworks.com/about-us/sustainabilityhttp://www.chevron.com/globalissues/energyefficiencyconservation/http://www.michelin.com/corporate/EN/group/sustainable-mobility/challengeshttp://www2.dupont.com/Sustainable_Solutions/en_US/index.html

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The U.S. economy is no longer manufacturingbased.

85% of jobs are in the service sector. The top-paying service jobs in the U.S. are in:

- Legal services

- Medical services

- Entertainment

- Accounting

- Finance

- Management consulting

TOP-PAYING SERVICE JOBSLG1

Manufacturing

and Services in

Perspective

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Manufacturers

and Service

Organizations

Become More

Competitive

U.S. is still the leader in nanotechnology andbiotechnology.

How can U.S. businesses maintain a competitiveedge?

- Focusing on customers

- Maintaining close relationships with suppliers

- Practicing continuous improvement

- Focusing on quality

- Saving on costs through site selection

- Relying on the Internet to unite companies

- Adopting new production techniques

REMAINING COMPETITIVE inGLOBAL MARKETSLG1

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Ten years ago, Germanys economy was muchlike ours today.

Stihlinvested in highly trained workers.

LEARNING from GERMANY(Reaching Beyond Our Borders)

Stihl remained competitivein the manufacturingworld.

German companiespoured money intoresearch and stayed awayfrom high tech products.

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From Production

to Operations

Management

Production -- The creation of goods using land,labor, capital, entrepreneurship and knowledge (the

factors of production).

PRODUCTION andPRODUCTION MANAGEMENT

ProductionManagement --All theactivities managers do to

help firms create goods.

LG2

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Operations Management --A specialized area inmanagement that converts or transforms resources

into goods and services.

Operations management includes:

- Inventory management

- Quality control- Production scheduling

- Follow-up services

OPERATIONS MANAGEMENTLG2

From Production

to Operations

Management

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All about creating a good experience for thosewho use the service.

OPERATIONS MANAGEMENTin the SERVICE SECTORLG2

Operations

Management in

the Service Sector

In hotels, like Ritz-Carlton, operationmanagementincludes fine dining,fresh flowers, andtraining for everyemployee.

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Source: Entrepreneur, February 2011.

THERES an APP for THATTop Productivity Apps for iPadLG2

App What it Does Price

Dropbox Syncs and backs up files Free

ServiceMax

Helps field employees with data

management Free

KeynoteUse to create and show slide

presentations$9.99

Penultimate Note taking made easier $3.99

ZigZag Board An easy-to-carry whiteboard $4.99

Operations

Management in

the Service Sector

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Progress

Assessment

What have U.S. manufacturers done to regain acompetitive edge?

What must U.S. companies do to continue tostrengthen the countrys manufacturing base?

What led companies to focus on operationsmanagement rather than production?

PROGRESS ASSESSMENT

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Production

Processes The PRODUCTION PROCESSLG3

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Form Utility -- The

value producers addto materials in the

creation of finished

goods and services.

FORM UTILITY

LG3

Production

Processes

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1. To build and deliver products in response to thedemands of the customer at the scheduled

delivery time.

2. To provide an acceptable quality level.

3. To provide everything at the lowest possiblecost.

GROVES BASIC PRODUCTIONREQUIREMENTS

LG3

Production

Processes

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ProcessManufacturing -- Thepart of production that

physically or chemically

changes materials.

Assembly Process --

The part of theproduction process that

puts together

components.

PROCESS and ASSEMBLY inPRODUCTIONLG3

Production

Processes

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Production processes are either continuous orintermittent.

Continuous Process -- Long production runs turn

out finished goods over time.

Intermittent Process -- Production runs are shortand the producer adjusts machines frequently tomake different products.

KEY PRODUCTION PROCESSESLG3

Production

Processes

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MINUTE MADEProduction of Some of Americas Favorite ProductsLG3

Production

Processes

ProductNumber of ItemsMade in a Minute

Krispy Kreme Doughnuts 5,208

Chips Ahoy! Cookies 4,000

Twinkies 972

Jello Boxes 764

LifeSavers 100 rolls

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The Need to

Improve Production

Techniques and

Cut Costs

DEVELOPMENTS MAKING U.S.COMPANIES MORE COMPETITIVE

1. Computer-aided designand manufacturing

2. Flexible manufacturing

3. Lean manufacturing

4. Mass customization

LG3

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Computer-Aided

Design and

ManufacturingCOMPUTER-AIDED DESIGN and

MANUFACTURING

Computer-Aided Design(CAD) -- The use of

computers in the design ofproducts.

Computer-Aided

Manufacturing (CAM) --The use of computers in themanufacturing of products.

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Flexible

Manufacturing FLEXIBLE MANUFACTURING

Flexible Manufacturing -- Designing machines todo multiple tasks so they can produce a variety of

products.

Allen-Bradleyuses flexible manufacturing to buildmotor starters.

26 machines and robots build, test and packageparts.

LG3

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Mass

Customization MASS CUSTOMIZATION

Mass Customization -- Tailoring products to meetthe needs of a large number of individual customers.

LG3

More manufacturers arelearning to customize.

Mass customization

exists in the servicesector too.

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MASS CUSTOMIZATIONof CANDY

(Spotlight on Small Business)

Chocomizelets customers customize theirchocolate bars.

Co-founder, Eric Heinbockel, sought funding helpfrom his family.

Chocomize now has three full-time chocolatemakers and is expected to be a success.

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Progress

Assessment

Whats form utility?

Define and differentiate the following: processmanufacturing, assembly process, continuousprocess and intermittent process.

What do you call the integration of CAD andCAM?

Whats mass customization?

PROGRESS ASSESSMENT

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Operations

Management

Planning

Operations management planning helps solveproblems like:

- Facility location- Facility layout

- Materials requirement planning

- Purchasing

- Inventory control

- Quality control

OPERATIONS MANAGEMENTLG4

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Facility

Location

Facility Location --The process of

selecting a geographiclocation for a

companys operations.

FACILITY LOCATION

Rising numbers of Internet businesses meansbrick-and-mortar retailers must find greatlocations.

LG4

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Potential of low-cost labor is very attractive tocompanies hoping to remain competitive.

However, shuttering operations and moving canoften cause severe economic problems independent areas.

What would you do if you were the CEO ofChildrenWear Industries faced with this problem?

STAY or LEAVE(Making Ethical Decisions)

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Taking

Operations

Management to

the Internet

Sometimes businesses outsource engineering,design and manufacturing to other companies.

Often these relationships are managed throughthe Internet.

Many companies are developing Internet-focused

strategies.

OPERATIONS MANAGEMENTon the INTERNETLG4

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Facility Location

in the Future

Information technology gives firms increasedflexibility in terms of location.

Telecommuting -- Working from home viacomputer.

FUTURE FACILITY LOCATIONLG4

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Facility Layout

Facility Layout -- The physical arrangement ofresources, including people, to most efficiently

produce goods and provide services.

Facility layout depends on the processesperformed:

- Service: Help customers find products- Manufacturing: Improve efficiency

SETTING UP the FACILITYLG4

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1. Assembly Line LayoutWorkers do only a fewtasks at a time.

2. Modular LayoutTeams of workers produce morecomplex units of the final product.

3. Fixed-Position LayoutAllows workers to

congregate around the product.

4. Process LayoutSimilar equipment and functionsare grouped together.

FACILITY LAYOUT OPTIONSLG4

Facility Layout

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ASSEMBLY LINE LAYOUTLG4

Facility Layout

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MODULAR LAYOUTLG4

Facility Layout

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PROCESS LAYOUTLG4

Facility Layout

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FIXED-POSITION LAYOUTLG4

Facility Layout

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Materials

Requirement

Planning

Materials Requirement Planning (MRP) --Acomputer-based operations management system that

uses sales forecasts to make sure parts and

materials are available when needed.

Enterprise Resource Planning (ERP) --A newerversion of MRP, combines computerized functions

into a single integrated software program using asingle database.

MRP and ERPLG4

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Purchasing

Purchasing -- The functionthat searches for high-quality

material resources, finds the

best suppliers and negotiatesthe best price for goods and

services.

The Internet hastransformed purchasing.

PURCHASINGLG4

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Just-in-Time

Inventory Control

Just-in-Time (JIT) Inventory Control -- Theproduction process in which a minimum of inventory

is kept and parts, supplies and other needs aredelivered just in time to go on the assembly line.

To work effectively, the process requires excellent

coordination with suppliers.

INVENTORY CONTROLLG4

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The Baldrige

Awards

Companies can apply for awards in these areas:

- Manufacturing

- Services- Small Businesses

- Non-Profit/Government

- Education- Healthcare

The BALDRIGE AWARDSLG4

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Source: National Institute of Standards and Technology, www.quality.nist.gov, accessed June 2011.

THE WINNERS ARE2010 Baldrige Award RecipientsLG4

The Baldrige

Awards

Company Category Where from?

MEDRAD Manufacturing Warrendale, PA

Nestl Purina PetCare Manufacturing St. Louis, MO

Freese and Nichols Small Business Ft. Worth, TXK & N Management Small Business Austin, TX

Studer Group Small Business Gulf Breeze, FL

Advocate GoodSamaritan Hospital

Healthcare Downers Grove, IL

Montgomery CountyPublic Schools

Education Rockville, MD

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ISO 9000 d

http://www.quality.nist.gov/http://www.quality.nist.gov/

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ISO 9000 and

ISO 14000

Standards

The International Organization for Standardization(ISO) is a worldwide federation of nationalstandards bodies.

ISO 9000 -- The common name given to qualitymanagement and assurance standards.

ISO 14000 --A collection of the best practices formanaging an organizations impact on theenvironment.

WHAT is ISO?LG4

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Progress

Assessment

What are the major criteria for facility location?

What

s the difference between MRP and ERP?

Whats just-in-time inventory control?

What are Six Sigma quality, the Baldrige Award,ISO 9000 and ISO 14000?

PROGRESS ASSESSMENT

9-52

Control

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Control

Procedures:

PERT and Gantt

Charts

Program Evaluation and Review Technique(PERT) --A method for analyzing the tasks involved

in completing a given project and estimating the timeneeded.

PERTLG5

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Control

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1. Analyzing and sequencing tasks

2. Estimating the time needed to complete eachtask

3. Drawing a PERT network illustrating the first twosteps

4. Identifying the critical path

Critical Path -- The sequence of tasks thattakes the longest time to complete.

STEPS INVOLVED in PERTLG5

Control

Procedures:

PERT and Gantt

Charts

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Control

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PERT CHART for a MUSIC VIDEOLG5

Control

Procedures:

PERT and Gantt

Charts

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Control

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Gantt ChartA bar graph that shows what projectsare being worked on and how much has been

completed.

GANTT CHARTSLG5

Procedures:

PERT and Gantt

Charts

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Progress

Assessment

Draw a PERT chart for making breakfast of three-minute eggs, buttered toast and coffee. Define

the critical path.

How could you use a Gantt chart to keep track ofproduction?

PROGRESS ASSESSMENT