8/19/2011 - this isetc.yorktech.com/bus101/chap009.pdf · 8/19/2011 4 * * from production to...
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8/19/2011
1
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*Chapter Nine
Production
and
Operations
Management
McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
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*Profile
• Current CEO and President of
IBM, he started in the company
in 1973.
• The company invested $16
billion in acquiring 60 other
companies.
• Switching the company’s focus
from production to service,
Palmisano has led IBM to enter
the emerging global market.
SAMUEL J. PALMISANOIBM
9-2
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*Manufacturing
and Services in
Perspective
• From 2001 to 2009, manufacturing output in the
U.S. rose 4% each year.
• The U.S. is still the world’s leading
manufacturer.
MANUFACTURING in the U.S.
LG1
• Almost 25% of all
goods produced each
year come from the
U.S.
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Source: Parade Magazine, http://www.parade.com, accessed September 2010.
LG1
Manufacturing
and Services in
PerspectiveWHAT’S MADE in the USA?
Leading U.S. Manufactured Goods
Products Value Number of Employees
Chemicals – Pharmaceuticals,
cosmetics, soaps, paints,
fertilizers
$250 Billion 830,000 Americans
Transportation Equipment –
Cars, planes, trains, ships$195 Billion Over 1.4 Million Americans
Processed Foods,
Beverages and Tobacco –
Cookies, coffee, cigarettes,
prepared meals
$175 Billion 1.7 Million Americans
Computers and Electronics –
Computers and communication
equipment
$146 Billion 1.2 Million Americans
9-4
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Source: Bloomberg BusinessWeek, http://www.businessweek.com, accessed September 2010.
Exporters ExtraordinaireTop Ten States that Manufacture Goods for Export
State Thousands of Workers
California 206.1
Texas 108.9
Ohio 95.6
Michigan 79.8
New York 77.2
Illinois 76.6
Pennsylvania 71.8
Washington 71.3
North Carolina 60.1
Indiana 59.6
Manufacturing
and Services in
Perspective
LG1
9-5
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Source: Industry Week, http://www.industryweek.com.
MASSIVE MANUFACTURERSThe Top Ten U.S. Manufacturers
Rank Company
1 Exxon-Mobil
2 Chevron
3 ConocoPhillips
4 General Electric
5 General Motors
6 Ford Motor
7 Valero Energy
8 Hewlett-Packard
9 IBM
10 Procter & Gamble
Manufacturing
and Services in
Perspective
LG1
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• The Green Economy is worth more than $200
billion annually and is expected to reach $1 trillion
by 2020.
• Consumers like products that say “all natural,”
“locally grown,” “energy efficient,” etc.
• The market for new green products and services
is almost endless.
• The Green Movement, however, is only
beginning.
The “GREEN” MOVEMENT
IMPROVES the ECONOMY(Thinking Green)
9-7
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• The U.S. economy is no longer manufacturing
based.
• 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 JOBS
LG1
Manufacturing
and Services in
Perspective
9-8
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* Manufacturers
and Service
Organizations
Become More
Competitive
• U.S. is still the leader in nanotechnology and
biotechnology.
• How can U.S. businesses maintain a competitive
edge?
- Focusing on customers
- Practicing continuous improvement
- Focusing on quality
- Relying on the Internet to unite companies
- Adopting new production techniques.
REMAINING COMPETITIVE in
GLOBAL MARKETSLG1
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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 and
PRODUCTION MANAGEMENTLG2
• Production
Management -- All the
activities managers do to
help firms create goods.
9-10
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*From Production
to Operations
Management
• Operations Management -- A specialized area in
management that converts or transforms resources
into goods and services.
• Operations management includes:
• Inventory management
• Quality control
• Production scheduling
• Follow-up services
OPERATIONS MANAGEMENT
LG2
9-11
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*Progress
Assessment
• What have U.S. manufacturers done to regain a
competitive edge?
• What must U.S. companies do to continue to
strengthen the country’s manufacturing base?
• What led companies to focus on operations
management rather than production?
PROGRESS ASSESSMENT
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*Production
ProcessesThe PRODUCTION PROCESS
LG3
9-13
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*Production
Processes
• Form Utility -- The value producers add to materials
in the creation of finished goods and services.
FORM UTILITY
LG3
9-14
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1. To build and deliver products in response to the
demands of the customer.
2. To provide an acceptable quality level.
3. To provide everything at the lowest possible
cost.
GROVE’S BASIC PRODUCTION
REQUIREMENTSLG3
Production
Processes
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• Process Manufacturing -- The part of production
that physically or chemically changes materials.
• Assembly Process -- The part of the production
process that puts together components.
PROCESS and ASSEMBLY in
PRODUCTIONLG3
Production
Processes
9-16
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• Production processes are either continuous or
intermittent.
• Continuous Process -- Long production runs turn
out finished goods over time.
• Intermittent Process -- Production runs are short
and the producer adjusts machines frequently to
make different products.
KEY PRODUCTION PROCESSES
LG3
Production
Processes
9-17
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*MADE in a MINUTE
Production of Some of America’s Favorite Products
Product Number of Items
Made in a Minute
Krispy Kreme Doughnuts 5,208
Chips Ahoy! Cookies 4,000
Twinkies 972
Jello Boxes 764
LifeSavers 100 rolls
Production
Processes
LG3
9-18
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*The Need to
Improve Production
Techniques and
Cut Costs
DEVELOPMENTS MAKING U.S.
COMPANIES MORE COMPETITIVELG3
1. Computer-aided design and manufacturing
2. Flexible manufacturing
3. Lean manufacturing
4. Mass customization
9-19
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*Computer-Aided
Design and
Manufacturing
COMPUTER-AIDED DESIGN and
MANUFACTURINGLG3
• Computer-Aided Design
(CAD) -- The use of
computers in the design of
products.
• Computer-Aided
Manufacturing (CAM) --The use of computers in the
manufacturing of products.
9-20
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*Flexible
Manufacturing FLEXIBLE MANUFACTURING
LG3
• Flexible Manufacturing -- Designing machines to
do multiple tasks so they can produce a variety of
products.
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*Lean
Manufacturing LEAN MANUFACTURING
LG3
• Lean Manufacturing -- Using less of everything
than in mass production.
• Compared to others, lean companies:
• Take half the human effort.
• Have half the defects in finished products.
• Require one-third the engineering effort.
• Use half the floor space.
• Carry 90% less inventory.
9-22
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*Mass
CustomizationMASS CUSTOMIZATION
LG3
• Mass Customization --Tailoring products to meet the
needs of a large number of
individual customers.
• More manufacturers are
learning to customize.
• Mass customization exists
in the service sector too.
9-23
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*Progress
Assessment
• What’s form utility?
• Define and differentiate the following: process
manufacturing, assembly process, continuous
process and intermittent process.
• What do you call the integration of CAD and
CAM?
• What’s mass customization?
PROGRESS ASSESSMENT
9-24
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*Operations
Management
Planning
• Operations management planning helps solve
problems like:
- Facility location
- Facility layout
- Materials requirement planning
- Purchasing
- Inventory control
- Quality control
OPERATIONS MANAGEMENT
LG4
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*Facility
Location
• Facility Location --The process of
selecting a geographic
location for a
company’s operations.
FACILITY LOCATION
LG4
• Rising numbers of Internet businesses means
brick-and-mortar retailers must find great
locations.
9-26
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• Potential of low-cost labor is very attractive to
companies hoping to remain competitive.
• However, shuttering operations and moving can
often cause severe economic problems in
dependent areas.
• What would you do if you were the CEO of
ChildrenWear Industries faced with this problem?
STAY or LEAVE(Making Ethical Decisions)
9-27
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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 through
the Internet.
• Many companies are developing Internet-focused
strategies.
OPERATIONS MANAGEMENT
on the INTERNETLG4
9-28
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*Facility Location
in the Future
• Information technology gives firms increased
flexibility in terms of location.
• Telecommuting -- Working from home via
computer and modem.
FUTURE FACILITY LOCATION
LG4
9-29
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• Dain Hancock of Lockheed Martin had the
formidable task of uniting 80 companies into a
single production unit.
PARTNERING BEYOND
COUNTRY BORDERS(Reaching Beyond Our Borders)
• Using the Internet
and tech tools, like
electronic white
boards, kept the
companies in touch
in real time.
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*Facility Layout
• Facility Layout -- The physical arrangement of
resources, including people, to most efficiently
produce goods and provide services.
• Facility layout depends on the processes
performed:
- Service: Help customers find products
- Manufacturing: Improve efficiency
SETTING UP the FACILITY
LG4
9-31
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*Facility Layout
1. Assembly Line Layout – Workers do only a few
tasks at a time.
2. Modular Layout – Teams of workers produce more
complex units of the final product.
3. Fixed-Position Layout – Allows workers to
congregate around the product.
4. Process Layout – Similar equipment and functions
are grouped together.
FACILITY LAYOUT OPTIONS
LG4
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LG4
Facility LayoutASSEMBLY LINE LAYOUT
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LG4
Facility LayoutMODULAR LAYOUT
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LG4
Facility LayoutPROCESS LAYOUT
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LG4
Facility LayoutFIXED-POSITION LAYOUT
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*Materials
Requirement
Planning
• Materials Requirement Planning (MRP) -- A
computer-based operations management system that
uses sales forecasts to make sure parts and
materials are available when needed.
• Enterprise Resource Planning (ERP) -- A newer
version of MRP, combines computerized functions
into a single integrated software program using a
single database.
MRP and ERP
LG4
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*Purchasing
• Purchasing -- The function that searches for high-
quality material resources, finds the best suppliers
and negotiates the best price for goods and services.
PURCHASING
LG4
• The Internet has
transformed
purchasing.
9-38
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*Just-in-Time
Inventory Control
• Just-in-Time (JIT) Inventory Control -- The
production process in which a minimum of inventory
is kept and parts, supplies and other needs are
delivered just in time to go on the assembly line.
• To work effectively, the process requires excellent
coordination with suppliers.
INVENTORY CONTROL
LG4
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*Quality Control
• Quality -- Consistently producing what the customer
wants while reducing errors before and after delivery.
• Six Sigma Quality -- A quality measure that allows
only 3.4 defects per million opportunities.
QUALITY CONTROL
LG4
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*Quality Control
• Statistical Quality Control -- A process used to
continually monitor all phases of the production
process.
• Statistical Process Control -- A process of
testing statistical samples of product components at
each stage of production.
• Measuring quality along the production process
reduces the need for quality-control at the end.
STATISTICAL QUALITY CONTROL &
STATISTICAL PROCESS CONTROL LG4
9-41
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*The Baldrige
Awards
• Companies can apply for awards in these areas:
- Manufacturing
- Services
- Small Businesses
- Education
- Healthcare
The BALDRIGE AWARDS
LG4
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Source: National Institute of Standards and Technology, http://www.quality.nist.gov, accessed September 2010.
• Honeywell Federal Manufacturing and
Technologies
Kansas City, Missouri (Manufacturing)
• AtlantiCare
Egg Harbor Township, New Jersey (Healthcare)
• Heartland HealthSt. Joseph, Missouri (Healthcare)
• Midway USA
Columbia, Missouri (Small Business)
THE WINNERS ARE…2009 Baldrige Award Recipients
The Baldrige
Awards
LG4
9-43
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*ISO 9000 and
ISO 14000
Standards
• The International Organization for Standardization
(ISO) is a worldwide federation of national
standards bodies.
• ISO 9000 -- The common name given to quality
management and assurance standards.
• ISO 14000 -- A collection of the best practices for
managing an organization’s impact on the
environment.
WHAT is the ISO?
LG4
9-44
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*Progress
Assessment
• What are the major criteria for facility location?
• What’s the difference between MRP and ERP?
• What’s just-in-time inventory control?
• What are Six Sigma quality, the Baldrige Award,
ISO 9000 and ISO 14000?
PROGRESS ASSESSMENT
9-45
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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 time
needed.
PERT
LG5
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*Control
Procedures:
PERT and
GANTT Charts
1. Analyzing and sequencing tasks
2. Estimating the time needed to complete each
task
3. Drawing a PERT network illustrating the first two
steps
4. Identifying the critical path
• Critical Path -- The sequence of tasks that
takes the longest time to complete.
STEPS INVOLVED in PERT
LG5
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*
LG5
Control
Procedures:
PERT and
GANTT Charts
PERT CHART for a MUSIC VIDEO
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*Control
Procedures:
PERT and
GANTT Charts
• Gantt Chart – A bar graph that shows what projects
are being worked on and how much has been
completed.
GANTT CHARTS
LG5
9-49
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*
LG5
Control
Procedures:
PERT and
GANTT Charts
GANTT CHART for a
DOLL FACTORY
9-50
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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 of
production.
PROGRESS ASSESSMENT
9-51