chapter 15 managing service and manufacturing operations
TRANSCRIPT
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?
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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.
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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
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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
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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.
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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