CHAPTER 9: USING THE LATEST TECHNOLOGY TO PRODUCE WORLD- CLASS PRODUCTS AND SERVICES

 I. AMERICA'S MANUFACTURING BASE.

 LEARNING GOAL 1. Describe the production process and explain the importance of productivity.

 A. A NEW ERA IN THE INDUSTRIAL REVOLUTION.

 1. The heart of the free enterprise system in the U.S. has always been its manufacturers.

 2. American manufacturers implemented a number of things to regain a competitive lead.

 a. Today, however, manufacturing produces less than one-fourth of the U.S. gross domestic product.

 b. Competition from foreign manufacturers forces U.S. companies to alter their production techniques and managerial style.

 3. To regain competitive edge, American manufacturers have implemented:

 a. A CUSTOMER FOCUS.

 b. COST SAVINGS THROUGH SITE SELECTION.

 c. A faster response to the market through FLEXIBLE MANUFACTURING.

 d. More savings on the plant floor through LEAN MANUFACTURING.

 e. COMPUTER-AIDED MANUFACTURING and other modern practices.

 f. TOTAL QUALITY MANAGEMENT.

 g. BETTER CONTROL PROCEDURES.

 4. Important issues will need to be debated:

 a. The merits of MOVING PRODUCTION FACILITIES TO FOREIGN COUNTRIES.

 b. REPLACING WORKERS WITH ROBOTS AND OTHER MACHINERY.

 c. PROTECTING AMERICAN MANUFACTURERS through quotas and other restrictions of free trade.

 5. Tomorrow's college graduates will face tremendous challenges (and career opportunities) in redesigning and rebuilding America's manufacturing base.

 B. THE BASICS OF PRODUCTION MANAGEMENT.

 1. PRODUCTION AND OPERATIONS MANAGEMENT is all the activities managers do to create goods and services.

 2. The concepts that apply to service organizations apply generally to manufacturing organizations as well.

 3. New production techniques make it possible to virtually custom-made products for individual industrial buyers.

 a. This requires getting closer to customers to find out what their product needs are.

 b. The future will require effective marketing combined with effective production and management to keep the U.S. competitive.

 4. There are OPPORTUNITIES FOR CAREERS in production and operations management today.

 a. Few college students are majoring in careers involving manufacturing and mining.

 b. Student entrepreneurs who have the skills to own or work in highly automated factories and mines will have more opportunities.

 C. PRODUCTION AND PRODUCTIVITY.

 1. Production uses basic INPUTS to produce OUTPUTS.

 2. PRODUCTION is the creation of finished goods and services using the factors of production: land, labor (machinery), capital, entrepreneurship, and information.

 3. FORM UTILITY is the value added by the creation of finished goods and services using raw materials, components, and other inputs.

 4. Production is the creative process in all industries that produce goods and services.

 5. To be competitive, manufacturers must keep the costs of inputs down and the amount of output relatively high.

 a. PRODUCTIVITY is the term used to de scribe output per unit of input.

 b. OUTPUT could mean goods or services.

 II. KEEPING COSTS LOW: SITE SELECTION.

 LEARNING GOAL 2. Explain the importance of site selection in keeping down costs and identify the criteria used to evaluate different sites.

 A. The shift of manufacturing and service organizations sometimes results in pockets of unemployment and tremendous growth in others.

 1. Entrepreneurs move their facilities from one location to another for several reasons:

 a. Manufacturers often choose sites that are CLOSE TO THE RIGHT KIND OF LABOR OR CHEAP LABOR.

 b. Even though the cost of labor is becoming a smaller chunk of total production costs, CHEAP LABOR REMAINS A MAJOR REASON LESS TECHNOLOGICALLY ADVANCED MANUFACTURERS MOVE THEIR PLANTS.

 c. It is important for firms to maintain the SAME QUALITY STANDARDS AND FAIR LABOR PRACTICES wherever they pro duce.

 d. Many firms are moving to the southern part of the U.S. because the region has mostly nonunion labor.

 2. The survival of U.S. manufacturing depends on its ability to remain competitive, and that means ether cheaper inputs or increased outputs.

 3. CHEAPER RESOURCES are another major reason for moving production facilities.

 4. REDUCING TIME TO MARKET critical to successful global competition.

 a. Manufacturers need sites that move their products through the system quickly and at the lowest costs.

 b. One key to reducing time-to-market involves seeking countries with the most advanced information systems.

 B. LOCATING CLOSE TO MARKETS TO SERVE CUSTOMERS BETTER.

 1. Some businesses remain in large metropolitan areas to be near where their customers are.

 2. By locating close to their customers, businesses lower transportation costs and can be more responsive to customer needs for service.

 3. Many businesses are building factories in foreign countries to get closer to international customers.

 a. When U.S. firms select foreign sites, they also study they quality of life for workers and managers.

 b. Site selection has become a critical issue in production and operations management.

 C. SITE SELECTION IN THE FUTURE.

 1. New developments in information technology are enabling firms and employees more flexibility in choosing locations.

 2. TELECOMMUTING, working from home via computer and modem, is a major trend in business.

 3. Today, a big incentive to locate in a particular location is the TAX SITUATION AND DEGREE OF GOVERNMENT SUPPORT.

 a. Some states and local governments have higher taxes, yet many offer tax reductions and other supports to attract new businesses.

 b. Once a location is selected, production can begin.

 III. PRODUCTION PROCESSES.

 LEARNING GOAL 3. Classify the various production processes and how materials requirement planning.

 A. THE PRODUCTION PROCESS.

 1. Andrew S. Grove, chief executive officer of Intel, defines the THREE BASIC REQUIREMENTS OF PRODUCTION:

 a. To build and deliver products in response to the demands of the customer at a scheduled delivery time.

 b. To provide an acceptable quality level.

 c. To provide everything at the lowest possible cost.

 B. TYPES OF PRODUCTION OPERATIONS.

 1. SYNTHETIC SYSTEMS either change raw materials into other products.

 a. PROCESS MANUFACTURING, an activity that physically or chemically changes material.

 b. ASSEMBLY PROCESS, in which components are put together to constitute a new entity.

 2. ANALYTIC SYSTEMS break down raw materials into components to extract other products.

 3. CONTINUOUS VERSUS INTERMITTENT PROCESSES.

 a. A CONTINUOUS PROCESS is one in which long production runs turn out finished goods over time.

 b. An INTERMITTENT PROCESS is an operation where the production run is short and the machines are changed frequently to produce different products.

 c. Today, most new manufacturers use intermittent processes.

 C. MATERIALS REQUIREMENT PLANNING: THE RIGHT PLACE AT THE RIGHT TIME.

 1. The technological changes in manufacturing have resulted in an entirely new terminology for production and operations management.

 a. MATERIALS REQUIREMENT PLANNING (MRP) is a computer-based operations management system that uses sales forecasts to make sure the needed parts and materials are available at the right place and the right time.

 b. MRP was most popular with companies that made products with a lot of different parts.

 2. MRP II is an advanced version of MRP that involves more than materials planning. It includes planning all the resources involved including projected sales, personnel, plant capacity, and distribution limitations.

 3. ENTERPRISE RESOURCE PLANING is a computer-based production and operations system that links multiple firms into one, integrated production unit.

 a. The software enables the monitoring of quality and customer satisfaction as it's happening.

 b. MRP II monitors processes in MULTIPLE FIRMS at the same time.

 c. Eventually, such programs will link sup pliers, manufacturers, and retailers in a completely integrated manufacturing and distribution system.

 IV. MODERN PRODUCTION TECHNIQUES.

 LEARNING GOAL 4. Describe manufacturing techniques such as just-in-time inventory control, flexible manufacturing, lean manufacturing, and competing in time.

 A. The goal of manufacturing and process management is to provide high-quality goods and services instantaneously in response to customer demand.

 1. Traditional organizations were not designed to be so responsive, but to make a limited variety of products at a low cost.

 2. Over the years, low cost often came at the expense of quality and flexibility.

 3. Such inefficiencies made U.S. companies subject to foreign competition.

 4. As a result of this competition, companies today must make a wide variety of high-quality custom-designed products at a very low cost.

 B. JUST-IN-TIME INVENTORY CONTROL.

 1. One major cost of production is holding parts in warehouses.

 2. JUST-IN-TIME INVENTORY CONTROL is a system which arranges for delivery of the smallest possible quantities at the latest possible time to keep inventory as low as possible.

 a. Suppliers deliver their products 'just in time' to go on the assembly line; a minimum of inventory is kept.

 b. Using enterprise requirement planning (ERP) or similar system, the manufacturer determines what parts and supplies will be needed.

 c. Efficiency is maintained by having the supplier linked by computer to the producer,

 3. The latest version of JIT is called JIT II, de signed to create more harmony and trust than JIT.

 4. ERP and JIT systems make sure: the right materials are at the right place at the right time at the cheapest cost to meet customer needs.

 C. NEW PURCHASE AGREEMENTS.

 1. PURCHASING is the function in the firm that searches for quality material resources, finds the best suppliers, and negotiates the best price for quality goods and services.

 2. In the past, manufacturers tended to deal with many different suppliers.

 3. Today, they rely more heavily on one or two-the relationship between suppliers and manufacturers is much closer.

 4. The purchasing department is responsible for finding such suppliers, negotiating long-term contracts, and getting the best price possible.

 D. FLEXIBLE MANUFACTURING is the design of machines to do multiple tasks so that they can produce a variety of products.

 E. LEAN MANUFACTURING.

 1. LEAN MANUFACTURING is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, less engineering time to develop a new product in half the time.

 2. A company becomes lean by CONTINUOUSLY INCREASING THE CAPACITY TO PRODUCE MORE, higher quality results with fewer resources.

 3. GM redesigned its production processes, abandoning the assembly line, to make the Saturn automobile.

 a. The most dramatic change was to switch to modular construction.

 b. GM also expanded use of ROBOTS, computer-controlled machines capable of performing many tasks requiring the use of materials and tools.

 c. Robots usually are fast, efficient, and accurate, but can never completely replace a creative worker.

 E. MASS CUSTOMIZATION means tailoring products to meet the needs of individual customers.

 1. Flexible manufacturing systems enable manufacturers to custom-make goods as quickly as mass-produced items.

 2. Mass customization is also coming to services.

 F. COMPETING IN TIME means getting your product to market before your competitors.

 G. COMPUTER-AIDED DESIGN AND MANUFACTURING.

 LEARNING GOAL 5. Show how CAD/CAM improves the production process.

 1. COMPUTER-AIDED DESIGN (CAD) is the integration of computers into the design of products.

 2. COMPUTER-AIDED MANUFACTURING (CAM) is the integration of computers into the manufacturing of products.

 3. CAD/CAM, the combining of computer- aided design with computer-aided manufacturing, mad it possible to custom-design products for small markets.

 4. Computer-aided design has INCREASED PRODUCTIVITY by 2 to 1.

 a. In the past computer-aided design ma chines couldn't talk to computer-aided manufacturing machines.

 b. Recently software programs have been designed to unite CAD with CAM: COMPUTER-INTEGRATED MANUFACTURING (CIM).

 V. CONTROL PROCEDURES: PERT AND GANTT CHARTS.

 LEARNING GOAL 6. Illustrate the use of PERT, Gantt charts, and TQM in production planning.

 A. An important function of a production manager is to be sure that products are manufactured and delivered on time.

 B. PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT).

 1. PERT is a method for analyzing the tasks involved in completing a given project, estimating the time needed to complete each task, and identifying the minimum time needed to complete the total project.

 2. The STEPS INVOLVED IN USING PERT include:

 a. Analyzing tasks that need to be done and sequencing the tasks.

 b. Estimating the time needed to complete each task.

 c. Drawing a PERT network illustrating the information from steps 1 and 2.

 d. Identifying the CRITICAL PATH, the sequence of tasks that takes the longest time to complete.

 e. This path is referred to as the critical path, because A DELAY in the time needed to complete this path WOULD CAUSE THE PROJECT OR PRODUCTION RUN TO BE LATE.

 3. A PERT network can be made up of thou sands of events over many months, and is usually done by computer.

 4. The GANTT CHART is a bar graph that clearly shows what projects are being worked on and how much has been completed (on a daily basis).

 a. The computer is helping the paper Gantt chart becoming obsolete.

 b. Using a Gantt-like computer program, a manager can trace the production process minute by minute.

 C. TOTAL QUALITY IN PRODUCTION MANAGEMENT.

 1. QUALITY CONTROL is the measurement of products and services against set standards.

 a. Earlier, quality control was often done at the end of the production line by a quality control department.

 b. TOTAL QUALITY means satisfying customers by building in and ensuring quality from product planning to production, purchasing, sales, and service.

 c. Emphasis is placed on CUSTOMER SATISFACTION.

 2. TQM programs begin by analyzing the consumer to see what quality standards need to be established.

 3. Quality is then designed into products, and every product must meet those standards.

 D. MEASURING PRODUCTIVITY IN THE SERVICE SECTOR.

 1. The greatest productivity problem in the U.S. is in the service economy.

 2. It is DIFFICULT TO MEASURE PRODUCTIVITY in the service sector.

 3. Computers are improving service sector productivity; for example, ATMs speed banking transactions.

 4. Operations management has led to PRODUCTIVITY INCREASES IN THE SERVICE SECTOR, but haven't been reflected in national productivity figures.

 LEARNING GOAL 7. Explain the importance of productivity in the service sector.

 E. SERVICES GO INTERACTIVE.

 1. The service industry has always taken ad vantage of new technology to increase customer satisfaction.

 2. Now interactive computer networks are revolutionizing services.

 3. As computers and modems get faster, the Internet may take over much of traditional retailing.

 4. The service sector is experiencing the same kind of revolution as manufacturing has.

 F. PREPARING FOR THE FUTURE.

 1. Changes in technology mean NEW OPPORTUNITIES and HIGHER STANDARD OF LIVING AND QUALITY OF LIFE, but it also means preparing for such changes.

 2. The new era in manufacturing and service sectors will require SPECIAL TRAINING to manage the new high-tech workers.

 3. Many universities are adding COURSES IN MANUFACTURING MANAGEMENT and robotics to help students prepare.

 4. There will be more emphasis on PARTICIPATIVE MANAGEMENT and the design of ATTRACTIVE WORK ENVIRONMENTS.