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.