Chapter 9
- AMERICA’S EVOLVING
MANUFACTURING AND SERVICES BASE.
- A NEW ERA.
- To regain its
competitive edge, U.S. industry has implemented many changes, including:
- A CUSTOMER
FOCUS.
- COST SAVINGS
THROUGH SITE SELECTION.
- TOTAL QUALITY
MANAGEMENT using ISO 9000
and ISO 14000 standards.
- NEW
MANUFACTURING TECHNIQUES.
- Reliance on the
INTERNET to unite companies.
- . Important issues
will need to be debated:
- The merits of
MOVING PRODUCTION FACILITIES TO FOREIGN COUNTRIES.
- REPLACING
WORKERS WITH ROBOTS AND OTHER MACHINERY.
- PROTECTING
AMERICAN MANUFACTURERS
through quotas and other restrictions of free trade.
- The service sector
has become a larger and larger part of the overall economy.
- Tomorrow’s college
graduates will face tremendous challenges (and career opportunities) in
redesigning and rebuilding America’s
manufacturing base.
- FROM PRODUCTION TO
OPERATIONS MANAGEMENT.
-
PRODUCTION
is the creation of finished goods and
services using the factors of production.
- INPUTS
are land, labor, capital, entrepreneurship, and knowledge.
- PRODUCTION
MANAGEMENT is the term used
to describe the creation of goods.
- Production has
historically been associated with manufacturing, but this is changing
significantly.
- The SERVICE
SECTOR has grown dramatically.
- The U.S. now has
a SERVICE ECONOMY, one dominated by the service sector.
- To reflect these
changes, the term PRODUCTION often is replaced by OPERATIONS.
-
OPERATIONS MANAGEMENT
is a specialized area in
management that converts or transforms resources into goods and services.
- Some organizations
produce mostly goods; others produce mostly services; some produce
both.
- MANUFACTURERS TURN
TO SERVICES AND A CUSTOMER ORIENTATION FOR PROFIT.
- Companies that have
prospered in the last decade have expanded operations management and moved
it closer to the customer.
- The text uses the
following examples:
- Car companies
increase revenues by providing parts and servicing used cars.
- Another example
is IBM, which has lessened its reliance on selling computer hardware by
expanding the sale of computer services.
- APPLICATIONS
SERVICE PROVIDERS (ASPs) are
companies that provide software services online so companies do not have
to buy their own software.
- OPERATIONS
MANAGEMENT
FUNCTIONS
- FACILITY LOCATION.
- FACILITY
LOCATION is the process of
selecting a geographic location for a company’s operations.
- One strategy is
to make it easy for consumers to access your service.
- The ultimate
convenience is shopping through the Internet.
- The most
successful service-sector businesses are conveniently located.
- The shift of
manufacturing and service organizations sometimes results in pockets of
unemployment and tremendous growth in others.
- Entrepreneurs move
their facilities from one location to another for several reasons:
- Manufacturers
often choose sites that are CLOSE TO THE RIGHT KIND OF LABOR OR CHEAP
LABOR.
- 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.
- It is important
for firms to maintain the SAME QUALITY STANDARDS AND FAIR LABOR
PRACTICES wherever they produce.
- Another reason
for moving facilities is for inexpensive resources.
- The most
important resource is people, so companies tend to cluster where smart
and talented people are.
- REDUCING TIME
TO MARKET critical to
successful global competition.
- Manufacturers
need sites that move their products through the system quickly and at
the lowest costs.
- One key to
reducing time-to-market involves seeking countries with the most
advanced information systems.
- LOCATING CLOSE
TO MARKETS.
- Many businesses
are building factories in foreign countries to get closer to
international customers.
- When U.S. firms
select foreign sites, they also study they quality of life for workers
and managers.
- Site selection
has become a critical issue in production and operations management.
- FACILITY
SELECTION IN THE FUTURE.
- New developments
in information technology are enabling firms and employees more
flexibility in choosing locations.
- TELECOMMUTING,
working from home via computer and modem, is a major trend in business.
- Today, a big
incentive to locate in a particular location is the TAX SITUATION AND
DEGREE OF GOVERNMENT SUPPORT.
- Some states and
local governments have higher taxes, yet many offer tax reductions and
other supports to attract new businesses.
- FACILITY LAYOUT.
CONCEPT CHECK
- FACILITY LAYOUT
is the physical arrangement of resources in the production process.
- Facility layout
depends on the processes that are to be performed.
- For SERVICES,
the layout is usually designed to help the consumer find and buy things.
- Many stores are
adding kiosks that help customers find things on the Internet.
- For
MANUFACTURING PLANTS, efficient facilities layout can result in cost
savings.
- The text uses the
example of Delphi Automotive Systems.
- The plant floor
is now organized around customer-focused work cells that are modular and
portable.
- As a result,
productivity increased over 25%.
- Many companies are
moving from an assembly-line layout to a MODULAR LAYOUT.
- Many companies
are outsourcing the production functions to specialists.
- With an
Internet-based layout, the customer is tied into the process.
- TAKING
OPERATIONS MANAGEMENT TO THE INTERNET.
- Many rapidly
growing companies outsource engineering, design, manufacturing, and
other tasks.
- Companies are
creating new relationships with suppliers over the Internet, creating an
INTERFIRM process.
- Coordination is
critical.
- Companies called
ELECTRONIC HUBS (E-HUBS) make the flow of goods among firms faster and
smoother.
- Many firms are
developing whole new Internet-focused strategies to compete more
effectively.
- The concept of
SUPPLY CHAIN MANAGEMENT will be discussed in Chapter 15.
-
QUALITY CONTROL
.
- QUALITY CONTROL
is the measurement of products and services against set standards.
- Earlier, quality
control was often done at the end of the production line by a quality
control department.
- QUALITY
means satisfying customers by building in and ensuring quality from
product planning to production, purchasing, sales, and service.
- Emphasis is
placed on CUSTOMER SATISFACTION.
- TQM programs
begin by analyzing the consumer to see what quality standards need to be
established.
- Quality is then
designed into products, and every product must meet those standards.
- Examples include
quality successes at Holiday Inn, Motorola, and Xerox.
- The customer is
ultimately the one who determines what the standard for quality should
be.
- QUALITY
STANDARDS: THE BALDRIGE AWARDS.
- One standard for
quality was set with the introduction in 1987 of the MALCOLM BALDRIGE
NATIONAL QUALITY AWARDS.
- To qualify, a
company has to show quality in SEVEN KEY AREAS: leadership,
strategic planning, customer and market focus, information and analysis,
human resources focus, process management, and business results.
- The focus is
shifting to provide TOP-QUALITY CUSTOMER SERVICE in all respects.
- The text uses the
example of Sunny Fresh Foods, a recent Baldrige winner.
-
ISO 9000
AND ISO 14000 STANDARDS.
- The new global
measures for quality are called ISO 9000 standards.
- ISO 9000
refers to quality management and assurance standards published by the
International Organization for Standardization.
- The latest
standards, called ISO 9000:2000 were published in November of
2000.
- ISO standards
provide a "common denominator" of business quality accepted around the
world.
- The European
Union is demanding that companies doing business with the EU be
certified by ISO standards.
- ISO 14000
is a collection of the best
practices for managing and organization's environmental impacts.
- Today, ISO 90000
and 14000 standards have been blended so that a firm can work on both at
once.
- Today, ISO 90000 and
14000 standards have been blended so that a firm can work on both at once.
- The text follows the
career of Horst Schulze of Marriot Hotels and the luxury hotel’s operations
management.
- Operations
management in the service industry is about creating a good experience for
those who use the service.
- Delighting
customers has become the quality standard for luxury hotels and other
service businesses.
- MEASURING
PRODUCTIVITY IN THE SERVICE SECTOR.
- The greatest
productivity problem in the U.S. is in the service economy.
- Operations
management has led to PRODUCTIVITY INCREASES IN THE SERVICE SECTOR,
but haven’t been reflected in national productivity figures.
- It is DIFFICULT
TO MEASURE PRODUCTIVITY in the service sector.
- Productivity
measures don’t capture improvements in quality.
- When new systems
are developed to measure the quality improvement of goods and services,
productivity in the service sector with go up dramatically.
- COMPUTERS
are improving service sector productivity.
- Burger King’s
workers now use headsets to take orders.
- ATMs speed
banking transactions.
- Grocery stores
use computerized checkout and universal product codes to speed checkout.
- Airlines are also
experiencing productivity increases due to computerization.
- Airlines are also
experiencing productivity increases due to computerization.
- SERVICES GO
INTERACTIVE.
- The service
industry has always taken advantage of new technology to increase customer
satisfaction.
- Now interactive
computer networks are revolutionizing services.
- As computers and
modems get faster, the Internet may take over much of traditional
retailing.
- The service sector
is experiencing the same kind of revolution as manufacturing has.
- OPERATIONS
MANAGEMENT IN THE MANUFACTURING
SECTOR.
- Production uses basic
inputs to produce outputs.
- Production adds
value, or utility, to materials or processes.
- FORM UTILITY
is the value added by the creation of finished goods and services, such as
the value added by taking silicon and making computer chips or putting
services together to create a vacation package.
- Form utility can
exist at the retail levels as well.
- To be competitive,
manufacturers must keep the costs of inputs down and the amount of output
high.
- How does a producer
keep costs low and still increase output?
- PROCESS PLANNING.
- PROCESS PLANNING
is choosing the best means for turning resources into useful goods and
services.
- Andrew S. Grove,
chief executive officer of Intel, defines the THREE BASIC REQUIREMENTS
OF PRODUCTION:
- To build and
deliver products in response to the demands of the customer at a
scheduled delivery time.
- To provide an
acceptable quality level.
- To provide
everything at the lowest possible cost.
- TYPES OF
PRODUCTION OPERATIONS.
- In the
ASSEMBLY PROCESS, components are put together to constitute a new
entity.
- CONTINUOUS
VERSUS INTERMITTENT PROCESSES.
- A CONTINUOUS
PROCESS is one in which long production runs turn out finished goods
over time.
- An
INTERMITTENT PROCESS is an operation where the production run is
short and the machines are changed frequently to produce different
products.
- Today, most new
manufacturers use intermittent processes.
- MATERIALS
REQUIREMENT PLANNING.
- 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.
- MRP was most
popular with companies that made products with a lot of different parts.
- 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.
- MRP II was called
MANUFACTURING RESOURCE PLANNING
- ENTERPRISE
RESOURCE PLANING is a
computer-based production and operations system that links multiple firms
into one, integrated production unit.
- The software
enables the monitoring of quality and customer satisfaction as it’s
happening.
- ERP
monitors processes in MULTIPLE FIRMS at the same time.
- ERP systems are
going global via the Internet.
- DYNAMIC
PERFORMANCE MONITORING (DNP)
lets plant operations monitor use of power, chemicals, and other
resources.
- Some firms are
providing SEQUENTIAL DELIVERY, providing components in an order
sequenced to their customers’ production process.
- Eventually, such
programs will link suppliers, manufacturers, and retailers in a completely
integrated manufacturing and distribution system.
- MODERN PRODUCTION
TECHNIQUES.
- The goal of
manufacturing and process management is to provide high-quality goods and
services instantaneously in response to customer demand.
- Traditional
organizations were not designed to be so responsive, but to make a limited
variety of products at a low cost.
- The whole idea of
MASS PRODUCTION was to make a large number of limited variety of
products at a very low cost.
- Over the years, low
cost often came at the expense of quality and flexibility.
- Such inefficiencies
made U.S. companies subject to foreign competition.
- As a result of this
competition, companies today must make a wide variety of high-quality
custom-designed products at a very low cost.
-
JUST-IN-TIME INVENTORY CONTROL.
- One major cost of
production is holding parts in warehouses.
- JUST-IN-TIME
INVENTORY CONTROL is a
production process in which a minimum of inventory is kept on the premises
and parts, supplies, and other needs are delivered just in time to go on
the assembly line.
- Suppliers deliver
their products "just in time" to go on the assembly line; a minimum of
inventory is kept.
- Using enterprise
requirement planning (ERP) or similar system, the manufacturer
determines what parts and supplies will be needed.
- Efficiency is
maintained by having the supplier linked by computer to the producer,
- 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.
- INTERNET
PURCHASING.
- 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.
- In the past,
manufacturers tended to deal with many different suppliers.
- Today, they rely
more heavily on one or two—the relationship between suppliers and
manufacturers is much closer.
- Internet-based
purchasing services allow companies to find the best supplies at the best
price.
- Net marketplaces
come in three forms:
- TRADING
EXCHANGE PLATFORMS.
-
INDUSTRY-SPONSORED EXCHANGES.
- NET MARKET
MAKERS.
- NET MARKET
MAKERS.
- FLEXIBLE
MANUFACTURING
- FLEXIBLE
MANUFACTURING is the design of
machines to do multiple tasks so that they can produce a variety of
products.
- The text uses the
examples of Food Motor Company and Allen-Bradley Company.
- LEAN
MANUFACTURING.
- 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
- A company becomes
lean by CONTINUOUSLY INCREASING THE CAPACITY TO PRODUCE MORE,
higher quality results with fewer resources.
- GM redesigned its
production processes, abandoning the assembly line, to make the Saturn
automobile.
- The most dramatic
change was to switch to modular construction.
- GM also expanded
use of ROBOTS, computer-controlled machines capable of performing
many tasks requiring the use of materials and tools.
- Robots usually
are fast, efficient, and accurate, but can never completely replace a
creative worker.
- MASS CUSTOMIZATION
means tailoring products to meet the needs of individual customers.
- Flexible
manufacturing systems enable manufacturers to custom-make goods as quickly
as mass-produced items.
- More and more
manufacturers are learning to customize their products for individual
customers.
- Mass customization
is also coming to services.
- COMPETING IN TIME
means being as fast or faster than competition in responding to consumer
wants and needs and getting goods and services to them.
- Speedy response is
essential to competing in the global marketplace.
- Computer-aided
design and computer-aided manufacturing enable firms to compete in time
and in efficiency.
- COMPUTER-AIDED
DESIGN AND MANUFACTURING
- COMPUTER-AIDED
DESIGN (CAD) is the
integration of computers into the design of products.
- COMPUTER-AIDED
MANUFACTURING (CAM) is the
integration of computers into the manufacturing of products.
- CAD/CAM,
the combining of computer-aided design with computer-aided manufacturing,
mad it possible to custom-design products for small markets.
- Computer-aided
design has DOUBLED PRODUCTIVITY in many firms.
- In the past
computer-aided design machines couldn’t talk to computer-aided
manufacturing machines.
- Recently software
programs have been designed to unite CAD with CAM:
COMPUTER-INTEGRATED MANUFACTURING (CIM).
- CONTROL PROCEDURES:
PERT AND GANTT CHARTS
- An important function
of a production manager is to be sure that products are manufactured and
delivered on time.
- PROGRAM EVALUATION
AND REVIEW TECHNIQUE (PERT).
- 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.
- The STEPS
INVOLVED IN USING PERT include:
- Analyzing tasks
that need to be done and sequencing the tasks.
- Estimating the
time needed to complete each task.
- Drawing a PERT
network illustrating the information from steps 1 and 2.
- Identifying the
CRITICAL PATH, the sequence of tasks that takes the longest time
to complete.
- 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.
- A PERT network can
be made up of thousands of events over many months, and is usually done by
computer.
- 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).
- The computer is
helping the paper Gantt chart becoming obsolete.
- Using a
Gantt-like computer program, a manager can trace the production process
minute by minute.
- PREPARING FOR THE
FUTURE.
- Career opportunities
exist for students majoring in operations and production management and
inventory management.
- Changes in technology
mean NEW OPPORTUNITIES and HIGHER STANDARD OF LIVING AND QUALITY
OF LIFE, but it also means preparing for such changes.
- The workplace will be
dominated by computers, robots, and other machinery.
- Many universities are
adding COURSES IN MANUFACTURING MANAGEMENT and robotics to help
students prepare.
- There will be more
emphasis on PARTICIPATIVE MANAGEMENT and the design of ATTRACTIVE
WORK ENVIRONMENTS.