chapter 21 operations and service management

Operations and Service Management

Chapte

r 21

Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.

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Strategic success depends on efficient operations

Operational concerns take on even greater importance in today’s competitive environment where consumers often want customized products and services delivered immediately

Manager’s Challenge: Donnelley


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Management and control of production operations

Define operations management

How to bring operations into strategic decision making

Overview of integrated operations activities

Specific operations design issues

How managers measure and improve productivity

Topics

Chapter 21


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Operations Management

The field of management that specializes

in the physical production of goods or

services and uses quantitative techniques

for solving manufacturing problems

Technical core = heart of the

organization’s production of its product

or service


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The Organization as an Operations Management System

Products & Facilities

Product design

Facilities layout

Capacity planning

Facilities location

Structure

Reporting relationships

Teams

Control Processes

Inventory management

Productivity

Quality

Operations ManagementInputs

Raw materials

Human

resources

Land, buildings

Information

Technology

Outputs

Products

Services

Operations Strategy

The Technical Core

Feedback


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Manufacturing and Service Organizations

Source: Based on Richard L. Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and Byron J. Finch and Richard L. Luebbe, Operations

Management (Fort Worth, Texas: The Dryden Press, 1995), 50.


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Operational Concerns for Manufacturing and Service Organizations

Scheduling

Must obtain materials and supplies

Both must be concerned with

quality and productivity


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Four Stages of Operations Strategy

Stage 4

Initiates Competitive

Advantage

• Advanced

capabilities

developed and

significant input to

strategic process

provided

• Concerns:

New products

New services

New technologies

International

Stage 3

Organizationally

Supportive

• Organization’s

competitive strategy

closely followed and

supported

• Concerns:

Advanced process

technologies

New plants

What to make for the

United States

Stage 2

Industry Current

• Goals set according

to industry

practice

• Concerns:

Capital investment

Quality control

Inventory

management

Capacity

Stage 1

No Involvement

• No positive

contribution to

strategy

formulation

• Concerns:

Cost

Labor efficiency

Source: Based on R.H. Hayes and S.C. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984).


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The Integrated Enterprise

Supply chain management = managing

the sequence of suppliers and

purchasers, covering all stages of

processing from obtaining raw materials

to distributing finished goods to final

consumers


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The E-Supply Chain

Retail

Chain

Retail

Store

Intranet Data Exchange

Customer

Extranet

Data

Exchange

ManufacturerExtranet

Data

Exchange

Supplier

Partnership approach to the supply chain optimizes inventory

levels and enables rapid response to customer needs


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How to Win Customers?

Better price

Quality

Performance

Delivery

Responsiveness to customer demand


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Design for Manufacturabilityand Assembly - DFMA

Often requires

– Restructuring operations

– Creating teams of designers,

manufacturers, and assemblers to meet

objectives of design


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Product Design Objectives

1 Producibility

Cost

Quality

Reliability

2

3

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Service Design Objectives

1 Producibility

Cost

Quality

Reliability

2

3

4

Timing5

Ethical Dilemma: A Friend for Life?


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Procurement

Purchasing supplies, services, and

raw materials for use in the

production process


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Facilities Layout

Process Layout

Product Layout

Cellular Layout

Fixed-position Layout


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Technology Automation

Service Technology

Restaurants – calculate exact cost and ingredient

needs for each menu item

Banking – ATMs

Gas stations – pay-at-pump systems

Retailing = RFID – radio-frequency identification

(high-tech barcode)


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Technology Automation

Flexible Manufacturing Systems, the use of

automated production lines that can be quickly

adapted to produce more than one kind of

product

CAD/CAM

● CAD = computer aided design

● CAM = computer aided manufacturing

● PLM = Product-life cycle management


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Facility Location

Cost-benefit analysis – most common

approach to selecting a site for a new

location

New location scouting software is helping

managers turn facilities location into a

science


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Capacity Planning

Determination and adjustment of the

organization’s ability to produce

products and services to match

customer demand


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Inventory Management

Finished goods inventory

Work-in-process inventory

Raw materials inventory


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Techniques for Inventory Management

Economic order quantity

Material requirements

planning

Just-in-Time inventory

systems

Logistics & Distribution

management


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Logistics and Distribution Management

Logistics = activities required to physically

move materials into the company’s

operations facility and to move finished

products to customers

Distribution = moving finished products to

customers (order fulfillment)


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Material Requirements Planning - MRP

Dependent demand inventory planning

and control system

Schedules exact materials required

Is computer based

Based on precise estimates of future

needs for production


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Lean Manufacturing and Productivity

Lean manufacturing = process using

highly trained employees at every

stage of the production process to cut

waste and improve quality – employee

involvement is key


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Measuring Productivity

Productivity = organization’s output of products and services divided by its inputs

Total factor

Productivity

Labor

Productivity

Output

Labor + Capital + Materials + Energy=

= Output

Labor dollars


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Improving Productivity

1. Technological productivity

2. Employee productivity

3. Managerial productivity

Experiential Exercise: What Is Your

Attitude Toward Productivity?

chapter 21 operations and service management

Leadership & Management

division of thomson

service management chapter

supported concerns

industry practice concerns

strategy formulation

organizations production

service organizations

service managementmanagement