operations management and control systems the key elements of total quality management (tqm) ......
TRANSCRIPT
Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Operations
Management and
Control Systems
12
PowerPoint Presentation by
Ian Anderson, Algonquin College
Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Looking Ahead
After studying this chapter, you should be able to:
1. Discuss the nature of the operations process for both products and services.
2. Describe the need for management control systems.
3. Explain the key elements of total quality management (TQM) programs.
4. Explain how reengineering and other methods of work improvement can increase productivity and make a firm more competitive.
5. Discuss the importance of purchasing and the nature of key purchasing policies.
6. Describe ways to control inventory and minimize inventory costs.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
The Operations Process
• The Nature of the Operations Process
–Operations management
• The planning and control of the operations process
– The activities that produce a firm’s goods and services
• Involves acquiring inputs and overseeing their
transformation in
products and services
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
The Operations Process
Inputs
Operations
Outputs
• Designing • Processing • Treating • Storing • Advising
• Fabricating • Refining • Assembling • Shipping • Instructing
Clothing
Baked goods
Paint
Dry cleaning
Appliance repair
Automobile painting
Products Services
Money Labour Equipment Information Energy Raw
Materials
Examples: Examples:
Exhibit 12-1
Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Manufacturing versus Service
• Manufacturing Versus Service Operations
–Productivity is more easily measured in manufacturing than service operations
–Quality is more difficult to establish in service than manufacturing operations.
–Customers are more involved in service than manufacturing operations.
–Manufacturing can produce goods for inventory; service operations cannot store or bank services.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Types of Manufacturing
• Job Shops –Operations characterized by short production runs of
small quantities of unique items.
• Repetitive Manufacturing –Operations in which long production runs are used to
produce a large quantity of a standardized product.
• Batch Manufacturing –An intermediate form involving more variety in volume
and products than job shops and less than repetitive manufacturing.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Planning and Scheduling
and Maintenance
• Operations Planning and Scheduling
–Attempting to achieve the orderly, sequential flow of products to market.
• Production operations
• Service operations
• Plant Maintenance
–The role of maintenance
• To correct equipment malfunctions and prevent breakdowns
–Types of maintenance
• Preventive maintenance
• Corrective maintenance 12-7
Chapter 12 Copyright © 2010 by Nelson Education Ltd.
The Control Cycle
• Control Cycle
– A period of time over which an activity is planned,
measured, corrected, and re-planned
• Variance
– The difference between planned forecast activity
and actual activity
• Critical questions
– What, how and how often to measure?
– What is unacceptable variance and how to correct?
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
The Control Cycle Illustrated
Exhibit 12-2
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Successful Quality Management
Supportive
Organizational
Culture
Appropriate
Tools and
Techniques
Focus on Customers
Essential Elements of
Successful Quality Management
Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Total Quality Management and Quality
Goals of Operations Management
• Total Quality Management (TQM)
–An aggressive, all-encompassing management approach
to providing high-quality products and services.
• Quality
–The features of a product or service that enable it to
satisfy customers’ needs.
–A perception of the customer as to the suitability of the
product or service of a firm.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Customer Focus on Quality Management
• Customer Expectations
–Quality is the extent to which a product or service satisfies customer’s needs and expectations.
• Product quality
• Service quality
• Product and service quality combinations
– ―The customer is the focal point of quality efforts.‖
• Customer Feedback
–Customers are the eyes and ears of the business for quality matters.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Benchmarking and TQM
• Benchmarking
–The process of studying the products, services, and
practices of other firms and using the insights gained to
improve quality internally.
–Identify best practices, understand them, and use the
insights gained to improve one’s operations
• Continuous Quality Improvement
–A constant and dedicated effort to improve quality.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Tools and Techniques of TQM
• Employee Participation
–Employee performance is a critical quality
variable.
–Quality circle
• A group of employees who meet regularly to discuss
quality-related problems.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Tools and Techniques of TQM
• The Inspection Process
–The examination of a product to determine whether it meets quality standards.
–Inspection standard
• A specification of a desired quality level and allowable tolerances.
–Attribute inspection
• The determination of product acceptability based on whether it will or will not work.
–Variable inspection
• The determination of product acceptability based on a variable such as weight or length.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Statistical Methods of Quality Control
• Acceptance Sampling –The use of a random, representative portion to determine
the acceptability of an entire lot.
• Statistical Process Control –The use of statistical methods
to assess quality during the operations process.
• Control Chart –A graphic illustration
of the limits used in statistical process control.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
International Certification for
Quality Management
• ISO 9000
–The standards governing international certification of a
firm’s quality management procedures.
–QM variables include customer focus, leadership and
continual improvement
• ISO 14000
–A set of generic management standards for responsible
environmental management.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Quality Management in
Service Businesses
• Six factors positively influence customers’ perception of service quality
1. Being on target
2. Care and Concern
3. Spontaneity
4. Problem Solving
5. Follow up
6. Recovery
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Competitive Strength Through
Improved Productivity
• The Importance of Improving Productivity
–Productivity is the efficiency with which inputs are transformed into outputs.
–Productivity is more difficult to increase in service industries than in manufacturing sectors.
Inputs
OutputstyProductivi
nInformatio Materials Raw Money Energy Labour
servicesand/or ProductstyProductivi
…continued
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Competitive Strength Through
Improved Productivity
• Reengineering for Improved Productivity
–Reengineering
• A fundamental restructuring to improve the operations
process.
• Asking ―Why?‖ is important in the reengineering
process.
…continued
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Avoid Failure in
Process Improvement
• Be customer focused
• Phase in improvements
• Involve the employees
• Divide the project up
• Communicate
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Lean Manufacturing
• Three-pronged approach to:
1. Eliminate waste
2. Ensure quality
3. Involve employees in designing and managing their
work
• Key principles:
– Define value from the customer’s perspective
– Identify and map the value stream
– Reduce or eliminate waste or improve flow
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Reducing or Eliminating Waste
• Stop overproduction for building inventory
• Prevent unnecessary use/storage of raw materials
• Streamline transportation
• Optimize motion and actions of personnel
• Reduce waiting and idle time in process
• Reduce or eliminate defects
• Reduce steps/features not valued by customers
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Benefits of “Being Lean”
• Culture of continuous improvement
• Decreasing manufacturing cycle times
• Reducing waste
• Empowering employees
• Increasing profits and cash flow
• Increasing production capacity
• Increasing customer satisfaction
• Reducing costs
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
• Operations Analysis
–Laws of motion economy • Arranging work in the most cost-effective and efficient manner
possible.
• Methods of Work Measurement
–Motion Study • An analysis of all the motions a worker makes to complete a given
job.
–Time Study • A determination of the average time, it takes to complete
Work Improvement
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Purchasing Policies and Practices
• Purchasing –The process of obtaining materials, equipment, and
services from outside.
• The Importance of Purchasing –The process of acquiring quality raw material inputs
affects:
• The timely and consistent production of quality products.
• Retailer sales of finished products to customers.
• The costs of products, their profitability and their selling prices.
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Make or Buy Decisions
• Purchasing Practices and Profitability
–Making or buying
• A firm’s choice between producing and purchasing component parts for its products.
–Reasons for making:
• Increased utilization of plant capacity
• Assurance of supply of critical components
• Maintaining secrecy in designs and processes
• Saving on transportation costs and supplier profits
• Closer coordination and control of overall process
• Higher quality components for inputs
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Outsourcing and
Reasons for Buying
• Purchasing Practices and Profitability
–Outsourcing
• Purchasing products or services that are outside the firm’s
area of competitive advantage.
–Reasons for Buying
• Supplier’s part/service is cheaper and/or higher quality
• Investment savings on space, personnel, equipment
• Greater flexibility in matching supply and demand
• Increased focus on production of core product/service
• No risk of equipment obsolescence
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Sources of Supply
• Diversifying sources of supply
–Reasons for having a sole supplier
• Outstanding supplier quality
• Quantity discounts for volume purchases
• Single orders too small to divide among suppliers
• Quality of supplier-customer relationship
–Reasons for having multiple suppliers
• Choice of best quality, price, and service
• Supplier competes for business
• Insurance against input interruptions
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Relationships with Suppliers
• Relationships with suppliers
–Selecting suppliers • Price and quality
• Location and delivery reliability
• Services offered—credit, product support, promotion
• Building good relationships with suppliers
–Purchasing practices • Pay bills promptly
• Be courteous to sales representatives
• Avoid abrupt cancellations of orders
• Maintain a professional relationship
• EDI
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Strategic Alliances
• Developing Strategic Alliances
–Strategic alliance is an organizational relationship that
links two independent business entities in a common
endeavour. Involves close coordination of buyers and
sellers to:
• Reduce product introduction lead time
• Improve product quality
• Engage in joint problem solving
• Make joint adjustments to market conditions
• Involve the supplier early in product development
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Inventory Management
and Operations
• Inventory Cost Control
–Economic order quantity (EOQ)
• The quantity to purchase in order to minimize total
inventory costs.
Total
inventory
costs
Total
ordering
costs
Total
carrying
costs = +
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Graphic Portrayal of the
Economic Order Quantity
EOQ Total Costs
Ordering Costs
Carrying Costs
Order Quantity (Units)
Cost ($)
Exhibit 12-3
Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Inventory Management and Operations
• ABC Inventory Analysis
–A system of classifying items in inventory by relative value
–Category A (close/continuous control)
• High-value or critical production component items
–Category B (moderate control)
• Less costly, secondary importance items
–Category C (periodic control)
• Low-cost and noncritical items
…continued
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Inventory Management and Operations
• Just-In-Time Inventory (JIT) System, also Kanban
–A method of reducing inventory level to an absolute
minimum.
• New items arrive at the same time that the last inventory
item is placed in service
–JIT promotes:
• Closer coordination with suppliers
• Consistent quality production
• Lower safety stock levels
…continued
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Chapter 12 Copyright © 2010 by Nelson Education Ltd.
Inventory Management and Operations
• Inventory Record-Keeping Systems
–Physical inventory system
• A method that provides for periodic counting of items in inventory
–Cycle counting
• A system of counting different segments of the physical inventory at different times during the year.
–Perpetual inventory
• A method for keeping a running record of inventory.
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