Business &
Ethics
(BAHU 1023)
O P E R AT I O N S M A N A G E M E N T:
PROCESS
Production and Operations Management
The creation of products
and services by turning
Production
inputs into outputs,
which are products
and services
Operations
Management of the
Management
production process
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What Does Operations Mean
Today?
Service Operations (Service Production)
◦ activities producing intangible and
tangible products, such as
entertainment, transportation, and
education
Goods Operations (Goods Production)
◦ activities producing tangible products,
such as radios, newspapers, buses, and
textbooks
Creating Value Through
Operations
Utility
◦ product’s ability to satisfy a human want or need
Operations (Production) Management
◦ systematic direction and control of the activities that
transform resources into finished products that create
value for and provide benefits to customers
Operations (Production) Managers
◦ managers responsible for ensuring that operations
activities create value and provide benefits to
customers
The Production Process
Inputs Outputs
Raw Natural Products
materials resources
Conversion
process
Human
Capital
resources Services
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The Resource Transformation
Process
Production and Operations Management
1. Production Planning
the aspect of operations management;
when, where how
Main Types
of 2. Production Control
Decisions scheduling, controlling quality and
cost
3. Improving production and
operations
efficient methods.
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Production Planning
Short-Term Medium-Term Long-Term
1 Year 2 Years 3-5 Years
Type of Production Process
Site selection
Decisions
in
Production
Facility layout Planning
Resource planning
Types of Production
Mass The ability to manufacture many
Production identical goods at once.
Goods are mass-produced up to a point,
Mass
then custom tailored to
Customization the needs of individual customers.
The production of goods or services one at
Customization a time according to the
needs of individual customers.
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Mass Production – manufacturing products in large
amounts through standardization, mechanization and
specialized skills.
Flexible Production – producing smaller batches using
information technology, communication and
cooperation.
Customer-Driven Production – evaluating customer
demands to link with manufacturer.
Classification of Production
Processes
Process The basic input is broken down into one
Manufacturing or more outputs.
The basic inputs are combined or
Assembly Process transformed into the output.
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Production Timing
A production process that uses long
Continuous
production runs without equipment
Process shutdowns.
A production process that uses short
Intermittent Process production runs to make batches of
different products.
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Factors in Facility Location Decisions
Availability of production inputs
Marketing factors
Manufacturing environment
Local incentives
International location
considerations
Process layout
Make-or-buy decisions
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Make-or-Buy Decisions
Quantity of items needed
Standard or
nonstandard items
Factors Size of components
Special design features
Quality and reliability
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• A vital function is necessary for generating money
to pay employees, lenders, and stockholders.
• Effective production and operations management
can:
– lower a firm’s costs of production.
– boost the quality of its goods and services.
– allow it to respond dependably to customer demands.
– enable it to renew itself by providing new products.
Robots – reprogrammable machines capable of performing routine jobs and
manipulating material
Computer-Aided Design and Manufacturing – enables engineers to design
parts and buildings on computer screens faster and with fewer mistakes.
Flexible Manufacturing Systems – a production facility that workers can
quickly modify to manufacture different products.
Computer-Integrated Manufacturing – integrates robots, computers and
other technologies to help workers design products, control machines, handle
materials, and control the production function.
Oversee the work of people and machinery to convert inputs
(materials and resources) into finished goods and services.
• Choose what goods or services to offer customers.
• Convert original product ideas into final specifications.
• Design the most efficient facilities to produce those products.
Business Strategy Determines
Operations Capabilities
Operations Capability (Production Capability)
special ability that production does especially
well to outperform the competition
Excellent firms learn, over time, how to
achieve more than just one competence
Layouts
Layout: the configuration of departments, work centers,
and equipment,
◦ Whose design involves particular emphasis on movement of
work (customers or materials) through the system
Importance of layout
◦ Requires substantial investments of money and effort
◦ Involves long-term commitments
◦ Has significant impact on cost and efficiency of short-term
operations
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The Need for Layout Decisions
Inefficient operations
For Example: Changes in the design
High Cost of products or services
Bottlenecks
Accidents
The introduction of new
products or services
Safety hazards
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The Need for Layout Design (Cont’d)
Changes in Changes in volume of
environmental output or mix of
or other legal products
requirements
Morale problems
Changes in methods
and equipment
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Basic Layout Types
Product Layout
◦ Layout that uses standardized processing operations to achieve
smooth, rapid, high-volume flow
◦ Auto plants, cafeterias
Process Layout
◦ Layout that can handle varied processing requirements
◦ Tool and die shops, university departments
Fixed Position Layout
◦ Layout in which the product or project remains stationary, and
workers, materials, and equipment are moved as needed
◦ Building projects, disabled patients at hospitals
Combination Layouts
◦ A combination of process and product layouts combines the
advantages of the both types of layouts. A combination layout is
possible where an item is being made in different types and sizes.
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A Flow Line for Production or Service
Flow Shop or Assembly Line Work Flow
Raw materials Station Station Station Station Finished
or customer 1 2 3 4 item
Material Material Material Material
and/or and/or and/or and/or
labor labor labor labor
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A U-Shaped Production Line
Advantage: more compact, increased communication
facilitating team work, minimize the material handling
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Inventory Management
The supply of goods that a firm
Inventory holds for use in production or for
sale to customers
The determination of how much
Inventory inventory a firm will keep on hand, and
Management the ordering, receiving, storing, and
tracking of inventory
A continuously updated list of inventory
Perpetual
levels, orders,
Inventory sales, and receipts
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Supply Chain Management
The entire sequence of securing inputs,
Supply Chain producing goods, and delivering goods to
customers
Goal:
Satisfying customers with
quality products and services
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A picture is better than 1000 words!
How many words would be better than 3 pictures?
- A supply chain consists of
Supplier Manufacturer Distributor Retailer Customer
Upstream
Downstream
- aims to Match Supply and Demand,
profitably for products and services
SUPPLY SIDE DEMAND SIDE
- achieves
The right
Product
+ + + + +
The right
Price
The right
Store
The right
Quantity
The right
Customer
The right
Time
= Higher
Profits
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utdallas.edu/~metin
Putting Quality First
The process of creating standards for quality,
Quality
producing goods that meet them, and then
control
measuring finished products against them.
The use of quality principles in
Total Quality
all aspects of a company’s production and
Management
operations.
Continuous A commitment to constantly seek better ways of
improvement doing things to maintain and increase quality.
A QC process that relies on defining what needs
Six Sigma to be done to ensure quality, measuring and
analyzing results, and ongoing improvement.
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Differences between Service and
Goods Manufacturing Operations
Interacting with customers
The intangible and unsortable nature of some services
The customer’s presence in the process
Service quality considerations
Service Production Processes:
Extent of Customer Contact
Low-Contact System
◦ level of customer contact in which the customer need not be part of the
system to receive the service
High-Contact System
◦ level of customer contact in which the customer is part of the system
during service delivery
Business Strategies That Win
Customers for Four Companies
Table 7.1 Business Strategies that Win Customers for Four Companies
Strategy for Attracting What the Company Does to Implement Its
Company
Customers Strategy
Toyota Quality Cars perform reliably, have an appealing fit
and finish, and consistently meet or exceed
customer expectations at a competitive
price
Save-A-Lot Low cost Foods and everyday items offered at savings
up to 40 percent less than conventional food
chains
3M Flexibility Innovation, with more than 55,000 products
in a constantly changing line of convenience
items for home and office
FedEx Dependability Every delivery is fast and on time, as
promised
Operations Capabilities and
Characteristics for Four Companies
Table 7.2 Operations Capabilities and Characteristics for Four Companies
Operations
Key Operations Characteristics
Capability
Quality (Toyota) • High-quality standards for materials suppliers
• Just-in-time materials flow for lean manufacturing
• Specialized, automated equipment for consistent product buildup
• Operations personnel are experts on continuous improvement of product, work
methods, and materials
Low Cost (Save-A- • Avoids excessive overhead and costly inventory (no floral departments, sushi bars, or
Lot) banks that drive up costs)
• Limited assortment of products, staples, in one size only for low-cost restocking,
lower inventories, and less paperwork
• Many locations; small stores—less than half the size of conventional grocery stores—
for low construction and maintenance costs
• Reduces labor and shelving costs by receiving and selling merchandise out of custom
shipping cartons
Operations Capabilities and
Characteristics for Four Companies (2 of 2)
Table 7.2 Continued
Operations
Key Operations Characteristics
Capability
Flexibility (3M) • Maintains some excess (expensive) production capacity available for fast startup on
new products
• Adaptable equipment and facilities for production changeovers from old to new
products
• Hires operations personnel who thrive on change
• Many medium- to small-sized manufacturing facilities in diverse locations, which
enhances creativity
Dependability • Customer automation: uses electronic and online communications tools with
(FedEx) customers to shorten shipping time
• Wireless information system for package scanning by courier, updating of package
movement, and package tracking by customer
• Maintains a company air force, global weather forecasting center, and ground
transportation for pickup and delivery, with backup vehicles for emergencies
• The 25 automated regional distribution hubs process 3.5 million packages per day for
next-day deliveries
