Chapter 6 Operations Management in Manufacturing and Service Industries

the costs of materials make up about____percent of total manufacturing costs

50%

Which of the following statements is NOT true about PERT charts?

A PERT chart identifies a critical path: the sequence of activities that will take the least amount of time to complete.

Capacity Planning

A manufacturer can predict overall demand, produce the product, store it in inventory, and ship it to a customer when it's ordered. Service providers, however, can't store their products for later use

facilities decisions

After selecting the best production process, operations managers must then decide where the goods will be manufactured, how large the manufacturing facilities will be, and how those facilities will be laid out.

Inventory Control

Businesses that provide both goods and services, such as retail stores and auto-repair shops, have the same inventory-control problems as manufacturers: keeping levels too high costs money, while running out of inventory costs sales.

______________________software is used to design products. It creates computer models, permitting engineers to test products and work out design problems before moving to the prototype stage.

CAD - computer-aided design

Companies often link CAD (computer-aided design) software to the manufacturing process. This task can be accomplished with _____________________software, which determines the steps needed to produce a component and instructs a machine to do the work.

CAM - computed-aided manufacturing

The capabilities of a CAD/CAM system can be expanded by means of ________________ software, which integrates various operations, from design to production, with fundamental activities ranging from order taking to shipping.

CIM - computer-integrated manufacturing

intangibility

Manufacturers produce tangible products—things that can be touched or handled, such as automobiles and appliances. Service companies provide intangible products, such as banking, entertainment, or education.

Managing Operations

Service firms provide customers with personal attention and must satisfy their needs in a timely manner. This task is complicated by the fact that demand can vary greatly over the course of any given day. Managers, therefore, must pay particular attention to employee work schedules and (in some cases) inventory management.

advantage of the internet

The Internet provides an additional benefit to purchasing managers by helping them communicate with suppliers and potential suppliers. They can use the Internet to give suppliers specifications for parts and supplies, encourage them to bid on future materials needs, alert them to changes in requirements, and give them instructions on doing business with their employers. Using the Internet for business purchasing cuts the costs of purchased products and saves administrative costs related to transactions. And it's faster for procurement and fosters better communications.

purchasing (procurement)

The process of acquiring the materials and services to be used in production

inventory control

This task requires that they strike a balance between two threats to productivity: losing production time because they've run out of materials, and wasting money because they're carrying too much inventory.

make-to-order

commonly used by such businesses as print or sign shops that produce low-volume, high-variety goods according to customer specifications.

e-purchasing (or e-procurement)

companies use the Internet to interact with suppliers

we can gain efficiency only by improving our performance on one or more of the activities along the ________ ____________

critical path

Both product and process layouts arrange work by _____.

function

You are the operations manager for a mid-size manufacturing company in Seattle. You're responsible for estimating the quantity of materials used for production and determining when materials should be ordered. For years, you have relied on a Materials Requirement Planning (MRP) system to help you on this task. About six months ago you switched to a more sophisticated system called a(n) ________________ that goes beyond material planning to help monitor resources in all areas of the company.

manufacturing resource planning II

grant charts

named after the designer, Henry Gantt, is an easy-to-use graphical tool that helps operations managers determine the status of projects. (useful when the production process is fairly simple and the activities aren't interrelated.)

mass production (make-to-stock strategy)

practice of producing high volumes of identical goods at a cost low enough to price them for large numbers of customers. Goods are made in anticipation of future demand (based on forecasts) and kept in inventory for later sale. This approach is particularly appropriate for standardized goods ranging from processed foods to electronic appliances.

At Vermont Teddy Bear Company, bears being made move from one workstation to another. At each station, workers use specialized equipment to perform a particular step in the production process. The plant layout used by Vermont Teddy Bear Company is a _______________________.

process layout

four common types of facility layouts:

process, product, cellular, and fixed position

At Just Born, high-volume marshmallow peeps are produced efficiently by people, equipment, or departments arranged in an assembly line—that is, a series of workstations at which already-made parts are assembled. The plant layout used by Just Born is a _____________________.

product layout

Operations Management in Manufacturing (3 jobs)

production planning, production control, quality control

Once the production process is in place, the attention of the operations manager shifts to the daily activities of materials management, which encompass the following activities:

purchasing, inventory control, and work scheduling

Total quality management (TQM)

quality assurance, includes all the steps that a company takes to ensure that its goods or services are of sufficiently high quality to meet customers' needs

Material Requirements Planning (MRP)

relies on a computerized program both to calculate the quantity of materials needed for production and to determine when they should be ordered or made

Computer-Integrated Manufacturing

systems have taken the integration of computer-aided design and manufacturing to a higher level—and are in fact revolutionizing the production process

Computer-Aided Design

test the product digitally and work out design problems before moving to the prototype stage.By rotating the image on the screen, they could even view the design from every angle

manufacturing resource planning (MRP II)

that goes beyond material planning to help monitor resources in all areas of the company. Such a program can, for instance, coordinate the production schedule with HR managers' forecasts for needed labor.

traffic count

the number of cars or people that pass by a specific location in the course of a day

what else do CIM systems do?

they handle such functions as order entry, inventory control, warehousing, and shipping. In the manufacturing plant, the CIM system controls the functions of industrial robots—computer-controlled machines used to perform repetitive tasks that are also hard or dangerous for human workers to perform.

a company adheres to TQM principles by focusing on three tasks:

-Customer satisfaction -Employee involvement -Continuous improvement

Operations Planning

-What services (and perhaps what goods) should they offer? -How will they provide these services? -Where will they locate their business, and what will their facilities look like? -How will they forecast demand for their services?

Your college is likely to outsource all of the following services EXCEPT:

Admissions

cellular layout advantages

Teams monitor both the quantity and the quality of their own output. This arrangement often results in faster completion time, lower inventory levels, improved quality, and better employee morale.

Because they also need to control the timing of all operations, managers set up schedules:

They select jobs to be performed during the production process, assign tasks to work groups, set timetables for the completion of tasks, and make sure that resources will be available when and where they're needed

customer contact

You could spend your entire working life assembling cars in Detroit and never meet a customer who bought a car that you helped to make. But if you were a waitress, you'd interact with customers every day. In fact, their satisfaction with your product would be determined in part by the service that you provided. Unlike manufactured goods, many services are bought and consumed at the same time.

Outsourcing in the Goods-Producing Sector

few companies have either the expertise or the inclination to produce everything needed to make a product, want to specialize in the processes that they perform best—and outsource the rest, want to take advantage of outsourcing by linking up with suppliers located in regions with lower labor costs

In producing large items, such as airplanes, manufacturers use a ___________________, in which the product stays in one place and the workers (and equipment) go to the product.

fixed position layout

product layout

high-volume goods are produced efficiently by people, equipment, or departments arranged in an assembly line (a series of workstations at which already-made parts are assembled)

Flexible Manufacturing Systems

in which computer-controlled equipment can easily be adapted to produce a variety of goods. An FMS has immense advantages over traditional production lines in which machines are set up to produce only one type of good. makes it possible to change equipment setups merely by reprogramming computer-controlled machines. Such flexibility is particularly valuable to companies that produce customized products.

List the characteristics that distinguish service operations from manufacturing operations.

intangibility, customization, and customer contact

what are the 3 types of production-method decisions?

make-to-order, mass production, and mass customization

Many customers are dissatisfied with standardized products. They want goods that can be bought at reasonable prices, but they want their goods personalized to meet their individual tastes or needs rather than accept standardized products as they come off assembly lines. To meet the demand of these customers, many companies have turned to an approach called ______________________.

mass production

Outsourcing in the Service Sector

outsource many of their noncore functions.

Continuous Improvement

the commitment to making constant improvements in the design, production, and delivery of goods and services. Improvements can almost always be made to increase efficiency, reduce costs, and improve customer service and satisfaction.

routing of materials

the work flow of each item based on the sequence of operations in which it will be used.

Total quality management (TQM), or quality assurance, includes all the steps that a company takes to ensure that its goods or services are of sufficiently high quality to meet customer needs. Successful total quality management requires companies to do all of the following EXCEPT:

When outsourcing core and noncore functions, relinquish control over quality to the vendor doing the work

ISO standards

focus on the way a company does its work, not on its output. Compliance with ISO standards is voluntary, and the certification process is time-consuming and complex. (essential to be competitive in the global marketplace)

When Kellogg's wants to check to be sure each box of Raisin Bran cereal contains two scoops of raisins, it used a technique called ___________________________, which monitors production quality by testing a sample of output to see whether goods in process are being made according to predetermined specifications.

statistical process control

Statistical Process Control

this technique monitors production quality by testing a sample of output to see whether goods in process are being made according to predetermined specifications.

Benchmarking

to compare their performance on a number of dimensions with the performance of other companies that excel in particular areas

what are the 2 scheduling techniques?

Grantt and Pert charts

Scheduling

In manufacturing, managers focus on scheduling the activities needed to transform raw materials into finished goods. In service organizations, they focus on scheduling workers so that they're available to handle fluctuating customer demand

fixed-position layout

In producing large items, manufacturers use fixed-position layout in which the product stays in one place and the workers (and equipment) go to the product.

International Organization for Standardization (ISO)

The resources of this organization will enable you to identify those organizations that have people and processes in place for delivering products that satisfy customers' quality requirements. You can also find out which organizations work to reduce the negative impact of their activities on the environment.

Site Selection

To be successful in a service industry, you need to be accessible to your customers. must locate where there's a high volume of available customers.

Quality Management

To compete today, companies must deliver quality goods and services that satisfy customers' needs.

master production schedule (MPS)

To draw up an MPS, managers need to know where materials are located and headed at every step in the production process

Customer Satisfaction

they let their customers define quality by identifying and offering those product features that satisfy customer needs. They encourage customers to tell them how to make the right products, both goods and services, that work the right way. providing quality is a factor in every facet of their operations—from design, to product planning and control, to sales and service. To get feedback on how well they're doing, many companies routinely use surveys and other methods to monitor customer satisfaction. By tracking the results of feedback over time, they can see where they need to improve.

electronic data interchange (EDI)

to process your transactions and transmit all your purchasing documents.

A PERT diagram demonstrates that the only way you can complete a project faster is by saving time on the _______________________.

critical path

ISO 14000

family of international standards for environmental management.

PowerSki was able to satisfy three important criteria

(1) proximity to the firm's suppliers, (2) availability of skilled engineers and technicians, and (3) favorable living conditions

In selecting a supplier, operations managers must consider such questions as the following:

-Can the vendor supply the needed quantity of materials at a reasonable price? -Is the quality good? -Is the vendor reliable (will materials be delivered on time)? -Does the vendor have a favorable reputation? -Is the company easy to work with?

service providers must consider many variables when estimating demand and capacity:

-How many customers will I have? -When will they want my services (which days of the week, which times of the day)? -How long will it take to serve each customer? -How will external factors, such as weather or holidays, affect the demand for my services?

site selection

-locate plants close to suppliers, customers, or both - want to locate in areas with ample numbers of skilled workers - prefer locations where they and their families will enjoy living -want locations where costs for resources and other expenses—land, labor, construction, utilities, and taxes—are low -favorable business climate—one in which, for example, local governments might offer financial incentives (such as tax breaks) to entice them to do business in their locales

When starting or expanding operations, businesses in the service sector must make a number of decisions which are quite similar to those made by manufacturers. Which of the following is NOT a question that managers in the service sector must address?

All of these are questions that managers in the service sector must address.

Size and Layout

Because manufacturers do business out of plants rarely visited by customers, they base the size and layout of their facilities solely on production needs. in the service sector, however, most businesses must design their facilities with the customer in mind: they must accommodate the needs of their customers while keeping costs as low as possible

advantages of CAD and CAM systems

CAD/CAM systems permit companies to design and manufacture goods faster, more efficiently, and at a lower cost, and they're also effective in helping firms monitor and improve quality.

Overseeing a service organization puts special demands on managers, especially services requiring a high degree of contact with customers. Which of the following tasks are often more difficult for those running a service business than for those running a manufacturing operation?

Estimating demand

Which of the following would NOT be a factor you would consider in picking the location of a new software development company?

Favorable business climate: one which offers tax incentives to entice new businesses

quality control

Finally, the operations manager is directly involved in efforts to ensure that goods are produced according to specifications and that quality standards are maintained.

Operations managers manage the process that transforms inputs into outputs. Those working in a manufacturing firm are responsible for transforming resources into finished goods. To perform this function in today's environment, operations managers do all of the following EXCEPT:

Hold down the costs of materials and labor

customization

Manufactured goods are generally standardized; one twelve-ounce bottle of Pepsi is the same as any other twelve-ounce bottle of Pepsi. Services, by contrast, are often customized to satisfy the specific needs of a customer. When you go to the barber or the hairdresser, you ask for a haircut that looks good on you because of the shape of your face and the texture of your hair. When you go to the dentist, you ask him or her to fill or pull the tooth that's bothering you.

capacity planning

Now that you know where you're going to locate, you have to decide on the quantity of products that you'll produce. You begin by forecasting demand for your product then calculate the capacity requirements of your production facility—the maximum number of goods that it can produce over a given time under normal working conditions. Lastly, ready to determine how much investment in plant and equipment you'll have to make, as well as the number of labor hours required for the plant to produce at capacity.

production control

Once the production process is underway, managers must continually schedule and monitor the activities that make up that process. They must solicit and respond to feedback and make adjustments where needed. At this stage, they also oversee the purchasing of raw materials and the handling of inventories.

advantage of Outsourcing

One advantage of outsourcing its production function is that the management team can thereby devote its attention to refining its product design and designing future products.

Arranging work by function, however, isn't always efficient.

Production lines can back up, inventories can build up, workers can get bored with repetitive jobs, and time can be wasted in transporting goods from one workstation to another

PERT charts

Program Evaluation and Review Technique is designed to diagram the activities required to produce a good, specify the time required to perform each activity in the process, and organize activities in the most efficient sequence. (more complex schedules and related activities)

Operations Processes

Service organizations succeed by providing services that satisfy customers' needs.

International Quality Standards

Some consumers want to know which companies continuously improve their performance in both of these areas—that is, practice both quality management and environmental management. (It might be worth your while to find out whether your suppliers were also being conscientious in these areas—and even your suppliers' suppliers)

Employee Involvement

Successful TQM requires that everyone in the organization, not simply upper-level management, commits to satisfying the customer. Employees have to be properly trained not only to do their jobs but also to detect and correct quality problems.

As operations manager at Vermont Teddy Bear Company, you need to be able to quickly assess the status of projects. You do this using a Gantt Chart, an easy-to-use graphical tool that helps monitor a project's status. The Gantt Chart for an order of hiking bears shows several activities that have to be done in a specified order: cutting the bears' fur, stuffing and sewing the fur, cutting materials for the clothes, sewing the clothes, embroidering the t-shirts, cutting the accessories, sewing the accessories, dressing the bears, packaging the bears, and shipping the bears. Which of the following will occur if any of these activities fall behind schedule?

Unless the time is made up some place else in the schedule, the tasks of dressing the bears, packing the bears, and shipping the bears will be behind schedule.

sampling distribution

a statistical process control method to determine if goals are met

operations manager

consists of all the activities involved in transforming a product idea into a finished product, as well as those involved in planning and controlling the systems that produce goods and services. (manage the process that transforms inputs into outputs)

disadvantage to mass production

customers have to accept standardized products as they come off assembly lines

You are the purchasing manager for SAS, a software development company, which is very nice to its employees. One of your tasks is to purchase soft drinks that are provided free to employees. The sodas are purchased online by going to the "business customers" section of several soft drink companies. Rather than pay for the large volume of sodas purchased by check, you use a ___________________ to process your transaction and transmit all your purchasing documents.

electronic data interchange

quality circles

employees who perform similar jobs work as teams to identify quality, efficiency, and other work-related problems, to propose solutions, and to work with management in implementing their recommendations.

ISO 9000

family of international standards for quality management

Planning the Production Process

goals, trade-offs, production methods, site selection, facility layout, and components and materials management.

process layout

groups together workers or departments that perform similar tasks. Goods in process (goods not yet finished) move from one workstation to another. At each position, workers use specialized equipment to perform a particular step in the production process

plant layout

how equipment, machinery, and people will be arranged to make the production process as efficient as possible

Production-Method Decisions

how much input do I receive from a particular customer before producing my goods? Am I making a one-of-a-kind good based solely on customer specifications, or am I producing high-volume standardized goods to be sold later? Do I offer customers the option of "customizing" an otherwise standardized good to meet their specific needs?

If a manufacturer runs out of materials it needs for production then production stops. In the past companies dealt with this problem by keeping large inventories of materials on hand. This tied up a lot of money in inventory and added storage and insurance costs to their expenses. Companies learned that they must strike a balance between losing production time because the company runs out of materials, and wasting money because they are carrying too much inventory. The process of striking this balance is called ____________________________.

inventory control

Burger King encourages its customers to customize their burgers through its slogan, "Have it your way." In contrast, when customers order burgers at McDonald's, employees pull a burger from a batch of burgers made at the same time with the same condiments. In producing burgers, Burger King is using a(n) ________________ approach and McDonald's is using a(n)___________________ approach.

make-to-order; make-to-stock

production planning

managers determine how goods will be produced, where production will take place, and how manufacturing facilities will be laid out.

Facilities

owners and managers must invest a lot of time in selecting a location, determining its size and layout, and forecasting demand. A poor location or a badly designed facility can cost customers, and inaccurate estimates of demand for products can result in poor service, excessive costs, or both.

disadvantage of just-in-time-production

requires considerable communication and cooperation between the manufacturer and the supplier. The manufacturer has to know what it needs, and when. The supplier has to commit to supplying the right materials, of the right quality, at exactly the right time.

mass customization

requires that a company interact with the customer to find out exactly what the customer wants and then manufacture the good, using efficient production methods to hold down costs. One efficient method is to mass-produce a product up to a certain cut-off point and then to customize it to satisfy different customers.

cellular layout

small teams of workers handle all aspects of building a component, a "family" of components, or even a finished product. Each team works in a small area, or cell, equipped with everything that it needs to function as a self-contained unit. Machines are sometimes configured in a U-shape, with people working inside the U. (team members often share duties, they're trained to perform several different jobs)

Computer-Aided Manufacturing

software system determines the steps needed to produce the component and instructs the machines that do the work

just-in-time-production

the manufacturer arranges for materials to arrive at production facilities just in time to enter the manufacturing process. Parts and materials don't sit unused for long periods, and the costs of "holding" inventory are significantly cut

a pert chart also identifies a critical path:

the sequence of activities that will entail the greatest amount of time.