CHAPTER 9. Production and Operations Management

ISO 14000

A collection of the best practices for managing an organization's impact on the environment.

materials requirement planning (MRP)

A computer-based operations management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place.

program evaluation and review technique (PERT)

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.

enterprise resource planning (ERP)

A newer version of materials requirement planning (MRP) that combines the computerized functions of all the divisions and subsidiaries of the firm—such as finance, human resources, and order fulfillment—into a single integrated software program that uses a single database.

just-in-time (JIT) inventory control

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.

continuous process

A production process in which long production runs turn out finished goods over time.

intermittent process

A production process in which the production run is short and the machines are changed frequently to make different products.

Six Sigma quality

A quality measure that allows only 3.4 defects per million opportunities.

operations management

A specialized area in management that converts or transforms resources (including human resources) into goods and services.

What is the current state of manufacturing in the United States?

Activity in the nation's manufacturing sector has declined since its height. The result has been fewer jobs in manufacturing. Even though manufacturing companies offer fewer jobs, they have become more productive, meaning that they need fewer employees to do the same amount of work. Today many manufacturing jobs are coming back to the U.S. as labor costs increase in other countries. Much of this chapter is devoted to showing you what manufacturers and service providers can do to revive the U.S. economy to become world-class competitors.

Gantt chart

Bar graph showing production managers what projects are being worked on and what stage they are in at any given time.

quality

Consistently producing what the customer wants while reducing errors before and after delivery to the customer.

How do CAD/CAM systems work?

Design changes made in computer-aided design (CAD) are instantly incorporated into the computer-aided manufacturing (CAM) process. The linking of CAD and CAM is computer-integrated manufacturing (CIM).

flexible manufacturing

Designing ma-chines to do multiple tasks so that they can produce a variety of products.

What is facility location and how does it differ from facility layout?

Facility location is the process of selecting a geographic location for a company's operations. Facility layout is the physical arrangement of resources, including people, to produce goods and services effectively and efficiently.

What kind of firms use operations managers?

Firms in both the manufacturing and service sectors use operations managers.

What is flexible manufacturing?

Flexible manufacturing means designing machines to produce a variety of products.

critical path

In a PERT network, the sequence of tasks that takes the longest time to complete.

How do robotics help make manufacturers more competitive?

Industrial robotics can work 24 hours a day, seven days a week, with great precision. Most of the jobs they replace are dirty or so repetitive that robots are necessary, or at least helpful.

What is just-in-time (JIT) inventory control?

JIT requires suppliers to deliver parts and materials just in time to go on the assembly line so they don't have to be stored in warehouses.

How do managers evaluate different sites?

Labor costs and land costs are two major criteria for selecting the right sites. Other criteria include whether resources are plentiful and inexpensive, skilled workers are available or are trainable, taxes are low and the local government offers support, energy and water are available, transportation costs are low, and the quality of life and of education are high.

What is lean manufacturing?

Lean manufacturing is the production of goods using less of everything than in mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product.

What relationship do materials requirement planning (MRP) and enterprise resource planning (ERP) have with the production process?

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 time and place. Enterprise resource planning (ERP), a newer version of MRP, combines the computerized functions of all the divisions and subsidiaries of the firm—such as finance, material requirements planning, human resources, and order fulfillment—into a single integrated software program that uses a single database. The result is shorter time between orders and payment, less staff to do ordering and order processing, reduced inventories, and better customer service for all the firms involved.

What is mass customization?

Mass customization means making custom-designed goods and services for a large number of individual customers. Flexible manufacturing makes mass customization possible. Given the exact needs of a customer, flexible machines can produce a customized good as fast as mass-produced goods were once made. Mass customization is also important in service industries.

What is operations management?

Operations management is the specialized area in management that converts or transforms resources, including human resources, into goods and services.

What is process manufacturing, and how does it differ from assembly processes?

Process manufacturing physically or chemically changes materials. Assembly processes put together components.

What is production management?

Production management consists of all the activities managers do to help their firms create goods. To reflect the change in importance from manufacturing to services, the term production is often replaced by the term operations.

What is Six Sigma quality?

Six Sigma quality sets standards at just 3.4 defects per million opportunities and detects potential problems before they occur. Statistical quality control (SQC) is the process some managers use to continually monitor all processes in the production process and ensure quality is being built into the product from the beginning. Statistical process control (SPC) tests statistical samples of product components at each stage of the production process and plots the results on a graph so managers can recognize and correct deviations from quality standards.

mass customization

Tailoring products to meet the needs of individual customers.

process manufacturing

That part of the production process that physically or chemically changes materials.

assembly process

That part of the production process that puts together components.

ISO 9000

The common name given to quality management and assurance standards.

production

The creation of finished goods and services using the factors of production: land, labor, capital, entrepreneurship, and knowledge.

purchasing

The function in a firm that searches for quality material resources, finds the best suppliers, and negotiates the best price for goods and services.

facility layout

The physical arrangement of resources (including people) in the production process.

facility location

The process of selecting a geographic location for a company's operations.

statistical process control (SPC)

The process of taking statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards.

statistical quality control (SQC)

The process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning.

lean manufacturing

The production of goods using less of everything compared to mass production.

production management

The term used to describe all the activities managers do to help their firms create goods.

computer-integrated manufacturing (CIM)

The uniting of computer-aided design with computer-aided manufacturing.

computer-aided design (CAD)

The use of computers in the design of products.

computer-aided manufacturing (CAM)

The use of computers in the manufacturing of products.

form utility

The value producers add to materials in the creation of finished goods and services.

What quality standards do firms use in the United States?

To qualify for the Malcolm Baldrige National Quality Award, a company must demonstrate quality in seven key areas: leadership, strategic planning, customer and market focus, information and analysis, human resources focus, process management, and business results. International standards U.S. firms strive to meet include ISO 9000 and ISO 14000. The first is a world standard for quality and the second is a collection of the best practices for managing an organization's impact on the environment.

What have U.S. manufacturers done to achieve increased output?

U.S. manufacturers have increased output by emphasizing close relationships with suppliers and other companies to satisfy customer needs; continuous improvement; quality; site selection; use of the Internet to unite companies; and production techniques such as enterprise resource planning, computer-integrated manufacturing, flexible manufacturing, lean manufacturing, and robotics.

Is there any relationship between a PERT chart and a Gantt chart?

Whereas PERT is a tool used for planning, a Gantt chart is a tool used to measure progress.

telecommuting

Working from home via computer and modem.