GB 311 Module 13

three most important factors determining the value of a property (real-estate)

"location, location, and location."

Baldrige National Quality Program

A national program to encourage American firms to focus on quality improvement.

process

A set of related activities that transform inputs into outputs, thus adding value

key factors operations managers evaluate in deciding location

Adequacy of Utilities: Is the supply of electricity reliable? Is clean water available? Land: Is adequate land available for a facility? How much does the land cost? Labor Market Conditions: Are workers with the right skills available? How expensive is labor? Transportation Factors: Is the location near customers and suppliers? Is appropriate transportation nearby? Quality-of-Life Factors: What is the climate like? Are adequate healthcare facilities available? Legal and Political Environment: Does the local government support new businesses? What are the local taxes, fees, and regulations?

lean production

An approach to production that emphasizes the elimination of waste in all aspects of production processes.

Six Sigma

An approach to quality improvement characterized by very ambitious quality goals, extensive training of employees, and a long-term commitment to working on quality-related issues.

total quality management (TQM)

An approach to quality improvement that calls for everyone within an organization to take responsibility for improving quality and emphasizes the need for a long-term commitment to continuous improvement.

toady

Apple made a long-term commitment to renewable energy by paying First Solar $848 million to buy half of the energy produced at its California Flats solar farm for 25 years.

outsourcing

Arranging for other organizations to perform supply chain functions that were previously performed internally

ERP

ERP initially focused on integrating the flow of information among all aspects of a single organization's operations—accounting, finance, sales and marketing, production, and human resources. newest versions go beyond a single organization to help manage activities along an entire supply chain or value chain. The common information system makes it easier for organizations throughout the chain to communicate and coordinate their activities. they continue to evolve and take advantage of new technologies. One of the newest developments is the arrival of Web-based ERP systems that can be "rented" from online providers—a strategy that reduces the need to invest in new hardware and software Web-based ERP services is an example of cloud computing

services

Intangible products.

efficiency

Producing output or achieving a goal at the lowest cost.

poka-yokes

Simple methods incorporated into a production process designed to eliminate or greatly reduce errors.

goods

Tangible products.

advantages of robots

They often perform jobs that most human workers find tedious, dirty, dangerous, or physically demanding. They don't get tired, so they can work very long hours while maintaining a consistently high level of performance. They are flexible; unlike old dogs, robots can be taught new tricks because they are reprogrammable

drawbacks of ERP systems

complex, expensive, and difficult to implement, and they require users to learn new ways to enter and access data Productivity can actually fall until users become accustomed to these new methods

firm projects

constructing a new production facility, developing a new commercial airliner, or filming a movie are complex and expensive endeavors

key challenge of services

customers often participate in the provision of services, which means that service providers have less control over how the process is carried out, how long it takes to complete, and whether the result is satisfactory

most important function of operations management

design and management of value chains

Using the Critical Path Method to Focus Efforts

direction of the arrows shows the immediate predecessors for each activity independent activities = no arrow links

From a Focus on Efficiency to a Focus on Effectiveness

effectiveness means finding ways to give customers more for their money—while still making a profit. Technological advances create value by allowing the development of faster, cheaper products with more features and functionality every yea

Services

ex: legal advice, entertainment, and medical care

avoiding bottlenecks

reduce how long it takes content to get to customers, and maximize the quality of its streamed data

path

sequence of activities that must be completed in the order specified by the arrows for the overall project to be completed

From Exploiting the Environment to Protecting the Environment

serious consequences of environmental pollution became increasingly apparent Operations managers at socially responsible companies responded by adopting a variety of green practices to produce goods and services in more environmentally responsible ways

challenges of services

service providers can't produce the service in advance and store it to meet temporary surges in demand demand for many types of services varies significantly, depending on the season, the day of the week, or the time of day Given such fluctuations in demand, the selection of capacity becomes a crucial consideration.

fixed position layout

used for goods that must be produced at a specific site (such as a building or a dam) or that are so large and bulky that it isn't feasible to move them from station to station (such as a ship or commercial airplane). Even some services, such as concerts or sporting events that are performed at a specific location, use this approach the good or service stays in one place, and the employees, machinery, and equipment are brought to the fixed site when needed during various stages of the production process.

Nondurable goods

used up more quickly and are often perishable ex: toothpaste, apples, and paper towels

product layout

when firms produce goods that are relatively standardized and produced in large volumes. This type of layout organizes machinery, equipment, and other resources according to the specific sequence of operations that must be performed. machinery used in this type of layout is often highly specialized, designed to perform one specific task very efficiently. ex: assembly line, where the product being produced moves from one station to another in a fixed sequence, with the machinery and workers at each station performing specialized tasks

computer-integrated manufacturing (CIM)

A combination of CAD/CAM software with flexible manufacturing systems to automate almost all steps involved in designing, testing, and producing a product.

computer-aided design/computer-aided manufacturing (CAD/CAM)

A combination of software that can be used to design output and send instructions to automated equipment to perform the steps needed to produce this output

bottleneck

A content bottleneck is any gap between the demand for content from consumers and the ability for the marketing organization to deliver that content

critical path

A delay in any activity on a critical path is likely to delay the completion of the entire project Distinguishing between the critical path and other paths can help operations managers allocate resources more efficiently Activities that aren't on the critical path can be delayed without causing a delay in the overall completion of the project—as long as the delay isn't too great When operations managers see delays in critical path activities, they may be able to keep the project on track by diverting manpower and other resources from activities with slack to activities on the critical path

ISO 14000

A family of generic standards for environmental management established by the International Organization for Standardization.

ISO 9000

A family of generic standards for quality management systems established by the International Organization for Standardization.

customer benefit package

A product consists of all of the tangible and intangible features that create value for consumers by satisfying their needs and wants. -- product and warranty

just-in-time (JIT) production

A production system that emphasizes the production of goods to meet actual current demand, thus minimizing the need to hold inventories of finished goods and work in process at each stage of the supply chain.

critical path method (CPM)

A project-management tool that illustrates the relationships among all the activities involved in completing a project and identifies the sequence of activities likely to take the longest to complete.

robot

A reprogrammable machine that is capable of manipulating materials, tools, parts, and specialized devices in order to perform a variety of tasks.

immediate predecessors

Activities in a project that must be completed before some other specified activity can begin.

role of operations manager in marketing research

Although operations managers don't normally have the primary responsibility for designing these goods and services, they provide essential information and advice during the product-design process, especially regarding the challenges and constraints involved in creating actual products on time and within budget. Once the actual goods and services are designed, operations managers must determine the processes needed to produce them and get them to the customer Once these processes are designed, operations managers also play a key role in determining where they will be performed, what organizations will perform them, and how the processes will be organized and coordinated Once a product is designed, operations managers must determine the best way to produce it. This involves determining the most efficient processes, deciding the best sequence in which to arrange those processes, and designing the appropriate layout of production and distribution facilities

three types of factors of servicescapes

Ambience refers to factors such as decor, background music, lighting, noise levels, and even scents. For example, massage therapists often use low light, soothing background music, and pleasant scents to create a relaxing atmosphere for a massage. Functionality involves how easy it is for the customers to move through the facility and find what they are looking for. Signs, symbols, and artifacts convey information to customers and create impressions. Obviously, signs like "Place Your Order Here" and "Pick Up Your Order Here" provide useful information that helps consumers maneuver through the service encounter. But other signs and symbols can be used to create favorable impressions.

Describe how operations managers face the special challenges posed by the provision of services.

Customers often participate in the provision of services, so service providers have only limited control over ways in which their processes are carried out, how long they take to complete, and whether the result is satisfactory. A servicescape is the environment in which the customer and service provider interact. A well-designed servicescape can create a better service experience for both the customer and the provider. Another challenge facing service providers involves determining the proper capacity of service facilities. If the capacity of a service facility is too small, customers facing long waits during peak periods may take their business elsewhere. But a facility large enough to handle peak capacity is more expensive to build and operate and may have substantial excess capacity during off-peak periods. Many service firms try to spread out demand so that big surges don't occur by offering price discounts to customers during off-peak times.

Operations management oversees all the activities involved in producing and distributing goods and services. When operations managers do their job well, their firms produce the right goods and services in the right quantities and distribute them to the right customers at the right time—all while keeping quality high and costs low. Operations management has undergone profound changes over the past half century. One change has been a switch in focus from efficiency to effectiveness. Efficiency means achieving a goal at the lowest cost. Effectiveness means creating value by satisfying wants. Other key changes include more emphasis on the provision of services, a switch from mass production to customized production, a focus on global markets (and global competition), reliance on complex value chains, and recognition of the need to protect the environment.

Define operations management and describe how the role of operations management has changed over the last five decades.

computer-aided design (CAD)

Drawing and drafting software that enables users to create and edit blueprints and design drawings quickly and easily

From Local Competition to Global Competition

For the first 25 years after World War II, American firms dominated key markets -- This strength was based partly on the fact that the United States possessed a rich base of natural resources, a growing and increasingly well-educated labor force, an excellent infrastructure, and the strong incentive system inherent in a market economy. -- also reflected the fact that the production facilities and infrastructure in many European and Asian nations had been severely damaged during the war

key changes that have characterized the practice of operations management over the last five decades.

From a Focus on Efficiency to a Focus on Effectiveness From Goods to Services From Mass Production to Mass Customization From Local Competition to Global Competition From Simple Supply Chains to Complex Value Chains From Simple Supply Chains to Complex Value Chains

good vs services

Goods Are tangible: They have a physical form and can be seen, touched, handled, etc. Services Are intangible: They can be "experienced," but they don't have a physical form. Goods Can be stored in an inventory. Services Must be consumed when they are produced. Can be shipped. Goods Must be consumed where they are provided. Are produced independently of the consumer. Services Often require the customer to be actively involved in their production. Goods Can have at least some aspects of their quality determined objectively by measuring defects or deviations from desired values. Services Intangible nature means quality is based mainly on customer perceptions.

From Goods to Services

Goods are consumed, while services are experienced 1960s --> the U.S. economy was a manufacturing powerhouse, with more than a third of its labor force employed in the goods-producing sector. over the last five decades --> the American economy has experienced a fundamental shift away from the production of goods and toward the provision of services beginning of 2017 --> less than 14% of the nonfarm labor force worked in the goods-producing sector. By contrast, employment in the service sector had risen to 86% of the labor force.

small capacities

If the capacity of a service facility is too small, customers facing long waits during periods of peak demand may well take their business elsewhere

strategies operations managers have used to improve the quality of goods and services.

In recent years, U.S. firms have adopted programs such as total quality management (TQM) and Six Sigma to improve quality. TQM and Six Sigma both view quality improvement as a continuous process that is the responsibility of everyone within the organization. Both approaches also empower workers and make use of teams to solve quality-related problems. But Six Sigma incorporates more specific quality goals and relies on more sophisticated techniques that require a higher degree of expertise. Another way firms have tried to improve efficiency has been to launch programs designed to achieve certification or recognition from outside authorities. Two common approaches are to participate in the Baldrige National Quality Program and to seek certification under the International Organization for Standardization's ISO 9000 standards.

Explain how lean and green practices can help both the organization and the environment.

Lean production refers to a set of strategies and practices that eliminate waste to make organizations more efficient, responsive, and flexible. Inventory control is one of the key areas where waste often occurs. Many lean firms use just-in-time production methods to minimize the amount of parts, work in process, and finished products they hold in inventory. Many firms have also become "greener" by finding environmentally friendly ways to produce and distribute their goods and services. Green practices include designing facilities to be more energy efficient; using renewable energy; making use of recyclable materials; switching to paints, lubricants, cleaning fluids, and solvents that are less harmful to the environment; and providing labeling to help consumers find out which products are the most environmentally friendly.

importance of location (facility location)

Location also matters to operations managers because the location of facilities strongly affects the efficiency and effectiveness of an organization's processes

operations management

Managing all of the activities involved in creating value by producing goods and services and distributing them to customers.

inventories

Manufacturing firms usually hold inventories of raw materials, components and parts, work in process, and finished goods. Retail firms don't normally hold work in process or raw materials, but they do hold inventories of the finished goods they sell as well as basic supplies that they need.

supply chain management software

Modern operations managers rely on sophisticated supply chain management software to streamline the communications among supply chain participants and to help them plan and coordinate their efforts

offshoring

Moving production or support processes to foreign countries.

weighing options

Operations managers must weigh these drawbacks against the ability to handle a larger number of customers during peak hours. Many service firms try to minimize this trade-off by finding ways to spread out demand so that big surges don't occur. One way to do this is to give customers an incentive to use the service at off-peak times Many bars and restaurants have "happy hours" or "early-bird specials." Similarly, movie theaters have lower prices for matinée showings, and resort hotels offer reduced rates during their off seasons.

key responsibilities of operations managers

Operations managers often play a role in the design of products by helping designers understand the challenges and constraints involved in producing high-quality products on time and within budget. Once the design is finalized, operations managers must determine the best production processes to convert inputs into outputs; design a facility layout that creates an efficient flow of materials, parts, and work in process through the production process; select the best locations for facilities; make decisions about how much inventory to hold; determine how to allocate resources needed to complete complex projects; and manage value chains to coordinate the functions of all of the organizations and processes directly or indirectly involved in producing goods and services and distributing them to customers.

From Simple Supply Chains to Complex Value Chains

Over the last five decades, the increasingly competitive and global nature of markets has brought about major changes in how firms produce and distribute their goods and services supply chains today span multiple organizations located in many different countries. shift from a cost perspective to a value perspective has led operations managers to extend their view beyond the traditional supply chain to encompass a broader range of processes and organizations known as a value chain

role of Poorly designed processes

Poorly designed processes can result in production delays, quality problems, and high costs

changes in technology have revolutionized operations management.

Rapid changes in both machinery and equipment and in software and information technologies have revolutionized operations management. The biggest change in machinery and equipment has been the increasing use of automation, which means replacing human operation and control of machinery and equipment with programmed control. The development of software applications to allow computer-aided design (CAD), computer-aided engineering (CAE), and computer-aided manufacturing (CAM) has given firms the flexibility to design, test, and produce goods more quickly and efficiently than ever before. When these powerful software applications are integrated with robots and other automated equipment, the result is called computer-integrated manufacturing. This tight integration allows firms to produce customized goods quickly and at low cost, a process called mass customization.

automation

Replacing human operation and control of machinery and equipment with some form of programmed control.

flow shop process

Services that provide a high volume of relatively standardized products also use flow-shop processes ex: fast-food restaurants often use a simple product layout to prepare sandwiches, pizzas, or tacos in a standard sequence of steps

choices firms face when perform processes itself

Should it perform these functions domestically, or should it offshore these activities?

benefits of holding larger inventories

Smoother Production Schedules: A candy maker might produce more candy than it needs in August and September and hold the excess in inventory so that it can meet the surge in demand for Halloween treats without investing in more production capacity. Protection against Stock-Outs and Lost Sales: Holding larger inventories reduces the chance of stock-outs and lost sales due to supply disruptions or unexpected surges in demand. Reduced Ordering Costs: Every time a company orders supplies, it incurs paperwork and handling costs. Holding a larger average inventory reduces the number of orders the firm must make and thus reduces ordering costs.

computer-aided engineering (CAE)

Software that enables users to test, analyze, and optimize their designs

computer-aided manufacturing (CAM)

Software that takes the electronic design for a product and creates the programmed instructions that robots must follow to produce that product as efficiently as possible.

enterprise resource planning (ERP)

Software-based approach to integrate an organization's (and in the sophisticated versions, a value chain's) information flows.

inventory

Stocks of goods or other items held by organizations.

servicescape

The environment in which a customer and service provider interact.

value chain

The network of relationships that channels the flow of inputs, information, and financial resources through all of the processes directly or indirectly involved in producing goods and services and distributing them to customers.

critical path

The sequence of activities in a project that is expected to take the longest to complete.

Automation

The use of automated systems has become increasingly common—and increasingly sophisticated Automation began in the early 1950s with primitive programmed machines Some robots have special sensors that allow them to "see," "hear," or "feel" their environment. Many robots are mobile and can even be guided over rugged terrain.

costs of holding larger inventories

Tied-Up Funds: Items in inventory don't generate revenue until they're sold, so holding large inventories can tie up funds that could be better used elsewhere within the organization. Additional Holding Costs: Bigger inventories require more storage space, which can mean extra costs for heating, cooling, taxes, insurance, and more. Increased Risk: Holding large inventories exposes the firm to the risk of losses due to spoilage, depreciation, and obsolescence.

effectiveness

Using resources to create value by providing customers with goods and services that offer a better relationship between price and perceived benefits.

Operations manager

When operations managers do their job well, their firms produce the right goods and services in the right quantities and distribute them to the right customers at the right time—all the while keeping quality high and costs low. operations managers can have a major impact on a firm's revenues and its costs, and thus on its overall profitability.

larger capacities

a facility large enough to handle peak capacity is more expensive to build; costs more to heat, cool, and insure; and may have substantial excess capacity during off-peak periods

marketing definition of product

an object, or system, or service made available for consumer use as of the consumer demand; it is anything that can be offered to a market to satisfy the desire or need of a customer.

Ikea

being the world's largest wood furniture producer gives Ikea leverage Ikea's costs are significantly lower than those of its competitors

cons of outsourcing

can complicate value chains and create coordination problems can expose the firm to certain types of risks -- , it may have to entrust others in its value chain with confidential information and intellectual property, such as copyrighted material or patented designs These strategic assets have less legal protection in some countries than in the United States, so providing access to foreign firms may increase the risk that the firm's intellectual property will be pirated or counterfeited greatest concern when firms have outsourced some of their supply chain functions to organizations in China

Value chain

clearly includes its supply chain, which consists of the organizations, activities, and processes involved in the physical flow of goods, from the raw materials stage to the final consumer. some organizations use the terms value chain and supply chain interchangeably. -- value chain is a broader concept; in addition to the supply chain, it includes activities and processes involved in acquiring customers—such as contract negotiations and customer financing—as well as activities and processes involved in keeping customers by providing services after the sale, such as performing warranty repairs, offering call center assistance, and helping customers recycle used goods. main focus is on the customer; in contrast, the supply chain is more oriented toward traditional production relationships

considerations of inventory

comparing the costs and benefits associated with different levels of inventory Finally, with less in-store inventory, store employees can quickly put new shipments directly onto lower store shelves instead of the slower, more expensive process of putting excess product inventory on top shelves via ladders and forklifts how to avoid stocks outs -- scheduling shipments properly

significant part of operations management

designing products that meet customers' needs

Taiichi Ohno (born 1912)

developed the just-in-time production method while working up Toyota's ranks as an automotive engineer Ohno's principles focused on speeding processes, improving quality, and slimming down operations production principles were officially adopted as the Toyota Production System in the mid-1950s, leading to increased efficiency and decreased costs company-wide Ohno's system served as a model for future production systems such as lean and Six Sigma was promoted to executive vice president of Toyota in 1975. He retired in 1978 but retained the role of consultant until 198

1970s

economies of Japan, Germany, and other war-ravaged nations had been rebuilt, with many of their major companies boasting efficient new production facilities with state-of-the-art technology. many Japanese firms had adopted new techniques that greatly improved the quality of their products lower labor costs, impressive technology, and world-class quality, these foreign producers quickly began to take market share from American firms In more recent years, firms in Korea, India, and China have also become formidable competitors.

today

efficiency remains important, but operations managers now realize that keeping costs (and prices) low are only part of the equation Customers usually buy goods that offer the best value—and these aren't always the same as the goods that sell for the lowest price A product that offers better features, more attractive styling, and higher quality may provide more value—and attract more customers—than a product with a lower price. today's operations managers have broadened their focus to look at benefits as well as costs

role of Well-designed processes and facility layouts

enable a firm to produce high-quality products effectively and efficiently, giving it a competitive advantage

key considerations (some facilities)

ex: coal mine, for instance, must be located where there's coal other types of facilities, the decision is more complex many service firms place primary interest on locating close to their customers while manufacturing firms are often more concerned about the cost and availability of land and labor and access to highways, railways, and port facilities

Durable goods

expected to last three years or longer ex: furniture, cars, and appliances.

cellular layout

falls between the product layout and the process layout falls between the product layout and the process layout A production facility might have several cells, each designed to efficiently produce a family of parts (or entire products) that have similar processing requirements Like an assembly line, the product moves from one station in the cell to the next in a specific sequence unlike most assembly lines, cells are relatively small and are designed to be operated by a few workers who perform a wider array of tasks than assembly-line workers.

struggle of deciding inventory needs

increasing (or decreasing) the amount of inventory involves both benefits and costs

Designing the Servicescape

interaction between customers and service providers, design of service facilities often must take the experiences of the participants into account A well-designed servicescape can have a positive influence on the attitudes and perceptions of both the customer and those who provide the service. A poor servicescape can have the opposite effect.

one common production strategy (5 years ago)

keep costs low by producing large quantities of standardized products goal of this mass production strategy was to achieve reductions in average cost by taking advantage of specialization and the efficient use of capital

1960s

many operations managers viewed the natural environment as something to exploit emphasis on keeping costs low made it tempting to dispose of wastes as cheaply as possible—often by dumping them into rivers, lakes, or the atmosphere

stock outs

not having products that customers need

vertical integration

occurs when a firm develops the capability to carryout processes previously performed by its suppliers or distributors, or when it buys those external companies

offshoring

offshoring is not the same thing as outsourcing processes to other organizations Offshoring doesn't require outsourcing; a firm often offshores processes by directly investing in its own foreign facilities Similarly, outsourcing doesn't require a firm to go offshore; activities can be outsourced to other domestic firms many firms have combined these approaches by hiring organizations in other countries to perform some of the processes that they previously performed at their own domestic facilities offshoring can go in both directions. Just as American firms offshore processes to other countries, some foreign companies offshore some of their processes to the United States.

outsourcing

opposite of vertical integration the trend in value chain design has been to rely more on outsourcing and less on vertical integration allows a firm to shed functions it doesn't perform well in order to focus on its areas of strength. It also frees people, money, and other resources that had been tied up in the outsourced activities, allowing these resources to be employed in more profitable ways. ways

ways to organize processes

product layout process layout cellular layout fixed position layout

1960s

the focus of operations management was mainly on efficiency. goal was to keep costs low so the firm could make a profit while keeping prices competitive

capacity

the number of customers the service facility can accommodate per time period

One of the most important issues that operations managers examine when they design value chains

the trade-off between vertical integration and outsourcing

reasons for offshoring by US firms

to take advantage of less expensive labor Land and other resources also may be less expensive in developing nations than in the United States some foreign governments, eager to attract American investments, may offer financial incentives or other inducements many foreign markets are growing much more rapidly than the relatively mature U.S. market. Firms often find it advantageous to locate production facilities close to these rapidly growing markets.

From Mass Production to Mass Customization

today's technologies allow many firms to pursue mass customization—the production of small quantities of customized goods and services that more precisely meet the needs of specific customers—with very little increase in costs. access to customized and personalized food experiences at the restaurant level, at the fast casual level, and at the packaged food level and it has only increased

process layout

used by many firms that need to produce small batches of goods that require a degree of customization. This approach arranges equipment according to the type of task performed. ex: in a machine shop, all of the drills may be located in one area, all of the lathes in another area, and all of the grinders in yet another doesn't require work to be performed in a specific sequence; instead, the product can be moved from one type of machinery to another in whatever sequence is necessary can be used to produce a variety of products without the need for expensive retooling. this flexibility sometimes comes at the cost of longer processing times and more complex planning and control systems. Also, because the machinery and equipment used in a process layout is usually more general-purpose in nature and may be used to produce a greater variety of goods, the process layout requires workers to be more versatile than those employed in a product layout.

Robot tasks

welding, spray painting, and assembling products, but they can do many other things ranging from packaging frozen pizza to disposing of hazardous waste