Chapter Eighteen
Operations Management
Chapter Objectives (1 of 2)
Describe the role of the transformation process in operations management
Explain what factors determine organizational productivity
Discuss what re-engineering of work processes involves
Describe how adding a “manufacturing focus” to organizational strategy affects an organization
Identify the four key decisions that provide the long-term strategic direction for operations planning
Chapter Objectives (2 of 2)
Describe the three decisions that make up tactical operations planning
Identify the three approaches to maintenance control
Explain the contingency factors that affect the implementation of TQM
Discuss the advantages and potential problems of just-in-time (JIT) inventory systems
Explain how flexible manufacturing systems could give an organization a competitive advantage
Describe how speed can be a competitive advantage
The Operations System
Inputs
People
Technology
Capital
Equipment
Material
Information
Transformation
process
Outputs
Goods
Services
Figure 19-1
Deming’s 14 Points for Improving Management’s Productivity
1. Plan for the long-term future, not for next month or next year.
2. Never be complacent concerning the quality of your product.
3. Establish statistical control over your production processes and require your suppliers to do so as well.
4. Deal with the fewest number of suppliers - the best ones, of course.
5. Find out whether your problems are confined to particular parts of the production process or stem from the overall process itself.
Table 19-1a
Deming’s 14 Points for Improving Management’s Productivity
6. Train workers for the job that you are asking them to perform.
7. Raise the quality of your line supervisors.
8. Drive out fear.
9. Encourage departments to work closely together rather than to concentrate on departmental or divisional distinctions.
10. Do not be sucked into adopting strictly numerical goals, including the widely popular formula of “zero defect.”
Table 19-1b
Deming’s 14 Points for Improving Management’s Productivity
11. Require your workers to do quality work, not just to be at their stations from 9 to 5.
12. Train your employees to understand statistical methods.
13. Train your employees in new skills as the need arises.
14. Make top managers responsible for implementing these principles.
Table 19-1c
Characteristics of Services
Services
Intangible
Can’t be stored
in inventory
Involve customer or
client in actual production
Service
Organizations
Produce
Figure 19-2
Decisions Made in Planning Operations
What
is to be
produced?
How many
are to be
produced?
Where are
they to be
produced?
Which
production
methods are
to be used?
How should
equipment and
workstations
be arranged?
Capacity
Planning
Facilities
Location
Planning
Process
Planning
Facilities
Layout
Planning
Strategic Operations Plans
What’s the over-
all production plan for all products?
(Typically for the
year)
Aggregate
Planning
How many units of
each product will
be produced?
(Typically for the
month)
Master
Scheduling
What materials
are needed to
satisfy the
master schedule?
Materials
Requireemnts
Planning
Tactical Operations Plans
Compre-
hensive
Operations
Plans
Figure 19-3
A Process Layout at a Medical Clinic
Neurology
Obstetrics/Gynecology
Rest Rooms
Reception room
Pediatrics
Pharmacy
X-ray
Laboratory Tests
Plastic and
Recon-
structive
Surgery
Patient
enters
clinic
Patient
exits
clinic
Patient
Waiting
Area
Figure 19-4
A Product Layout in an Aluminum Tubing Plant
Raw
Alum.
Ingot
Receiving
Dept.
Casting
Dept.
Press
Dept.
Tube
Dept.
Finishing
Dept.
Inspection
Dept.
Packing
Dept.
Shipping
Dept.
Shipped
to
plant
Ingot
accepted
Ingot
melted
Metal
pressed
into
large
tubes
Large
tubes
stretched
into
various
dimensions
Finished
tubing is
cleaned
Finished
tubes
inspected
Finished
tubes
packed
Finished
tubes
shipped
to
customers
Figure 19-5
Developing a Master Schedule from an Aggregate Plan
From the Aggregate Plan (units per month)
Months
Heavy-Duty
Transmission
Standard
Transmission
Economy
Transmission
Total
July
August
September
October
November
100
75
75
125
80
45
120
70
60
130
100
70
120
100
80
250
250
250
300
300
July
August
Weeks
1176
1177
1178
1179
1180
1
2
3
4
5
6
7
8
0
0
0
10
15
0
0
5
10
10
0
0
10
5
10
0
0
0
10
15
0
0
0
10
20
0
15
15
5
0
20
10
0
0
Master Schedule for Heavy-Duty Transmission (units)
0
20
0
10
0
0
Total 100
Total 125
Heavy-Duty Models
Inventory Cycle with Safety Stock
300
250
200
150
100
50
0
4 8 12 16 20 24 28 32 36 40 44 48 52
Quantity on Hand (in units)
Reorder
point
Safety
stock
level
Time (in weeks)
Figure 19-7
Example of an ABC Inventory System
10 20 30 40 50 60 70 80 90 100
Total Dollar Value (%)
Total Number of Items (%)
100
90
80
70
60
50
40
30
20
10
0
A
items
B
items
C
items
Figure 19-8
