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Achieving World-Class Operations ManagementAchieving World-Class Operations Management
Prepared byNorm Althouse
University of Calgary
Prepared byNorm Althouse
University of Calgary
Copyright © 2011 by Nelson Education Ltd.
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Learning Outcomes
2
1 Discuss why production and operations management is important in both manufacturing and service firms.
2 List the types of production processes used by manufacturers and service firms.
3 Describe how organizations decide where to put their production facilities and what choices must be made in designing the facility.
4 Explain why resource-planning tasks like inventory management and supplier relations are critical to production.
5 Discuss how operations managers schedule and control production.
6 Evaluate how quality management and lean-manufacturing techniques help firms improve production and operations management.
7 Identify the roles that technology and automation play in manufacturing and service industry operations management.
8 List some of the key trends affecting the way companies manage production and operations.
Copyright © 2011 by Nelson Education Ltd.
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Operations Management
3
changes in consumer
expectations, technology, and
competition
finding the most efficient and effective methods of
producing the goods or services
rethinking where, when and how the organization
will produce products and services
Copyright © 2011 by Nelson Education Ltd.
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The creation of products and services by turning inputs into outputs, which are products
and services
The creation of products and services by turning inputs into outputs, which are products
and servicesProductionProduction
Management of the production processManagement of the production processOperations Management
Operations Management
Copyright © 2011 by Nelson Education Ltd.
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Main Types ofDecisions
Main Types ofDecisions
1. Production Planning
3. Improving production and operations
Copyright © 2011 by Nelson Education Ltd.
2. Production Control
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 6
The Production Process
Raw materials
Raw materials
Natural resources
Natural resources
Human resources
Human resources CapitalCapital
Inputs Outputs
Conversionprocess
Conversionprocess
ProductsProducts
ServicesServices
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 7
Production and Operations Management
Main Main Types ofTypes of
DecisionsDecisions
Main Main Types ofTypes of
DecisionsDecisions
1. Production Planning
2. Production Control
3. Improving production and operations
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Site selectionSite selection
Facility layoutFacility layout
Resource planningResource planning
Type of Production ProcessType of Production Process
DecisionsDecisionsin in
ProductionProductionPlanningPlanning
DecisionsDecisionsin in
ProductionProductionPlanningPlanning
Long-TermMedium-TermShort-Term1 Year1 Year 2 Years2 Years 3-5 Years3-5 Years
Copyright © 2011 by Nelson Education Ltd.
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Classification of Production Types
9Copyright © 2011 by Nelson Education Ltd.
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Converting Inputs to Outputs
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Assembly ProcessAssembly Process The basic inputs are combined or transformed into the output.
The basic inputs are combined or transformed into the output.
Process ManufacturingProcess Manufacturing The basic input is broken down into one or more outputs.
The basic input is broken down into one or more outputs.
Copyright © 2011 by Nelson Education Ltd.
Production involves converting inputs (raw materials, parts, human resources) into outputs (products or services)
Production involves converting inputs (raw materials, parts, human resources) into outputs (products or services)
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Production Timing
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Intermittent ProcessIntermittent Process A production process that uses short production runs to make batches of different products.
A production process that uses short production runs to make batches of different products.
Continuous ProcessContinuous Process A production process that uses long production runs without equipment shutdowns.
A production process that uses long production runs without equipment shutdowns.
Copyright © 2011 by Nelson Education Ltd.
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 12
Manufacturing to order, or for inventory
Manufacture to order
Manufacture to order
A product is not made until a customer has placed an order for it.
E.g. Dell Computers, Burger King
A product is not made until a customer has placed an order for it.
E.g. Dell Computers, Burger King
Manufacture for inventory
Manufacture for inventory
A product is made in advance of a customer ordering it. E.g. Hewlett
Packard, McDonalds
A product is made in advance of a customer ordering it. E.g. Hewlett
Packard, McDonalds
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Factors in Facility Location Decisions
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Marketing factorsMarketing factors
Manufacturing environmentManufacturing environment
Local incentivesLocal incentives
Availability of production inputsAvailability of production inputs
International location considerations
International location considerations
Copyright © 2011 by Nelson Education Ltd.
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 14
Production location problem
Where should the factory be built in Outlandia? …near to the source of supply? … or near to the consumers?
Location of main supply inputs
Location of main consumption market
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 15
Production location problem
Physical weight loss Supply Smelters; sawmills Physical weight gain Consumer Soft-drink bottling; manufacture of
cement blocks Bulk loss Supply Compressing cotton into high-
density bales Bulk gain Consumer Manufacturing containers; sheet-
metal work Perishability loss Supply Fish processing Perishability gain Consumer Newspaper (and job) printing;
baking bread Fragility loss Supply Packing goods for shipment Fragility gain Consumer Coking of coal Hazard loss Supply Deodorizing captured skunks Hazard gain Consumer Manufacturing explosives;
distilling moonshine whiskey
Process characteristic
…implies locating close to Examples
Source: The Dynamics of Industrial Location: The Factory, the Firm and the Production Systemby Roger Hayter, Department of Geography, Simon Fraser University, Burnaby, 2004(http://www.sfu.ca/geography/people/faculty/Faculty_sites/RogerHayter/books.htm)
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 16
Production location problem
Where should the factory be built in Outlandia? A centre of gravity model might be the answer when there are multiple consumption areas.
Consumer market B
Consumer market A
Consumer market C
Location of main supply inputs
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Designing the Facility
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Fixed-Position LayoutFixed-Position Layout The product stays in one place and workers and machinery move to it as needed
The product stays in one place and workers and machinery move to it as needed
Copyright © 2011 by Nelson Education Ltd.
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Make-or-Buy Decisions
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FactorsFactors Size of componentsSize of components
Standard or nonstandard items
Standard or nonstandard items
Quantity of items neededQuantity of items needed
Special design featuresSpecial design features
Quality and reliability of suppliersQuality and reliability of suppliers
Copyright © 2011 by Nelson Education Ltd.
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Inventory Management
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Perpetual InventoryPerpetual Inventory A continuously updated list of inventory levels, orders, sales, and receipts
A continuously updated list of inventory levels, orders, sales, and receipts
Copyright © 2011 by Nelson Education Ltd.
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Computerized Resource Planning
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Enterprise resource planning (ERP)
Enterprise resource planning (ERP)
A computerized resource-planning system that incorporates information about the firm’s suppliers and customer with its internally
generated data
A computerized resource-planning system that incorporates information about the firm’s suppliers and customer with its internally
generated data
Copyright © 2011 by Nelson Education Ltd.
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Supply Chain Management
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Goal:Satisfying customers with quality
products and services from their suppliers
Copyright © 2011 by Nelson Education Ltd.
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Production Control
22Copyright © 2011 by Nelson Education Ltd.
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 23
Gantt Chart
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 24
Critical Path Method
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Copyright © 2008 by Nelson, a division of Thomson Canada Limited 25
The Experience Curve
10 10 10 10 10 101 2 3 4 5 6
CostperUnitmade
Total Accumulated Production
Slope of .2 to .3, meaning a 20% to 30%reduction in unit manufacturing
costs for each doublingof production
As Boeing originally discovered with the 707, manufacturing cost continues to decline as you accumulate more production experience.
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Improving Production and Operations
26Copyright © 2011 by Nelson Education Ltd.
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Lean Manufacturing
27Copyright © 2011 by Nelson Education Ltd.
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Technology and Automation at Your Service
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Computer-Integrated ManufacturingComputer-Integrated Manufacturing
Flexible Manufacturing SystemsFlexible Manufacturing Systems
RoboticsRobotics
Computer-Aided Design andManufacturing Systems
Computer-Aided Design andManufacturing Systems
POS, ATMs, etc. POS, ATMs, etc.
Copyright © 2011 by Nelson Education Ltd.
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Trends in Operations Management
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Modular productionModular production
Designs for production efficiencyDesigns for production efficiency
Asset managementAsset management
Copyright © 2011 by Nelson Education Ltd.