Essentials of Contemporary Management

Chapter

14

Operations Management: Managing Vital Operations and Processes

Operations Management Concepts

Operations Management
The management of any aspect of the production system that transforms inputs into finished goods and services. Production system () The system used to acquire inputs, convert the inputs into outputs, and dispose of the outputs. Operations manager Responsible for managing the firms production system and for determining where operating improvements are to be made.
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Operations Management and Competitive Advantage

Concepts
Quality Goods and services that are reliable, dependable, or psychologically satisfying to customers. The amount of input needed to produce a given output. Less input required lowers cost and waste.

Efficiency

Responsiveness to Actions taken to respond to customer needs. customers Firms can react quickly and correctly to customer needs as they arise.

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Improving Responsiveness to Customers

Without customers, organizations would cease to exist.
Non-profit and for-profit firms all have customers. Managers need to identify who the customer is and their needs.

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Improving Responsiveness to Customers

What do customers want?
Usually customers prefer: A lower price to a higher price. High-quality products to low-quality products. Quick service to slow service (also prefer good after-sale support). Many features over few features. Products that are customized or tailored to their specific needs.

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Improving Quality
The concept of quality applies to the products of both manufacturing and service firms.
A firm that provides higher quality than others at the same price is more responsive to customers. Higher quality can also lead to better efficiency through lower waste levels and operating costs.

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Improving Efficiency

The fewer the inputs required to produce a given output, the higher the efficiency of a production system.
A

measure of the organizations efficiency in turning all of its inputs into outputs is:

outputs Total factor productivity all inputs

A

measure of a single input (such as labor) to total output (i.e., partial productivity):

outputs Labor productivity direct labor

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Facilities Layout, Flexible Manufacturing, and Efficiency

Facilities Layout
The operations management technique whose goal is to design the machine-worker interface to increase production system efficiency.

Flexible Manufacturing
Operations management techniques that attempt to reduce the setup costs associated with a production system.
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Facilities Layout
Product layout Machines are organized so that each operation is performed at work stations arranged in a fixed sequence. Example: mass production systems where workers are stationary and a belt moves work to them. Process Layout Self contained work stations not organized in a fixed sequence. Provides flexibility in making a wide variety of products tailored to customers.
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Facilities Layout (contd)

Fixed-Position Layout
The product stays in a fixed spot and components produced at remote stations are brought the product for to final assembly. Large jet aircraft assembly uses this type of layout.

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Flexible Manufacturing
Most firms face major expenses when setting up to produce a product.
These costs must be paid before production begins. The more often products to be built change, the higher setup costs become.

Flexible manufacturing reduces setup costs by reducing the time required to reset the production line for a different product by: Using easily replaced manufacturing equipment.
Redesigning the production system itself to be more productive.
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Just-in-Time Inventory and Efficiency

Just-in-Time (JIT) Inventory
Benefit of JIT Reduces inventory holding costs for warehousing, storage, inventory tracking, and the cost of capital tied up in inventory.

Drawback to JIT
Firm does not maintain a large buffer stock of parts which makes the firm vulnerable to strikes or supply problems that can quickly deplete onhand inventories.

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Efficient Manufacturing
Self-managed teams boost efficiency by allowing for a flatter organization structure.
The team takes on the role of the supervisor. Teams working together often become very skilled at enhancing productivity.

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Process Reengineering and Efficiency

Process Reengineering
A fundamental rethinking and radical redesign of the business process to achieve dramatic improvement in critical measures of performance. Boosts efficiency by directing efforts to activities that add value to the good or service produced. Top managers must support efficiency improvements for them to be accepted by workers.

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