Production & Operations Management

1
Production Operations Management

• Chapter 9

2
Goals

• USA Manufacturing
• Production ? Operations Management
• Production Processes
• Production techniques that have improved
  productivity in USA
• Operations management planning issues
• Control Procedures

3
USA Manufacturing

• In recent history manufacturing has declined
  while the service industry has grown
• 70 of US GDP comes from service sector
• 85 of jobs comes from service sector
• 25 of all goods produced in world come from US
  manufacturing sector (largest in world)
• This means that we must study how to produce
  goods and services
• Manufacturing industries doing well green
  technology, nanotechnologies, biotechnologies
• Tesla Motors (Electric carmaker)
• Solyndra (solar company)
• Codexis (biofuels firm)
• 3M (nano research done by 3M for adhesives, LCD
  displays and more)

4
Production ? Operations Management

• Production
• The creation of finished goods and services using
  the factors of production land, labor, capital,
  entrepreneurship and knowledge.
• Production Management
• Term used to describe all the activities managers
  do to help their firms create goods
• Operations management
• Term used to describe all the activities managers
  do to help their firms create goods and services
• Converting resources into goods and services

5
Operations Management

• Product creation, development, production,
  distribution, managing purchases, inventory
  control, quality control, storage, logistics and
  evaluations
• A great deal of focus is on effectiveness
  efficiency of processes
• Substantial measurement and analysis of internal
  processes in order to become more effective and
  efficient

http//www.managementhelp.org/ops_mgnt/ops_mgnt.ht
m
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What Is Operations Management Like At

• Appliance Manufacturer (Product)
• Operations Management take raw materials, human
  resources, parts, supplies, paints, tools and
  more to make appliance
• Example
• Dacor kitchen wear
• http//www.dacor.com/About-Us/The-Dacor-Family.asp
  x
• List of companies manufacturing appliances in USA
• http//www.ssrsi.org/Made20In2020USA/apliances.
  htm
• Sears (Retail, Finance Repair - Product
  Service)
• Operations Management covers everything
  purchases, sales, finances, repairs

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What Is Operations Management Like At

• Colleges (Service)
• Operations Management take information, teachers,
  buildings, computers, students and creates a
  service that transforms students into educated
  people
• Hospitals (Service)
• Hospitals Operations Management take information,
  buildings, high-tech machines, computers,
  supplies, highly skilled labor and creates a
  service that transforms sick people into healthy
  people

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Form Utility

• The value added by the creation of finished goods
  and services, such as
• The value added by taking silicon and making
  computer chips
• Putting services together to create a vacation
  package
• The value added by taking wood, paint, labor,
  packaging, and other costs and making a boomerang

9
Goal of production(Andrew S. Grove Intel)

• Build and deliver products that customers demand
  at a scheduled delivery time
• Acceptable quality
• Lowest possible price

10
Production Processes

• Process Manufacturing
• That part of the production process that
  physically or chemically changes materials
• Examples
• Poor the steel into the mold to make parts for
  excavator
• Cook steak, vegetables and rice
• Assembly Process
• The part of the production process that puts
  together components
• Examples
• Assemble parts to make excavator
• Assemble steak, vegetables and rice to make dinner

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Production Processes

• Continuous Process
• A production process in which long production
  runs turn out finished goods over time
• Examples
• Tortilla factory or lumber factory
• Intermittent Process
• A production process in which the production run
  is short and the machines are changed frequently
  to make different products
• Examples
• Auto factories can switch between models
• Bakers can make cakes and pies and tarts

12
Production techniques that have improved
productivity in USA

• CAD (Computer-aided Design)
• The use of computers in the design of products
• CAM (Computer-aided Manufacturing)
• The use of computers in the manufacturing of
  products
• CIM (Computer-integrated Manufacturing)
• One machine that does both CAD and CAM
• Expensive but cuts manufacturing costs
  dramatically
• Examples
• http//www.youtube.com/watch?vnvZBtJ-ncEMfeature
  related

13
Production techniques that have improved
productivity in USA

• Mass Production (Perfective in US by companies
  like Ford)
• Make a lot of one thing
• Like Henry Ford did
• Flexible Manufacturing
• Designing machines to do multiple tasks so that
  they can produce a variety of products
• http//www.youtube.com/watch?vcb-I4FhF36Qfeature
  related
• Lean Manufacturing (Originated in Japan)
• Manufacturing that uses fewer inputs (resources)
  to make the same number of outputs than before.
  Increase productivity.
• Reduce labor hours, waste, defects, floor space,
  inventory
• http//www.youtube.com/watch?vAUPji7L9aSsfeature
  related

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Production techniques that have improved
productivity in USA

• Mass Customization
• Tailoring products to meet the needs of
  individual customers on a mass scale
• Examples
• Dell design your own computer
• Vans shoes design your own shoe
• Colleges design your own degree
• Season Tickets to Mariner Games

15
Reverse Innovation or Frugal Innovation(Originate
d in emerging markets)

• Reverse Innovation or Frugal Innovation
• What are needs of poor ? create product
• Turbo Charged Lean Manufacturing
• Examples
• Tata Motors (Indian Company) makes 2200 car
• Kenya leads the world in mobile phone money
  transfer
• GE R D labs in Bangalore, India makes hand-held
  ECG (electrocardiogram) for 800 (instead of
  2000)
• TCS (India) create inexpensive water filter from
  rice husks (waste product)
• Narayana Hrudayalaya Hospital (India) Heart
  Surgery for 2000 (same success rate as US)
• BYD (China) makes lithium batteries for 12
  (instead of 40)

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Reverse Innovation or Frugal Innovation

• Key ideas
• Dramatically reduce costs by
• Redesign products processes
• Applying division of labor (expert does what they
  are expert at) and economies of scale in new
  areas like surgery
• Listening to what the poor need
• Product must be tough and easy to use
• Use minimal raw materials
• Not harsh on environment

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Reverse Innovation or Frugal Innovation

• Rethinking Production processes
• Contract out more work and stick to core
  competency
• Use existing technology in new ways
• Computers are rare in India and TVs are common,
  so TCS designed a box that connects mobile phone
  (can get internet) to TV
• Narayana Hrudayalaya Hospital
• 1000 beds instead of more common 200 (economies
  of scale)
• Surgeons can specialize in one operation and
  become that best at the one operations

18
Operations Management Planning Issues
(Manufacturing And Service)

• Facility location
• Facility layout
• Materials requirement planning
• Purchasing
• JIT (just-in-time inventory) control
• Quality control

19
Operations Management Planning

• Facility Location
• The process of selecting a geographic location
  for a companys operations
• Considerations
• Less expensive property, labor, logistic costs
• Location, Location, Location
• Attractive communities to live in life style to
  attract employees
• Are suppliers close?
• Are there enough customers or employees?
• Tax breaks
• Can we just do things on the internet? Retail or
  engineer?

20
Operations Management Planning

• Facility Layout
• The physical arrangement of resources (including
  people) in the production process
• Products
• http//www.youtube.com/watch?vAUPji7L9aSsfeature
  related
• Services
• Aravind Eye Hospital (India) 4 operating beds
  next to each other and 2 doctors

21
Operations Management Planning

• MRP (Material Requirement Planning)
• A computer-based production management system
  that uses sales forecasts to make sure that
  needed parts and materials are available at the
  right time and place (for a single firm)
• ERP (Enterprise Resource Planning)
• A computer application that enables multiple
  divisions or firms to manage all of their
  operations (finance, requirements planning,
  human resources and order fulfillment) on the
  basis of a single, integrated set of corporate
  data
• ERP Programs help to bring operations management
  to the Internet

22
Operations Management Planning

• Purchasing
• The function in a firm that searches for quality
  material resources, finds the best suppliers, and
  negotiates the best price for the goods and
  services
• Pays all bills that allow discounts during the
  discount period
• 2/10/net 30
• 1000 owed
• Discount if pay within 10 days 1000.02 20
• 20 discount for paying 20 days early
• Annual rate earned (1.02)(365/20)-1 43.53

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Operations Management Planning

• JIT (Just-in-time Inventory Control)
• The 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
• Reduces storage costs, facility space, obsolesces
• Requires close ties with suppliers

24
Operations Management Planning

• Quality
• Consistently producing what the customer wants
  while reducing errors before and after delivery
  to the customer
• The before in the most important
• Statistical Quality Control (SQC)
• Statistics used to continually monitor quality
• Six Sigma Quality (Six Standard Deviation
  Quality)
• A quality measure that allows only 3.4 defects
  per million opportunities

25
Control Procedures

• Pert Charts (Critical Path)
• A method for analyzing that tasks involved in
  completing a given project
• The Critical Path is the path that takes the
  longest and this is most critical to avoid delays
  on this path
• Gantt Charts
• Bar graph showing production managers what
  projects are being worked on and what stage they
  are in any given time

26
How Manufacturers Have Become More Effective

• Focus more on customers
• Maintain close relationships
• Continuous improvement
• Focus on quality
• Save costs through site selection
• Rely on the Internet to unite partners
• New production techniques
• Looking overseas to get new ideas for production
  and innovation in providing goods and services