Chapter 18 Managing Service and Manufacturing Operations

1
Chapter 18Managing Service and Manufacturing
Operations
Designed Prepared byB-books, Ltd.
2
Operations Management
3
Managing for Productivity and Quality
After reading these sections, you should be able
to

• discuss the kinds of productivity and
  theirimportance in managing operations.
• explain the role that quality plays in
  managingoperations.

4
Productivity
Productivity Outputs
Inputs
1
5
Why Productivity Matters
1.1
6
Why Productivity Matters

• Increased wages and new jobs
• More donations to charities
• More affordable and better products

1.1
7
Kinds of Productivity

• Partial productivity

Multifactor productivity
1.2
8
Multifactor Productivity Growth
1.2
9
Quality
2
10
Meanings for Quality
A product or service free of deficiencies
Quality
The characteristics of a product or service that
satisfy customer needs
2
11
Car Quality
2
12
Quality-Related Product Characteristics
2.1
13
Serviceability

• Reva uses a computer diagnostic system that can
  sync to the owners cell phone, indicating the
  type of service the vehicle needs.

14
Characteristics of Service Quality
2.1
15
ISO 9000 and 14000
2.2
16
Baldrige National Quality Award

• Given to U.S. companies to recognize achievement
  in quality and business performance
• Raises awareness about the importance of quality
  and performance excellence as a competitive edge

2.3
17
Criteria for the Baldrige National Quality Award

• Leadership
• Strategic Planning
• Customer and Market Focus
• Measurement, Analysis, Knowledge Management
• Human Resource Focus
• Process Management
• Business Results

2.3
18
Baldrige Application Process
19
Total Quality Management
Customer focus and satisfaction
2.4
20
Total Quality Management
2.4
21
Managing Operations
After reading these sections, you should be able
to

• explain the essentials of managing a
  servicebusiness.
• describe the different kinds of
  manufacturingoperations.
• explain why and how companies should manage
  inventory levels.

22
Service Operations

• are made
• are tangible
• are storable
• 32.7 of GDP

• are performed
• are intangible
• are unstorable
• 57.2 of GDP

3
23
Service Operations
Service-ProfitChain
ServiceRecoveryand Empowerment
3
24
Service Recovery and Empowerment

• Service recovery is restoring customer
  satisfaction to strongly dissatisfied customers
• Fixing the mistakes that were made
• Performing heroic service that delights customers
• Empowering workers can help solve customer
  dissatisfaction
• The goal is zero customer defections

3.2
25
Costs of Empowering Service Employees
3.2
26
Benefits of EmpoweringService Employees
3.2
27
Manufacturing Operations
4
28
Amount of Processing inManufacturing Operations

• Make-to-order operations
• manufacturing doesnt begin until an order is
  placed
• Assemble-to-order operations
• used to create semi-customized products
• Make-to-stock operations
• manufacture standardized products

4.1
29
Amount of Processing inManufacturing Operations
4.1
30
Flexibility of Manufacturing Operations
4.1
31
Flexibility of Manufacturing Operations
4.2
32
Inventory
5
33
Types of Inventory
5.1
34
Manufacturers Pursue Vertical Integration
Beyond the Book

• Many big manufacturers are acquiring the
  producers of raw materials and crucial parts.
• Given the rising costs of commodities like copper
  and rubber, these companies feel pressure to
  protect themselves from supply scarcity.
• Owning suppliers also gives manufactures more
  control over the quality of their parts.
• Source T. Aeppel, A Hot Commodities Market
  Spurs Buying Spree by Manufacturers, The Wall
  Street Journal, 14 August 2006.

35
Types of Inventory
5.1
36
Measuring Inventory

• Average Aggregate Inventory
• the average overall inventory for a certain time
  period
• Weeks of Supply
• the number of weeks to run out of inventory
• Inventory Turnover
• the number of times a year that a company sells
  its average inventory

5.2
37
Costs of Maintaining an Inventory
OrderingCost
all costs associated with ordering inventory,
correcting mistakes,determining when/how much to
order
Setup Cost
cost of downtime and lost efficiencywhen a
machine is changed to producedifferent kinds of
inventory
HoldingCost
cost of keeping inventory until it isused or
sold
StockoutCosts
cost when a company runs out of a product
5.3
38
Webfront Design Reduces Need For Inventory
Beyond the Book

• Nau, an outdoor clothing company, uses a webfront
  design in its stores.
• Customers can try clothes on at the store and
  then order garments shipped to their own home.
• Customers get free shipping and a 10 discount
  and Nau can build smaller stores and cut
  operating expenses.

Source Fast Company, June 2007, 98.
39
Managing Inventory
5.4
40
Managing Inventory
5.4
41
Biz Flix Casino
Beyond the Book
Does the casino have independent or
interdependent demand systems?
Take Two Video Click
What type of operations management does this
scene showmanufacturing operations management or
service operations management?