© 2006 prentice hall, inc.2 – 1 operations management chapter 2 – fundamentals of operations...

© 2006 Prentice Hall, Inc. 2 – 1

Operations ManagementOperations Management

Chapter 2 – Fundamentals of OperationsChapter 2 – Fundamentals of Operations

© 2006 Prentice Hall, Inc.

Heizer/Render Heizer/Render Operations Management, 8e Operations Management, 8e


Learning ObjectivesLearning Objectives

Specific approaches used by OM Specific approaches used by OM to achieve strategiesto achieve strategies

DifferentiationDifferentiation Low costLow cost ResponseResponse

When you complete this chapter, you When you complete this chapter, you should be able to:should be able to:

Describe or Explain:Describe or Explain:


Global StrategiesGlobal Strategies

Boeing – sales and production are Boeing – sales and production are worldwideworldwide

Benetton – moves inventory to stores Benetton – moves inventory to stores around the world faster than its around the world faster than its competition by building flexibility into competition by building flexibility into design, production, and distributiondesign, production, and distribution

Sony – purchases components from Sony – purchases components from suppliers in Thailand, Malaysia, and suppliers in Thailand, Malaysia, and around the worldaround the world


Reasons to GlobalizeReasons to Globalize

Reasons to GlobalizeReasons to Globalize

Reduce costs (labor, taxes, tariffs, etc.)Reduce costs (labor, taxes, tariffs, etc.) Improve supply chainImprove supply chain Provide better goods and servicesProvide better goods and services Understand marketsUnderstand markets Learn to improve operationsLearn to improve operations Attract and retain global talentAttract and retain global talent

Tangible Tangible ReasonsReasons

Intangible Intangible ReasonsReasons

Figure 2.1Figure 2.1


Risks: You May Wish To Risks: You May Wish To ConsiderConsider

National literacy rateNational literacy rate

Rate of innovationRate of innovation

Rate of technology Rate of technology changechange

Number of skilled Number of skilled workersworkers

Political stabilityPolitical stability

Product liability lawsProduct liability laws

Export restrictionsExport restrictions

Variations in languageVariations in language

Work ethicWork ethic

Tax ratesTax rates

InflationInflation

Availability of raw Availability of raw materialsmaterials

Interest ratesInterest rates

PopulationPopulation

Number of miles of Number of miles of highwayhighway

Phone systemPhone system


Developing Missions and Developing Missions and StrategiesStrategies

MissionMission statements tell an statements tell an organization where it is goingorganization where it is going

The The Strategy Strategy tells the tells the organization how to get thereorganization how to get there


MissionMission

Mission – Mission – Who are we? Who are we? What is our business? What is our business? Where are you going?Where are you going?

Organization’s purpose Organization’s purpose for beingfor being

Focus is on Focus is on value-added value-added or business focusor business focus not on not on a product or services.a product or services.


Mission StatementsMission StatementsFedEx exists to FedEx exists to provide total reliable, provide total reliable,

competitively superior, global air-ground competitively superior, global air-ground transportation of high priority goods and transportation of high priority goods and

documentsdocuments that require rapid, time-certain that require rapid, time-certain delivery. delivery.

Merck exists to provide society with superior Merck exists to provide society with superior products and services - innovations and products and services - innovations and

solutions that improve the quality of lifesolutions that improve the quality of life and and satisfy customer needs - to provide satisfy customer needs - to provide

employees with meaningful work and employees with meaningful work and advancement opportunities and investors advancement opportunities and investors

with a superior rate of returnwith a superior rate of return



Hard Rock CaféHard Rock Café

Our Mission: To spread the spirit of Rock ‘n’ Our Mission: To spread the spirit of Rock ‘n’ Roll by Roll by delivering an exceptional delivering an exceptional

entertainment and dining experienceentertainment and dining experience..

Arnold Palmer Hospital is a healing Arnold Palmer Hospital is a healing environment environment providing family-centered care providing family-centered care

with compassion, comfortwith compassion, comfort and respect… and respect… when it matters the most.when it matters the most.



Mission StatementsMission Statements

Create mission statements for any of the Create mission statements for any of the following:following:

- For a store providing breakfasts for clients. For a store providing breakfasts for clients.

- For a laundromatFor a laundromat

- For an auto repair shopFor an auto repair shop



Mission StatementsMission Statements

Create mission statements for any of the Create mission statements for any of the following:following:- delivering healthy and time-saving morning delivering healthy and time-saving morning food servicefood service. .

- providing providing access to high end laundry access to high end laundry equipments and servicesequipments and services at lowest price. at lowest price.

- providing trustworthy staff, services and providing trustworthy staff, services and solutions for solutions for retaining and restoring life span retaining and restoring life span and reliability of vehiclesand reliability of vehicles. .



Service Production Flows Service Production Flows Development/Factory ConceptDevelopment/Factory Concept

Create factory concept for your mission statement:Create factory concept for your mission statement:

Basic concept will consist of a list of activities and Basic concept will consist of a list of activities and where they will be done.where they will be done.


Get Get materialsmaterials TransportTransport ProcessProcess InspectInspect Assemble Assemble


Service Production Flow (1)Service Production Flow (1)[Single Staff][Single Staff]

Business Activity flow for Breakfast Factory [ I ]Business Activity flow for Breakfast Factory [ I ]

Get Get EggsEggs

EggsEggsIn potIn pot Boil Eggs in potBoil Eggs in pot

RemoveRemoveEggsEggs

AssembleAssembleon trayon tray

Prepare Prepare breadbread

Put in Put in toastertoaster

Make Make CoffeeCoffee

RemoveRemovetoasttoast


ToastToastwaitingwaiting

Prepare Prepare coffeecoffee

CoffeeCoffeewaitingwaiting

PourPourCoffeeCoffee


ToasterToaster

StartStart EndEnd

Sub-process 2Sub-process 2



Key Attributes of Process (I)Key Attributes of Process (I)-3 different flow units, I.e. eggs, coffee, toast3 different flow units, I.e. eggs, coffee, toast- 3 independent sub-processes, I.e. parallel sub-processes3 independent sub-processes, I.e. parallel sub-processes- standardized activity duration for each unitstandardized activity duration for each unit

Eggs waitingEggs waiting



Productivity & Other Measures of Production Flow (1)Productivity & Other Measures of Production Flow (1)[Single worker][Single worker]


Get Get EggsEggs











CoffeeCoffeewaitingwaiting



ToasterToaster

StartStart EndEnd




Which measures could be used to evaluate this process? Which measures could be used to evaluate this process? - Time from beginning to end of process [minutes] (input measure)- Time from beginning to end of process [minutes] (input measure)- Quality of items [hotness of coffee, hardness of eggs] (output measure)Quality of items [hotness of coffee, hardness of eggs] (output measure)- Max. number of eggs that can be boiled per batch or hour (productivity measure)Max. number of eggs that can be boiled per batch or hour (productivity measure)- Max number of toasts that can be made per hour or batch (productivity measure)Max number of toasts that can be made per hour or batch (productivity measure)- Max. volume of coffee that can be made per batch or hour (productivity measure)Max. volume of coffee that can be made per batch or hour (productivity measure)- Worker resources needed to make full plate [hours per plate] (productivity measure)Worker resources needed to make full plate [hours per plate] (productivity measure)

Eggs waitingEggs waiting



Redesigned of Production Flow (1)Redesigned of Production Flow (1)[Two workers][Two workers]


Get Get EggsEggs












ToasterToaster

StartStart Old Old EndEnd




Improvement of new process: Improvement of new process: - Time from beginning to end of process [minutes] (input measure) - Time from beginning to end of process [minutes] (input measure) CYCLE TIME HORTENEDCYCLE TIME HORTENED- Quality of items [hotness of coffee, hardness of eggs] (output measure) Quality of items [hotness of coffee, hardness of eggs] (output measure) WARMERWARMER- Max. number of eggs that can be boiled per batch or hour (productivity measure)Max. number of eggs that can be boiled per batch or hour (productivity measure)- Max number of toasts that can be made per hour or batch (productivity measure)Max number of toasts that can be made per hour or batch (productivity measure)- Max. volume of coffee that can be made per batch or hour (productivity measure)Max. volume of coffee that can be made per batch or hour (productivity measure)- Worker resources needed to make plate [hours per plate] (productivity measure) Worker resources needed to make plate [hours per plate] (productivity measure) HIGHERHIGHER

ProcessProcesspostponementpostponement

ProcessProcesspostponementpostponement

Worker 1Worker 1

New New EndEnd

Worker 2Worker 2

Worker 2Worker 2


Service Production Flow (2)Service Production Flow (2)

Load Load washerwasher Wash clothesWash clothes

RemoveRemoveclothesclothes TransferTransfer

Load Load dryerdryer


StartStart EndEnd

Business Activity flow for Laundromat [ II ]Business Activity flow for Laundromat [ II ]

Add Add soapsoap

Dry clothesDry clothes RemoveRemoveSub-process 2Sub-process 2


Key Attributes of Process (II)Key Attributes of Process (II)- single flow unit for all sub-processes, I.e. clothessingle flow unit for all sub-processes, I.e. clothes- 2 interdependent sub-processes, I.e. serial sub-processes2 interdependent sub-processes, I.e. serial sub-processes- standardized activity duration for each unitstandardized activity duration for each unit


Analysis of Production Flow (2)Analysis of Production Flow (2)





StartStart EndEnd


Add Add soapsoap



30 minutes30 minutes


Max. capacity 250 IbsMax. capacity 250 Ibs


Q.Q. If you have 300 Ibs of clothes to wash, how long will you need and why?If you have 300 Ibs of clothes to wash, how long will you need and why?Q. How would you redesign the process to shorten your wait time?Q. How would you redesign the process to shorten your wait time?


Bottleneck Types Bottleneck Types Production Flow (2)Production Flow (2)





StartStart EndEnd


Add Add soapsoap







Types of bottlenecks:Types of bottlenecks:- Volume capacityVolume capacity- Critical activityCritical activity- Longest activity or processing timeLongest activity or processing time


Service Production Flow (3)Service Production Flow (3)

Business Activity flow for Auto Repair Factory [ III ]Business Activity flow for Auto Repair Factory [ III ]

Get Get carcar

DocumDocument ent issuesissues PayPay

DiagnoseDiagnose Repair carRepair car TestTestWaitingWaitingfor partsfor parts

Request Request partsparts

StartStart EndEnd


Sub-process 1Sub-process 1Pre-Pre-

DiagnoseDiagnose Pick-upPick-up

Key Attributes of Process (III)Key Attributes of Process (III)- same flow units through all sub-processes, I.e. clothessame flow units through all sub-processes, I.e. clothes- 2 interdependent sub-processes, I.e. serial sub-processes2 interdependent sub-processes, I.e. serial sub-processes- irregular/unique activities and different durations for each unit possibleirregular/unique activities and different durations for each unit possible


Key LessonsKey Lessons

1.1. There are different types of processesThere are different types of processes

2.2. Process can be redesigned by exploiting Process can be redesigned by exploiting trade-offstrade-offs

- More staff to raise number of units producedMore staff to raise number of units produced

- Larger machine capacity to reduce waiting time Larger machine capacity to reduce waiting time and improve produced unitsand improve produced units

- Eliminate waiting, errors and reworkEliminate waiting, errors and rework

- Reduce inventory on-handReduce inventory on-hand

- Combine activities Combine activities

- Run activities in parallelRun activities in parallel



Process Design TypesProcess Design Types

LowLow ModerateModerate HighHighVolumeVolume

HighHigh

ModerateModerate

LowLow

Var

iety

of

Pro

du

cts

Var

iety

of

Pro

du

cts

Process-focusedJOB SHOPS

(Print shop, emergency room, machine shop,

fine dining Repetitive (modular) focus

ASSEMBLY LINE(Cars, appliances,

TVs, fast-food restaurants) Product focused

CONTINUOUS(steel, beer, paper, bread, institutional

kitchen)

Mass CustomizationCustomization at high

Volume(Dell Computer’s PC)


Strategic ProcessStrategic Process

Marketing Operations Finance/ Accounting

Functional Area Missions

Organization’s Mission


OM’s Contribution to StrategyOM’s Contribution to Strategy

Product

Quality

Process

Location

Layout

Human resource

Supply-chain

Inventory

Scheduling

Maintenance

FLEXIBILITYSony’s constant innovation of new products………………………………....Design HP’s ability to follow the printer market………………………………Volume

Southwest Airlines No-frills service……..…..LOW COST

DELIVERY Pizza Hut’s five-minute guarantee at lunchtime…………………..…..……..Speed Federal Express’s “absolutely, positively on time”………………………..….Dependability

QUALITY Motorola’s automotive products ignition systems…………………………......Conformance Motorola’s pagers………………………..….Performance

IBM’s after-sale service on mainframe computers……....AFTER-SALE SERVICE

Fidelity Security’s broad line of mutual funds………….BROAD PRODUCT LINE


OperationsOperations SpecificSpecific CompetitiveCompetitiveDecisionsDecisions ExamplesExamples Strategy UsedStrategy Used AdvantageAdvantage

Response(Faster)

Cost leadership(Cheaper)

Differentiation(Better)


Strategy Development ProcessStrategy Development Process

Determine Corporate MissionState the reason for the firm’s existence and identify the

value it wishes to create.

Form a StrategyBuild a competitive advantage, such as low price, design, or

volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines.

Environmental AnalysisIdentify the strengths, weaknesses, opportunities, and threats.

Understand the environment, customers, industry, and competitors.


© 2006 prentice hall, inc.2 – 1 operations management chapter 2 – fundamentals of operations...

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