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Production
andOperations
Management
Chapter 09
McGraw-Hill/Irwin Copyri ght 2013 by The McGraw-H il l Companies, Inc. Al l r ights reserved.
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1. Describe the current state of U.S. manufacturingand what manufacturers have done to becomemore competitive.
2. Describe the evolution from production tooperations management.
3. Identify various production processes and describe
techniques that improve productivity, includingcomputer-aided design and manufacturing, flexiblemanufacturing, lean manufacturing and masscustomization.
LEARNING GOALSChapter Nine
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4. Describe operations management planning issuesincluding facility location, facility layout, materials
requirement planning, purchasing, just-in-timeinventory control and quality control.
5. Explain the use of PERT and Gantt charts to
control manufacturing processes.
LEARNING GOALSChapter Nine
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Profile
Palmisano, CEO and President of IBM, started inthe company in 1973.
The companys earnings have quadrupled underPalmisano.
SAMUEL J. PALMISANOIBM
Switching the companys
focus from production toservice, Palmisano ledIBM to enter the emergingglobal market.
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This companys robots manufacture, test, andpackage motor starters - all untouched by
human hands. The machines can fill specialorders, even for a single item, without slowingdown the process.
Name that company!
NAME that COMPANYChapter Nine
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Manufacturing
and Services in
Perspective
The U.S. is still the worlds leadingmanufacturer.
Manufacturing has continued to grow since1970. In fact, U.S. manufacturing is 2x biggerthan in 1970.
MANUFACTURING in the U.S.
Almost 25% of all
goods produced eachyear come from theU.S.
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Source: Parade Magazine, www.parade.com, accessed June 2011.
WHATS MADE in the USA?Leading U.S. Manufactured GoodsLG1
Manufacturing
and Services in
Perspective
Products Value Number of Employees
ChemicalsPharmaceuticals,cosmetics, soaps, paints, fertilizers
$250 Billion 830,000 Americans
Transportation EquipmentCars, planes, trains, ships
$195 Billion Over 1.4 MillionAmericans
Processed Foods, Beveragesand TobaccoCookies, coffee,cigarettes, prepared meals
$175 Billion 1.7 Million Americans
Computers and Electronics
Computers and communicationequipment
$146 Billion 1.2 Million Americans
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Source: CNBC, www.cnbc.com, accessed June 2011.
Exporters ExtraordinaireTop Ten States that Manufacture Goods for ExportLG1
Manufacturing
and Services in
Perspective
Rank State Amount Exported
1 California $142.61 billion
2 Texas $130.66 billion
3 New York $72.58 billion
4 Michigan $67.94 billion
5 Washington $61.99 billion
6 Illinois $57.92 billion
7 Ohio $42.59 billion
8 Florida $41.58 billion
9 New Jersey $36.77 billion
10 Pennsylvania $34.57 billion
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Source: Industry Week, www.industryweek.com, accessed June 2011.
MASSIVE MANUFACTURERSThe Top Ten U.S. ManufacturersLG1
Manufacturing
and Services in
Perspective
Rank Company Industry
1 Exxon Mobil Petroleum and Coal
2 Chevron Petroleum and Coal
3 General Electric Electrical Equipment and Appliances4 ConocoPhillips Petroleum and Coal
5 Ford Motor Company Automobiles
6 Hewlett-Packard Computers
7 IBM Computers
8 Procter & Gamble Chemicals
9 Archer-Daniels-Midland Food
10 Boeing Aerospace
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The market for new green products and servicesis almost endless.
Given the rate of population growth, it
simportant to plan ahead for a world with limitedresources.
Companies like DuPont, Michelin, Chevronand
Nokiaare working on sustainability projects.
Procter & Gambleand Kaiser Permanenteissuetheir own mandatory sustainability scorecards to
their supply chains.
KEY WORD:SUSTAINABILITY
(Thinking Green)
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The U.S. economy is no longer manufacturingbased.
85% of jobs are in the service sector. The top-paying service jobs in the U.S. are in:
- Legal services
- Medical services
- Entertainment
- Accounting
- Finance
- Management consulting
TOP-PAYING SERVICE JOBSLG1
Manufacturing
and Services in
Perspective
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Manufacturers
and Service
Organizations
Become More
Competitive
U.S. is still the leader in nanotechnology andbiotechnology.
How can U.S. businesses maintain a competitiveedge?
- Focusing on customers
- Maintaining close relationships with suppliers
- Practicing continuous improvement
- Focusing on quality
- Saving on costs through site selection
- Relying on the Internet to unite companies
- Adopting new production techniques
REMAINING COMPETITIVE inGLOBAL MARKETSLG1
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Ten years ago, Germanys economy was muchlike ours today.
Stihlinvested in highly trained workers.
LEARNING from GERMANY(Reaching Beyond Our Borders)
Stihl remained competitivein the manufacturingworld.
German companiespoured money intoresearch and stayed awayfrom high tech products.
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From Production
to Operations
Management
Production -- The creation of goods using land,labor, capital, entrepreneurship and knowledge (the
factors of production).
PRODUCTION andPRODUCTION MANAGEMENT
ProductionManagement --All theactivities managers do to
help firms create goods.
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Operations Management --A specialized area inmanagement that converts or transforms resources
into goods and services.
Operations management includes:
- Inventory management
- Quality control- Production scheduling
- Follow-up services
OPERATIONS MANAGEMENTLG2
From Production
to Operations
Management
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All about creating a good experience for thosewho use the service.
OPERATIONS MANAGEMENTin the SERVICE SECTORLG2
Operations
Management in
the Service Sector
In hotels, like Ritz-Carlton, operationmanagementincludes fine dining,fresh flowers, andtraining for everyemployee.
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Source: Entrepreneur, February 2011.
THERES an APP for THATTop Productivity Apps for iPadLG2
App What it Does Price
Dropbox Syncs and backs up files Free
ServiceMax
Helps field employees with data
management Free
KeynoteUse to create and show slide
presentations$9.99
Penultimate Note taking made easier $3.99
ZigZag Board An easy-to-carry whiteboard $4.99
Operations
Management in
the Service Sector
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Progress
Assessment
What have U.S. manufacturers done to regain acompetitive edge?
What must U.S. companies do to continue tostrengthen the countrys manufacturing base?
What led companies to focus on operationsmanagement rather than production?
PROGRESS ASSESSMENT
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Production
Processes The PRODUCTION PROCESSLG3
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Form Utility -- The
value producers addto materials in the
creation of finished
goods and services.
FORM UTILITY
LG3
Production
Processes
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1. To build and deliver products in response to thedemands of the customer at the scheduled
delivery time.
2. To provide an acceptable quality level.
3. To provide everything at the lowest possiblecost.
GROVES BASIC PRODUCTIONREQUIREMENTS
LG3
Production
Processes
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ProcessManufacturing -- Thepart of production that
physically or chemically
changes materials.
Assembly Process --
The part of theproduction process that
puts together
components.
PROCESS and ASSEMBLY inPRODUCTIONLG3
Production
Processes
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Production processes are either continuous orintermittent.
Continuous Process -- Long production runs turn
out finished goods over time.
Intermittent Process -- Production runs are shortand the producer adjusts machines frequently tomake different products.
KEY PRODUCTION PROCESSESLG3
Production
Processes
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MINUTE MADEProduction of Some of Americas Favorite ProductsLG3
Production
Processes
ProductNumber of ItemsMade in a Minute
Krispy Kreme Doughnuts 5,208
Chips Ahoy! Cookies 4,000
Twinkies 972
Jello Boxes 764
LifeSavers 100 rolls
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The Need to
Improve Production
Techniques and
Cut Costs
DEVELOPMENTS MAKING U.S.COMPANIES MORE COMPETITIVE
1. Computer-aided designand manufacturing
2. Flexible manufacturing
3. Lean manufacturing
4. Mass customization
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Computer-Aided
Design and
ManufacturingCOMPUTER-AIDED DESIGN and
MANUFACTURING
Computer-Aided Design(CAD) -- The use of
computers in the design ofproducts.
Computer-Aided
Manufacturing (CAM) --The use of computers in themanufacturing of products.
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Flexible
Manufacturing FLEXIBLE MANUFACTURING
Flexible Manufacturing -- Designing machines todo multiple tasks so they can produce a variety of
products.
Allen-Bradleyuses flexible manufacturing to buildmotor starters.
26 machines and robots build, test and packageparts.
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Mass
Customization MASS CUSTOMIZATION
Mass Customization -- Tailoring products to meetthe needs of a large number of individual customers.
LG3
More manufacturers arelearning to customize.
Mass customization
exists in the servicesector too.
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MASS CUSTOMIZATIONof CANDY
(Spotlight on Small Business)
Chocomizelets customers customize theirchocolate bars.
Co-founder, Eric Heinbockel, sought funding helpfrom his family.
Chocomize now has three full-time chocolatemakers and is expected to be a success.
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Progress
Assessment
Whats form utility?
Define and differentiate the following: processmanufacturing, assembly process, continuousprocess and intermittent process.
What do you call the integration of CAD andCAM?
Whats mass customization?
PROGRESS ASSESSMENT
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Operations
Management
Planning
Operations management planning helps solveproblems like:
- Facility location- Facility layout
- Materials requirement planning
- Purchasing
- Inventory control
- Quality control
OPERATIONS MANAGEMENTLG4
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Facility
Location
Facility Location --The process of
selecting a geographiclocation for a
companys operations.
FACILITY LOCATION
Rising numbers of Internet businesses meansbrick-and-mortar retailers must find greatlocations.
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Potential of low-cost labor is very attractive tocompanies hoping to remain competitive.
However, shuttering operations and moving canoften cause severe economic problems independent areas.
What would you do if you were the CEO ofChildrenWear Industries faced with this problem?
STAY or LEAVE(Making Ethical Decisions)
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Taking
Operations
Management to
the Internet
Sometimes businesses outsource engineering,design and manufacturing to other companies.
Often these relationships are managed throughthe Internet.
Many companies are developing Internet-focused
strategies.
OPERATIONS MANAGEMENTon the INTERNETLG4
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Facility Location
in the Future
Information technology gives firms increasedflexibility in terms of location.
Telecommuting -- Working from home viacomputer.
FUTURE FACILITY LOCATIONLG4
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Facility Layout
Facility Layout -- The physical arrangement ofresources, including people, to most efficiently
produce goods and provide services.
Facility layout depends on the processesperformed:
- Service: Help customers find products- Manufacturing: Improve efficiency
SETTING UP the FACILITYLG4
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1. Assembly Line LayoutWorkers do only a fewtasks at a time.
2. Modular LayoutTeams of workers produce morecomplex units of the final product.
3. Fixed-Position LayoutAllows workers to
congregate around the product.
4. Process LayoutSimilar equipment and functionsare grouped together.
FACILITY LAYOUT OPTIONSLG4
Facility Layout
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ASSEMBLY LINE LAYOUTLG4
Facility Layout
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MODULAR LAYOUTLG4
Facility Layout
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PROCESS LAYOUTLG4
Facility Layout
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FIXED-POSITION LAYOUTLG4
Facility Layout
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Materials
Requirement
Planning
Materials Requirement Planning (MRP) --Acomputer-based operations management system that
uses sales forecasts to make sure parts and
materials are available when needed.
Enterprise Resource Planning (ERP) --A newerversion of MRP, combines computerized functions
into a single integrated software program using asingle database.
MRP and ERPLG4
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Purchasing
Purchasing -- The functionthat searches for high-quality
material resources, finds the
best suppliers and negotiatesthe best price for goods and
services.
The Internet hastransformed purchasing.
PURCHASINGLG4
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Just-in-Time
Inventory Control
Just-in-Time (JIT) Inventory Control -- Theproduction process in which a minimum of inventory
is kept and parts, supplies and other needs aredelivered just in time to go on the assembly line.
To work effectively, the process requires excellent
coordination with suppliers.
INVENTORY CONTROLLG4
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The Baldrige
Awards
Companies can apply for awards in these areas:
- Manufacturing
- Services- Small Businesses
- Non-Profit/Government
- Education- Healthcare
The BALDRIGE AWARDSLG4
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Source: National Institute of Standards and Technology, www.quality.nist.gov, accessed June 2011.
THE WINNERS ARE2010 Baldrige Award RecipientsLG4
The Baldrige
Awards
Company Category Where from?
MEDRAD Manufacturing Warrendale, PA
Nestl Purina PetCare Manufacturing St. Louis, MO
Freese and Nichols Small Business Ft. Worth, TXK & N Management Small Business Austin, TX
Studer Group Small Business Gulf Breeze, FL
Advocate GoodSamaritan Hospital
Healthcare Downers Grove, IL
Montgomery CountyPublic Schools
Education Rockville, MD
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ISO 9000 and
ISO 14000
Standards
The International Organization for Standardization(ISO) is a worldwide federation of nationalstandards bodies.
ISO 9000 -- The common name given to qualitymanagement and assurance standards.
ISO 14000 --A collection of the best practices formanaging an organizations impact on theenvironment.
WHAT is ISO?LG4
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Progress
Assessment
What are the major criteria for facility location?
What
s the difference between MRP and ERP?
Whats just-in-time inventory control?
What are Six Sigma quality, the Baldrige Award,ISO 9000 and ISO 14000?
PROGRESS ASSESSMENT
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Control
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Control
Procedures:
PERT and Gantt
Charts
Program Evaluation and Review Technique(PERT) --A method for analyzing the tasks involved
in completing a given project and estimating the timeneeded.
PERTLG5
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Control
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1. Analyzing and sequencing tasks
2. Estimating the time needed to complete eachtask
3. Drawing a PERT network illustrating the first twosteps
4. Identifying the critical path
Critical Path -- The sequence of tasks thattakes the longest time to complete.
STEPS INVOLVED in PERTLG5
Control
Procedures:
PERT and Gantt
Charts
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Control
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PERT CHART for a MUSIC VIDEOLG5
Control
Procedures:
PERT and Gantt
Charts
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Control
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Gantt ChartA bar graph that shows what projectsare being worked on and how much has been
completed.
GANTT CHARTSLG5
Procedures:
PERT and Gantt
Charts
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Progress
Assessment
Draw a PERT chart for making breakfast of three-minute eggs, buttered toast and coffee. Define
the critical path.
How could you use a Gantt chart to keep track ofproduction?
PROGRESS ASSESSMENT