© Prentice Hall, 2005
1-1
Objectives
1. Definitions of production, productivity, and quality
2. An understanding of the importance of operations and production strategies,
systems, and processes
3. Insights into the role of operations management concepts in the workplace
4. An understanding of how operations control procedures can be used to
control production
5. Insights into operations control tools and how they evolve into a continual
improvement approach to production management and control
© Prentice Hall, 2005
1-2
Production
 Defining
Production
 Productivity
Productivity = Outputs / Inputs
Traditional strategies for increasing productivity by improving :
1. Effectiveness of the organizational workforce through training
2. Production process through automation
3. Product design to make products easier to assemble
4. Production facility by purchasing more modern equipment
5. Quality of workers hired to fill open positions
© Prentice Hall, 2005
1-3
Production
 Quality
and Productivity
 Focus
on Continual Improvement
 Focus
on Quality and Integrated Operations
 Quality Assurance
Statistical Quality Control
 “No Rejects” Philosophy

 Quality
Circles
 Automation
 Strategies,
© Prentice Hall, 2005
Systems, and Processes
1-4
Production
© Prentice Hall, 2005
1-5
Production
© Prentice Hall, 2005
1-6
Operations Management
 Defining
Operations Management
Performance of managerial activities entailed in:
Selecting
Designing
Operating
Controlling
Updating production systems
© Prentice Hall, 2005
1-7
Operations Management
© Prentice Hall, 2005
1-8
Operations Management
 Operations
 Involves
 Takes
Management Considerations
managers
place within the context of objectives and policies
 Standards
© Prentice Hall, 2005
for effectiveness and efficiency
1-9
Operations Management
 Operations
 Capacity

Management Considerations (continued)
Strategy
Five Steps in Capacity Decisions
1. Measure the capacity of currently available facilities
2. Estimate future capacity needs on the basis of demand forecasts
3. Compare future capacity needs and available capacity
4. Identify ways to accommodate long-range capacity changes
5. Select best alternative based on quantitative and qualitative evaluation
© Prentice Hall, 2005
1 - 10
Operations Management
 Operations
 Location

Management Considerations (continued)
Strategy
Factors in a Good Location
© Prentice Hall, 2005

Nearness to market and distribution centers

Nearness to vendors and resources

Requirements of federal, state, and local governments

The character of direct competition

The degree of interaction with the rest of the corporation

The quality and quantity of labor pools

The environmental attractiveness of the area

Taxes and financing requirements

Existing and potential transportation

The quality of utilities and services
1 - 11
Operations Management
 Operations
Management Considerations (continued)
 Product
Strategy
 Process
Strategy

Types of Processes
1) Continuous process
2) Repetitive process
3) Job-shop process
 Layout
Strategy
1. Product layout
2. Process (functional) layout
3. Fixed-position layout
© Prentice Hall, 2005
1 - 12
Operations Management
© Prentice Hall, 2005
1 - 13
Operations Management
 Operations
 Human
Management Considerations (continued)
Resources Strategy
Human resource imperatives:
1. Optimize individual, group, and organizational effectiveness
2. Enhance the quality of organizational life

Operational Tools in Human Resources Strategy
© Prentice Hall, 2005

Manpower planning

Job design

Work methods analysis

Motion-study techniques

Work measurement methods
1 - 14
Operations Control
 Just-in-Time
Inventory Control
Just-in-time (JIT)
 Best
Conditions for JIT
 Advantages
of JIT
 Characteristics
of JIT
1. Closeness of suppliers
2. High quality of materials purchased from suppliers
3. Well-organized receiving and handling of materials purchased
4. Strong management commitment
© Prentice Hall, 2005
1 - 15
Operations Control
 Maintenance
Control
Pure-preventive maintenance policy
Pure-breakdown (repair) policy
 Cost
Control
 Stages
in Cost Control
1. Establishing standard or planned cost amounts
2. Measuring actual costs incurred
3. Comparing planned costs to incurred costs
4. Making changes to reduce actual costs to planned costs
© Prentice Hall, 2005
1 - 16
Operations Control
 Budgetary
 Potential
Control
Pitfalls of Budgets
1. Placing too much emphasis on relatively insignificant expenses
2. Increasing budgeted expenses without adequate information
3. Ignoring the fact that budgets must be changed periodically
 Human
Relations Considerations in Using Budgets
 Reducing
© Prentice Hall, 2005
Human Relations Problems
1 - 17
Operations Control
 Ratio Analysis
1. Liquidity ratios
2. Leverage ratios
3. Activity ratios
4. Profitability ratios
 Using
Ratios to Control Organizations
Evaluate all ratios simultaneously
 Compare computed values with industry averages
 Incorporate trend analysis

 Materials
Control
 Procurement
of Materials
 Receiving, Shipping, and Trafficking
 Inventory and Shop-Floor Control
© Prentice Hall, 2005
1 - 18
Operations Control
© Prentice Hall, 2005
1 - 19
Selected Operations Control Tools
 Using
Control Tools to Control Organizations
 Inspection
 To
Inspect or Not to Inspect
 Management
by Exception
 Establishing
 Management
© Prentice Hall, 2005
Rules
by Objectives
1 - 20
Selected Operations Control Tools
 Break-Even Analysis
 Basic
Ingredients of Break-Even Analysis
1. Fixed costs
2. Variable costs
3. Total costs
4. Total revenue
5. Profits
6. Loss
7. Break-even point
© Prentice Hall, 2005
1 - 21
Selected Operations Control Tools
 Break-Even Analysis
 Types

(continued)
of Break-Even Analysis
Algebraic Break-Even Analysis
BE = FC / ( P - VC )

Graphic Break-Even Analysis

Advantages of Using the Algebraic and Graphic Break-Even Methods
 Control
© Prentice Hall, 2005
and Break-Even Analysis
1 - 22
Selected Operations Control Tools
© Prentice Hall, 2005
1 - 23
Selected Operations Control Tools
© Prentice Hall, 2005
1 - 24
Selected Operations Control Tools
 Other
Broad Operations Control Tools
 Decision Tree Analysis
 Process
Control
 Value Analysis
 Computer-Aided
Design
 Computer-Aided
Manufacturing
© Prentice Hall, 2005
1 - 25
Questions
© Prentice Hall, 2005
1 - 26