Chapter 7
Managing
Operations and
Improving Quality
“There are many
ways of going
forward, but only
one way of standing
still.”
—
Franklin D. Roosevelt
PowerPoint Presentation by Charlie Cook
Copyright © 2005 Prentice Hall, Inc.
All rights reserved.
Key Topics
• Operations and Utility Creation
• Service operations vs. goods production
• Operations planning
• The supply chain strategy
• Quality management
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7–2
The Management Process
• Planning – What are we going to do?
• Organizing – How are we going to do it?
• Directing – Get it done!
• Controlling – How well did we do?
• Operations touches on all areas, especially the
middle two.
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7–3
Organization Chart with Operations
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7–4
As of May 2005
What should operations do?
Operations oversees the processes that transform
resources (inputs) into services and goods (outputs)
that create value & benefits (utility) for customers.
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7–5
Operations Create Utility to Satisfy
Form
Time
Place
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7–6
What shouldn’t Operations do?
Operations managers should eliminate nonessential processes which do not add utility for the
customer.
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7–7
Key Topics
• Operations and Utility Creation
• Service operations vs. goods production
• Operations planning
• Total quality management tools
• The supply chain strategy
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7–8
Defining Operations
• Service:
 Performing tangible and
intangible services.
 High contact
 Low contact
• Goods Production:
 Producing tangible
products.
 Analytic (break down)
 Synthetic (build up)
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7–9
Services in depth
• Focus on:
 Performance vs production
 Process and outcome both involve customer
 Service characteristics
 Intangible,
Customized, Unstorable
 Customer-service link
 The
customer is more a part of the process
 Service quality considerations
 What
else is important to the customer?
 Modern day feedback
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7–10
Growth in the Goods and Services
Sectors
Millions of Workers
100
Services
80
60
40
20
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2000
1998
1996
1994
1992
1990
1988
1986
1984
Goods Production
7–11
What’s Had The Biggest Effect on
Productivity?
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7–12
Integration of Global Operations & the
Effect on Production
•
•
•
•
Technology has pushed operations
to become better and faster
globally.
The internet has integrated
production with global
suppliers and customers.
As technology further evolves,
fewer services are naturally
protected.
Bonus: If you can figure out how to
build a strength, you can capture
the world.
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
7–13
Key Topics
• Operations and Utility Creation
• Service operations vs. goods production
• Operations planning
• Total quality management tools
• The supply chain strategy
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
7–14
Resource Transformation Process
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Figure 7–1
7–15
Operations
Planning
and Control
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Figure 7–2
7–17
Operations Planning Topics
Capacity
Location
Quality
Layout

Process
 Product
 Cellular
Methods
(Processes)
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7–18
Methods Planning: Process Flow Chart
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7–19
Operations Scheduling
• Gantt chart
• Pert chart
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7–21
Gantt Charting Demonstration
• Identify the activity to be planned
• Set a deadline & time scale (hours, days, months, etc.)
• Identify steps needed to complete the task
 Use scratch paper first!
• Identify time needed for each step
• Is the schedule RUMBA?
 Reasonable? Understandable? Measurable? Believable? Achievable?
• THEN build the Gantt chart
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7–22
Gantt Charting Activity
• Pick a business task of moderate complexity (>5 steps).
• Set a deadline & time scale (hours, days, months, etc.)
• Identify steps needed to complete the task
 Use scratch paper first!
• Identify time needed for each step
• Is your schedule RUMBA?
 Reasonable? Understandable? Measurable? Believable? Achievable?
• THEN fill in chart
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7–23
Gantt Charting Activity – Controlling
• Is your schedule Reasonable? Achievable?
Measurable?
• Where do you need the most follow-up
attention?
 Think: Where will a slow down cause a deliverable
delay?
• How will you manage a crisis?
• What are your contingency plans?
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7–24
PERT Chart Project Scheduling
: A delay here delays the final project deliverable.
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Figure 7–5
7–25
Gantt Chart
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Figure 7–4
7–26
Managing Several Projects with Gant
Charts:
• Master Chart
• Subsidiary Charts
Gantt Chart for:_Director of facilities_______________________________________________________________________
Event Stage
Time Series April April April April
May
May
May
May
June June
Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 W
1
Open New warehouse
2
Refurbish forklifts
3
Hire 25 new workers
4
Redecorate Classroom
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7–27
Operations Planning Topics
Capacity
Location
Quality
Layout

Process
 Product
 Cellular
Methods
(Processes)
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7–30
Quality Management:
Ensuring quality throughout the business
• Total Quality
Management
Start with customers
Quality: The
combination of
characteristics of a
product or service that
bear on its ability to
satisfy stated or implied
needs.
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Team approach
Measurement
Continual
improvement
7–32
Tools for Total Quality Management
Quality
improvement
teams
Getting Close
to the
Customer
Value-Added
Analysis
Process
improvement
vs
Reengineering
Statistical
Process
Control
ISO
Certification
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7–33
Process Improvement Management using TQM
• Process:
 Delegated control
 Focus on determinants of
goal - processes
 Constant improvement
100%
Usable Production
Usable Production
• Results:
 Top down control
 → Focus at end
 “J” curve
90%
80%
70%
60%
0
1
2
3
Time in Quarters
4
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100%
90%
80%
70%
60%
0
1
2
3
Time in Quarters
4
7–34
Process Control Chart at Honey Nuggets
Cereal
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Figure 7–6
7–35
What can you tell about this firm?
Number of shipping errorss
Shipping Errors
15
10
5
0
-5
-10
29-Dec
8-Jan
18-Jan
28-Jan
7-Feb
17-Feb
27-Feb
9-Mar
Day of the month
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7–36
Expanding scope of management
Supply Chain Management
Managing the supply chain as a whole to maximize
customer value and reduce waste.
Value Chain Management
All factors related to the value received
by the customer.
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7–37
Supply Chain for Baked Goods
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Figure 7–7
7–38
Process Management Diversion
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7–39
Chapter Review
•
Explain “operations” and the utility that operations
processes provide.
•
Distinguish service operations from goods
production.
•
Describe the five decision areas involved in
operations planning.
•
Identify the key tools for total quality management.
•
Explain supply chain management.
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7–40