Production
Management and
Distribution
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Chapter 16
Production Management and Distribution
Production Management
and Distribution
16.1
From Idea to Product
16.2
Production and Distribution
2
Production Management and Distribution
16.1
Discuss how entrepreneurs develop new
products.
Explain the product development process.
Section 16.1 From Idea to Product
3
Production Management and Distribution
16.1
Entrepreneurs work with limited resources, so
they must find creative ways to develop and
manufacture their products, such as outsourcing.
Product development is a repetitive process based
on feedback from customers who test the product.
Section 16.1 From Idea to Product
4
Production Management and Distribution
16.1
product development
outsourcing
prototype
Section 16.1 From Idea to Product
5
Production Management and Distribution
Product Development for
Entrepreneurs
The transformation from idea to marketable product
is a lengthy process.
Entrepreneurs must learn how to develop new
products with limited resources.
Section 16.1 From Idea to Product
6
Production Management and Distribution
What Is Product
Development?
Some people consider
product development to
be the riskiest part of
start-up of a new small
business.
Section 16.1 From Idea to Product
product development
the process of creating
new or improved
products, involving taking
an idea for a product,
designing it, building a
model, and testing it
7
Production Management and Distribution
Outsourcing Product
Development
No matter what they are
producing, entrepreneurs
can use outsourcing to
reduce the cost of product
development.
Section 16.1 From Idea to Product
outsourcing hiring
people and other
companies to handle
tasks a business can
not do or chooses not to
do itself
8
Production Management and Distribution
The Product Development
Process
The four steps of product development are:
1.
2.
3.
4.
opportunity recognition
concept investigation
product design
prototype building and testing
Section 16.1 From Idea to Product
9
Production Management and Distribution
The Product Development
Process
Product development is not a linear process.
An entrepreneur may start developing a product
and along the way discover something new that
changes the direction of development.
Section 16.1 From Idea to Product
10
Production Management and Distribution
The Product Development
Process
A prototype may not look
like the final product, but
should work like the final
product.
Section 16.1 From Idea to Product
prototype a working
model of a product
11
Production Management and Distribution
Designing It Right the
First Time
There are three good reasons for designing a
product right the first time:
1. the cost of the design
2. the quality and marketability of the product
3. the time to launch
Section 16.1 From Idea to Product
12
Production Management and Distribution
16.1
1. Discuss how entrepreneurs develop new
products.
Once entrepreneurs recognize an opportunity for a product, they
study the market to make certain there is sufficient demand. They
design the product on paper or on a computer, incorporating the
needs and wants of potential customers and including input from
the people involved in marketing, producing, and financing the
product. They build a prototype to test the product with customers.
Section 16.1 From Idea to Product
13
Production Management and Distribution
16.1
2. Explain the product development process.
Product development is not a linear process. Although it
appears to move forward in a step-by-step manner, it is
really a repetitive process. An entrepreneur may start
developing a product and along the way discover
something new that changes the direction of development.
Section 16.1 From Idea to Product
14
Production Management and Distribution
16.2
Explain what is involved in production
management.
Describe the activities that are part of
distribution management.
Section 16.2 Production and Distribution
15
Production Management and Distribution
16.2
Coming up with an idea for a product or service is
only a small part of creating a successful
business—you have to turn that idea into reality.
Production and distribution are two ways
entrepreneurs bring new products to market.
Section 16.2 Production and Distribution
16
Production Management and Distribution
16.2
Gantt chart
PERT diagram
quality control
quality circle
productivity
automation
Section 16.2 Production and Distribution
logistics
common carrier
contract carrier
private carrier
freight on board (FOB)
17
Production Management and Distribution
Production Management
Once you have developed a prototype, you are
ready to plan production.
Section 16.2 Production and Distribution
18
Production Management and Distribution
Production Management
Production management involves three functions:
1. Acquiring the resources needed to create
a product.
2. Planning how to convert those resources
into products.
3. Making sure the products meet the
standards set for them.
Section 16.2 Production and Distribution
19
Production Management
Scheduling
Maintenance
Areas of
Production
Management
Automation
Section 16.2 Production and Distribution
Quality
Control
Productivity
20
Production Management and Distribution
Scheduling
Businesses plan their production by making
schedules.
These schedules describe each activity that
must be completed to produce goods or
services.
Section 16.2 Production and Distribution
21
Production Management and Distribution
Scheduling
A Gantt chart is an
effective way to depict basic
information about a project.
Section 16.2 Production and Distribution
Gannt chart a graphic
schedule of a project’s
phases, activities, and
tasks plotted against a
time line
22
Production Management and Distribution
Scheduling
The longest path through a
PERT diagram, the critical
path, dictates the length of
time needed to complete a
project.
Section 16.2 Production and Distribution
PERT diagram a project
schedule that is arranged
in a diagram used for
scheduling complex
projects
23
Production Management and Distribution
Controlling Quality
Quality control takes time
and costs money, but it is a
way to ensure customer
satisfaction.
Section 16.2 Production and Distribution
quality control the
process of making sure
the goods or services a
business produces meet
certain standards, such
as appearance,
performance, and
consistency
24
Production Management and Distribution
Controlling Quality
A quality circle is an
effective way of improving
quality because it requires
employees to be
responsible for their work.
Section 16.2 Production and Distribution
quality circle a small
group of employees who
do similar jobs and meet
regularly to identify ways
to improve the quality of
what they do
25
Production Management and Distribution
Managing Other Areas of
Production
Businesses use
productivity rates to
measure and improve
performance.
productivity a measure
of how much a business
produces in a given time,
or the output of each
worker per unit of time
Automation can cut
production time, reduce
errors, and simplify
procedures.
automation the use of
machines to do the work
of people
Section 16.2 Production and Distribution
26
Production Management and Distribution
Distribution Management
Distribution management includes:
transportation
shipping and receiving
storage and warehousing
materials handling
delivery terms
Section 16.2 Production and Distribution
27
Production Management and Distribution
Transportation
Logistics involves figuring
out how to move a product
from the producer to the
customer.
Section 16.2 Production and Distribution
logistics the planning,
execution, and control of
the movement and
placement of people
and/or goods
28
Production Management and Distribution
Transportation
A common carrier is hired
by businesses to transport
products.
Section 16.2 Production and Distribution
common carrier a
firm that provides
transportation services
at uniform rates to the
general public
29
Production Management and Distribution
Transportation
A railroad is a contract
carrier.
Section 16.2 Production and Distribution
contract carrier a
shipping company that
transports freight under
contract with one or
more shippers
30
Production Management and Distribution
Transportation
A private carrier is a
privately owned and
operated delivery vehicle.
Section 16.2 Production and Distribution
private carrier a
business that operates
vehicles primarily for
the purpose of
transporting its own
products and materials
31
Production Management and Distribution
Delivery Terms
The most favorable delivery
term for a small business is
free on board (FOB).
Section 16.2 Production and Distribution
free on board (FOB)
a delivery term that
designates a shipment
as delivered for no
additional charge to a
buyer
32
Production Management and Distribution
16.2
1. Explain what is involved in production
management.
Production management has three functions:
acquiring the resources needed to create a
product, planning how to convert those
resources into products, and making sure the
products meet set standards.
Section 16.2 Production and Distribution
33
Production Management and Distribution
16.2
2. Describe the activities that are part of
distribution management.
Distribution management includes transportation,
shipping and receiving, storage and warehousing,
materials handling, and specification of delivery
terms. It controls the movement of a product from the
manufacturer to customers.
Section 16.2 Production and Distribution
34
Production Management and Distribution
Distribution in
E-Commerce
In e-commerce, as in other types of businesses, one of the
most important functions is delivering the right product or
service in the right place at the right time.
E-commerce channels, intermediaries, and cybermediaries
are all vital parts of electronic distribution.
Section 16.2 Production and Distribution
35
Production Management and Distribution
Tech Terms
cybermediary
a business that acts as a broker or agent to facilitate transactions over
the Internet
disintermediation
the removal of intermediaries, such as wholesalers or retailers, from
business transactions between producers and consumers
Section 16.2 Production and Distribution
36
Production Management and Distribution
Tech Terms
intermediary
a business that is involved in the process of moving a product from the
manufacturer to a customer or user
Web affiliate
a company that aims to drive targeted traffic to a Web site, usually an
e-commerce merchant, usually for a commission for the sales they
generate on the merchant site
Section 16.2 Production and Distribution
37
End of
Production
Management and
Distribution
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