Operations
Management
Chapter 2 –
Fundamentals of Operations
Heizer/Render
Operations Management, 8e
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Prentice
Hall, Inc. Hall, Inc.
©
2006
Prentice
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Learning Objectives
When you complete this chapter, you
should be able to:
Describe or Explain:
 Specific approaches used by OM
to achieve strategies
 Differentiation
 Low cost
 Response
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Global Strategies
 Boeing – sales and production are
worldwide
 Benetton – moves inventory to stores
around the world faster than its
competition by building flexibility into
design, production, and distribution
 Sony – purchases components from
suppliers in Thailand, Malaysia, and
around the world
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Reasons to Globalize
Reasons to Globalize
Tangible  Reduce costs (labor, taxes, tariffs, etc.)
Reasons  Improve supply chain
 Provide better goods and services
 Understand markets
Intangible  Learn to improve operations
Reasons  Attract and retain global talent
Figure 2.1
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Risks: You May Wish To
Consider
 National literacy rate
 Work ethic
 Rate of innovation
 Tax rates
 Rate of technology
change
 Inflation
 Number of skilled
workers
 Political stability
 Product liability laws
 Availability of raw
materials
 Interest rates
 Population
 Export restrictions
 Number of miles of
highway
 Variations in language
 Phone system
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Developing Missions and
Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there
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Mission
 Mission –
Who are we?
What is our business?
Where are you going?
 Organization’s purpose
for being
 Focus is on value-added
or business focus not on
a product or services.
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Mission Statements
FedEx exists to provide total reliable,
competitively superior, global air-ground
transportation of high priority goods and
documents that require rapid, time-certain
delivery.
Merck exists to provide society with superior
products and services - innovations and
solutions that improve the quality of life and
satisfy customer needs - to provide
employees with meaningful work and
advancement opportunities and investors
with a superior rate of return
Figure 2.2
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Hard Rock Café
Our Mission: To spread the spirit of Rock ‘n’
Roll by delivering an exceptional
entertainment and dining experience.
Arnold Palmer Hospital is a healing
environment providing family-centered care
with compassion, comfort and respect…
when it matters the most.
Figure 2.2
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Mission Statements
Create mission statements for any of the
following:
- For a store providing breakfasts for clients.
- For a laundromat
- For an auto repair shop
Figure 2.2
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Mission Statements
Create mission statements for any of the
following:
- delivering healthy and time-saving morning
food service.
- providing access to high end laundry
equipments and services at lowest price.
- providing trustworthy staff, services and
solutions for retaining and restoring life span
and reliability of vehicles.
Figure 2.2
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Service Production Flows
Development/Factory Concept
Create factory concept for your mission statement:
Basic concept will consist of a list of activities and
where they will be done.
Get
materials
Transport
Process
Inspect
Assemble
Figure 2.2
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Service Production Flow (1)
[Single Staff]
Start
End
Sub-process 1
Get
Eggs
Eggs
In pot
Remove Assemble
Eggs
on tray
Boil Eggs in pot
Sub-process 2
Sub-process 3
Prepare Put in
bread toaster
Toaster
Toast
waiting
Prepare
coffee
Make
Coffee
Eggs waiting
Remove Assemble
toast
on tray
Coffee
waiting
Toast
waiting
Pour Assemble
Coffee on tray
Key Attributes of Process (I)
-3 different flow units, I.e. eggs, coffee, toast
- 3 independent sub-processes, I.e. parallel sub-processes
- standardized activity duration for each unit
Business Activity flow for Breakfast Factory [ I ]
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Productivity & Other Measures of Production Flow (1)
[Single worker]
Start
End
Sub-process 1
Get
Eggs
Eggs
In pot
Remove Assemble
Eggs
on tray
Boil Eggs in pot
Sub-process 2
Sub-process 3
Prepare Put in
bread toaster
Toaster
Toast
waiting
Prepare
coffee
Make
Coffee
Eggs waiting
Remove Assemble
toast
on tray
Coffee
waiting
Toast
waiting
Pour Assemble
Coffee on tray
Which measures could be used to evaluate this process?
- Time from beginning to end of process [minutes] (input 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 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)
- Worker resources needed to make full plate [hours per plate] (productivity measure)
Business Activity flow for Breakfast Factory [ I ]
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Redesigned of Production Flow (1)
[Two workers]
Start
Sub-process 1
Get
Eggs
Eggs
In pot
Old
End
New
End
Boil Eggs in pot
Remove Assemble
Eggs
on tray
Worker 1
Sub-process 2
Process
Prepare Put in
postponement bread toaster
Remove Assemble
on tray
Toaster
toast
Worker 2
Pour Assemble
Coffee on tray
Worker 2
Sub-process 3
Process
postponement
Prepare
coffee
Make
Coffee
Improvement of new process:
- Time from beginning to end of process [minutes] (input measure) CYCLE TIME HORTENED
- Quality of items [hotness of coffee, hardness of eggs] (output measure) WARMER
- 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. volume of coffee that can be made per batch or hour (productivity measure)
- Worker resources needed to make plate [hours per plate] (productivity measure) HIGHER
Business Activity flow for Breakfast Factory [ I ]
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Service Production Flow (2)
Start
End
Load Add
washer soap
Wash clothes
Remove
clothes Transfer
Sub-process 2
Load
dryer
Sub-process 1
Dry clothes
Remove
Assemble
on tray
Key Attributes of Process (II)
- single flow unit for all sub-processes, I.e. clothes
- 2 interdependent sub-processes, I.e. serial sub-processes
- standardized activity duration for each unit
Business Activity flow for Laundromat [ II ]
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Analysis of Production Flow (2)
Start
End
60 minutes
Max. capacity 150 Ibs
Load Add
washer soap
Wash clothes
Remove
clothes Transfer
Sub-process 1
Max. capacity 250 Ibs
Sub-process 2
Load
dryer
Dry clothes
Remove
Assemble
on tray
30 minutes
Q.
Q.
If you have 300 Ibs of clothes to wash, how long will you need and why?
How would you redesign the process to shorten your wait time?
Business Activity flow for Laundromat [ II ]
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Bottleneck Types
Production Flow (2)
Start
End
60 minutes
Max. capacity 300 Ibs
Load Add
washer soap
Wash clothes
Remove
clothes Transfer
Sub-process 1
Max. capacity 250 Ibs
Sub-process 2
Load
dryer
Dry clothes
Remove
Assemble
on tray
30 minutes
Types of bottlenecks:
- Volume capacity
- Critical activity
- Longest activity or processing time
Business Activity flow for Laundromat [ II ]
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Service Production Flow (3)
Start
End
Get
car
Docum
Preent
Diagnose
issues
Sub-process 2
Sub-process 1
Diagnose
Request Waiting
parts for parts
Repair car
Pay
Pick-up
Test
Key Attributes of Process (III)
- same flow units through all sub-processes, I.e. clothes
- 2 interdependent sub-processes, I.e. serial sub-processes
- irregular/unique activities and different durations for each unit possible
Business Activity flow for Auto Repair Factory [ III ]
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Key Lessons
1. There are different types of processes
2. Process can be redesigned by exploiting
trade-offs
-
More staff to raise number of units produced
Larger machine capacity to reduce waiting time
and improve produced units
Eliminate waiting, errors and rework
Reduce inventory on-hand
Combine activities
Run activities in parallel
Figure 2.2
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Process Design Types
Variety of Products
High
Moderate
Process-focused
Mass Customization
JOB SHOPS
Customization at high
Volume
(Print shop, emergency
room, machine shop,
(Dell Computer’s PC)
fine dining
Repetitive (modular)
focus
ASSEMBLY LINE
(Cars, appliances,
TVs, fast-food
Product focused
restaurants)
CONTINUOUS
(steel, beer, paper,
bread, institutional
kitchen)
Low
Low
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Moderate
Volume
High
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Strategic Process
Organization’s
Mission
Functional
Area Missions
Marketing
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Operations
Finance/
Accounting
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OM’s Contribution to Strategy
Operations
Decisions
Product
Quality
Process
Examples
Specific
Strategy Used
Competitive
Advantage
FLEXIBILITY
Sony’s constant innovation
of new products………………………………....Design
HP’s ability to follow
the printer market………………………………Volume
Southwest Airlines No-frills service……..…..LOW COST
Location
Layout
Human
resource
Supply-chain
Inventory
Scheduling
Maintenance
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DELIVERY
Pizza Hut’s five-minute
guarantee at lunchtime…………………..…..……..Speed
Federal Express’s “absolutely,
positively on time”………………………..….Dependability
Differentiation
(Better)
Response
(Faster)
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
Cost
leadership
(Cheaper)
Figure 2.4
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Strategy Development Process
Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Determine Corporate Mission
State the reason for the firm’s existence and identify the
value it wishes to create.
Form a Strategy
Build a competitive advantage, such as low price, design, or
volume flexibility, quality, quick delivery, dependability, aftersale service, broad product lines.
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Figure 2.6
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