PowerPoint Presentation
to Accompany
Management, 2/e
John R. Schermerhorn, Jr .
and Barry Wright
Chapter 17:
Operations and Services Management
Prepared by: Jim LoPresti
University of Colorado, Boulder
Revised by: Dr. Shavin Malhotra
Ryerson University, Toronto, Ontario
Published by: John Wiley & Sons Canada, Ltd.
Planning Ahead — Chapter 17 Study Questions
 What are the essentials of operations management?
 What is value chain management?
 How do organizations manage service and product
quality?
 How can work processes be designed for productivity?
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Study Question 1: What are the essentials of
operations management?
 Operations management
• Managing productive systems that transform resources
into finished products, goods, and services for customers.
• Typical operations management decisions include:
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Resource acquisition
Inventories
Facilities
Workflows and technologies
Product quality
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Study Question 1: What are the essentials of
operations management?
Productivity
• Quantitative measure of the efficiency
with which inputs are transformed into
outputs.
• Productivity = Output / Input.
Competitive advantage
• A core competency that clearly sets an
organization apart from competitors and
gives it an advantage over them in the
marketplace.
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Study Question 1: What are the essentials of
operations management?
Companies may achieve competitive
advantage in many ways, including:
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Product innovations
Customer service
Speed to market
Manufacturing flexibility
Product/service quality
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Study Question 1: What are the essentials of
operations management?
 Technology
• The combination of knowledge, skills, equipment,
computers, and work methods used to transform
resource inputs into organization outputs.
• Manufacturing technology.
• Service technologies.
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Study Question 1: What are the essentials of
operations management?
 Core manufacturing technologies:
• Small-batch production.
• A variety of custom products are tailor-made to order.
• Mass production.
• A large number of uniform products are made in an assemblyline system.
• Continuous-process production.
• A few products are made by continuously feeding raw
materials through a highly automated production system with
largely computerized controls.
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Study Question 1: What are the essentials of
operations management?
Manufacturing technology trends
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Robotics
Flexible manufacturing systems
Mass customization
Cellular layouts
Computer-integrated manufacturing
Lean production
Design for disassembly
Remanufacturing
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Study Question 1: What are the essentials of
operations management?
 Core service technologies:
• Intensive technology
• Focuses the efforts of many people with special expertise
on the needs of patients or clients.
• Mediating technology
• Links together parties seeking a mutually beneficial
exchange of values.
• Long-linked technology
• Functions like mass production, where a client is passed
from point to point for various aspects of service delivery.
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Study Question 2: What is value chain
management?
Value chain
• Sequence of step-by-step activities resulting in finished goods
or services with customer value.
Supply chain management
• Supply chain management is the strategic management of all
operations relating to an organization’s resource suppliers.
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Figure 17.1 Elements in an organization’s value chain.
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Study Question 2: What is value chain
management?
Inventory control
• Goal is to ensure that inventory is just the
right size to meet performance needs, thus
minimizing the cost.
• Methods of inventory control:
• Economic order quantity
• Just-in-time scheduling
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Study Question 2: What is value chain
management?
Inventory control
• Economic order quantity
• Inventory replenished with fixed quantity
order when inventory falls to
predetermined level.
• Just-in-time scheduling
• Materials arrive at workstation or facility
‘just-in-time’ for use.
• Virtually eliminates carrying costs of
inventories.
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Figure 17.2 Inventory control by economic order
quantity (EOQ).
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Study Question 2: What is value chain
management?
Break-even analysis
Determination of the point at which sales revenues are
sufficient to cover costs.
• Break-Even Point =
•
Fixed Costs / (Price – Variable Costs)
Used in evaluating:
• New products
• New program initiatives
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Figure 17.3 Graphical approach to break-even
analysis.
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Study Question 3: How do organizations
manage service and product quality?
 Customer relationship management
– Establishes and maintains high standards of customer
service in order to strategically build lasting relationships
with and add value to customers.
• External customers purchase the organization’s goods or
utilize its services.
• Internal customers are the persons and groups within an
organization who depend on the results of others' work to
do their own jobs.
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Study Question 3: How do organizations
manage service and product quality?
Customer Relationship Management
(CRM)
• Uses latest technologies for intensive
customer communication and collection
of data regarding customer needs and
desires.
• Establishes and maintains high standards
of customer service.
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Figure 17.4 The importance of external and internal
customers.
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Study Question 3: How do organizations
manage service and product quality?
Total quality management (TQM)
• Quality principles are an integral part of
organization’s strategic objectives.
• Applying them to all aspects of operations.
• Committing to continuous improvement.
• Striving to meet customers’ needs by doing
things right the first time.
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Study Question 3: How do organizations manage
service and product quality?
ISO (International Standards
Organization) certification
• Adopted by many countries as quality benchmark.
• Companies undergo rigorous audit to determine if ISO
requirements are met.
• Focus is on customer service and product quality.
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Study Question 3: How do organizations
manage service and product quality?
Quality and Continuous Improvement
• W. Edwards Deming emphasized:
• Constant innovation.
• Use of Statistical methods.
• Training in the fundamentals of quality
assurance.
• Continuous improvement
• Quality circles
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Study Question 3: How do organizations
manage service and product quality?
 Continuous improvement
• Constant search for new ways to improve current
performance.
• Reduce cycle time between order receipt and delivery.
 Quality circle
• Small group of workers who meet to improve quality
• Assumes responsibility for quality
• Taps into members’ creativity
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Study Question 3: How do organizations manage
service and product quality?
Statistical quality control
• Uses rigorous statistical analysis for checking processes,
materials, products, and services to ensure that they meet
high standards.
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Takes random work samples
Measures quality in samples
Determines acceptability
Unacceptable quality results in corrective action
“Six Sigma” common example of SQC
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Figure 17.5 Sample control chart showing upper
and lower control limits.
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Study Question 4: How can work processes be
designed for productivity?
Process reengineering
• Systematic and complete analysis of work processes.
• Design of new and better work processes.
Work process
• “A related group of tasks that create a result of value for
the customer.” (Michael Hammer)
Workflow
• Movement of work from one point to another in the
manufacturing or service delivery process.
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Study Question 4: How can work processes be
designed for productivity?
 Process value analysis
• Core processes are identified and evaluated for
their performance contributions.
• Each step in workflow is examined
• Step is eliminated if not found to be
important, useful, and contributing to the
value added
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Study Question 4: How can work processes be
designed for productivity?
 Steps in reengineering core processes:
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Identify core processes.
Map core processes in respect to workflows.
Evaluate all tasks for core processes.
Search for ways to eliminate unnecessary tasks or work.
Search for ways to eliminate delays, errors, and
misunderstandings.
• Search for efficiencies in how work is shared and transferred
among people and departments.
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.
Figure 17 6 How reengineering can streamline work
processes.
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