PowerPoint Presentation
to Accompany
Management
Third Canadian Edition
John R. Schermerhorn, Jr.
Barry Wright
Prepared by: Jim LoPresti
University of Colorado, Boulder
Revised by: Dr. Shavin Malhotra
Ryerson University, Toronto, Ontario
Chapter 17:
Operations and Services Management
Management 3e - Chapter 17
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Chapter 17 Study Questions
 17.1 Identify the essentials of services and
operations management.
 17.2 Explain what is value chain
management.
 17.3 Describe how organizations manage
customer service and product quality.
 17.4 Explain how work processes can be
designed for productivity.
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Operations Management Essentials
 Operations management
• Managing productive systems that transform
resources into finished products, goods, and
services for customers.
• Typical operations management decisions
include:
• Resource acquisition
• Inventories
• Facilities
• Workflows and technologies
• Product quality
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Operations Management Essentials
 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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Operations Management Essentials
 Companies may achieve competitive
advantage in many ways, including:
•
•
•
•
•
Product innovations
Customer service
Speed to market
Manufacturing flexibility
Product/service quality
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Operations Management Essentials
 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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Operations Management Essentials
 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 assembly-line 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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Operations Management Essentials
 Manufacturing technology trends
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•
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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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Operations Management Essentials
 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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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 17.2 Elements in an organization’s value chain.
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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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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 17.3 Inventory control by economic order
quantity (EOQ).
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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 17.4 Graphical approach to break-even
analysis.
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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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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 17.5 The importance of external and internal
customers.
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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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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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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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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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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.
• 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 17.6 Sample control chart showing upper
and lower control limits.
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Work Processes
 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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Work Processes
 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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Work Processes
 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 8 How reengineering can streamline
work processes.
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