Chapter 15
Managing Service and
Manufacturing Operations
Management, by Williams
South-Western College Publishing
Copyright © 2000
2
What Would You Do?
Producing a Daily Paper at Newsday
How can late-breaking stories be
included in the paper?
How can quality and productivity be
improved?
In terms of production, should they
focus on efficiency or flexibility?
Management, by Williams
South-Western College Publishing
Copyright © 2000
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Learning Objectives
Managing for
Productivity and Quality
After discussing this section,
you should be able to:
discuss the kinds of productivity and their
importance in managing operations.
explain the role that quality plays in managing
operations.
Management, by Williams
South-Western College Publishing
Copyright © 2000
4
Productivity
Why Productivity
Matters
Kinds of
Productivity
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South-Western College Publishing
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Why Productivity Matters
Higher
Productivity
Higher
Standard
of
Living
Lower
Costs
Lower
Prices
Higher
Profits
Higher
Market
Share
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Kinds of Productivity
Partial productivity =
Outputs
Single Kind of Input
Multifactor productivity =
Outputs
Labor + Capital + Materials + Energy
Management, by Williams
South-Western College Publishing
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Quality
Quality-Related Product Characteristics
Quality-Related Service Characteristics
ISO 9000
Malcolm Baldrige National Quality Award
Total Quality Management
Management, by Williams
South-Western College Publishing
Copyright © 2000
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Quality-Related Product
Characteristics
Reliability
the average time between breakdowns
Serviceability
the ease with which a product is fixed
Durability
mean time to failure
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Quality-Related Product
Characteristics
Reliability
Tangibles
Responsiveness
Assurance
Empathy
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ISO 9000
A series of five international standards
Certifies quality processes
Managers often want this to improve
customer satisfaction
Management, by Williams
South-Western College Publishing
Copyright © 2000
Malcolm Baldrige National Quality
Award
11
Given to U.S. companies
Recognizes achievement in quality
Winners have been financially successful
Management, by Williams
South-Western College Publishing
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Total Quality Management
Customer Focus and Satisfaction
Continuous Improvement
Teamwork
Management, by Williams
South-Western College Publishing
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Learning Objectives
Managing Operations
After discussing this section,
you should be able to:
explain the essentials of managing a service
business.
describe the different kinds of manufacturing
operations.
describe why and how companies should
manager inventory levels.
Management, by Williams
South-Western College Publishing
Copyright © 2000
14
Service Operations
ServiceProfit
Chain
Service
Recovery and
Empowerment
Management, by Williams
South-Western College Publishing
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15
Service-Profit Chain
Internal Service Quality
Employee Satisfaction
Service Capability
High Value Service
Customer Satisfaction
Customer Loyalty
Profit and Growth
Adapted From Figure 15.2
Management, by Williams
South-Western College Publishing
Copyright © 2000
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Service Recovery and Empowerment
Service recovery is restoring customer
satisfaction to strongly dissatisfied
customers
Empowering workers is one way to speed
up service recovery
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South-Western College Publishing
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Manufacturing Operations
Amount of
Processing
in Manufacturing
Operations
Flexibility of
Manufacturing
Operations
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South-Western College Publishing
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Amount of Processing in
Manufacturing Operations
Make-to-order operations
manufacturing doesn’t begin until an order is
placed
Assemble-to-order operations
used to create semi-customized products
Make-to-stock operations
manufacture standardized products
Management, by Williams
South-Western College Publishing
Copyright © 2000
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Flexibility of Manufacturing
Operations
Continuous- LineBatch
Job
Project
Flow
Flow
Production Shops Manufacturing
Production Production
Least Flexible
Adapted From Figure 15.3
Most Flexible
Management, by Williams
South-Western College Publishing
Copyright © 2000
Back to the Future
20
Software Simplifies Operations Management
Sophisticated mathematical and
statistical models
now in easy to use software
Examples:
Resources in Motion Management System
(RIMMS)
ROBCAD
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South-Western College Publishing
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Inventory
Types of Inventory
Measuring Inventory
Costs of Maintaining an Inventory
Managing Inventory
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South-Western College Publishing
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Types of Inventory
Raw
Materials
Fabrication
Vendors
Component
Parts
Initial Assembly
Retailers
Field
Warehouses
Wholesalers
Adapted From Figure 15.4
Work-inProgress
Distribution
Centers
Final Assembly
Finished
Goods
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Measuring Inventory
Average aggregate inventory
the average overall inventory for a certain
time period
Stockout
running out of inventory
Inventory turnover
the number of times a year that a company
sells its average inventory
Management, by Williams
South-Western College Publishing
Copyright © 2000
Blast From The Past
24
Guns, Geometry, and Fire
Whitney and standardized parts
interchangeable parts
fewer defects
Monge’s 3-dimensional drawings
more precise designs
Fire led to just-in-time at Oldsmobile
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Costs of Maintaining an Inventory
Ordering costs
all associated costs with ordering goods
Setup costs
changing goods produced
Holding costs
carrying inventory
Stockout costs
running out of inventory
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South-Western College Publishing
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Managing Inventory
Economic Order
Quantity
Just-in-Time
Independent Demand
Systems
Dependent Demand
Systems
Kanban
Materials Requirement
Planning
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South-Western College Publishing
Copyright © 2000
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Been There, Done That
Mr. Kaizen
America has focused on quality, not
cost management
Eliminating muda is important
Must focus on gemba
Management, by Williams
South-Western College Publishing
Copyright © 2000
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What Really Happened?
Producing a Daily Paper at Newsday
Reduce delays by reducing production
problems
Moved up most closing times but
extended it for sports
Used both JIT and MRP
Management, by Williams
South-Western College Publishing
Copyright © 2000