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Operations and Value ChainManagement
Operations and Value ChainManagement
CHAPTER 21CHAPTER 21
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Copyright 2008 by South-Western, a division of Thomson Learning. All rights reserved.2
Learning ObjectivesLearning Objectives
Define operations managementand describe its
applications within manufacturing and service
organizations.
Discuss the role of operations management strategy inthe companys overall competitive strategy.
Explain the role of e-business in todays partnership
approach to supply chain management.
Summarize considerations in designing an operations
system, including product and service design, facilitieslayout, and capacity planning.
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Learning Objectives (contd.)Learning Objectives (contd.)
Explain why small inventories are preferred by
most organizations.
Discuss major techniques for the managementof materials and inventory.
Describe what is meant by lean manufacturing.
Defineproductivityand explain why and how
managers seek to improve it.
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Operations and Value Chain ManagementOperations and Value Chain Management
Strategic success depends onefficient operations
Operational concerns take on evengreater importance in todayscompetitive environment whereconsumers often want customized
products and services deliveredimmediately
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Operations ManagementOperations Management
The field of management that
specializes in the physicalproduction
of goods or services and uses
quantitative techniques for solvingmanufacturing problems
Technical core = heart of the
organizations production of its productor service
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The Organization as a Value Chain SystemThe Organization as a Value Chain System
Products & Facilities
Product designFacilities layout
Capacity planning
Facilities location
Structure
Reporting relationshipsTeams
Control Processes
Inventory managementProductivity
Quality
Operations ManagementInputs
Raw materials
Human
resources
Land, buildings
InformationTechnology
Inputs
Raw materials
Human
resources
Land, buildings
InformationTechnology
Outputs
Products
Services
Outputs
Products
Services
Competitive Strategy
The Technical Core
Feedback
Exhibit 21.1
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Copyright 2008 by South-Western, a division of Thomson Learning. All rights reserved.7
Manufacturing and Service OrganizationsManufacturing and Service Organizations
Source: Based on Richard L. Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and
Byron J. Finch and Richard L. Luebbe, Operations Management(Fort Worth, Texas: The Dryden Press, 1995), 50.
Exhibit 21.2
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Operations StrategyOperations Strategy
The recognition of the importance
of operations to the firms success
and the involvement of operations
managers in the organizations
strategic planning.
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Supply Chain ManagementSupply Chain Management
Supply chain management -
managing the sequence of suppliers
and purchasers, covering all stages
ofprocessing from obtaining rawmaterials to distributing finished
goods to final consumers
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The Integrated EnterpriseThe Integrated Enterprise
daft ch21 insert1.CLP
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Design for Manufacturabilityand Assembly - DFMA
Design for Manufacturabilityand Assembly - DFMA
Often requires
Restructuring operations
Creating teams of designers,
manufacturers, and assemblers tomeet objectives of design
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Product Design ObjectivesProduct Design Objectives
1 Producibility
Cost
Quality
Reliability
2
3
4
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Service Design ObjectivesService Design Objectives
1 Producibility
Cost
Quality
Reliability
2
3
4
Timing5
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ProcurementProcurement
Purchasing supplies, services,
and raw materials for use in the
production process
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Facilities LayoutFacilities Layout
Process Layout
Product Layout
Cellular Layout Fixed-position Layout
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Technology AutomationTechnology Automation
Service Technology
Restaurants calculate exact cost and
ingredient needs for each menu item
Banking ATMs Gas stations pay-at-pump systems
Retailing = RFID radio-frequency
identification (high-tech barcode)
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Technology AutomationTechnology Automation
Flexible Manufacturing Systems, the use
ofautomated production lines that can be
quickly adapted to produce more than one
kind ofproduct CAD/CAM
CAD = computeraided design
CAM = computeraided manufacturing
PLM = Product-life cycle management
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Facility LocationFacility Location
Cost-benefit analysis most common
approach to selecting a site fora new
location
New location scouting software ishelping managers turn facilities location
into a science
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Capacity PlanningCapacity Planning
Determination and adjustment of
the organizations ability to produce
products and services to matchcustomer demand
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Inventory ManagementInventory Management
Finished goods inventory
Work-in-process inventory
Raw materials inventory
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Techniques for Inventory ManagementTechniques for Inventory Management
Economic order quantity
Material requirements
planning
Just-in-Time inventory
systems
Logistics & Distribution
management
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Material Requirements Planning - MRPMaterial Requirements Planning - MRP
Dependent demand inventory planning
and control system
Schedules exact materials required Is computer based
Based on precise estimates of future
needs forproduction
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Logistics and Distribution ManagementLogistics and Distribution Management
Logistics = activities required to
physically move materials into the
companys operations facility and to
move finished products to customers
Distribution = moving finished products
to customers (order fulfillment)
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Lean Manufacturing and ProductivityLean Manufacturing and Productivity
Lean manufacturing = process using
highly trained employees at every
stage of the production process to cut
waste and improve quality employeeinvolvement is key
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Measuring ProductivityMeasuring Productivity
Productivity = organizations output ofproductsand services divided by its inputs
Total factorProductivity
Labor
Productivity
OutputLabor + Capital + Materials + Energy
=
= OutputLabor dollars
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Improving ProductivityImproving Productivity
1. Employee productivity
2. Managerialproductivity
