Chapter Eighteen
Operations Management
Chapter Objectives (1 of 2)
? Describe the role of the transformation process in
operations management
? Explain what factors determine organizational
productivity
? Discuss what re-engineering of work processes
involves
? Describe how adding a,manufacturing focus” to
organizational strategy affects an organization
? Identify the four key decisions that provide the
long-term strategic direction for operations
planning
Chapter Objectives (2 of 2)
? Describe the three decisions that make up tactical
operations planning
? Identify the three approaches to maintenance
control
? Explain the contingency factors that affect the
implementation of TQM
? Discuss the advantages and potential problems of
just-in-time (JIT) inventory systems
? Explain how flexible manufacturing systems could
give an organization a competitive advantage
? Describe how speed can be a competitive
advantage
The Operations System
Inputs
? People
? Technology
? Capital
? Equipment
? Material
? Information
Transformation
process
Outputs
? Goods
? Services
Figure 19-1
Deming’s 14 Points for Improving
Management’s Productivity
? 1,Plan for the long-term future,not for next month
or next year,
? 2,Never be complacent concerning the quality of
your product,
? 3,Establish statistical control over your production
processes and require your suppliers to do so as
well,
? 4,Deal with the fewest number of suppliers - the
best ones,of course,
? 5,Find out whether your problems are confined to
particular parts of the production process or stem
from the overall process itself,Table 19-1a
Deming’s 14 Points for Improving
Management’s Productivity
? 6,Train workers for the job that you are asking them
to perform,
? 7,Raise the quality of your line supervisors,
? 8,Drive out fear,
? 9,Encourage departments to work closely together
rather than to concentrate on departmental or
divisional distinctions,
? 10,Do not be sucked into adopting strictly
numerical goals,including the widely popular
formula of,zero defect.”
Table 19-1b
Deming’s 14 Points for Improving
Management’s Productivity
? 11,Require your workers to do quality work,not just
to be at their stations from 9 to 5,
? 12,Train your employees to understand statistical
methods,
? 13,Train your employees in new skills as the need
arises,
? 14,Make top managers responsible for
implementing these principles,
Table 19-1c
Characteristics of Services
Services
Intangible
Can’t be stored
in inventory
Involve customer or
client in actual production
Service
Organizations Produce
Figure 19-2
Decisions Made in Planning Operations
What
is to be
produced? How many are to be
produced?
Where are
they to be
produced?
Which
production
methods are
to be used?
How should
equipment and
workstations
be arranged?
Capacity
Planning
Facilities
Location
Planning
Process
Planning
Facilities
Layout
Planning
Strategic Operations Plans
What’s the over-
all production
plan for all
products?
(Typically for the
year)
Aggregate
Planning
How many units of
each product will
be produced?
(Typically for the
month)
Master
Scheduling
What materials
are needed to
satisfy the
master schedule?
Materials
Requireemnts
Planning Compre-
hensive
Operations
Plans
Figure 19-3
A Process Layout at a
Medical Clinic
Neurology Obstetrics/Gynecology
Rest Rooms
Reception room
Pediatrics
Pharmacy
X-ray
Laboratory Tests
Plastic and
Recon-
structive
Surgery
Patient
enters
clinic Patient
exits
clinic
Patient
Waiting
Area
Figure 19-4
A Product Layout in an
Aluminum Tubing Plant
Raw
Alum,
Ingot
Receiving
Dept,
Casting
Dept,
Press
Dept,
Tube
Dept,
Finishing
Dept,
Inspection
Dept,
Packing
Dept,
Shipping
Dept,
Shipped
to
plant
Ingot
accepted
Ingot
melted
Metal
pressed
into
large
tubes
Large
tubes
stretched
into
various
dimensions
Finished
tubing is
cleaned
Finished
tubes
inspected
Finished
tubes
packed
Finished
tubes
shipped
to
customers
Figure 19-5
Developing a Master Schedule
from an Aggregate Plan
From the Aggregate Plan (units per month)
Months
Heavy-Duty
Transmission
Standard
Transmission
Economy
Transmission
Total
July August September October November
100
75
75
125
80
45
120
70
60
130
100
70
120
100
80
250 250 250 300 300
July August
Weeks
1176
1177
1178
1179
1180
1 2 3 4 5 6 7 8
0
0
0
10
15 0
0
5
10
10 0
0
10
5
10 0
0
0
10
15 0
0
0
10
20 0
15
15
5
0 20
10
0
0
Master Schedule for Heavy-Duty Transmission (units)
0 20
0
10
0
0
Total 100 Total 125 Heavy
-D
uty
Mo
del
s
Inventory Cycle with Safety Stock
300
250
200
150
100
50
0 4 8 12 16 20 24 28 32 36 40 44 48 52
Qu
an
tity
on
H
an
d (i
n u
ni
ts)
Reorder
point
Safety
stock
level
Time (in weeks) Figure 19-7
Example of an ABC
Inventory System
10 20 30 40 50 60 70 80 90 100
To
tal
D
ol
lar
Val
ue
(%)
Total Number of Items (%)
100
90
80
70
60
50
40
30
20
10
0
A
items
B
items C
items
Figure 19-8
Operations Management
Chapter Objectives (1 of 2)
? Describe the role of the transformation process in
operations management
? Explain what factors determine organizational
productivity
? Discuss what re-engineering of work processes
involves
? Describe how adding a,manufacturing focus” to
organizational strategy affects an organization
? Identify the four key decisions that provide the
long-term strategic direction for operations
planning
Chapter Objectives (2 of 2)
? Describe the three decisions that make up tactical
operations planning
? Identify the three approaches to maintenance
control
? Explain the contingency factors that affect the
implementation of TQM
? Discuss the advantages and potential problems of
just-in-time (JIT) inventory systems
? Explain how flexible manufacturing systems could
give an organization a competitive advantage
? Describe how speed can be a competitive
advantage
The Operations System
Inputs
? People
? Technology
? Capital
? Equipment
? Material
? Information
Transformation
process
Outputs
? Goods
? Services
Figure 19-1
Deming’s 14 Points for Improving
Management’s Productivity
? 1,Plan for the long-term future,not for next month
or next year,
? 2,Never be complacent concerning the quality of
your product,
? 3,Establish statistical control over your production
processes and require your suppliers to do so as
well,
? 4,Deal with the fewest number of suppliers - the
best ones,of course,
? 5,Find out whether your problems are confined to
particular parts of the production process or stem
from the overall process itself,Table 19-1a
Deming’s 14 Points for Improving
Management’s Productivity
? 6,Train workers for the job that you are asking them
to perform,
? 7,Raise the quality of your line supervisors,
? 8,Drive out fear,
? 9,Encourage departments to work closely together
rather than to concentrate on departmental or
divisional distinctions,
? 10,Do not be sucked into adopting strictly
numerical goals,including the widely popular
formula of,zero defect.”
Table 19-1b
Deming’s 14 Points for Improving
Management’s Productivity
? 11,Require your workers to do quality work,not just
to be at their stations from 9 to 5,
? 12,Train your employees to understand statistical
methods,
? 13,Train your employees in new skills as the need
arises,
? 14,Make top managers responsible for
implementing these principles,
Table 19-1c
Characteristics of Services
Services
Intangible
Can’t be stored
in inventory
Involve customer or
client in actual production
Service
Organizations Produce
Figure 19-2
Decisions Made in Planning Operations
What
is to be
produced? How many are to be
produced?
Where are
they to be
produced?
Which
production
methods are
to be used?
How should
equipment and
workstations
be arranged?
Capacity
Planning
Facilities
Location
Planning
Process
Planning
Facilities
Layout
Planning
Strategic Operations Plans
What’s the over-
all production
plan for all
products?
(Typically for the
year)
Aggregate
Planning
How many units of
each product will
be produced?
(Typically for the
month)
Master
Scheduling
What materials
are needed to
satisfy the
master schedule?
Materials
Requireemnts
Planning Compre-
hensive
Operations
Plans
Figure 19-3
A Process Layout at a
Medical Clinic
Neurology Obstetrics/Gynecology
Rest Rooms
Reception room
Pediatrics
Pharmacy
X-ray
Laboratory Tests
Plastic and
Recon-
structive
Surgery
Patient
enters
clinic Patient
exits
clinic
Patient
Waiting
Area
Figure 19-4
A Product Layout in an
Aluminum Tubing Plant
Raw
Alum,
Ingot
Receiving
Dept,
Casting
Dept,
Press
Dept,
Tube
Dept,
Finishing
Dept,
Inspection
Dept,
Packing
Dept,
Shipping
Dept,
Shipped
to
plant
Ingot
accepted
Ingot
melted
Metal
pressed
into
large
tubes
Large
tubes
stretched
into
various
dimensions
Finished
tubing is
cleaned
Finished
tubes
inspected
Finished
tubes
packed
Finished
tubes
shipped
to
customers
Figure 19-5
Developing a Master Schedule
from an Aggregate Plan
From the Aggregate Plan (units per month)
Months
Heavy-Duty
Transmission
Standard
Transmission
Economy
Transmission
Total
July August September October November
100
75
75
125
80
45
120
70
60
130
100
70
120
100
80
250 250 250 300 300
July August
Weeks
1176
1177
1178
1179
1180
1 2 3 4 5 6 7 8
0
0
0
10
15 0
0
5
10
10 0
0
10
5
10 0
0
0
10
15 0
0
0
10
20 0
15
15
5
0 20
10
0
0
Master Schedule for Heavy-Duty Transmission (units)
0 20
0
10
0
0
Total 100 Total 125 Heavy
-D
uty
Mo
del
s
Inventory Cycle with Safety Stock
300
250
200
150
100
50
0 4 8 12 16 20 24 28 32 36 40 44 48 52
Qu
an
tity
on
H
an
d (i
n u
ni
ts)
Reorder
point
Safety
stock
level
Time (in weeks) Figure 19-7
Example of an ABC
Inventory System
10 20 30 40 50 60 70 80 90 100
To
tal
D
ol
lar
Val
ue
(%)
Total Number of Items (%)
100
90
80
70
60
50
40
30
20
10
0
A
items
B
items C
items
Figure 19-8
