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CHAPTER TEN
Achieving World-Class Operations Management
CHAPTER SUMMARY
This chapter describes how manufacturers and service firms manage and control the
creation of products and services. This process is known as operations management.
Operations managers are charged with managing and supervising the conversion
process.
Operations management involves production planning, production control, and
improving production and operations. Production planning involves which type of
production process best fits with company. In general, the three types of production
processes are mass production, mass customization, and customization. In addition to
production type, operations managers classify production processes in two ways: (1)
how inputs are converted into outputs and (2) the timing of the process.
Two key aspects of production control are routing and scheduling. Routing sets out a
work flow, the sequence of machines and operations through which a product or service
progresses from start to finish. Gantt charts, the critical path method, and PERT are
commonly used scheduling tools for complex situations.
Methods to improve production and operations include quality-management
techniques, lean manufacturing, and technology and automation. Total Quality
Management (TQM), Six Sigma, and the Malcolm Baldrige National Quality Award
emphasize the use of quality principles in all aspects of a company’s production and
operations. Lean manufacturing streamlines production by eliminating steps in the
production process that do not add benefits customers want. Computer systems such as
computer-aided design and manufacturing systems, robotics, flexible manufacturing
systems, and computer-integrated manufacturing are enabling manufacturers to
automate factories in ways never possible.
Finally, trends affecting production and operations management include a shortage of
skilled workers, dwindling scientific advances, and business process management (BPM).
LEARNING OUTCOMES
, 1. Why is production and operations management important in both
manufacturing and service firms?
In the 1980s, many U.S. manufacturers lost customers to foreign competitors
because their production and operations management systems did not support
the high-quality, reasonably priced products consumers demanded. Service
organizations also rely on effective operations management to satisfy
consumers. Operations managers, the personnel charged with managing and
supervising the conversion of inputs into outputs, work closely with other
functions in organizations to help ensure quality, customer satisfaction, and
financial success.
2. What types of production processes do manufacturers and service firms use?
Products are made using one of three types of production processes. In mass
production, many identical goods are produced at once, keeping production
costs low. Mass production, therefore, relies heavily on standardization,
mechanization, and specialization. When mass customization is used, goods are
produced using mass-production techniques up to a point, after which the
product or service is custom tailored to individual customers by adding special
features. When a firm’s production process is built around customization, the
firm makes many products one at a time according to the very specific needs or
wants of individual customers.
3. How do organizations decide where to put their production facilities? What
choices must be made in designing the facility?
Site selection affects operating costs, the price of the product or service, and the
company’s ability to compete. In choosing a production site, firms must weigh
the availability of resources—raw materials, human resources, and even capital
—needed for production, as well as the ability to serve customers and take
advantage of marketing opportunities. Other factors include the availability of
local incentives and the manufacturing environment. Once a site is selected, the
firm must choose an appropriate design for the facility. The three main
production facility designs are process, product, and fixed-position layouts.
Cellular manufacturing is another type of facility layout.
4. Why are resource-planning tasks like inventory management and supplier
relations critical to production?
Production converts input resources; such as raw materials and labor, into
outputs, finished products and services. Firms must ensure that the resources
needed for production will be available at strategic moments in the production
September 5, 2018 2
, process. If they are not, productivity, customer satisfaction, and quality may
suffer. Carefully managing inventory can help cut production costs while
maintaining enough supply for production and sales. Through good relationships
with suppliers, firms can get better prices, reliable resources, and support
services that can improve production efficiency.
September 5, 2018 3
must be attributed to OpenStax
CHAPTER TEN
Achieving World-Class Operations Management
CHAPTER SUMMARY
This chapter describes how manufacturers and service firms manage and control the
creation of products and services. This process is known as operations management.
Operations managers are charged with managing and supervising the conversion
process.
Operations management involves production planning, production control, and
improving production and operations. Production planning involves which type of
production process best fits with company. In general, the three types of production
processes are mass production, mass customization, and customization. In addition to
production type, operations managers classify production processes in two ways: (1)
how inputs are converted into outputs and (2) the timing of the process.
Two key aspects of production control are routing and scheduling. Routing sets out a
work flow, the sequence of machines and operations through which a product or service
progresses from start to finish. Gantt charts, the critical path method, and PERT are
commonly used scheduling tools for complex situations.
Methods to improve production and operations include quality-management
techniques, lean manufacturing, and technology and automation. Total Quality
Management (TQM), Six Sigma, and the Malcolm Baldrige National Quality Award
emphasize the use of quality principles in all aspects of a company’s production and
operations. Lean manufacturing streamlines production by eliminating steps in the
production process that do not add benefits customers want. Computer systems such as
computer-aided design and manufacturing systems, robotics, flexible manufacturing
systems, and computer-integrated manufacturing are enabling manufacturers to
automate factories in ways never possible.
Finally, trends affecting production and operations management include a shortage of
skilled workers, dwindling scientific advances, and business process management (BPM).
LEARNING OUTCOMES
, 1. Why is production and operations management important in both
manufacturing and service firms?
In the 1980s, many U.S. manufacturers lost customers to foreign competitors
because their production and operations management systems did not support
the high-quality, reasonably priced products consumers demanded. Service
organizations also rely on effective operations management to satisfy
consumers. Operations managers, the personnel charged with managing and
supervising the conversion of inputs into outputs, work closely with other
functions in organizations to help ensure quality, customer satisfaction, and
financial success.
2. What types of production processes do manufacturers and service firms use?
Products are made using one of three types of production processes. In mass
production, many identical goods are produced at once, keeping production
costs low. Mass production, therefore, relies heavily on standardization,
mechanization, and specialization. When mass customization is used, goods are
produced using mass-production techniques up to a point, after which the
product or service is custom tailored to individual customers by adding special
features. When a firm’s production process is built around customization, the
firm makes many products one at a time according to the very specific needs or
wants of individual customers.
3. How do organizations decide where to put their production facilities? What
choices must be made in designing the facility?
Site selection affects operating costs, the price of the product or service, and the
company’s ability to compete. In choosing a production site, firms must weigh
the availability of resources—raw materials, human resources, and even capital
—needed for production, as well as the ability to serve customers and take
advantage of marketing opportunities. Other factors include the availability of
local incentives and the manufacturing environment. Once a site is selected, the
firm must choose an appropriate design for the facility. The three main
production facility designs are process, product, and fixed-position layouts.
Cellular manufacturing is another type of facility layout.
4. Why are resource-planning tasks like inventory management and supplier
relations critical to production?
Production converts input resources; such as raw materials and labor, into
outputs, finished products and services. Firms must ensure that the resources
needed for production will be available at strategic moments in the production
September 5, 2018 2
, process. If they are not, productivity, customer satisfaction, and quality may
suffer. Carefully managing inventory can help cut production costs while
maintaining enough supply for production and sales. Through good relationships
with suppliers, firms can get better prices, reliable resources, and support
services that can improve production efficiency.
September 5, 2018 3
