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Chapter 4: Production and Operations Management

The process of getting a good or service to the customer; a series of related activities, with value being added at each stage
Benefits of Production
– Increased profits/decreased production costs
– Ability to be cost effective and remain competitive
Operations Management
Managing the activities and processes to produce and distribute goods and services.
Operations Manager
Duties include overseeing how the facilities should be organized, what supplies to purchase, what materials and inventory to keep on hand, how the product is produced, and how quality is measured and controlled.
Proximity to Market
How close your facility is (physically) to the customer base
Utility Supply
The availability of public infrastructure services, such as electricity, natural gas, water, and communications
Factors in Choosing Plant Location
Transportation, Utility Supply, Waste management, hazardous waste disposal, labor availability, living conditions, laws and regulations (Human Factors)
Human Factor
How the location decision affects the people in a surrounding community and vice versa. Composed of three components: labor availability, living conditions, laws and regulations
Facility Layout
The physical arrangement of resources and people in the production process and how they interact; involved everything from arrangement of cubicles to position of robotic arms
Types of Facility Layout
Process, Product, Cellular, Fixed Position
Process Layout
Groups together similar tasks, and partially assembled products move from one station to the next as workers perform a particular step in the production process. Mostly used to produce low volume, customized products.
Product Layout
Used mostly for high volume, standardized products that can be produced in a sequential fashion.
Cellular Layout
Places small teams of workers who handle all aspects of assembly, so each station is equipped with the parts and tools necessary to produce a product from start to finish. The worker moves with the product.
Fixed Position Layout
Used for manufacturing large items, such as ships/airplanes/modular homes. The product stays in one place, and the workers move around the product to complete assembly.
Make-or-Buy Decision
Managers deciding what needs to be purchased versus what can be bought from other supplies. Factors such as cost and quality are considered.
Production Management
Planning, implementation, and control measures used to convert resources into finished products. Used to determine what to produce, what processes/machinery will minimize costs, and the quantity produced.
The value of the finished good or service that it brings to the customer.
Production Plan
A description of how resources are to be used to develop a product in a specific way.
Production Manager
Duties include setting schedules, choosing what parts and supplies to buy for the assembly process, overseeing quality control, managing other important issues
Common Production Processes
Mass, production, mass customization, flexible manufacturing, lean production
Mass Production
Method of producing large quantities of goods at low cost. Relies on identical machines and automated assembly lines.
Assembly Line
Also known as a production line. Partially complete products are moved from one worker to the next on a conveyor belt.
Mass Customization
The production of goods or services tailored to meet customers’ individual needs cost-effectively.
Flexible Manufacturing System (FMS)
Several machines linked together by a central computer; all the machines produce different parts simultaneously. Can adapt to changes in schedules and specifications.
Components of FMS
Processing machines, a material-handling system, a central computer, and human labor.
Lean Production
A set of principles concerned with reducing waste and improving flow. The basic tenet is to do more with less (overproduction, wait time, waste, transportation, inventory, motion, over-processing, defective units).
Industrial Robot
Any device that performs automatically, typically completing repetitive tasks.
Advantages of Robots
Offered consistency, Reduced production costs, raised productivity, production of high-quality goods.
Computer-Aided Design (CAD)
Using a computer and software to create two-dimensional or three-dimensional models of physical parts
Computer-Aided Manufacturing (CAM)
Uses the design data from CAD to control the machinery used in the manufacturing process.
Simultaneous Engineering
Integration of CAD and CAM systems with the various aspects of a firm’s production process
Computer-Integrated Manufacturing (CIM)
Systems that combine design and manufacturing functions with other automated functions such as order taking, shipment, and billing for the complete automation of a manufacturing plant.
The efficient organization of equipment, facilities, labor, and materials. There are two types: forward and backward.
Forward Scheduling
Start with the date that materials are available, create the most efficient schedule, and then determine a shipping date based on that schedule.
Backward Scheduling
You are given a shipping or due date, and you have to determine the start date and the most efficient schedule based on when everything must be finished.
Assigning a job to a specific machine or an entire work center
Assigning the order in which jobs are processed
Gantt Chart
Used to keep tabs on production process. Formatted similarly to a horizontal bar graph; used to lay out each task in a project, the order in which these tasks must be completed, and how long each task should take.
PERT Acronym
Program evaluation and review technique
PERT Chart
Maps out the various steps involved in a project, differentiating tasks that must be completed in a certain order from tasks that may be completed simultaneously.
Critical Path
The path of sequential tasks that will take the most time to complete. Helps managers determine an overall timeline.
The task of acquiring the materials and services needed in the production process.
Inventory Control
The receiving, storing, handling, and tracking of everything in a company’s stock, from raw materials to finished products.
Types of Stock
Raw materials, unfinished products, finished products, consumables
Stock Book Solution
Stock on hand is tallied in a book along with stock on order and stock that has been sold.
Reserve Stock System
Stock is set aside in reserve so that it cannot be used unless the company needs to dip into the extra supply.
Just-in-Time (JIT) Inventory Control
Keeps the smallest amount of inventory on hand as possible, and everything else that is needed is ordered so that it arrives when it is needed.
Radio Frequency Identification (RFID)
A computerized inventory system that uses a barcode tag on each item to keep track of inventory
Materials Requirement Planning (MRP)
A computer based program used for inventory control and production planning. The system determines which parts will be needed to finish the job and compares these findings to the current inventory.
Enterprise Resource Planning (ERP)
Functions the same as MRP, but can be integrated with other business functions such as finance and human resources.
Quality Control
The use of techniques, activities, and processes to guarantee that a certain good or service meets a specified level of quality
Total Quality Management (TQM)
Checking for quality at every step and factor in production of a good. Also involved ongoing improvement of products, services, and processes.
Plan-Do-Check-Act (PDCA) Cycle
Formulate a plan to reduce potential errors, carry out that plan on a small scale, check the outcome and effectiveness of the change, and then implement the plan on a larger scale while monitoring results continually.
Statistical Quality Control (SQC)
The continual monitoring of each stage of the entire production process to ensure that quality standards are being met at every stage.
Statistical Process Control (SPC)
Uses statistical sampling of products at every phase of production and displays the results on a graph to show potential variations that need to be corrected.
Six Sigma
A method that seeks to eliminate defects by removing variation in outcomes and measuring and analyzing manufacturing processes to see if standards are being met.
International Organization for Standardization (ISO)
An organization dedicated to creating worldwide standards of quality for goods and services
ISO 9001
An ISO standard that implements a quality management system
ISO 14001
An ISO standard that implements an environmental management system

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