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Intro to Business: Chapter 9

PERT (program evaluation and review technique)
1) analyzing and sequencing tasks that need to be done
2) estimating the time needed to complete each task
3) drawing a PERT network illustrating the information from steps 1 and 2
4) identifying the critical path

critical path: the sequence of tasks that takes the longest time to complete, use PERT chart

PERT :
– when project managers analyze tasks involved in completing a project, estimate time needed for each task, and estimate the minimum time needed to complete the project, they are applying PERT to operations management

Enterprise Resource Planning (ERP)
– a newer version of MRP
– combines the computerized functions of all the divisions and subsidaries of the firm–such as finance, HR, and order fullfillment–into a single integrated software program that uses a single database

result is:
– shorter time between orders and payment
– less staff needed to do ordering and order processing
– reduced inventories
– better customer service
– any department can see the status of an order at any time

computer-aided manufacturing (CAM)
the use of computers in the manufacturing of products

ex of a production change through use of CAM:
– using a computer program to tell machines how to cut patterns for clothing

intermittent process
a production process in which the production run is short and the machines are changed frequently to make different products

when operations serve different customers with differing needs an intermittent process layout should be used in production

ex: manufacturing a piece of custom designed furniture

computer-aided design (CAD)
the use of computers in the design of products

allows workers to design products in three dimensions

computer-integrated manufacturing (CIM)
the uniting of computer-aided design with computer-aided manufacturing

while CIM is extremely useful in combining the benefits of CAD and CAM, a negative is that it can be very * expensive * to implement.

process manufacturing
that part of the production process that physically or chemically changes materials

ex: physically changing an egg during food preparation

assembly process
that part of the production process that puts together components

ex: putting together parts of a car like the engine and frame

continuous process
a production process in which long production runs turn out finished goods over time

ex:
conveyor belt constantly lowering eggs into boiling water for three minutes and then lifting them out during meal preparation

mass production
– focuses on producing a limited variety of products
developing countries are providing new markets for companies that can provide them with needed
goods and services
six sigma quality
a quality measure that allows only 3.4 defects per million opportunities
statistical quality control (SQC)
the process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning
statistical process control (SPC)
the process of testing statistical samples of product components at each stage of the production process and plotting those results on a graph. any variances from quality standards are recognized and can be corrected if beyond the set of standards
telecommuting
benefits:
– firms may choose less expensive locations
– employees are in touch with company and customers right from home
– less dependence on locating new sources of labor
production
the creation of finished goods and services using the factors of production: land, labor, capital, entrepreneurship, and knowledge

historically meant manufacturing

production management
the term used to describe all the activities managers do to help their firms create goods

the US has become a service economy that is dominated by the service sector

nature of business has changed significantlly over last 20 years as the service sector, including internet services, has grown dramatically

mass customization focuses on the needs of what type of customer
individual
customize
to make a unique product or provide a specific service to specific individuals
Data from the UN on global output from 1970 to 2009 show that America’s manufacturing output has continued to increase since the 1970s.
In fact, output is about twice as much as it was in 1970s. On its own, US manufacturing would rank as the sixth largest economy in the world. In 2009, US manufacturing output was over $2 trillion (including mining and utilities. That’s more than 45% higher than China’s.
As the US service sector becomes a larger part of the overall economy, managers will be more occupied with service productivity, and with blending services and manufacturing through the internet. How can US manufacturers and service organizations maintain a competitive edge? Most of them are:
– focusing more on customers *
– maintaining closer relationships with suppliers and other companies
– practicing continuous improvement *
– focusing on quality *
– saving on costs through site selection
– relying on the internet to unite companies to work together
– adopting production techniques such as enterprise resource planning, computer integrated manufacturing, flexible manufacturing, and lean manufacturing

the US economy is no longer based on manufacturing, as about 70 percent of US GDP comes from the service sector

operations management
a specialized area in management that converts or transforms resources (including human resources) into goods and services

in an automobile plant, O.M. transforms raw materials, HR, parts, supplies, paints, tools, and other resources into automobiles.

in a college or university, O.M. takes inputs such as information, professors, supplies, buildings, offices, and computer systems and creates services that transform students into educated people through a process called education.

operations management is so important because it is the implementation phase of management.

the goal of operations management is to: – keep operations running efficiently, create a good experience for the customer

is a specialized area of management that includes:
– production scheduling
– inventory management

operations management planning in a service environment focuses on creating a good experience for those using the service

form utility
the value producers add to materials in the creation of finished goods and services

ex: a baker making a specific type of cake from basic ingredients

the production process
consists of taking the factors of production (land, labor, capital, entrepreneurship, knowledge) and using those inputs to produce goods, services, and ideas. planning, routing, scheduling, and other activities are the means to accomplish the objective–the output

aspects of control in the production process:
– routing
– planning
– scheduling
– distribution

goods, services, and ideas are all OUTPUTS of the production process

In a production process raw materials are considered INPUTS whereas the finished products are considered OUTPUTS

ORDER in the production process:
inputs > production control > outputs

flexible manufacturing
designing machines to do multiple tasks so that they can produce a variety of products
lean manufacturing
the production of goods using less of everything compared to mass production

– less human effort, less manufacturing space, less investment in tools, less engineering time to develop a new product

a company becomes lean by continuously increasing its capacity to produce high-quality goods while decreasing its need for resources. here are some characteristics of lean companies:
– they take half the human effort
– they have half the defects in the finished product or service
– they require one-third the engineering effort
– they use half the floor space for the same output
– they carry 90 percent less inventory

technological improvements are largely responsible for the increase in productivity and efficiency of US plants

mass customization
tailoring products to meet the needs of a large number of individual customers, now practiced widely

ex of service: vacation package from a travel agency

facility location
the process of selecting a geographic location for a company’s operations

ex of facility location strategy:
– locating a bank inside of a supermarket

facility location for manufacturers
consider labor costs, availability of resources, including labor, access to transportation that can reduce time to market, proximity to suppliers, proximity to customers, crime rates, quality of life for employees, cost of living, need to train or retrain the local workforce
telecomuting
working form home via computer

information technology (IT): computers, modems, email, voice mail, text messaging, teleconferencing, etc.–is giving firms and employees increased flexibility to choose locations while staying in the competitive mainstream.

facility layout
the physical arrangement of resources (including people) in the production process

– depends greatly on the processes that are to be performed
– for services, the layout is usually designed to help the consumer find and buy things, including on the internet: a service facility layout, including on the internet, is usually designed to help customers find and buy things

assembly line layout: workers do only a few tasks at a time

modular layout: teams of workers combine to produce more complex units of the final product

fixed position layout: allows workers to congregate around the product to be completed (i.e. bridge or airplane)

* process layout: one in which similar equipment and functions are grouped together. the order in which the product visits a function depends on the design of the item. this allows for flexibility. because the layout of the plant changes so often, employees use scooters in order to more efficiently provide needed skills, supplies, and services to multiple workstations. *

materials requirement planning (MRP)
a computer based operations management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place
product layout (also called Assembly Line Layout)
used to produce large quantities of a few types of products

ex: vehicle manufacturing

process layout
frequently used in operations that serve different customers’ different needs
cellular or module layout
can accommodate changes in design or customer demand

ex: woodworking requiring differing designs of a product

fixed position layout
a major feature of planning is scheduling work operations

ex: bridge construction

purchasing
the function in a firm that searches for high quality material resources, finds the best suppliers, and negotiates the best price for goods and services
just in time (JIT) inventory control
a production process in which a minimum of inventory is kept on the premises and parts, supplies, and other needs are delivered just in time to go on the assembly line (a major production expense is holding items in storage for later use)

requires accurate production schedule (using ERP) and excellent coordination with carefully selected suppliers, who are usually connected electronically so they know what will be done and when

the goal:
– deliver the minimum amount of inventory just in time to go to the assembly line

quality
consistently producing what the customer wants while reducing errors before and after delivery to the customer

problems in checking for quality:
1) the need to inspect work requires extra people and resources
2) if an error was found, someone had to correct the mistake or scrap the product. costly.
3) if the customer found the mistake, he or she might be dissatisfied and might even buy from another firm thereafter

quality control is a never ending process of continually improving what a company produces.

* should be part of the operations management planning process * rather than simply an end of the line inspection.

the Baldrige Awards
in US in 1987, a standard was set for overall company quality with the introduction of this award.

Malcolm Baldrige National Quality Awards

to quality, an organization has to show quality in seven key areas:
– leadership, strategic planning, customer and market focus, information and analysis, human resources focus, process management, and business results

areas in which a company can apply for award:
– services, healthcare, manufacturing, nonprofit/government, small business, education

International Organization for Standardization (ISO)
is a worldwide federation of national standards bodies from more than 140 countries that set global measures for the quality of individual products. ISO is a nongovernmental organization established in 1947 to promote the development of world standards to facilitate the international exchange of goods and services. NOT an acronym, it comes from greek word isos, meaning “one-ness”

ISO 9000 is a common name given to quality management and assurance standards. some of the latest standards are called ISO 9001: 2008. the EU (european union) uses this certification in order to do business with companies.

ISO 14000 is a collection of best practices for managing an organization’s impact on the environment. as an environmental management system, it does not prescribe a performance level. requirements for certification include having an environmental policy, having specific improvement targets, conducting audits of environmental programs, and maintaining top management review of the processes.

certification in both ISO 9000 and ISO 14000 would show that a firm has a world-class management system in both quality and environmental standards.

ISO is the name for the International Organization for Standardization, which is a:
– federation whose purpose is to facilitate trade
– worldwide federation of national standards bodies

ISO 14000 is geared toward environmental impact of organizations while the focus of ISO 9000 is on * quality * .

GANTT chart
enables a production manager to see at a glance when projects are scheduled to be completed and what the status is now; a bar chart

reasons to use:
– to determine stages of a project
– to trace a production process
– to identify projects in process

what is the current state of manufacturing in the US?
activity in the nation’s manufacturing sector has declined. the result has been an increase in joblessness. one cause of that increase is the fact that companies have become more productive, meaning they need fewer employees to do the same amount of work.
how will technological improvements in production-oriented companies affect the number of workers required?
lower the number of workers required
which sector has suffered less from the economic slowdown than the manufacturing sector?
service sector
production adds ___, or utility, to materials or processes
value
according to Andrew Grove, the former chairmen of Intel, three basic requirements of production are
1) timely delivery
2) an acceptable quality level
3) at the lowest possibly cost to the consumer
time to market
moving products quickly and efficiently to customers in order to remain competitive
operations manager
responsible for producing products, and delivering them on time, on budget, and to specifications
a company may decide to locate its production operations in order to:
– use a skilled workforce
– reduce transportation costs
– reduce time to market
examples of a problem solved by operations management planning as it relates to manufacturing include:
– time to market
– inventory control
– facility location
the main idea behind mass production is
to produce a large number of a limited variety of products at a very low cost
PERT is a planning tool for projects, while
GANTT chart is a tracking tool for measuring production progress
tremendous career opportunities exist in operations management as manufacturing and service companies attempt to remain ___ in the global market
competitive
it is easier to design mass customization for services rather than products because
there is no tangible good to be adapted
in the past, CAD and CAM systems could not communicate with one another. ___ solved this problem by marrying the two systems which cuts 80% of programming time during production today
CIM – computer integrated manufacturing
the quality control steps of plan, do check, act are aimed at finding potential errors before they happen as part of:
– statistical process control
– the Deming cycle, quality control approach

Plan Do Check Act (PDCA).. idea is to find potential errors before they happen

locating operations near a supplier can greatly reduce ___ costs and allow for easier communication
transportation
global competition makes it necessary for manufacturers to consider time to market when choosing a
facility location
production methods that use computer technology to make the US more competitive globally:
– CAD
– CAM
– Lean manufacturing
Deming Cycle
quality movement geared toward finding errors before they happen
Because services are more adaptable than products it is easier to design them for:
mass customization
Economic indicators that led to President Obama’s stimulus proposal:
– Loss of jobs in housing and manufacturing
– Anticipated decrease in home values
– Increased joblessness in the Midwest

president Obama’s stimulus proposal was a result of economic indicators of joblessness showing we had entered a period of * recession *

the production process should be a sequence of steps starting with inputs, followed by production control, and ending with:
– finished products
– outputs
a hotel is an example of an organization that provides mostly
services
a restaurant is an example of an organization that produces both
services and goods
companies will relocate their production facilities to obtain less expensive:
– electricity
– water
– natural resources
what is a positive aspect of ChildrenWear Industries relocating its operations to Asia?
increased revenue for firm vacating
disadvantages of storing large quantities of items in inventory:
– items can be pilfered or stolen
– items become obsolete
– increased costs associated with inventory management
innovation and competition in the hotel industry has led operations managers to provide an increased variety of amenities to satisfy the needs of their:
customers
reasons why a company might relocate to where a resource is plentiful is to enjoy:
– a lower cost of buying
– a lower cost of shipping
developing and tracking schedules using monitoring methods such as PERT or GANTT charts during the production process is an example of applying:
production control
the United States has been producing about how much of the world’s manufactured goods?
25 percent
when project managers create bar graphs showing production managers what projects are being worked on and what stage they are in at any given time, they are applying what tool to operations management?
Gantt Chart
entrepreneurs building new green ventures will lead to:
– more employment
– a stronger economy
key reasons why producers move their plants are to:
– find skilled labor
– have a close proximity to customers
– find cheaper labor
– be closer to resources
international companies must identify their strengths and weaknesses to ___ successfully in global markets
compete
the traditional goal of manufacturing organizations was to produce goods efficiently and inexpensively while the current goal of operations management is to
respond rapidly to customers
foreign producers have become competitive in the global economy through the use of US ___ advances
technological
in the past, manufacturers dealt with many suppliers such that if one could not deliver then another would be chosen. today, this is not so because:
there is a greater emphasis on the relationship
a major benefit of CAD and CAM is that they make it possible to custom-design products to meet the needs of small markets with very little increase in ___.
costs
some service organizations, such as hospitals, try to create efficiencies in layout much like a ___
manufacturing facility
inter-firm process
using an internet focused strategy, operations managers are outsourcing design, production, and shipping to other firms through this process
bundling inputs such as information, doctors, supplies, and offices that transform sick people into healthy ones in a hospital building is an example of applying operations management to the ____ industry.
service industry
what are the computerized production methods that have made the US more competitive both domestically and globally?
– CAD
– flexible manufacturing
– CAM
– mass customization
free internet access, access to computer hardware and software, and concierge service are all examples of hotel amenities provided through effective ___.
operations management

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