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Essentials of
Contemporary
Management
Chapter
14
Operations Management:
Managing Vital Operations and Processes
PowerPoint Presentation by Charlie Cook
© Copyright The McGraw-Hill Companies, Inc., 2004. All rights reserved.
Learning Objectives
• After studying the chapter, you should be able to:
Explain the role of operations management in
achieving superior quality, efficiency, and
responsiveness to customers.
Describe what customers want, and explain why it is
so important for managers to be responsive to their
needs.
Explain why achieving superior quality in an
organization’s operations and processes is so important.
Explain why achieving superior efficiency is so
important.
© Copyright 2004 McGraw-Hill. All rights reserved.
14–2
Learning Objectives (cont’d)
Differentiate among facilities layout, flexible
manufacturing, just-in-time inventory, and
process reengineering.
© Copyright 2004 McGraw-Hill. All rights reserved.
14–3
Operations Management Concepts
• Operations Management
The management of any aspect of the production
system that transforms inputs into finished goods
and services.
Production system
• The system used to acquire inputs, convert the
inputs into outputs, and dispose of the outputs.
Operations manager
• Responsible for managing the firm’s production
system and for determining where operating
improvements are to be made.
© Copyright 2004 McGraw-Hill. All rights reserved.
14–4
Operations Management and
Competitive Advantage
Concepts
Quality
Goods and services that are reliable,
dependable, or psychologically satisfying to
customers.
Efficiency
The amount of input needed to produce a given
output. Less input required lowers cost and
waste.
Responsiveness to Actions taken to respond to customer needs.
customers
Firms can react quickly and correctly to
customer needs as they arise.
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14–5
The Purpose of Operations Management
Figure 14.1
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14–6
Improving Responsiveness to Customers
• Without customers, organizations would cease
to exist.
Non-profit and for-profit firms all have customers.
Managers need to identify who the customer is and
their needs.
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14–7
Improving Responsiveness to Customers
• What do customers want?
Usually customers prefer:
• A lower price to a higher price.
• High-quality products to low-quality products.
• Quick service to slow service (also prefer good
after-sale support).
• Many features over few features.
• Products that are customized or tailored to their
specific needs.
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Improving Quality
• The concept of quality applies to the products
of both manufacturing and service firms.
A firm that provides higher quality than others at
the same price is more responsive to customers.
Higher quality can also lead to better efficiency
through lower waste levels and operating costs.
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14–9
Impact of Increased Quality on
Organizational Performance
Figure 14.2
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14–10
Improving Efficiency
•
The fewer the inputs required to produce a
given output, the higher the efficiency of a
production system.
A
measure of the organization’s efficiency in
turning all of its inputs into outputs is:
outputs
Total factor productivity 
all inputs
A
measure of a single input (such as labor) to
total output (i.e., partial productivity):
outputs
Labor productivity 
direct labor
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14–11
Facilities Layout, Flexible Manufacturing,
and Efficiency
• Facilities Layout
The operations management technique whose goal
is to design the machine-worker interface to
increase production system efficiency.
• Flexible Manufacturing
Operations management techniques that attempt to
reduce the setup costs associated with a production
system.
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14–12
Three Facilities Layouts
Figure 14.3
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14–13
Facilities Layout
• Product layout
Machines are organized so that each operation is
performed at work stations arranged in a fixed
sequence.
• Example: mass production systems where
workers are stationary and a belt moves work to
them.
• Process Layout
Self contained work stations not organized in a
fixed sequence.
• Provides flexibility in making a wide variety of
products tailored to customers.
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14–14
Facilities Layout (cont’d)
• Fixed-Position Layout
The product stays in a fixed spot and components
produced at remote stations are brought the
product for to final assembly.
• Large jet aircraft assembly
uses this type of layout.
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14–15
Changing a Facilities Layout
Figure 14.4
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14–16
Flexible Manufacturing
• Most firms face major expenses when setting
up to produce a product.
These costs must be paid before production begins.
• The more often products to be built change, the
higher setup costs become.
Flexible manufacturing reduces setup costs by
reducing the time required to reset the production
line for a different product by:
• Using easily replaced manufacturing equipment.
• Redesigning the production system itself to be
more productive.
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14–17
Just-in-Time Inventory and Efficiency
• Just-in-Time (JIT) Inventory
Benefit of JIT
• Reduces inventory holding costs for
warehousing, storage, inventory tracking, and the
cost of capital tied up in inventory.
Drawback to JIT
• Firm does not maintain a large buffer stock of
parts which makes the firm vulnerable to strikes
or supply problems that can quickly deplete onhand inventories.
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14–18
Efficient Manufacturing
• Self-managed teams boost efficiency by
allowing for a flatter organization structure.
• The team takes on the role of the supervisor.
• Teams working together often become very
skilled at enhancing productivity.
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14–19
Process Reengineering and Efficiency
• Process Reengineering
A fundamental rethinking and radical redesign of
the business process to achieve dramatic
improvement in critical measures of performance.
• Boosts efficiency by directing efforts to activities
that add value to the good or service produced.
• Top managers must support efficiency
improvements for them to be accepted by
workers.
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14–20
Operations Management:
Some Remaining Issues
• Quality and Efficiency- Is It Worth It?
Achieving superior responsiveness requires
profound shift change in management operations
and in the culture of an organization.
Without hard work and persistence, change will not
succeed.
Managers must consider the ethical implications
and human costs of adopting JIT, flexible
manufacturing, and reengineering.
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14–21