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2. Objectives
1. Definitions of production, productivity, and quality
2. An understanding of the importance of operations and production strategies,
systems, and processes
3. Insights into the role of operations management concepts in the workplace
4. An understanding of how operations control procedures can be used to
control production
5. Insights into operations control tools and how they evolve into a continual
improvement approach to production management and control
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3. Production
Defining Production
Productivity
Productivity = Outputs / Inputs
Traditional strategies for increasing productivity by improving :
1. Effectiveness of the organizational workforce through training
2. Production process through automation
3. Product design to make products easier to assemble
4. Production facility by purchasing more modern equipment
5. Quality of workers hired to fill open positions
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4. Production
Quality and Productivity
Focus on Continual Improvement
Focus on Quality and Integrated Operations
Quality Assurance
 Statistical Quality Control
 “No Rejects” Philosophy
Quality Circles
Automation
Strategies, Systems, and Processes
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5. Production
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6. Production
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7. Operations Management
Defining Operations Management
Performance of managerial activities entailed in:
Selecting
Designing
Operating
Controlling
Updating production systems
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8. Operations Management
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9. Operations Management
Operations Management Considerations
 Involves managers
 Takes place within the context of objectives and policies
 Standards for effectiveness and efficiency
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10. Operations Management
Operations Management Considerations (continued)
Capacity Strategy
 Five Steps in Capacity Decisions
1. Measure the capacity of currently available facilities
2. Estimate future capacity needs on the basis of demand forecasts
3. Compare future capacity needs and available capacity
4. Identify ways to accommodate long-range capacity changes
5. Select best alternative based on quantitative and qualitative evaluation
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11. Operations Management
Operations Management Considerations (continued)
Location Strategy
 Factors in a Good Location
 Nearness to market and distribution centers
 Nearness to vendors and resources
 Requirements of federal, state, and local governments
 The character of direct competition
 The degree of interaction with the rest of the corporation
 The quality and quantity of labor pools
 The environmental attractiveness of the area
 Taxes and financing requirements
 Existing and potential transportation
 The quality of utilities and services
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12. Operations Management
Operations Management Considerations (continued)
Product Strategy
Process Strategy
 Types of Processes
1) Continuous process
2) Repetitive process
3) Job-shop process
Layout Strategy
1. Product layout
2. Process (functional) layout
3. Fixed-position layout
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13. Operations Management
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14. Operations Management
Operations Management Considerations (continued)
Human Resources Strategy
Human resource imperatives:
1. Optimize individual, group, and organizational effectiveness
2. Enhance the quality of organizational life
 Operational Tools in Human Resources Strategy
 Manpower planning
 Job design
 Work methods analysis
 Motion-study techniques
 Work measurement methods
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15. Operations Control
Just-in-Time Inventory Control
Just-in-time (JIT)
Best Conditions for JIT
Advantages of JIT
Characteristics of JIT
1. Closeness of suppliers
2. High quality of materials purchased from suppliers
3. Well-organized receiving and handling of materials purchased
4. Strong management commitment
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16. Operations Control
Maintenance Control
Pure-preventive maintenance policy
Pure-breakdown (repair) policy
Cost Control
Stages in Cost Control
1. Establishing standard or planned cost amounts
2. Measuring actual costs incurred
3. Comparing planned costs to incurred costs
4. Making changes to reduce actual costs to planned costs
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17. Operations Control
Budgetary Control
Potential Pitfalls of Budgets
1. Placing too much emphasis on relatively insignificant expenses
2. Increasing budgeted expenses without adequate information
3. Ignoring the fact that budgets must be changed periodically
Human Relations Considerations in Using Budgets
Reducing Human Relations Problems
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18. Operations Control
Ratio Analysis
1. Liquidity ratios
2. Leverage ratios
3. Activity ratios
4. Profitability ratios
Using Ratios to Control Organizations
 Evaluate all ratios simultaneously
 Compare computed values with industry averages
 Incorporate trend analysis
Materials Control
Procurement of Materials
Receiving, Shipping, and Trafficking
Inventory and Shop-Floor Control
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19. Operations Control
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20. Selected Operations Control Tools
Using Control Tools to Control Organizations
Inspection
To Inspect or Not to Inspect
Management by Exception
Establishing Rules
Management by Objectives
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21. Selected Operations Control Tools
Break-Even Analysis
Basic Ingredients of Break-Even Analysis
1. Fixed costs
2. Variable costs
3. Total costs
4. Total revenue
5. Profits
6. Loss
7. Break-even point
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22. Selected Operations Control Tools
Break-Even Analysis (continued)
Types of Break-Even Analysis
 Algebraic Break-Even Analysis
BE = FC / ( P - VC )
 Graphic Break-Even Analysis
 Advantages of Using the Algebraic and Graphic Break-Even Methods
Control and Break-Even Analysis
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23. Selected Operations Control Tools
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24. Selected Operations Control Tools
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25. Selected Operations Control Tools
Other Broad Operations Control Tools
Decision Tree Analysis
Process Control
Value Analysis
Computer-Aided Design
Computer-Aided Manufacturing
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26. Questions
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