Chapter 07 Lecture Notes Page

Chapter 7

Managing Operations and Improving Quality

Chapter Overview

Operations (or production) is the process and activities for transforming
resources into finished services and goods for customers. The operations
function creates four kinds of utility - time utility, place utility,
possess utility, and form utility - to meet customer needs.

Performing a service is different from manufacturing a good in several key
ways: the raw material for service production includes the people who are
seeking the service. In addition, most services are intangible,
customized, and can not be stored. Because of these characteristics,
service providers generally focus on the customer service, often
acknowledging the customer as part of the operations process.

Operations planning for both goods and services involves the analysis of
five key factors: Capacity planning requires determining how much of a
product a firm must be able to produce. Location planning involves
choosing among potential facility sites. Layout planning entails designing
an effective, efficient facility. Quality planning ensures that products
meet a firm's quality standards. Methods planning involves identifying
specific production steps and methods for performing them.

Total quality management (TQM) includes any activity designed to get high
quality products to the marketplace. Important TQM tools include
statistical process control, quality/cost studies, getting closer to the
customer, business process reengineering, IS 9000, and outsourcing.

The concept behind supply chain management is that members of the supply
chain - the stream of all activities and companies that create a product -
can gain competitive advantage by working together as a coordinated system
of units. Managing the chain as a whole has yielded better service and
lower prices, leading customers to prefer the products produced by the
supply chain, which, in turn, benefits all of its members.

Chapter Objectives

1. Explain the meaning of the term operations and describe the four kinds
of utility operations processes provide.
2. Identify the characteristics that distinguish service operations from
goods production and explain the main differences of the service
focus.
3. Describe the factors involved in operations planning.
4. Identify some of the key tools for total quality management, including
strategies for getting closer to the customer.
5. Explain how a supply chain strategy differs from traditional
strategies for coordinating operations among firms.


REFERENCE OUTLINE


Opening Case: A Supersonic Project Gets Off the Ground (I)


I. Goods and Services Operations
A. Growth in the Service and Goods Sectors
B. The Growth of Global Operations

II. Creating Value Through Operations
A. Operations Processes
1. Goods-Manufacturing Processes: Analytic vs. Synthetic
Processes
2. Service Processes: Extent of Customer Contact
B. Differences between Service and Manufacturing Operations
1. Focus on Performance
2. Focus on Process and Outcome
3. Focus on Service Characteristics
4. Focus on the Customer-Service Link
5. Focus on Service Quality Considerations

III. Operations Planning
A. Capacity Planning
1. Capacity Planning for Producing Goods
2. Capacity Planning for Producing Services
B. Location Planning
1. Location Planning for Producing Goods
2. Location Planning for Producing Services
C. Layout Planning
1. Layout Planning for Producing Goods
2. Layout Planning for Producing Services
D. Quality Planning
E. Methods Planning
1. Methods Improvement in Goods
2. Methods Improvement in Services

IV. Operations Scheduling
A. Scheduling Goods Operations
B. Scheduling Service Operations

V. Operations Control
A. Materials Management
B. Tools for Operations Process Control
1. Work Training
2. Team Production Systems: Just-Time Operations
3. Material Requirements Planning
4. Quality Control


VI. Quality Improvement
A. Managing for Quality
1. Planning for Quality
2. Organizing for Quality
3. Directing for Quality
4. Controlling for Quality
B. Tools for Total Quality Management
1. Statistical Process Control
2. Quality/Cost Studies
3. Getting Closer to the Customer
4. ISO 9000
5. Process Reengineering
6. Outsourcing

VII. Adding Value Through Supply Chains
A. The Supply Chain Strategy
B. Supply Chain Management

LECTURE OUTLINE

I. Goods and Services Operations (Use PowerPoint 7.4.)

Service operations provide tangible and intangible services; firms
that make tangible products are engaged in goods production.


A. Growth in the Service and Goods Sectors (Use PowerPoint 7.5.)


The economic significance of the manufacturing sector is
increasing. Real income from manufacturing has been steadily
rising, increasing by more than 30 percent in the past decade;
in addition, the United States returned to the number-one spot
for the eighth straight year in 2001 - ahead of Japan and
Germany.

B. The Growth of Global Operations (Use PowerPoint 7.6.)


Global competition has made production a faster-paced, higher-
tech, "cleaner" activity.

Notes:
____________________________________________________________________________
____________________________________________________________________________
______________________________________________

II. Creating Value Through Production (Use PowerPoint 7.7.)


Both services and goods provide consumers with utility, which is
the ability of a product to satisfy a human want. Time utility is
created when marketers make products available when consumers want
them; place utility is created when products are made available
where they are convenient for consumers; ownership utility is
created when products become available for consumer to own and use;
and, form utility is created merely through transforming raw
materials into finished goods.


A. Operations Processes (Use PowerPoint 7.8.)

An operations process is a set of methods and technologies used
in the production of goods and services.


1. Goods-Manufacturing Processes: Analytic vs. Synthetic
Processes. An analytic process converts raw materials
into components; a synthetic process converts raw
materials into finished goods.




2. Service Processes: Extent of Customer Contact. In high-
contact processes, the customer must be a part of the
service; in low-contact processes, customers do not have
to be present while the service transaction is being
performed.

B. Differences between Service and Manufacturing Operations (Use
PowerPoint 7.9.)


1. Focus on Performance. Goods are produced, while
services are performed. Because services are more
intangible and customized than most products, service
operations tend to be more complex than goods production.

2. Focus on Process and Outcome. Manufacturing operations
focus on the outcome of the production process, but the
products of most service operations are combinations of
goods and services.
3. Focus on Service Characteristics. Intangibility,
services that cannot be touched, tasted, or smelled;
customization, services that are designed for
individuals' needs; and, unstorability, services that
cannot be packaged and stored, characterize service
transactions.

4. Focus on Customer-Service Link. Service operations often
acknowledge the customer as part of the service
transaction itself.

5. Focus on Quality Considerations. Customers use different
criteria to judge services and goods; consumer
perceptions of service quality are highly subjective
because of the intangible nature of services.

Notes:
____________________________________________________________________________
____________________________________________________________________________
______________________________________________

III. Operations Planning (Use PowerPoint 7.10.)

Managers from many departments contribute to the firm's decisions
about operations management; this is a process of logical steps
upon which the success of the firm depends. The overall business
plan guides operations planning, as do qualitative and quantitative
forecasts.


A. Capacity Planning

The amount of a product that a company can produce under normal
working conditions is its capacity. A firm's capacity depends
on how many people it employs and the number and size of its
facilities.


1. Capacity Planning for Producing Goods. Capacity planning
means ensuring that a firm's capacity just slightly