PowerPoint Presentation

to Accompany
Management, 9/e
John R. Schermerhorn, Jr.

Chapter 19:
Operations Management and Services

Prepared by: Jim LoPresti

University of Colorado, Boulder
Published by: John Wiley & Sons, Inc.
 Planning Ahead — Chapter 19 Study Questions

What are the essentials of services

and operations management?

How do organizations manage
customer service and product
quality?

How can work processes be
designed for productivity?

Management 9/e - Chapter 19 2

 Study Question 1: What are the essentials of
services and operations management?

Operations management
 Managing productive systems that transform
resources into finished products, goods, and
services for customers.
 Typical operations management decisions
include:
 Resource acquisition
 Inventories
 Facilities
 Workflows and technologies
 Product quality

Management 9/e - Chapter 19 3

 Study Question 1: What are the essentials of
services and operations management?

Productivity
• Quantitative measure of the efficiency
with which inputs are transformed into
outputs.
• Productivity = Output / Input.

Competitive advantage
• A core competency that clearly sets an
organization apart from competitors and
gives it an advantage over them in the
marketplace.

Management 9/e - Chapter 19 4

Study Question 1: What are the essentials of
services and operations management?

Companies may achieve competitive

advantage in many ways, including:
 Product innovations
 Customer service

 Speed to market

 Manufacturing flexibility

 Product/service quality

Management 9/e - Chapter 19 5

Study Question 1: What are the essentials of
services and operations management?

Technology
 The combination of knowledge,
skills, equipment, computers, and
work methods used to transform
resource inputs into organization
outputs.
 Manufacturing technology.
 Service technologies.

Management 9/e - Chapter 19 6

 Study Question 1: What are the essentials of
services and operations management?

Core manufacturing technologies:

 Small-batch production.
 A variety of custom products are tailor-made to
order.
 Mass production.
 A large number of uniform products are made in
an assembly-line system.
 Continuous-process production.
 A few products are made by continuously feeding
raw materials through a highly automated
production system with largely computerized
controls.
Management 9/e - Chapter 19 7
 Study Question 1: What are the essentials of
services and operations management?

Manufacturing technology trends

 Robotics
 Flexible manufacturing systems
 Mass customization
 Cellular layouts
 Computer-integrated manufacturing
 Lean production
 Design for disassembly
 Remanufacturing

Management 9/e - Chapter 19 8

 Study Question 1: What are the essentials of
services and operations management?

Core service technologies:

 Intensive technology
 Focuses the efforts of many people with special
expertise on the needs of patients or clients.
 Mediating technology
 Links together parties seeking a mutually
beneficial exchange of values.
 Long-linked technology
 Functions like mass production, where a client is
passed from point to point for various aspects of
service delivery.

Management 9/e - Chapter 19 9

Study Question 1: What are the essentials of
services and operations management?

Value chain
 Sequence of step-by-step activities resulting in
finished goods or services with customer value.

Supply chain management

 Supply chain management is the strategic
management of all operations relating to an
organization’s resource suppliers.

Management 9/e - Chapter 19 10

Figure 19.1 Elements in an organization’s value
chain.

Management 9/e - Chapter 19 11

Study Question 1: What are the essentials of
services and operations management?

Inventory control
 Goal is to ensure that inventory is just
the right size to meet performance
needs, thus minimizing the cost.
 Methods of inventory control:
 Economic order quantity
 Just-in-time scheduling

Management 9/e - Chapter 19 12

 Study Question 1: What are the essentials of
services and operations management?

Inventory control
 Economic order quantity
 Inventory replenished with fixed quantity
order when inventory falls to predetermined
level.
 Just-in-time scheduling
 Materials arrive at workstation or facility
‘just-in-time’ for use.
 Virtually eliminates carrying costs of
inventories.

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Figure 19.2 Inventory control by economic order
quantity (EOQ).

Management 9/e - Chapter 19 14

Study Question 1: What are the essentials of
services and operations management?

Break-even analysis

Determination of the point at which
sales revenues are sufficient to
cover costs.
 Break-Even Point =
Fixed Costs / (Price – Variable Costs)
 Used in evaluating:
 New products
 New program initiatives

Management 9/e - Chapter 19 15

Figure 19.3 Graphical approach to break-even
analysis.

Management 9/e - Chapter 19 16

 Study Question 2: How do organizations manage
customer service and product quality?

ISO (International Standards

Organization) certification
 Adopted by many countries as quality benchmark.

 Companies undergo rigorous audit to determine if

ISO requirements are met.
 Focus is on customer service and product quality.

Management 9/e - Chapter 19 17

 Study Question 2: What is a customer-driven
organization?

Customer relationship management

– Establishes and maintains high standards of
customer service in order to strategically build
lasting relationships with and add value to
customers.
• External customers purchase the organization’s
goods or utilize its services.
• Internal customers are the persons and groups
within an organization who depend on the results
of others' work to do their own jobs.

Management 9/e - Chapter 19 18

 Study Question 2: How do organizations manage
customer service and product quality?

Customer Relationship Management

(CRM)
 Uses latest technologies for intensive
customer communication and collection
of data regarding customer needs and
desires.
 Establishes and maintains high
standards of customer service.

Management 9/e - Chapter 19 19

Figure 19.4 The importance of external and internal customers.

Management 9/e - Chapter 19 20

Study Question 2: How do organizations manage
customer service and product quality?

Total quality management (TQM)

 Quality principles are an integral part of
organization’s strategic objectives.
 Applying them to all aspects of
operations.
 Committing to continuous improvement.
 Striving to meet customers’ needs by
doing things right the first time.

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Study Question 2: How do organizations manage
customer service and product quality?

Quality and Continuous

Improvement
 W. Edwards Deming emphasized:
 Constant innovation.
 Use of Statistical methods.

 Training in the fundamentals of quality

assurance.
 Continuous improvement
 Quality circles

Management 9/e - Chapter 19 22

 Study Question 2: How do organizations manage
customer service and product quality?

Continuous improvement
• Constant search for new ways to improve current
performance.
• Reduce cycle time between order receipt and
delivery.

Quality circle
• Small group of workers who meet to improve
quality
• Assumes responsibility for quality
• Taps into members’ creativity

Management 9/e - Chapter 19 23

Study Question 2: How do organizations manage
customer service and product quality?

Statistical quality control

 Uses rigorous statistical analysis for checking
processes, materials, products, and services to
ensure that they meet high standards.
 Takes random work samples
 Measures quality in samples
 Determines acceptability
 Unacceptable quality results in corrective
action
 “Six Sigma” common example of SQC

Management 9/e - Chapter 19 24

Figure 19.5 Sample control chart showing upper
and lower control limits.

Management 9/e - Chapter 19 25

 Study Question 3: How can work processes be
designed for productivity?

Process reengineering
 Systematic and complete analysis of work
processes.
 Design of new and better work processes.

Work process
 “A related group of tasks that create a result of
value for the customer.” (Michael Hammer)

Workflow
 Movement of work from one point to another in
the manufacturing or service delivery process.

Management 9/e - Chapter 19 26

 Study Question 3: How can work processes be
designed for productivity?

Process value analysis

 Core processes are identified and
evaluated for their performance
contributions.
 Each step in workflow is examined
 Step is eliminated if not found to be
important, useful, and contributing to the
value added

Management 9/e - Chapter 19 27

Study Question 3: How can work processes be
designed for productivity?

Steps in reengineering core processes:

 Identify core processes.
 Map core processes in respect to workflows.
 Evaluate all tasks for core processes.
 Search for ways to eliminate unnecessary
tasks or work.
 Search for ways to eliminate delays, errors,
and misunderstandings.
 Search for efficiencies in how work is shared
and transferred among people and
departments.

Management 9/e - Chapter 19 28

Figure 19.6 How reengineering can streamline work
processes.

Management 9/e - Chapter 19 29

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