Publishing as Prentice Hall

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1 19-1

2 Explain the role of operations management Define the nature and purpose of value chain management Describe how value chain management is done Discuss contemporary issues in managing operations 19-2

3 The Role of Operations Management Operations management - the transformation process that converts resources into finished goods and services. 19-3

4 Managing Productivity Productivity The overall output of goods or services produced divided by the inputs needed to generate that output A composite of people and operations variables Benefits of Increased Productivity Economic growth and development Higher wages and profits without inflation Increased competitive capability due to lower costs 19-4

5 Services and Manufacturing Manufacturing organizations - organizations that produce physical goods. Service organizations - organizations that produce nonphysical products in the form of services. 19-5

6 Exhibit 19-1: The Operations System 19-6

7 Strategic Role of Operations Management The era of modern manufacturing began in the U.S. over 100 years ago. After WWII, U.S. manufacturers focused on functional areas other than manufacturing. By the 1970 s, foreign competitors integrated manufacturing technologies and were producing quality goods at lower costs. U.S manufacturers responded by investing in updated technology, restructuring organizations, and including production requirements in their strategic planning. 19-7

8 Managing Operations Using Value Chain Management Value - the performance characteristics, features, attributes, and any other aspects of goods and services for which customers are willing to give up resources. Value chain - the entire series of organizational work activities that add value at each step from raw materials to finished product. 19-8

9 Managing Operations Using Value Chain Management Value chain management - the process of managing the sequence of activities and information along the entire value chain. 19-9

10 Value Chain Management Requirements for Value Chain Management A new business model incorporating: Coordination and collaboration Investment in information technology Changes in organizational processes Committed leadership Flexible jobs and adaptable, capable employees A supportive organizational culture and attitudes 19-10

11 Value Chain Strategy Organizational processes - the ways that organizational work is done

12 Exhibit 19-2: Value Chain Strategy Requirements 19-12

13 Obstacles to Value Chain Organizational barriers Management Refusal or reluctance to share information Reluctance to shake up the status quo Security issues Cultural attitudes Lack of trust and too much trust Fear of loss of decision-making power Required capabilities Lacking or failing to develop the requisite value chain management skills 19-13

14 Obstacles to Value Chain People Management (cont.) Lacking commitment to do whatever it takes Refusing to be flexible in meeting the demands of a changing situation Not being motivated to perform at a high level Lack of trained managers to lead value chain initiatives 19-14

15 Exhibit 19-3: Obstacles to Value Chain Management 19-15

16 Current Issues in Managing Operations Technology s Role in Manufacturing Increased automation and integration of production facilities with business systems to control costs Predictive maintenance, remote diagnostics, and utility cost savings Quality - the ability of a product or service to reliably do what it s supposed to do and to satisfy customer expectations 19-16

17 Current Issues in Managing Operations Quality Initiatives Planning for quality Organizing and leading for quality Controlling for quality 19-17

18 Quality Goals ISO a series of international quality management standards that set uniform guidelines for processes to ensure that products conform to customer requirements

19 Quality Goals (cont.) Six Sigma - a quality program designed to reduce defects, help lower costs, save time, and improve customer satisfaction

20 Mass Customization and Lean Organization Mass customization - providing customers with a product when, where, and how they want it. Lean organization - an organization that understands what customers want, identifies customer value by analyzing all activities required to produce products, and then optimizes the entire process from the customer s perspective

21 Terms to Know operations management manufacturing organizations service organizations productivity value value chain value chain management organizational processes RFID intellectual property quality ISO 9000 Six Sigma mass customization Cellular manufacturing 19-21

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