Productivity and Quality in Operations

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Chapter 17
Productivity and Quality in Operations
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What is Operations Management?
Operations management is concerned with the
design, planning, and control of the factors that
enable us to provide the product or service
outputs of the organization.
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Importance of Making the Right Decisions

• Decision Making is Critical to Operations
  Management
• Operational managers must make decisions to
  ensure that the firms product or service output
  happens
• In the amount demanded.
• At the right time.
• With the appropriate quality level.
• In a manner that is compatible with the
  organization's goals.

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Manufacturing vs. Service Operating Systems
Distinctive characteristics of manufacturing vs.
service
Manufacturing
Service
Output often lacks physical qualities Cannot
stockpile inventories of finished
products Production and consumption usually is
simultaneous Quality is more difficult to access
Output is a physical product Can stockpile
inventories of finished products Production and
consumption is not simultaneous Quality is
relatively easy to access
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Structural Differences Among Operating Systems

• Volume/Variety Continuum
• Individual operating systems can be categorized
  along a volume/variety continuum, as illustrated
  in the next slide.

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Classification Scheme for Different Operating
Systems
Low variety/High volume (Specific purpose)
High variety/Low volume (Flexible purpose)
Volume/variety continuum
Product orientation Manufacturing - Repetitive,
assembly line - Continuous-flow
systems Service - Standard service systems
Process orientation Manufacturing - Job-shop
production system - Project systems Service -
Custom service systems
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Types of Manufacturing Systems Slide 1 of 2

• Repetitive, Assembly Line, or Mass- Production
  Systems
• Produces a high volume of discrete items.
• Continuous-Flow Production System
• Produces high volume of a continuous product or
  nondiscrete item.
• Job-Shop Production System
• Produces small quantities of a wide variety of
  specialized items.

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Types of Manufacturing Systems Slide 2 of 2

• Project Production System
• Produces large scale, unique items.

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Types of Service Systems

• Standard Service Systems
• Service systems (like a college dormitory
  cafeteria line) that are assembly line in
  nature.
• Custom Service Systems
• Service systems that are designed to provide
  different services to clients that have different
  needs.

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Operations Management Decision Areas
To operate any business organization, a number of
decisions must be made. Based upon the time
frame involved, these decisions can be
conveniently categorized as long-term system
design decisions or as short-term operating and
control decisions.
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Long-Term System Design Decisions Slide 1 of 4

• Choice of a Product or Service
• Product or Service Design
• System Capacity
• Process Selection
• Facility Location

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Long-Term System Design Decisions Slide 2 of 4

• Issues Pertaining to Facility Layout
• Process layout
• A configuration flexible enough to accommodate a
  wide diversity of products or customers.
• Product layout
• A configuration set for a specific purpose, with
  all product or service demands essentially
  identical.

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Long-Term System Design Decisions Slide 3 of 4

• Issues Pertaining to Facility Layout (cont.)
• Hybrid layout
• A configuration containing some degree of
  flexibility, lying between the extremes of
  process and product layouts.
• Fixed position layout
• A configuration used for large or bulky items
  that remain stationary in the manufacturing
  process.

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Long-Term System Design Decisions Slide 4 of 4
Concept development
Steps in Product Design
Preliminary design
Make versus buy decision
Transformation process design
Seek suppliers
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Short-Term Operating and Control Decisions Slide
1 of 4

• Aggregate Planning
• Link between the more general business planning
  activities and the more specific master planning
  activities.
• Master Production Schedule
• A detailed statement of projected production
  quantities for each item in each time period.

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Short-Term Operating and Control Decisions Slide
2 of 4

• Inventory Management
• One of the most studied of the short-term
  decisions deals with the control of inventories.
• Items in inventory may exist in any of four
  forms
• Raw materials, work-in process, finished goods,
  supplies.

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Short-Term Operating and Control Decisions Slide
3 of 4

• Materials Requirements Planning
• Methodology that uses the production schedule for
  the finished products to derive demand and
  production schedules for component items that
  make up the final product.
• Just-in-Time Inventory Management
• A philosophy that advocates eliminating waste,
  solving problems, and striving for continual
  improvement in operations.

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Short-Term Operating and Control Decisions Slide
4 of 4

• Supply Chain Management
• Management and control of the sequence of
  suppliers, warehouses, operations, and retail
  outlets for an organization.

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The Role of Productivity and Quality in Operations

• Productivity
• A measure of the efficiency with which a firm
  transforms inputs into outputs, calculated as
  output divided by input.
• In the broadest sense, productivity is defined as
  follows

system outputs
Productivity
system inputs
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Improving Productivity
Productivity Improvement Through Technology
Productivity Improvement Through a Diverse Work
Force
Productivity Improvement Through Design
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Fundamentals of Quality Slide 1 of 3

• Consumer Perspective
• Quality can be defined as the degree to which the
  product or service meets the expectations of the
  customer.
• Producer Perspective
• Quality can be defined as the degree to which the
  product or service conforms to design
  specifications.

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Fundamentals of Quality Slide 2 of 3

• Quality Control (QC)
• Focuses on the actual measurement of output to
  see if specifications have been met.
• Quality Assurance (QA)
• Focuses on any activity that influences the
  maintenance of quality at the desired level.

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Fundamentals of Quality Slide 3 of 3

• Total Quality Management (TQM)
• A systematic approach for enhancing products,
  services, processes, and operational quality
  control.

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Factors for Assessing Quality

• Product Factors
• Aesthetics, features, performance, reliability,
  serviceability, durability, conformance, and
  perceived quality.
• Service Factors
• Responsiveness, reliability, assurance, empathy,
  and tangibles.

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Cost of Quality

• Prevention Costs
• Appraisal Costs
• Internal-Failure Costs
• External-Failure Costs

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TQM as a Tool for Global Competitiveness Slide 1
of 4

• The Emphasis on Quality is Crucial for Two
  Reasons
• Customers are becoming increasingly conscious of
  quality in their choice of products and services.
• Increased quality leads to increased productivity
  and its associated benefits.

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TQM as a Tool for Global Competitiveness Slide 2
of 4

• Customer-Driven Standards
• External customer
• User of an item who is not a part of the
  organization that supplies the item.
• Internal customer
• User of an item who is a member of, or employee
  of, the organization that supplies the item.

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TQM as a Tool for Global Competitiveness Slide 3
of 4

• Management and Labor Commitment
• Organization and Coordination of Effects
• Benchmarking
• The process of comparing ones own products,
  services, or processes against those of industry
  leaders for the purpose of improvement.
• Kaizen
• Japanese term referring to the total quality
  management principle of continuous improvement.

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TQM as a Tool for Global Competitiveness Slide 4
of 4

• Employee Participation
• Quality Circle
• A work team that meets regularly to identify,
  analyze, and solve problems related to its work
  area.
• Special-Purpose Team
• A temporary team formed to solve a special or
  nonrecurring problem.

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Prominent Quality Management Philosophers Slide
1 of 2

• W. Edwards Deming
• Perhaps the most prominent quality philosopher,
  he devised a 14-point plan to summarize his
  philosophy on quality improvement.
• Joseph Juran
• Observed that over 80 percent of quality defects
  are caused by factors controllable by management.
• Developed a trilogy of planning, control, and
  implementation.

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Prominent Quality Management Philosophers Slide
2 of 2

• Others
• Armand Feigenbaum
• Introduced the concept of total quality control.
• Kaoru Ishikawa
• Introduced quality control circles.
• Philip Crosby
• Introduced the philosophy that quality is free.