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Chapter 09 - Production and Operations Management
9-1
chapter
.
Production and
Operations Management
what's new in this edition 9.3
brief chapter outline and learning objectives 9.5
lecture outline and lecture notes 9.7
PowerPoint slide notes 9.45
lecture enhancers 9.67
lecture enhancer 9-1: AMERICAN MANUFACTURING GROWS AT RECORD PACE 9.67
lecture enhancer 9-2: MANUFACTURERS MAKE DO WITH OLD EQUIPMENT 9.67
lecture enhancer 9-3: TOLEDO’S SUNNY FUTURE 9.68
lecture enhancer 9-4: INSIDE PAMPERS’ DIAPER LAB 9.69
lecture enhancer 9-5: PLEASING EVERYBODY WITH MASS CUSTOMIZATION 9.69
lecture enhancer 9-6: URBAN AGRICULTURE IN DETROIT 9.70
lecture enhancer 9-7: SPYING ON THE GREEN GIANT 9.70
lecture enhancer 9-8: MOTOROLA AND SIX SIGMA 9.71
lecture enhancer 9-9: THE FUTURE OF MANUFACTURING TECH 9.71
critical thinking exercises 9.72
critical thinking exercise 9-1: GROUP PROJECT: ORGANIZING PRODUCTION 9.72
critical thinking exercise 9-2: PRODUCTION PROCESSES 9.74
critical thinking exercise 9-3: SITE SELECTION 9.76
9
Chapter 09 - Production and Operations Management
9-2
critical thinking exercise 9-4: DESIGNING PLANT LAYOUT 9.78
critical thinking exercise 9-5: DRAWING A PERT DIAGRAM 9.79
bonus cases 9.80
bonus case 9-1: THE STATE OF AMERICAN MANUFACTURING 9.80
bonus case 9-2: A SMALL HOMECOMING BY AMERICAN MANUFACTURERS 9.82
Chapter 09 - Production and Operations Management
9-3
what’s new in
this edition
additions to the 11th edition:
• Getting to Know Shahid Khan
• Name That Company: Ritz Carlton
• Seeking Sustainability: Your Own Farm in a Box
• Reaching Beyond Our Borders: Nobody Does It Better
• Spotlight on Small Business: Make Your Own Kind of Music
• Key Term: Robotics
• Section: Robotics
• Section: Using sensing, measurement, and process control
• Video Case: Ball Corporation
revisions to the 11th edition:
• Making Ethical Decisions: Do We Stay or Do We Go?
• Statistical data and examples throughout the chapter were updated to reflect current information.
deletions from the 10th edition:
• Getting to Know Samuel J. Palmisano
• Name That Company: Allen-Bradley
• Thinking Green
• Reaching Beyond Our Borders
• Spotlight on Small Business
Chapter 09 - Production and Operations Management
9-4
Chapter 09 - Production and Operations Management
9-5
brief chapter outline
and learning objectives
CHAPTER 9
PRODUCTION AND OPERATIONS MANAGEMENT
Getting to Know SAHID KHAN of FLEX-N-GATE
learning objective 1
Describe the current state of U.S. manufacturing and what manufac-
turers have done to become more competitive.
I. MANUFACTURING AND SERVICES IN PERSPECTIVE
A. Manufacturers and Service Organizations Become More Competitive
learning objective 2
Describe the evolution from production to operations management.
II. FROM PRODUCTION TO OPERATIONS MANAGEMENT
A. Operations Management in the Service Sector
learning objective 3
Identify various production processes and describe techniques that
improve productivity, including computer-aided design and manufacturing,
flexible manufacturing, lean manufacturing, mass customization, and ro-
botics.
III. PRODUCTION PROCESSES
A. The Need to Improve Production Techniques and Cut Costs
B. Computer-Aided Design and Manufacturing
C. Flexible Manufacturing
D. Lean Manufacturing
E. Mass Customization
F. Robotics
G. Using Sensing, Measurement and Process Control
learning objective 4
Describe operations management planning issues including facility lo-
cation, facility layout, materials requirement planning, purchasing, just-in-
time inventory control, and quality control.
IV. OPERATIONS MANAGEMENT PLANNING
A. Facility Location
B. Facility Location for Manufacturers
Chapter 09 - Production and Operations Management
9-6
C. Taking Operations Management to the Internet
D. Facility Location in the Future
E. Facility Layout
F. Materials Requirement Planning
G. Purchasing
H. Just-in-Time Inventory Control
I. Quality Control
J. The Baldrige Awards
K. ISO 9000 and ISO 14000 Standards
learning objective 5
Explain the use of PERT and Gantt charts to control manufacturing
processes.
V. CONTROL PROCEDURES: PERT AND GANTT CHARTS
VI. PREPARING FOR THE FUTURE
VII. SUMMARY
Chapter 09 - Production and Operations Management of Goods and Services
9-7
Getting to Know SHAHID KHAN, CEO of FLEX-N-GATE
Pakistani immigrant Shahid Khan went from earning $1.20 an hour washing dishes
to building a multi-billion dollar auto parts empire.
learning objective 1
Describe the current state of U.S. manufacturing and what manufacturers have
done to become more competitive.
I. MANUFACTURING AND SERVICES IN
PERSPECTIVE
A. MANUFACTURING AFFECTS THE U.S. ECONOMY
1. The recent recession resulted in increased un-
employment and a dramatic fall in the stock mar-
ket.
a. The U.S. is still in a leadership position.
b. Some areas of the country enjoyed economic
growth from manufacturing while others
experienced declines.
2. GAINS IN PRODUCTIVITY
a. Productivity gains have lowered the number
of manufacturing workers that manufacturers
need.
b. The U.S. economy is no longer manufacturing-
based.
Operations management in this hotel company includes restaurants that offer the finest in ser-
vice, elevators that run smoothly, and a front desk that processes people quickly. It may in-
clude fresh-cut flowers in the lobbies and dishes of fruit in every room. Name that company.
(Students should read the chapter before guessing the company’s name: Ritz Carlton.)
Chapter 09 - Production and Operations Management of Goods and Services
9-8
PPT 9-1
Chapter Title
Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Production
and
Operations
Management
CHAPTER 9
PPT 9-2
Learning Objectives
LEARNING OBJECTIVES
9-2
1. Describe the current state of U.S. manufacturing and
what manufacturers have done to become more
competitive.
2. Describe the evolution from production to operations
management.
3. Identify various production processes and describe
techniques that improve productivity, including
computer-aided design and manufacturing, flexible
manufacturing, lean manufacturing and mass
customization.
PPT 9-3
Learning Objectives
LEARNING OBJECTIVES
9-3
4. Describe operations management planning issues
including facility location, facility layout, materials
requirement planning, purchasing, just-in-time
inventory control and quality control.
5. Explain the use of PERT and Gantt charts to control
manufacturing processes.
PPT 9-4
Shahid Khan
SHAHID KHAN
Flex-N-Gate
9-4
• Moved from Pakistan to the
U.S. at the age of 16.
• After college, he got a job
overseeing Flex-N-Gate.
• Bought the company after two
years and refined the
production process
• Now the company brings in
over $3 billion in sales each
year.
PPT 9-5
Name That Company
NAME that COMPANY
9-5
Operations management in this hotel company
includes restaurants that offer the finest in
service, elevators that run smoothly, and a front
desk that processes people quickly. It may
include fresh-cut flowers in the lobbies and
dishes of fruit in every room.
Name that company!
PPT 9-6
Manufacturing in the U.S.
MANUFACTURING in the U.S.
9-6
LO 9-1
• Some areas in the U.S.
are experiencing
economic growth while
others are declining.
• Manufacturing in the
U.S. is so productive
fewer workers are
needed.
PPT 9-7
What’s Made in the USA?
WHAT’S MADE in the USA?
Leading U.S. Manufactured Goods
9-7
Products Value Number of Employees
Chemicals – Pharmaceuticals,
cosmetics, soaps, paints, fertilizers $250 Billion 830,000 Americans
Transportation Equipment –
Cars, planes, trains, ships $195 Billion Over 1.4 Million
Americans
Processed Foods, Beverages
and Tobacco – Cookies, coffee,
cigarettes, prepared meals
$175 Billion 1.7 Million Americans
Computers and Electronics –
Computers and communication
equipment
$146 Billion 1.2 Million Americans
LO 9-1
Source: Parade Magazine, www.parade.com, accessed November 201 4.
lecture enhancer 9-1
AMERICAN MANUFACTURING
GROWS AT RECORD PACE
American manufacturing will likely never return to its hey-
day but we are still seeing growth in the sector. (See the
complete lecture enhancer on page 9.67 of this manual.)
lecture enhancer 9-2
MANUFACTURERS MAKE DO WITH
OLD EQUIPMENT
Much is said about the high-tech machines that manufactur-
ers use. Some companies, like Alcoa, also believe in updat-
ing old equipment. (See the complete lecture enhancer on
page 9.67 of this manual.)
Chapter 09 - Production and Operations Management of Goods and Services
9-9
c. Seventy percent of the U.S. GDP and 85%
of its jobs now come from the service sector.
d. The service sector has suffered along with
manufacturing as a result of the economic
downturn.
B. MANUFACTURERS AND SERVICE ORGANIZA-
TIONS BECOME MORE COMPETITIVE
1. Foreign manufacturers have become competitive
by using U.S. technology.
a. This helps reduce poverty and open new
markets.
b. Foreign producers are also moving to the U.S.
2. The service sector is gaining in importance.
3. To regain a competitive edge, American manu-
facturers have begun to:
a. Focus more on customers
b. Maintain closer relationships with suppliers
c. Practice continuous improvement
d. Focus on quality
e. Save on costs through site selection
f. Rely on the Internet to unite companies
g. Adopt new manufacturing techniques
4. Major issues facing American business include
service productivity and the use of the Internet.
learning objective 2
Describe the evolution from production to operations management.
Chapter 09 - Production and Operations Management of Goods and Services
9-10
bonus case 9-1
THE STATE OF AMERICAN MANU-
FACTURING
American manufacturing has been slowing down for years
and economists fear they could eventually lose their edge to
foreign competitors. (See the complete case on page 9.80 of
this manual.)
PPT 9-8
Massive Manufacturers
Source:IndustryWeek,www.industryweek.com,accessedNovember2014.
MASSIVE MANUFACTURERS
The Top Ten U.S. Manufacturers
9-8
Rank Company Industry
1Apple Computers
2 Renewable Energy Group Petroleum and Coal
3Polaris Industries Transportation
4 WABCO Holdings Automobile Parts
5Monster Beverage Beverages
6 Deluxe Corporation Publishing
7 Hershey Company Food
8 Coach, Inc. Apparel
9 CVR EnergyPetroleum and Coal
10 New Market Corporation Chemicals
LO 9-1
SEEKING
sustainability
PPT 9-9
Your Own Farm in a
Box
YOUR OWN FARM in a BOX
9-9
• Freight Farms was developed after the founders
were unsatisfied with rooftop greenhouses.
• Each container is 320-square-feet and can
produce 900 heads of leafy greens each week.
• The company works with small and medium-
sized food distributers so local food can be
enjoyed year round.
PPT 9-11
Top-Paying Service Jobs
TOP-PAYING SERVICE JOBS
9-10
LO 9-1
• The U.S. economy is no longer manufacturing
based.
• 85% of jobs are in the service sector.
• The top-paying service jobs in the U.S. are in:
- Legal services
- Medical services
- Entertainment
- Accounting
- Finance
- Management consulting
PPT 9-12
Remaining Competitive in Global
Markets
REMAINING COMPETITIVE in
GLOBAL MARKETS
9-11
LO 9-1
• U.S. is still the leader in nanotechnology and
biotechnology.
• How can U.S. businesses maintain a competitive
edge?
- Focusing on customers
- Maintaining close relationships with suppliers
- Practicing continuous improvement
- Focusing on quality
- Saving on costs through site selection
- Relying on the Internet to unite companies
- Adopting new production techniques
lecture enhancer 9-3
TOLEDO’S SUNNY FUTURE
To maintain a competitive edge, Toledo, Ohio, is turning
away from its glass past and toward solar energy. (See the
complete lecture enhancer on page 9.68 of this manual.)
Chapter 09 - Production and Operations Management of Goods and Services
9-11
II. FROM PRODUCTION TO OPERATIONS
MANAGEMENT
A. PRODUCTION is the creation of finished goods and
services using the factors of production: land, labor,
capital, entrepreneurship, and knowledge.
1. Production has usually been associated with
MANUFACTURING, but this is changing.
a. PRODUCTION MANAGEMENT is the term
used to describe all the activities managers
do to help their firms create goods.
b. The SERVICE SECTOR has grown
dramatically.
c. The U.S. now has a SERVICE ECONOMY,
one dominated by the service sector.
2. OPERATIONS MANAGEMENT is a specialized
area in management that converts or transforms
resources (including human resources) into
goods and services.
3. Operations management involves many
functions, including inventory management
and quality control.
4. Some organizations produce mostly goods
(factories and mines); others mostly services
(hospitals, schools); some produce both (Wendy’s).
B. OPERATIONS MANAGEMENT IN THE SERVICE
SECTOR
1. The text uses the example of the Ritz-Carlton
and the luxury hotel’s operations management.
Chapter 09 - Production and Operations Management of Goods and Services
9-12
REACHING BEYOND
our borders
PPT 9-12
Nobody Does it Bet-
ter
NOBODY DOES IT BETTER
9-12
• Germany’s economy is the
most powerful and
respected economy in
Europe.
• Mittlestand companies
design their own machines
and production processes.
• China has purchased many
German firms and are
studying their production
techniques.
critical thinking
exercise 9-1
GROUP PROJECT: ORGANIZING
PRODUCTION
This is a fun exercise to give students firsthand experience in
production. (See the complete exercise on page 9.72 of this
manual.)
PPT 9-13
Production and Production
Management
• Production -- The creation of goods using land,
labor, capital, entrepreneurship and knowledge (the
factors of production).
PRODUCTION and
PRODUCTION MANAGEMENT
9-13
LO 9-2
• Production
Management -- All the
activities managers do to
help firms create goods.
PPT 9-14
Operations Management
OPERATIONS MANAGEMENT
9-14
LO 9-2
• Operations Management -- A specialized area in
management that converts or transforms resources
into goods and services.
• Operations management includes:
- Inventory management
- Quality control
- Production scheduling
- Follow-up services
PPT 9-15
Operations Management in the
Service Sector
• All about creating a good experience for those
who use the service.
OPERATIONS MANAGEMENT
in the SERVICE SECTOR
9-15
LO 9-2
• In hotels, like Ritz-
Carlton, operation
management
includes fine dining,
fresh flowers, and
training for every
employee.
Chapter 09 - Production and Operations Management of Goods and Services
9-13
2. The hotel chain created a sophisticated comput-
erized guest recognition program and a Quality
Management Program to “certify” employees.
3. In the service industry, operations management
is about CREATING A GOOD EXPERIENCE for
those who use the service.
4. Customers now expect more services
(examples: Internet access and multilingual
customer service).
5. DELIGHTING CUSTOMERS has become the
quality standard for luxury hotels and other
service businesses.
learning objective 3
Identify various production processes and describe techniques that improve
productivity, including computer-aided design and manufacturing, flexible manu-
facturing, lean manufacturing, mass customization, and robotics.
III. PRODUCTION PROCESSES
A. PRODUCTION USES BASIC INPUTS TO PRO-
DUCE OUTPUTS
1. Production adds VALUE, or UTILITY, to materi-
als or processes.
a. FORM UTILITY is the value added by the
creation of finished goods and services,
such as the value added by taking silicon
and making computer chips or putting ser-
vices together to create a vacation package.
b. Form utility can also be created at the retail level.
2. Andrew S. Grove, former chair of Intel, defines
the THREE BASIC REQUIREMENTS OF
Chapter 09 - Production and Operations Management of Goods and Services
9-14
PPT 9-16
There’s an App for That
Source:PCMagazine,www.pcmag.com,accessedNovember2014.
THERE’S an APP for THAT
Top Productivity Apps for iPad
9-16
App What it Does Price
Dropbox Syncs and backs up files Free
Dragon Dictation services Free
Cubby Easy and unlimited data syncing Free
GoToMyPC Remote computer control Free
Air Display Turns tablet into a second monitor $9.99
LO 9-2
test
prep
PPT 9-17
Progress Assessment
TEST PREP
9-17
• What have U.S. manufacturers done to regain a
competitive edge?
• What must U.S. companies do to continue to
strengthen the country’s manufacturing base?
• What led companies to focus on operations
management rather than production?
PPT 9-18
The Production Process
TEXT FIGURE 9.1
The Production Process
The PRODUCTION PROCESS
9-18
LO 9-3
PPT 9-19
Form Utility
FORM UTILITY
9-19
LO 9-3
• Form Utility -- The value
producers add to materials
in the creation of finished
goods and services.
lecture enhancer 9-4
INSIDE PAMPERS’ DIAPER LAB
People at Pampers spend hours upon hours studying how
babies move, sleep, and fall. All to make sure their product
is the best it could be. (See the complete lecture enhancer
on page 9.69 of this manual.)
Chapter 09 - Production and Operations Management of Goods and Services
9-15
PRODUCTION:
a. To build and deliver products in response to
the demands of the customer at a scheduled
delivery time
b. To provide an acceptable quality level
c. To provide everything at the lowest possible
cost
3. TYPES OF PRODUCTION OPERATIONS
a. PROCESS MANUFACTURING is that part
of the production process that physically or
chemically changes materials.
b. The ASSEMBLY PROCESS is that part of
the production process that puts together
components.
4. CONTINUOUS VERSUS INTERMITTENT
PROCESSES
a. A CONTINUOUS PROCESS is a production
process in which long production runs turn
out finished goods over time.
b. An INTERMITTENT PROCESS is a produc-
tion process in which the production run is
short and the machines are changed
frequently to produce different products.
c. Today, most new manufacturers use
intermittent processes.
B. THE NEED TO IMPROVE PRODUCTION TECH-
NIQUES AND CUT COSTS
1. The goal of manufacturing and process man-
agement is to provide high-quality goods and
services instantaneously in response to custom-
