Chapter 09 – Production and Operations Management of Goods and Services
9-16
PPT 9-20
Grove’s Basic Production
Requirements
GROVE’S BASIC PRODUCTION
REQUIREMENTS
9-20
LO 9-3
1. To build and deliver products in response to the
demands of the customer at the scheduled
delivery time.
2. To provide an acceptable quality level.
3. To provide everything at the lowest possible
cost.
critical thinking
exercise 9-2
PRODUCTION PROCESSES
This exercise asks students to classify several products by the
type of manufacturing process used. (See the complete exer-
cise on page 9.74 of this manual.)
PPT 9-21
Process and Assembly in
Production
PROCESS and ASSEMBLY in
PRODUCTION
9-21
LO 9-3
• Process Manufacturing —
The part of production that
physically or chemically
changes materials.
• Assembly Process — The
part of the production process
that puts together components.
PPT 9-22
Key Production Processes
KEY PRODUCTION PROCESSES
9-22
LO 9-3
• Production processes are either continuous or
intermittent.
• Continuous Process — Long production runs turn
out finished goods over time.
• Intermittent Process — Production runs are short
and the producer adjusts machines frequently to
make different products.
PPT 9-23
Minute Made
MINUTE MADE
Production of Some of America’s Favorite Products
9-23
Product Number of Items
Made in a Minute
Krispy Kreme Doughnuts 5,208
Chips Ahoy! Cookies 4,000
Twinkies 972
Jello Boxes 764
LifeSavers 100 rolls
LO 9-3
Chapter 09 – Production and Operations Management of Goods and Services
9-17
er demand.
2. TRADITIONAL ORGANIZATIONS were not de-
signed to be very responsive to the customer.
3. MASS PRODUCTION let producers make a
large number of limited varieties of products at a
very low cost.
4. Over the years, low cost often came at the
EXPENSE OF QUALITY AND FLEXIBILITY.
5. Such inefficiencies opened U.S. companies to
foreign competition.
6. To meet this competition, companies today must
make a wide variety of high-quality custom-
designed products at a very low cost.
C. COMPUTER-AIDED DESIGN AND
MANUFACTURING
1. COMPUTER-AIDED DESIGN (CAD) is the use
of computers in the design of products.
2. COMPUTER-AIDED MANUFACTURING (CAM)
is the use of computers in the manufacturing of
products.
3. CAD/CAM, the use of both computer-aided de-
sign and computer-aided manufacturing, made it
possible to custom-design products for small
markets.
4. CAD has doubled productivity in many firms.
a. In the past, computer-aided design ma-
chines couldn’t talk to computer-aided
manufacturing machines.
Chapter 09 – Production and Operations Management of Goods and Services
9-18
PPT 9-24
Developments Making U.S.
Companies More Competitive
DEVELOPMENTS MAKING U.S.
COMPANIES MORE COMPETITIVE
9-24
LO 9-3
1. Computer-aided design
and manufacturing
2. Flexible manufacturing
3. Lean manufacturing
4. Mass customization
PPT 9-25
Computer-Aided Design and
Manufacturing
COMPUTER-AIDED DESIGN and
MANUFACTURING
9-25
LO 9-3
• Computer-Aided Design
(CAD) — The use of computers
in the design of products.
• Computer-Aided
Manufacturing (CAM) — The
use of computers in the
manufacturing of products.
Chapter 09 – Production and Operations Management of Goods and Services
9-19
b. COMPUTER-INTEGRATED MANUFAC-
TURING (CIM) is uniting computer-aided
design with computer-aided manufacturing.
D. FLEXIBLE MANUFACTURING
1. FLEXIBLE MANUFACTURING is designing
machines to do multiple tasks so that they can
produce a variety of products.
2. The text uses Allen-Bradley system of robots as
an example of flexible manufacturing.
E. LEAN MANUFACTURING
1. LEAN MANUFACTURING is the production of
goods using less of everything compared to
mass production.
2. Lean manufacturing uses less human effort, less
manufacturing space, less investment in tools,
and less engineering time to develop a new
product in half the time.
3. A company becomes lean by CONTINUOUSLY
INCREASING THE CAPACITY to produce
more, higher-quality results with fewer
resources.
4. Characteristics of lean companies:
a. They take half the human effort.
b. They have half the defects in the finished
product or service.
c. They require one-third the engineering effort.
d. They use half the floor space for the same
output.
e. They carry 90% less inventory.
Chapter 09 – Production and Operations Management of Goods and Services
9-20
PPT 9-26
Computer-Integrated Manufacturing
COMPUTER-INTEGRATED
MANUFACTURING
9-26
LO 9-3
• Computer-Integrated
Manufacturing (CIM) —
The uniting of computer-
aided design with computer-
aided manufacturing.
• CIM is expensive but it cuts
as much as 80% of the time
needed to program machines
to make parts.
PPT 9-27
Flexible Manufacturing
FLEXIBLE MANUFACTURING
9-27
LO 9-3
• Flexible Manufacturing — Designing machines to
do multiple tasks so they can produce a variety of
products.
• Allen-Bradley uses flexible manufacturing to build
motor starters.
• 26 machines and robots build, test and package
parts.
PPT 9-28
Lean Manufacturing
LEAN MANUFACTURING
9-28
LO 9-3
• Lean Manufacturing — Using less of everything
than in mass production.
• Compared to others, lean companies:
– Take half the human effort.
– Have half the defects in finished products.
– Require one-third the engineering effort.
– Use half the floor space.
– Carry 90% less inventory.
Chapter 09 – Production and Operations Management of Goods and Services
9-21
5. Technology has improved labor productivity, but
employees can become frustrated by
innovations.
6. More productivity and efficiency will help solve
the economic crisis.
F. MASS CUSTOMIZATION means tailoring products
to meet the needs of individual customers.
1. FLEXIBLE MANUFACTURING SYSTEMS let
manufacturers custom-make goods as quickly
as mass-produced items.
2. Manufacturers are learning to CUSTOMIZE
THEIR PRODUCTS for individual customers.
(Custom Foot uses infrared scanners to precise-
ly fit shoes.)
3. Mass customization of services is actually easier
because there is no tangible good that must be
adapted. (Capital Protection Insurance sells cus-
tomized risk management plans to companies.)
G. ROBOTICS can allow a manufacturer to operate 24–
7 and simplify mass customization.
H. SENSORS detect problems immediately and alert
someone to make changes.
learning objective 4
Describe operations management planning issues including facility location,
facility layout, materials requirement planning, purchasing, just–in-time inventory
control, and quality control.
IV. OPERATIONS MANAGEMENT PLANNING
A. Many of the issues covered in operations manage-
ment planning are the same in both service and
manufacturing sectors.
Chapter 09 – Production and Operations Management of Goods and Services
9-22
PPT 9-29
Mass Customization
MASS CUSTOMIZATION
9-29
LO 9-3
• Mass Customization —
Tailoring products to meet
the needs of a large
number of individual
customers.
• More manufacturers are
learning to customize.
• Mass customization
exists in the service
sector too.
lecture enhancer 9-5
PLEASING EVERYBODY WITH
MASS CUSTOMIZATION
Custom products often come with quite a heavy price tag. Not
for this bike company, though, they offer custom cycles for
under $500. (See the complete lecture enhancer on page 9.69
of this manual.)
SPOTLIGHT ON
small
business
PPT 9-30
Make Your Own
Kind of Music
MAKE YOUR OWN KIND of MUSIC
9-30
• Moniker Guitars
produces top quality,
personalized guitars for
everyday people.
• They follow a model
similar to NikeiD and
allows people to add
whatever design
elements they want –
even tiger stripes!
PPT 9-31
Robotics and Sensing
ROBOTICS and SENSING
9-31
LO 9-3
• The use of robotics allows manufacturing to
continue 24 hours a day.
• Sensors can detect problems immediately and
changes can be made quickly.
• Nanomanufacturing can manipulate on material
on the molecular level.
test
prep
PPT 9-32
Test Prep
TEST PREP
9-32
• What is form utility?
• Define and differentiate the following: process
manufacturing, assembly process, continuous
process and intermittent process.
• What do you call the integration of CAD and
CAM?
• What is mass customization?
PPT 9-33
Operations Management
OPERATIONS MANAGEMENT
9-33
LO 9-4
• Operations management planning helps solve
problems like:
– Facility location
– Facility layout
– Materials requirement planning
– Purchasing
– Inventory control
– Quality control
Chapter 09 – Production and Operations Management of Goods and Services
9-23
B. FACILITY LOCATION
1. FACILITY LOCATION is the process of select-
ing a geographic location for a company’s
operations.
a. One strategy is to find a site that makes it
EASY FOR CONSUMERS TO USE THE
COMPANY’S service, such as putting flower
shops and banks in supermarkets.
b. The ultimate convenience is shopping
through the INTERNET.
c. The most successful service-sector busi-
nesses are conveniently located.
C. FACILITY LOCATION FOR MANUFACTURERS
1. Automobile production is shifting from Detroit to
southern cities, creating both pockets of unem-
ployment and pockets of rapid growth.
2. Manufacturers consider:
a. Labor costs
b. Availability of resources, including labor
c. Access to transportation that can reduce
time to market
d. Proximity to suppliers
e. Proximity to customers
f. Crime rates
g. Quality of life for employees
h. Cost of living
i. The need to train or retrain the local work-
force
Chapter 09 – Production and Operations Management of Goods and Services
9-24
PPT 9-34
Facility Location
• Facility Location —
The process of
selecting a geographic
location for a
company
’
s
operations.
FACILITY LOCATION
9-34
LO 9-4
• Rising numbers of Internet businesses means
brick-and-mortar retailers must find great
locations.
bonus case 9-2
A SMALL HOMECOMING BY AMER-
ICAN MANUFACTURERS
Caterpillar is one of several U.S. companies that are bringing
factories back to American soil. (See the complete case on
page 9.82 of this manual.)
lecture enhancer 9-6
URBAN AGRICULTURE IN DETROIT
In cities that have lost large manufacturers, civic planners
have found new uses for vacant lots. (See the complete lecture
enhancer on page 9.70 of this manual.)
Chapter 09 – Production and Operations Management of Goods and Services
9-25
3. Manufacturers often choose sites that are
CLOSE TO INEXPENSIVE LABOR or to the
RIGHT KIND OF LABOR.
a. LOW-COST LABOR remains the key rea-
son manufacturers move their plants, even
though labor cost is becoming a smaller por-
tion of total production costs.
b. Firms should maintain the SAME QUALITY
STANDARDS AND FAIR LABOR PRAC-
TICES wherever they produce.
4. Another reason for relocating facilities is access
to INEXPENSIVE RESOURCES.
5. The most important resource is PEOPLE, so
companies tend to cluster where they find smart
and talented people.
6. REDUCING TIME TO MARKET, such as ac-
cess to modes of transportation, is critical to
successful global competition.
7. Locating CLOSE TO SUPPLIERS cuts the cost
of distribution.
8. Many businesses are BUILDING FACTORIES
OVERSEAS to get closer to international
customers.
9. When U.S. firms select foreign sites, they also
study the QUALITY OF LIFE for workers and
managers.
10. Site selection has become a critical issue in
production and operations management.
Chapter 09 – Production and Operations Management of Goods and Services
9-26
MAKING
ethical
decisions
PPT 9-35
Do We Stay or
Do We Go?
DO WE STAY or DO WE GO?
9-35
• Potential of low-cost labor is very attractive to
companies hoping to remain competitive.
• However, shuttering operations and moving can
often cause severe economic problems in
dependent areas.
• What would you do if you were the CEO of
ChildrenWear Industries faced with this problem?
Chapter 09 – Production and Operations Management of Goods and Services
9-27
D. TAKING OPERATIONS MANAGEMENT TO THE
INTERNET
1. Many rapidly growing companies OUTSOURCE
engineering, design, manufacturing, and other
tasks.
2. Companies are creating an INTERFIRM pro-
cess, creating new relationships with suppliers
over the Internet.
3. Coordination between companies can be as
close as coordination among departments in a
single firm.
E. FACILITY LOCATION IN THE FUTURE
1. New developments in information technology
are giving firms and employees more FLEXIBIL-
ITY in choosing locations.
2. TELECOMMUTING, working from home via
computer, is a major trend.
3. Today, a big incentive to locate in a particular
location is the TAX SITUATION and DEGREE
OF GOVERNMENT SUPPORT.
4. Although some states and local governments
have higher taxes, they can offer tax reductions
and other supports to attract new businesses.
F. FACILITY LAYOUT
1. FACILITY LAYOUT is the physical arrangement
of resources (including people) in the production
process.
a. The facility layout depends on what pro-
cesses are to be performed.
Chapter 09 – Production and Operations Management of Goods and Services
9-28
PPT 9-36
Operations Management on the
Internet
OPERATIONS MANAGEMENT
on the INTERNET
9-36
LO 9-4
• Sometimes businesses outsource engineering,
design and manufacturing to other companies.
• Often these relationships are managed through
the Internet.
• Many companies are developing Internet-focused
strategies.
critical thinking
exercise 9-3
SITE SELECTION
This exercise explores the factors managers consider in choos-
ing the site for manufacturing plants. (See the complete exer-
cise on page 9.76 of this manual.)
PPT 9-37
Future Facility Location
FUTURE FACILITY LOCATION
9-37
LO 9-4
• Information technology gives firms increased
flexibility in terms of location.
• Telecommuting — Working from home via
computer.
PPT 9-38
Setting Up the Facility
SETTING UP the FACILITY
9-38
LO 9-4
• Facility Layout — The physical arrangement of
resources, including people, to most efficiently
produce goods and provide services.
• Facility layout depends on the processes
performed:
– Service: Help customers find products
– Manufacturing: Improve efficiency
Chapter 09 – Production and Operations Management of Goods and Services
9-29
b. For SERVICES, the layout is usually de-
signed to help the consumer find and buy
things.
c. Increasingly, that means giving customers
access via the INTERNET.
d. Many stores are adding KIOSKS that help
customers find things on the Internet.
2. For MANUFACTURING PLANTS, efficient facili-
ties layout can lead to cost savings.
a. In an ASSEMBLY LINE LAYOUT workers
do only a few tasks at a time
b. Many firms are moving toward a MODULAR
LAYOUT, in which teams of workers com-
bine to produce more complex units of the
final product.
c. In a FIXED-POSITION LAYOUT, workers
gather around the product to be completed.
d. A PROCESS LAYOUT is one in which simi-
lar equipment and functions are grouped
together.
G. MATERIALS REQUIREMENT PLANNING
1. MATERIALS REQUIREMENT PLANNING
(MRP) is a computer-based production man-
agement system that uses sales forecasts to
make sure the needed parts and materials are
available at the right time and place.
Chapter 09 – Production and Operations Management of Goods and Services
9-30
critical thinking
exercise 9-4
DESIGNING PLANT LAYOUT
Students are asked to research and design a plant layout for a
production firm. (See the complete exercise on page 9.78 of
this manual.)
PPT 9-39
Facility Layout Options
FACILITY LAYOUT OPTIONS
9-39
LO 9-4
1. Assembly Line Layout – Workers do only a few
tasks at a time.
2. Modular Layout – Teams of workers produce more
complex units of the final product.
3. Fixed-Position Layout – Allows workers to
congregate around the product.
4. Process Layout – Similar equipment and functions
are grouped together.
PPT 9-40
Assembly Line Layout
TEXT FIGURE 9.2
Typical Layout Design
ASSEMBLY LINE LAYOUT
9-40
LO 9-4
PPT 9-41
Modular Layout
MODULAR LAYOUT
9-41
LO 9-4
PPT 9-42
Process Layout
PROCESS LAYOUT
9-42
LO 9-4
PPT 9-43
Fixed-Position Layout
FIXED-POSITION LAYOUT
9-43
LO 9-4
PPT 9-44
MRP and ERP
MRP and ERP
9-44
LO 9-4
• Materials Requirement Planning (MRP) — A
computer-based operations management system that
uses sales forecasts to make sure parts and
materials are available when needed.
• Enterprise Resource Planning (ERP) — A newer
version of MRP, combines computerized functions
into a single integrated software program using a
single database.