Chapter 09 – Production and Operations Management of Goods and Services
9-46
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!
Company: Allen-Bradley
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.
To start a discussion ask students: What items do com-
panies in the United States produce?
Chapter 09 – Production and Operations Management of Goods and Services
9-47
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 2014.
1. This slide presents the leading goods manufactured
in the United States.
2. Ask students: Why are the goods on the slide manu-
factured in the United States? (Students’ answers
will vary but should focus on the abundance of cer-
tain factors of production and the United States’
comparative advantage in the production of capital
intensive products, topics that were covered earlier
in the text.)
3. To determine what goods are manufactured in a
particular state use the Bureau of Economic Analy-
sis website (www.bea.gov).
PPT 9-8
Massive Manufacturers
Source:IndustryWeek,www.industryweek.com,accessedNovember2014.
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
This slide presents the top ten manufacturers (based on
revenues) according to Industry Week’s 2014 list of the
500 largest publicly held U.S. manufacturing compa-
nies.
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.
Chapter 09 – Production and Operations Management of Goods and Services
9-48
PPT 9-10
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 9-11
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
The famous economist Joseph Schumpeter believed in
continuous improvement and discussed capitalism as a
force for creative destruction. If the United States is to
remain competitive, the nation as a whole must continu-
ally innovate eschewing old inefficient industries in fa-
vor of capital-intensive knowledge-driven industries.
PPT 9-12
Nobody Does It Better
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.
Chapter 09 – Production and Operations Management of Goods and Services
9-49
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
9-50
PPT 9-16
There’s an App for That
Source:PCMagazine,www.pcmag.com,accessedNovember2014.
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
This slide shows the top iPad apps that help service busi-
nesses increase productivity.
PPT 9-17
Test Prep
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?
1. Manufacturers have regained a competitive advantage
by focusing on the following: The needs of customers,
maintaining a close relationship with suppliers to make
sure they are meeting customer needs, practicing con-
tinuous improvement, focusing on quality, saving on
costs through better site selection, using new technolo-
gies, adopting new production techniques.
2. To strengthen the nation’s manufacturing base will re-
quire an adjustment and recognition of the new realities
in manufacturing. This will require focusing on new
technologies, such as the green ventures discussed in
your textbook.
3. The nature of business has changed dramatically in the
past twenty years forcing companies to focus on opera-
tions management. One change is the shift from a
manufacturing economy to one dominated by the ser-
vice industry. Operations management is a more spe-
cialized area of management that converts resources in-
to useful outputs.
Chapter 09 – Production and Operations Management of Goods and Services
9-51
PPT 9-18
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.
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.
Andrew Grove is the former chair of computer chip manu-
facturer Intel.
Chapter 09 – Production and Operations Management of Goods and Services
9-52
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
1. This slide presents the production efficiency of vari-
ous products.
2. Before introducing this slide, it would be interesting
to ask the students to take a guess: How many Krispy
Kreme Doughnuts or Chips Ahoy! Cookies are made
every minute?
3. Again it is important to reinforce the point that pro-
duction efficiency directly translates into cost savings
and therefore profits.
Chapter 09 – Production and Operations Management of Goods and Services
9-53
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.
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.
Chapter 09 – Production and Operations Management of Goods and Services
9-54
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.
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.
Chapter 09 – Production and Operations Management of Goods and Services
9-55
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.
Chapter 09 – Production and Operations Management of Goods and Services
9-56
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?
1. Form utility is the value producers add to materials in
the creation of finished goods and services. For ex-
ample, when a company transforms raw steel into the
body of an automobile they are creating form utility.
2. Process manufacturing physically or chemically
changes materials, such as turning sand into glass or
computer chips. The assembly process puts together
components to create a product. For example, cars
are made through an assembly process that puts to-
gether the frame, engine and other parts. Continuous
process involves long production runs turning out
finished goods over time. For example, a plant that
makes plastic cups is run on a continuous process.
Rather than using long runs, an intermittent process
involves short runs that respond directly to specific
customer orders. An example of this process would
include manufacturers of men’s custom business
suits.
3. The integration of CAD and CAM is referred to as
computer-integrated manufacturing or CIM.
4. Mass customization is the process of tailoring prod-
ucts to meet the demands of a large number of indi-
vidual customers. One example of this process is
NIKEiD which allows customers to design athletic
shoes by choosing from a variety of colors and de-
signs. For more information on this process go to
www.nikeid.nike.com.
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
9-57
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.
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?
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.
Chapter 09 – Production and Operations Management of Goods and Services
9-58
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
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.
Chapter 09 – Production and Operations Management of Goods and Services
9-59
PPT 9-40
Assembly Line Layout
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
Chapter 09 – Production and Operations Management of Goods and Services
9-60
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.
PPT 9-45
Purchasing
PURCHASING
9-45
LO 9-4
• Purchasing — The function
that searches for high-quality
material resources, finds the
best suppliers and negotiates
the best price for goods and
services.
• The Internet has
transformed purchasing.