Chapter 14 – Operations Management: Managing Vital Operations and Processes
14-1
Chapter 14
Operations Management: Managing Vital
Operations and Processes
Learning Objectives 14-2
Key Definitions/Terms 14-2
Chapter Overview 14-2
Lecture Outline 14-3
Lecture Enhancers 14–12
Management in Action 14–14
Building Management Skills 14–16
Managing Ethically 14–17
Small Group Breakout Exercise 14–18
Be the Manager 14–18
Case in the News 14–19
Supplemental Features 14–20
Manager’s Hot Seat 14–21
Instructor PowerPoint Slides 14–21
CHAPTER CONTENTS
Chapter 14 – Operations Management: Managing Vital Operations and Processes
14-2
LO 14-1. Explain the role of operations management in achieving superior
quality, efficiency, and responsiveness to customers
LO 14-2. Describe what customers want, and explain why it is so important
for managers to be responsive to their needs.
LO 14-4. Explain why achieving superior efficiency is so important.
Customer relationship management (CRM): A
efficiency.
flexible manufacturing: Operations management
just-in-time inventory system: A system in which
parts or supplies arrive at an organization when
they are needed, not before.
operations manager: A manager who is
process reengineering: The fundamental
rethinking and radical redesign of business
inputs into outputs, and dispose of the outputs.
LEARNING OBJECTIVES
KEY DEFINITIONS/TERMS
CHAPTER OVERVIEW
Chapter 14 – Operations Management: Managing Vital Operations and Processes
practices and techniques such as facilities layout, flexible manufacturing, JIT, self-managed teams, and
process reengineering to build and sustain a competitive advantage.
NOTE ABOUT INSTRUCTOR POWERPOINT
SLIDES
The Instructor PowerPoint Slides include most Student
PowerPoint slides, along with additional material that
can be used to expand the lecture. Images of the
Instructor PowerPoint slides can be found at the end of
this chapter on page 14–21.
BASIC POWERPOINT SLIDE 1
(INSTRUCTOR’S POWERPOINT SLIDE 1)
Chapter Title
Management Snapshot (pp. 473-474)
Airlines Try Many Methods to Expedite Boarding Process
Why Is Efficiency Important?
Late departures and arrivals cost airlines in more ways than reputation, so making sure boarding occurs in
a timely manner is of great concern to the industry, as well as to passengers needing to make connecting
flights.
One study conducted by American Airlines claimed that randomized group boarding for most passengers
is the fastest method. American not only found that the back–to-front boarding method was slower than
the window-middle-aisle seat method, but it also discovered that putting passengers into random boarding
groups allowed the plane to fill up faster. Also, passengers were more likely to stow their bags in
overhead bins closer to their seats than at the front of the plane.
Another study done by the Discovery Channel found the method with the highest satisfaction rating was
the “reverse pyramid,” in which elite passengers boarded first followed by a complex set of zones that
began with the rear window seats. The method that allowed for fastest boarding was the one with no
assigned seats. Yet this method had the lowest satisfaction rating of all the methods attempted on the
program. The second-fastest method was boarding elite passengers first, followed by the window-middle-
aisle seat method. This method received high marks for passenger satisfaction.
What slows down boarding? Many passengers board outside their “zone” or whatever method the airline
is using, which makes the system less efficient. Second, other passengers pay for early boarding or are
given early boarding as part of their frequent flier program, which has the same effect as those who
jumped the line. Third, sometimes after stowing a carry-on bag in the overhead bin, a passenger
remembers something needed from the bag, stands up, and blocks the aisle while rummaging through the
bag to find it. Probably the most cited culprit for slow boarding is baggage.
LECTURE OUTLINE
14-4
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
boarding times.
I. Operations Management and Competitive
Advantage
A. Operations management is the management of
any aspect of the production system that transforms
inputs into finished goods and services.
B. A production system is the system that an
organization uses to acquire inputs, convert inputs into
outputs, and dispose of the outputs.
C. Operations managers are responsible for
managing an organization’s production system.
1. Their job is to manage the three stages of
production and determine where improvements
might be made to increase quality, efficiency and
responsiveness to customers.
2. Achieving superior efficiency and quality is part
of attaining superior responsiveness to customers
and a competitive advantage.
II. Improving Responsiveness To Customers
A. Organizations produce outputs (goods and services)
that are consumed by customers. Because customers
are vital to the organization’s survival, managers must
correctly identify customers and pursue strategies that
result in products that best meet their wants and needs.
B. What Do Customers Want? Although there may
be some variation from product to product, it is
possible to identify some general product attributes or
qualities that most customers want. Other things being
LO 14-1: Explain the role
of operations
management in
achieving superior
quality, efficiency,
and responsiveness
to customers.
POWERPOINT SLIDES 14-4 TO
14-9
LO 14-2: Describe what
customers want, and
explain why it is so
important for
managers to be
responsive to their
needs
POWERPOINT SLIDES 14-10 TO
14-13
TEXT REFERENCE
MANAGEMENT INSIGHT:
2. Higher quality products to low-quality products.
3. Quick service to slow service.
4. Products with many features to products with
few features.
5. Products that is customized or tailored to their
unique needs.
C. The problem this presents for managers is that
customers’ demands for these attributes typically
conflict with their demand for low prices. For this
reason, managers as well as customers must make a
price/attribute trade-off.
to Customers
1. Because satisfying customers is so important,
produce outputs that have the desired attributes –
quality, cost, and features.
2. Examples of these include: flexible
manufacturing systems, just-in-time inventory, and
new information systems and technologies
discussed in Chapter 13.
E. Customer Relationship Management: Customer
relationship management is a technique that uses IT to
maximize responsiveness to customers.
1. CRM systems have three interconnected
components: sales and selling, after-sales service
then recommends ways to improve the way the
sales process operates.
III. Improving Quality
Technology Provides Faster
Service for Customers at Panera
Panera is a large bakery– café
chain. The bakeries have been
operating successfully with a
traditional bakery–café model of
offerings. However, the
company’s CEO, Ron Shaick, has
recently started a new operating
system.
Now many customers can place
orders via computer or mobile app.
When the customer arrives at the
line, pay for the ordered food, and
either eat in or carry out. There
restaurants for customers who did
not order ahead but who want to
get through the line faster. And, of
course, customers can still go to
Panera began testing the system in
out to all restaurants by 2016. And
it has already seen users of the
new system increase the frequency
of their visits. The new system
also has improved the order
accuracy rates.
Of course adding the system has
to register customers at the cashier
have been redeployed to the
kitchen. (pp 477-478)
LO 14-3: Explain why
achieving
superior quality is
Chapter 14 – Operations Management: Managing Vital Operations and Processes
support; these products are designed to better meet
customer requirements. Quality is a concept that can
be applied to both manufacturing and service
organizations. Managers seek to control and improve
the quality of their organization for two reasons:
1. Customers usually prefer a higher-quality
product to a lower-quality product. By providing,
for the same price, a product of higher quality than
the competition, a company is being responsive to
customers.
2. Achieving high product quality lowers operating
costs because of the impact on employee
productivity, since less time is devoted to making
products that must be discarded or reworked.
IV. Improving Efficiency
A. The third goal of value chain management is to
increase the efficiency of an organization’s production
labor, capital, materials, or energy—to produce its
outputs.
2. Labor productivity-is most commonly used to
draw efficiency comparisons between different
organizations.
B. Facilities Layout, Flexible Manufacturing, and
Efficiency
1. The strategies used by managers to lay-out or
14–15
TEXT REFERENCE
MANAGEMENT INSIGHT:
Successful Discount Retailer
Knows Customer Satisfaction Is
Key
The TJX Companies Inc. sell
clothes, shoes, and other fashions,
along with home decorating items
at discounted prices. Its U.S. retail
stores are T.J. Maxx, Marshalls,
Sierra Trading Post, and
HomeGoods.
Aside from the savings, the main
appeal of the stores is the
“treasure-hunt shopping
experience” in which the stores
have different items and a different
look—often a somewhat opposite
experience to perusing the more
discount by purchasing overstocks
and canceled orders from other
retailers.
TJX stores have no walls or
physical dividers between
departments. This allows the
merchandise categories to expand
or contract according to supply
and demand. Inventory turns
rapidly, which keeps stores fresh
and allows the company to buy as
it needs. (pp. 481-482)
2. Facilities layout is the operations management
strategy whose goal is to design the machine-
worker interface to increase production system
efficiency.
3. Flexible manufacturing is the operations
management techniques that attempt to reduce the
setup costs associated with a production system.
C. Facilities Layout: The way in which machines,
robots, and people are grouped together affects how
productive they can be. There are three ways of
arranging workstations: product layout, process layout,
and fixed-position layout.
1. In a product layout, machines are organized so
that each operation needed to manufacture a
product or process a service is performed at
workstations arranged in a fixed sequence. In
manufacturing, workers are stationary and a
moving conveyor belt takes the product to the next
workstation. Mass production is the familiar name
for this layout.
manufacturing a variety of custom-made
products, each tailored to the needs of a
TEXT REFERENCE
Management Insight:
Steelcase Takes Its Own
Office Layout
Steelcase develops and
manufactures office furniture,
technology, and other office
architecture. Historically,
workers used to jockey to be
closer to the CEO’s office.
Like the organizational chart,
the closer a person was to the
CEO, the more power the
person had. However, in
2014, Steelcase published a
study suggesting that the
design of offices affects the
emotional well-being of
employees, which can have an
impact on business results.
The study suggested that
were moved onto floors
designed around important
issues facing the company.
Chapter 14 – Operations Management: Managing Vital Operations and Processes
b. Different teams assemble each component
part and then send the parts to the final
assembly team, which makes the final product.
D. Flexible Manufacturing: In a manufacturing
company, a major source of costs is setting up the
equipment needed to make a particular product. If
setup times for complex production equipment can be
reduced, efficiency will rise.
1. Flexible manufacturing aims to reduce the time
required to set up production equipment.
2. Setup time and its accompanying cost can be
dramatically reduced if equipment used for
manufacturing one product can be quickly replaced
with equipment used for manufacturing a second
product.
3. Flexible manufacturing also allows a company
to produce many more varieties of a product in the
same amount of time, thereby increasing
responsiveness to customers.
E. Just-in-Time Inventory and Efficiency:
Inventory is the stock of raw materials, inputs, and
component parts that an organization has on hand at a
particular time. Just-in-Time inventory systems get
components to the organization when they are needed,
not before.
1. An advantage of JIT systems is that defective
inputs can be quickly spotted.
2. A drawback of JIT systems is that they leave an
organization without a buffer stock of inventory.
3. Major cost savings can result from increasing
inventory turnover and reducing inventory holding
costs.
F. Self-Managed Work Teams and Efficiency:
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1. The typical team consists of from five to fifteen
employees who produce an entire product instead
of just parts of it.
2. Team members learn all team tasks and move
from job to job. The result is a flexible workforce.
3. Team members also assume responsibility for
work and vacation scheduling, ordering materials,
and hiring new members.
4. Traditionally, each of these was the
responsibility of first line managers.
5. The effect of introducing self-managed teams is
often an increase in efficiency of 30% percent of
more.
6. Cost savings also arise from eliminating
supervisors and creating a flatter organizational
hierarchy, which increases efficiency.
G. Process Reengineering and Efficiency: Process
reengineering is the fundamental rethinking and
radical redesign of business processes to achieve
dramatic improvements in critical measures of
performance such as cost, quality, speed, and service.
1. Order fulfillment for example, can be thought of
as a business process.
2. Process reengineering boosts efficiency because
it eliminates the time devoted to activities that do
not add value.
Ford Motor Company’s decision to simplify its
procurement process.
a. The reengineering of that process has come
close to eliminating the need for an accounts
payable department, thereby increasing the
A. Achieving superior responsiveness to customers
Chapter 14 – Operations Management: Managing Vital Operations and Processes
profound shift in management operations and in the
culture of an organization.
B. Failure of management to understand the dramatic
culture shift required may result in disillusionment
with JIT, flexible manufacturing, or reengineering.
C. None of these systems is a quick panacea to cure
industrial ills. Making these techniques work can pose
a significant challenge that calls for hard work and
persistence by the sponsoring managers.
D. Managers also need to understand the ethical
implications of the adoption of many of these
techniques. The increases in organizational
performance they yield often come at great cost to
employees. Employees may see the demands of their
job increase or they may see themselves reengineered
out of a job.
E. Continually increasing the demands placed on
employees regardless of human costs in terms of job
stress raises ethical concerns.
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POWERPOINT SLIDES 14-14 TO 14-15
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Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
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