Chapter 16: Managing Service and Manufacturing Operations P a g e | 1
Effective Management 7th Edition
Chapter 16: Managing Service and Manufacturing Operations
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a
set of lesson plans for you to use to deliver the content in Chapter 16.
Lesson Plan for Lecture (for large sections)
Lesson Plan for Group Work (for smaller sections)
Assignments with Teaching Tips and Solutions
Highlighted Assignments Key Points
What Would You Do? Louis Vuitton is looking to design factories that can increase
overall productivity while also maintaining the flexibility to
produce small batches of exclusive goods.
Management Team Decision Should Starbucks use lean production methods to increase the
number of drinks that baristas can make?
Additional Assignments Key Points
Management Decision Students examine how (and whether) to grow a small business.
Develop Your Career Potential Taking factory tours enables students to understand the
complexity of managing manufacturing operations.
Learning Outcomes
16-1 Discuss the kinds of productivity and their importance in managing operations.
At their core, companies are production systems that combine inputs (such as labor), raw materials,
capital, and knowledge to produce outputs (such as finished products or services). Productivity is a
16-2 Explain the role that quality plays in managing operations.
Quality can refer to a product or service free of deficiencies, or the characteristics of a product or service
that satisfy customer needs. Quality products usually possess three characteristics: reliability,
serviceability, and durability. Quality service involves reliability, tangibles, responsiveness, assurance,
16-3 Explain the essentials of managing a service business.
Services are different from goods. Goods are produced, tangible, and storable. Services are performed,
intangible, and perishable. Likewise, managing service operations is different from managing production
16-4 Describe the different kinds of manufacturing operations.
Manufacturing operations produce physical goods. Manufacturing operations can be classified according
to the amount of processing or assembly that occurs after receiving an order from customers. Make-to-
processing. The next highest degree of processing occurs in assemble-to-order operations, in which
preassembled modules are combined after orders are received to produce semicustomized products. The
inventory should be ordered. By having parts arrive just when they are needed at each stage of
production, JIT systems attempt to minimize inventory levels and holding costs. JIT systems often depend
on proximity, shared information, and the system of kanban made popular by Japanese manufacturers.
Terms
average aggregate inventory
continuous improvement
customer focus
customer satisfaction
ISO 9000
just-in-time (JIT) inventory
system
kanban
productivity
quality
service recovery
setup cost
Lesson Plan for Lecture
Pre-Class Prep for You: Pre-Class Prep for Students:
Review the chapter and determine what points
to cover.
Bring PPT slides.
Read Chapter 16, bring book.
Warm Up Begin Chapter 16 by asking students about their perceptions of JCPenney as a
manufacturer or a service operation.
Content
Delivery
Lecture slides: Make note of where you stop so you can pick up at the next class
meeting. Slides have teaching notes on them to help you as you lecture.
Topics PowerPoint Slides Activities
16-1a Why Productivity
Matters
16-1b Kinds of
Productivity
Manufacturing Operations
2: What Would You Do?
3: Why Productivity Matters
4: Kinds of Productivity
productive are you on a
scale of 1 to 1
0, with 10
being extremely
,
16-2 Quality
16-2a Quality-Related
16-2c Baldrige National
Quality Award
16-2d Total Quality
Management
6: Quality Related
Characteristics for Products
10: Baldrige National Quality
Award
11: Criteria for the Baldrige
National Quality Award
Ask students how
important quality is to
quality because it costs
less? Personalize
quality by asking
students what quality
16-3 Service Operations
16-3b Service Recovery
and Empowerment
13: Service Profit Chain
Ask students if they
nonservice businesses.
Consider recounting the
example of Saturn,
Chapter 16: Managing Service and Manufacturing Operations P a g e | 5
16-4 Manufacturing
Operations
16-4a Amount of
16-4c Measuring
Inventory
16-4d Costs of
16-4e Managing Inventory
15: Processing in
Manufacturing Operations
16: Inventory
20: Managing Inventory
21: Managing Inventory
22: Which System?
Poll students to see
who has been inside a
factory. If some have,
connect your discussion
of concepts on slides
22.
Management Workplace
23: Barcelona Restaurant
Group
Launch video in slide
23. Questions on slide
can guide discussion.
Special
Items
Spark a debate using one of the following statements:
te inventory it just pushes the burden down to
Conclusion
Possible assignments:
Remind students about any upcoming events.
Chapter 16: Managing Service and Manufacturing Operations P a g e | 6
Lesson Plan for Group Work
Pre-Class Prep for You: Pre-Class Prep for Students:
Review the material to cover and modify the
lesson plan to meet your needs.
Bring a laptop and make sure your class has an
Internet connection. If your regular class does
not have a high-speed connection, consider
moving class for this class meeting to a
location that does.
Read Chapter 16, bring book.
Warm Up ductive are you on a scale of 1 to 10, with
,
Content
Delivery
Lecture on Productivity and Quality (Sections 16-1 and 16-2).
Lecture on Service Operations (Section 16-3).
Preview
If you have finished covering Chapter 16, assign students to review Chapter 16.
Remind students about any upcoming events.
Chapter 16: Managing Service and Manufacturing Operations P a g e | 7
Assignments with Teaching Tips and Solutions
What Would You Do Case Assignment
What Really Happened? Solution
LOUIS VUITTON
In the case, you learned that the luxury goods market has doubled in size in the last decade to $220 billion
a year, with much of that growth coming from China. Not surprisingly, that growth has attracted fierce
competition, and disagreements about what constitutes luxury, with Coach and others focusing on
walks a tightrope between exclusivity, by producing small numbers or limited editions of a large variety
of high quality, luxury items, and expanding production of its most popular products to meet demand, but
also CEO Yves Carcelle says that “über-luxury” items are a small part of sales. Walking that tightrope
Vuitton takes to address these issues.
popular products, yet also have the flexibility to produce small batches (i.e., limited editions) of a large
number of different luxury goods. But how do you design factories to do both, and increase productivity?
Productivity is a measure of performance that indicates how many inputs it takes to produce or create an
output. The fewer inputs it takes to create an output (or the greater the output from one input), the higher
the productivity. For companies, higher productivity that is, doing more with less results in lower
costs for the company, lower prices, faster service, higher market share, and higher profits.
Louis Vuitton is interested in maximizing multifactor productivity across its entire line of luxury goods. It
wants to produce its most popular products to meet broad demand, while also being able to have the
flexibility to switch production from those high-volume goods to small batches of a large number of
limited-production items. And, it wants to do that without building new factories. A second way to
categorize manufacturing operations is by manufacturing flexibility, meaning the degree to which
Chapter 16: Managing Service and Manufacturing Operations P a g e | 8
For example, Louis Vuitton generally releases one new bag a season, or four per year. Because its
factories were working on long-term production schedules for its most popular products, they lacked the
ability to scale up production if one of those seasonal bags suddenly became popular. In other words, they
producing more goods without building more factories. As a result, it
was so low on inventory that it simply closed its high traffic French stores ear
this trade-off between flexibility, capacity, and productivity that Louis Vuitton wants to avoid. But how?
products as handmade, make use of robots? By using those products to move unfinished inventory
throughout the factory to get rid of waiting time and production bottlenecks. For example, in its Italian
Another productivity-
cutters find flaws in the animal skins they receive. The program finds the blemishes and abrasions, takes
into account their location, and then maximizes the useable space by determining where and how to cut
the dozens of pieces that make up item.
While those steps help with productivity, how has Louis Vuitton addressed flexibility in its factories?
Second, because workers complete just one task, such as cutting leather, gluing and sewing, or stitching
the lining, it generally takes 30 craftsmen eight days to produce just one Louis Vuitton bag. Production
bottlenecks are common as the faster workers are forced to wait on the slower workers. So, how can you
restructure production process to add more capacity without building any more factories?
Louis Vuitton designs and makes some of the most expensive, best-selling purses, shoulder bags, tote
bags, and luggage in the world. With many bags costing $3,000 or more, it might surprise you to learn
Chapter 16: Managing Service and Manufacturing Operations P a g e | 9
But by seeking a balance between its most popular products, and maintain exclusivity by producing very
über- –
volume make-to-stock production with the flexibility and craftsmanship of a make-to-order operation. In
make-to– -to-order operations often
produce highly specialized or customized (or expensive) goods, like über-high luxury goods. Make-to-
stock operations produce standardized products often in high volume and in advance of receiving an order
for it. Each product is exactly the same as the next. So how can you realize the efficiency from make-to-
stock and retain the high quality characteristic of make-to-order?
Louis Vuitton fixed the problem by switching to teams of six to twelve workers who learned to complete
Management Team Decision
GOING LEAN AT STARBUCKS
Purpose
The purpose of this case study is to have students consider whether a cafe, often renowned for a warm and
friendly atmosphere, should switch to lean production methods to increase the speed at which it serves its
products.
Setting It Up
You can introduce the case by asking students to agr
most important thing in a restaurant is speed of service. As long as customers get what they ordered
Questions
1. How would an increase in efficiency and production benefit your employees?
2. fee-making
robots?
One of the key assumptions in the service business is that success depends on how well employees,
the service providers, deliver their service to customers. However, according to the service profit
Chapter 16: Managing Service and Manufacturing Operations P a g e | 10
Practice Being a Manager
BALANCING SPEED AND ACCURACY
Exercise Overview and Objective
This exercise places students in the context of a major pharmaceutical company, where they play the role
of a management team working to improve productivity and quality. Their particular task is to make
recommendations for improving two units: 1) a pill-packaging unit, and 2) a research and development
(R&D) laboratory. The objective of this exercise is to give students some practice in developing
productivity and quality measures.
Preparation
No student preparation is required for this exercise. You may want to decide in advance how to best
assign students to small teams of three or four per team. Composition of these small groups is not an
important feature of the exercise, so convenient groupings (e.g., existing project teams) should work fine
here.
You may want to lay some groundwork for the exercise by lecturing in the session prior on the topic
of productivity and quality measures. It would help if students see some examples of these measures
ahead of conducting the exercise.
This exercise is also complemented nicely by a discussion of the dilemmas and management
challenges associated with managing productivity and quality. For example, if nurse productivity is
Chapter 16: Managing Service and Manufacturing Operations P a g e | 11
In-Class Use
You should allow enough time in Steps 1 and 2 for students to encounter some problems and/or concerns
about their measures. This time frame will vary per group, but you should probably allow at least 15 20
minutes.
Call time, or in some other way clearly mark the transition from Step 2 to Step 3. In Step 3 students
are required to critically evaluate the measures that they have just developed. Encourage students to be
possible weaknesses.
other to critique their work.
After approximately 10 minutes for critique (Step 3), you should move directly to class
debriefing and discussion (Step 4). The following questions are offered in Step 4 to frame this
discussion:
What are some of the challenges of measuring productivity and quality?
Are these challenges greater for particular types of work?
Students may recognize a number of challenges of measuring productivity and quality, including: a)
measuring th ersus mere activity level); b) constructing accurate
measures of rather complex outcomes (e.g., innovative diabetes medication); and c) avoiding unintended
consequences of employees concentrating on what is measured (e.g., R&D worker who hustles to achieve
the highest number of drug concepts productivity measure and thereby fails to develop the depth of a
single highly promising concept).
Students should recognize that the challenges are typically greater in areas where tasks are more