Business Essentials Tenth Canadian Edition PDF

Business Essentials Tenth Canadian Edition Chapter 10 Operations Management, Productivity, and Quality Copyright © 2023 Pearson Canada Inc. 10 - 1 Le...

Business Essentials Tenth Canadian Edition Chapter 10 Operations Management, Productivity, and Quality Copyright © 2023 Pearson Canada Inc. 10 - 1 Learning Objectives Explain the meaning of the term production (or operations) and describe the four kinds of utility it provides. Identify the characteristics that distinguish service operations from goods production and explain the main differences in the service focus. Describe the two types of operations processes. Dan Rentea/Alamy Stock Describe the factors involved in operations Photo planning and operations control. Explain the connection between productivity and quality. Understand the concept of total quality management and describe nine tools that companies can use to achieve it. Explain how a supply-chain strategy differs from traditional strategies for coordinating operations among businesses. Copyright © 2023 Pearson Canada Inc. 10 - 2 Creating Value Through Production (LO 10.1) (1 of 2) Operations Management – a set of methods and technologies used in the production of a good or a service. Service Operations – production activities that yield tangible and intangible service products Goods Production – production activities that yield tangible products Copyright © 2023 Pearson Canada Inc. 10 - 3 Creating Value Through Production (LO 10.1) (2 of 2) Time Utility – when the product is available Place Utility – where the product is available Ownership (Possession) Utility – consumption or use of product Form Utility – product’s form (the transformation of raw The decorations for a Christmas tree illustrate materials into a finished the importance of the concepts of time, place, ownership, and form utility to consumers. product) Lucky Business/Shutterstock Copyright © 2023 Pearson Canada Inc. 10 - 4 Difference Between Service and Manufacturing Operations (LO 10.2) Interacting with customers Services can be intangible and unstorable The customers presence in the operations process Service quality considerations (intangibles make all the difference) Copyright © 2023 Pearson Canada Inc. 10 - 5 Operations Processes (LO 10.3) (1 of 5) Goods-Producing Processes – methods and technologies used in the production of good & services – classified by ▪ type of transformation technology ▪ type of process (analytic or synthetic) ▪ amount of customer contact Copyright © 2023 Pearson Canada Inc. 10 - 6 Operations Processes (LO 10.3) (2 of 5) Types of Transformation Technology Chemical processes Fabrication processes Assembly processes Transport processes Clerical processes Norenko Andrey/Shutterstock Copyright © 2023 Pearson Canada Inc. 10 - 7 Operations Processes (LO 10.3) (3 of 5) Analytic Process – resources are broken down in the production process ▪ extracting minerals from ore Synthetic Process Farmers are operations managers who create utility – resources are combined by transforming soil, seeds, fuel, and other inputs into soybeans, milk, and other outputs. in the production process Solid photos/Shutterstock ▪ paint production Copyright © 2023 Pearson Canada Inc. 10 - 8 Operations Processes (LO 10.3) (4 of 5) Service-Producing Processes – customers are involved in and can affect the transformation process – low-contact system ▪ customers do not need Peathegee Inc/Blend Images/Getty to be physically Images present – high-contact system ▪ customers need to be physically present Copyright © 2023 Pearson Canada Inc. 10 - 9 Operations Processes (LO 10.3) (5 of 5) Business Strategy (Driver of Operations): – Quality – Lower prices – Flexibility – Dependability Copyright © 2023 Pearson Canada Inc. 10 - 10 Operations Planning (LO 10.4) (1 of 5) Successful operations are carefully planned and implemented – forecasting and planning ▪ Capacity ▪ quality ▪ location Dan Rentea/Alamy Stock Photo ▪ layout ▪ methods planning Copyright © 2023 Pearson Canada Inc. 10 - 11 Operations Planning (LO 10.4) (2 of 5) Figure 10.2 Operations planning and control Copyright © 2023 Pearson Canada Inc. 10 - 12 Operations Planning (LO 10.4) (3 of 5) Capacity Planning—Goods and Services – amount that a firm can produce under normal conditions ▪ Capacity should slightly exceed normal demand ▪ Accommodate seasonal changes and peak times ▪ Address ways to use excess capacity Copyright © 2023 Pearson Canada Inc. 10 - 13 Operations Planning (LO 10.4) (4 of 5) Layout Planning Process Layout – Equipment and people are grouped by function Cellular Layout – Used when families of products can follow similar flow paths Product Layout – Organizing equipment and people to produce one type of product ▪ assembly lines, industrial robotics, lean manufacturing Copyright © 2023 Pearson Canada Inc. 10 - 14 Operations Planning (LO 10.4) (5 of 5) Other Developments in Layout Flexibility Flexible Manufacturing Process (FMS) Soft Manufacturing Movable Factory Monty Rakusen/Cultura Creative R F/Alamy Stock Photo Copyright © 2023 Pearson Canada Inc. 10 - 15 Operations Scheduling (LO 10.4) (1 of 3) Scheduling Goods Operations Master Production Schedule (top level) – which products, when, what resources, what time period Scheduling Service Operations low-contact services: – based on desired completion dates and/or arrival high-contact services: – customer is directly involved (impacts scheduling) Copyright © 2023 Pearson Canada Inc. 10 - 16 Operations Scheduling (LO 10.4) (2 of 3) Gantt Charts – diagram of steps in the project and time required for each – can be used to check progress Figure 10.9 A Gantt chart Copyright © 2023 Pearson Canada Inc. 10 - 17 Operations Scheduling (LO 10.4) (3 of 3) PERT Charts – specifies the sequence and critical path of steps in a project – can identify activities that will cause delay Figure 10.10 A PERT chart Copyright © 2023 Pearson Canada Inc. 10 - 18 Operations Control (LO 10.4) (1 of 2) Operations Control – monitoring performance by comparing results to original plans and schedules follow-up-checking to ensure that production decisions are being implemented materials management production-process control Copyright © 2023 Pearson Canada Inc. 10 - 19 Operations Control (LO 10.4) (2 of 2) Materials Management – planning, organizing, and controlling the flow of materials from purchase to distribution of finished goods ▪ transportation ▪ purchasing ▪ inventory control ▪ supplier selection ▪ warehousing Chris Mueller/Redux Pictures Copyright © 2023 Pearson Canada Inc. 10 - 20 Operations Control (LO 10.5) (1 of 3) Tools for Process Control Worker training Material requirements training Just-in-time production systems Quality control Copyright © 2023 Pearson Canada Inc. 10 - 21 Operations Control (LO 10.5) (2 of 3) Just-in-Time Production Systems (JIT) – parts are delivered when they are needed ▪ resources continually flow from raw materials to the Nathan Denette/The CP Images finished product ▪ saves on warehouse costs ▪ smooth movement of product components Copyright © 2023 Pearson Canada Inc. 10 - 22 Operations Control (LO 10.5) (3 of 3) Materials Requirements Planning (MRP) – computerized bill of materials estimates production needs – resources are acquired and put into production only as needed Manufacturing Resource Planning MRP II – advanced version of MRP; ties all parts of the organization into production activities ▪ Production ▪ inventory ▪ human resources ▪ marketing ▪ finance Copyright © 2023 Pearson Canada Inc. 10 - 23 The Productivity–Quality Connection (LO 10.5) (1 of 3) Quality – a product’s fitness for use in terms of offering the features that consumers want Measuring Productivity – productivity is measured as a ratio of outputs to inputs Overall, Boeing has a very good quality and safety record. However, the ill-fated Boeing 737 M AX has – often use labour for input damaged that reputation. With two tragic accidents in Indonesia and Ethiopia, the new model was grounded because data is easily for months until quality assurances were met. available B.O'Kane/Alamy Stock Photo Gross Domestic Product (GDP) Labour Productivity = Total Number of Workers Copyright © 2023 Pearson Canada Inc. 10 - 24 The Productivity–Quality Connection (LO 10.5) (2 of 3) Domestic Productivity – productivity affects standard of living: employees (wages), investors (profits), customers (prices) Manufacturing productivity is higher than service productivity – but service industries have made some recent gains from modern information technology that eliminates inefficiencies Copyright © 2023 Pearson Canada Inc. 10 - 25 The Productivity–Quality Connection (LO 10.5) (3 of 3) Productivity between industries differs widely – agriculture, computer, steel have gained from new technology ▪ impacts: labour-union negotiations, investors, suppliers Company Productivity – high productivity gives a competitive edge – lower costs allow for lower prices, more profit or higher wages ▪ impacts: investors buying stock, employee profit- sharing plans, managers’ plans for the future Copyright © 2023 Pearson Canada Inc. 10 - 26 Total Quality Management (TQM) (L O 10.6) (1 of 2) Includes all activities and parts of the business (customers, suppliers, employees) Leadership and customer focus are key Requires highest level of commitment (no defects are tolerable) Highlights continuous improvement All employees are responsible for maintaining quality standards Copyright © 2023 Pearson Canada Inc. 10 - 27 Total Quality Management (TQM) (LO 10.6) (2 of 2) Performance Quality – refers to the features of a product and how well it performs Quality Reliability – refers to the consistency or repeatability of performance Michael jung/Shutterstock Quality Ownership – the idea that quality belongs to each person who creates or destroys it while performing a job Copyright © 2023 Pearson Canada Inc. 10 - 28 Tools for Quality Assurance (LO 10.6) (1 of 7) Quality-Assurance Tools competitive product analysis value-added analysis statistical process control quality/cost studies quality-improvement teams benchmarking getting closer to the customer ISO 9000:2000 and ISO 14000 re-engineering adding value through supply chains Copyright © 2023 Pearson Canada Inc. 10 - 29 Tools for Quality Assurance (LO 10.6) (2 of 7) Value-Added Analysis – evaluation process to determine the value added by: ▪ all work activities ▪ material flows ▪ paperwork – reveal and eliminate wasteful activities Copyright © 2023 Pearson Canada Inc. 10 - 30 Tools for Quality Assurance (LO 10.6) (3 of 7) Statistical Process Control (SPC) – SPC methods enable managers to analyze variations in production data – detect when adjustments are needed to create products with high quality reliability Process Variation – change in employees, materials, work methods, or equipment that affects output quality Control Chart – statistical process control method (results plotted on a diagram) – results outside the control limits are easily spotted (checked) Copyright © 2023 Pearson Canada Inc. 10 - 31 Tools for Quality Assurance (LO 10.6) (4 of 7) Quality/Cost Studies – assessing quality-related costs and identifying areas with cost-saving potential – quality costs are associated with making, finding, repairing or preventing product defects – requires determining the costs of ▪ internal failures ▪ external failures Copyright © 2023 Pearson Canada Inc. 10 - 32 Tools for Quality Assurance (LO 10.6) (5 of 7) Copyright © 2023 Pearson Canada Inc. 10 - 33 Tools for Quality Assurance (LO 10.6) (6 of 7) Benchmarking – compares the quality of a firm’s output with the quality of the output of the industry’s leaders internal – compare to past performance external – compare to competitors’ best practices Copyright © 2023 Pearson Canada Inc. 10 - 34 Tools for Quality Assurance (LO 10.6) (7 of 7) ISO 9000:2000 and ISO 14000 (Environmental) – program certifying that a company meets the rigorous standards of the International Organization for Standardization (ISO) – to earn the rating, firms are measured by qualified consultants on: ▪ product testing ▪ employee training ▪ record-keeping ▪ correcting defects Business Process Re-Engineering – redesigning business processes to improve performance, quality, and productivity Copyright © 2023 Pearson Canada Inc. 10 - 35 Tools for Quality Assurance (LO 10.7) Adding Value Through Supply Chains Supply Chain (Value Chain) – a group of companies and stream of activities involved in getting the product from the raw material stage to the end consumer Figure 10.14 Supply chain for baked goods Copyright © 2023 Pearson Canada Inc. 10 - 36 Supply-Chain Management (LO 10.7) Supply-Chain Management – offers a competitive edge because companies are working together to improve overall flow of goods ▪ customers get better value ▪ smooth flow of accurate information reduces unwanted inventory ▪ materials move faster to business customers and consumers Copyright © 2023 Pearson Canada Inc. 10 - 37 Quick-Check Questions (1 of 5) 1) Many of us will pay an extra service fee to get cash from private ATM machines because of the ________ utility it provides. A) place B) marketing C) form D) ownership Copyright © 2023 Pearson Canada Inc. 10 - 38 Quick-Check Answer (1 of 5) 1) Many of us will pay an extra service fee to get cash from private ATM machines because of the ________ utility it provides. A) place B) marketing C) form D) ownership Copyright © 2023 Pearson Canada Inc. 10 - 39 Quick-Check Questions (2 of 5) 2) __________ process combines a number of raw materials (such as glass and wood) to produce a finished product (such as a table). A) hybrid B) analytic C) synthetic D) natural Copyright © 2023 Pearson Canada Inc. 10 - 40 Quick-Check Answer (2 of 5) 2) __________ process combines a number of raw materials (such as glass and wood) to produce a finished product (such as a table). A) hybrid B) analytic C) synthetic D) natural Copyright © 2023 Pearson Canada Inc. 10 - 41 Quick-Check Questions (3 of 5) 3) _______ charts break down large projects into steps and specify the time required to perform each one. They not only show the necessary sequence of activities but identify the critical path for meeting project goals. A) G ANTT B) PERT C) JIT D) M RP Copyright © 2023 Pearson Canada Inc. 10 - 42 Quick-Check Answer (3 of 5) 3) _______ charts break down large projects into steps and specify the time required to perform each one. They not only show the necessary sequence of activities but identify the critical path for meeting project goals. A) G ANTT B) PERT C) JIT D) M RP Copyright © 2023 Pearson Canada Inc. 10 - 43 Quick-Check Questions (4 of 5) 4) ___________ utilizes a computer system to estimate production needs so that required resources are available when needed. A) Just-in-Time (JIT) production systems B) Material Requirements Planning (MRP) C) Quality control D) Materials management Copyright © 2023 Pearson Canada Inc. 10 - 44 Quick-Check Answer (4 of 5) 4) ___________ utilizes a computer system to estimate production needs so that required resources are available when needed. A) Just-in-Time (JIT) production systems B) Material Requirements Planning (MRP) C) Quality control D) Materials management Copyright © 2023 Pearson Canada Inc. 10 - 45 Quick-Check Questions (5 of 5) 5) British Airways examined its work processes to improve efficiency and customer satisfaction. They conducted a value-added analysis by looking directly at every element in their ___________. A) competitive advantage B) SWOT assessment C) quality reports D) supply chain Copyright © 2023 Pearson Canada Inc. 10 - 46 Quick-Check Answer (5 of 5) 5) British Airways examined its work processes to improve efficiency and customer satisfaction. They conducted a value-added analysis by looking directly at every element in their ___________. A) competitive advantage B) SWOT assessment C) quality reports D) supply chain Copyright © 2023 Pearson Canada Inc. 10 - 47