Chapter 18ii 2011

Management: Arab World Edition
Robbins, Coulter, Sidani, Jamali
Chapter 18: Managing Operations
Lecturer: : [Insert your name here]

Learning Outcomes

Follow this Learning Outline as you read and study this chapter.
18.1 The Role of Operations Management

• Define operations management.
• Contrast manufacturing and services organizations.
• Describe the managers’ role in improving productivity.
• Discuss the strategic role of operations management.
18.2 What Is Value Chain Management and Why Is It
Important?

• Define value chain and value chain management.
• Describe the goal of value chain management.
• Describe the benefits of successful value chain management.
18-3

Copyright © 2011 Pearson Education

Learning Outcomes
18.3 Managing Operations by Using Value Chain
Management

• Discuss the requirements for successful value chain
management.

• Explain the obstacles to value chain management.
18.4 Current Issues in Operations Management

• Discuss technology’s role in manufacturing.
• Explain ISO 9000 and Six Sigma.
• Describe mass customization and how operations management
contributes to it.
18-4


The Role of Operations
Management
1. Define operations management.
2. Contrast manufacturing and services organizations.

3. Describe the managers’ role in improving productivity.
4. Discuss the strategic role of operations management.

18-5


What Is Operations Management?
– Operations

Management refers to the design, operation, and
control of the transformation process that converts such resources
as labor and raw materials into goods and services that are sold to
customers.

18-6


The Importance of Operations Management
– It

encompasses both services and manufacturing.

– It

is important in effectively and efficiently managing productivity.

– It

plays a strategic role in an organization’s competitive success.

18-7


Exhibit 18–1

18-8


The Operations System

Manufacturing and Services
Manufacturing Organizations
– Use

operations management in the transformation process of turning
raw materials into physical goods.

Service Organizations
– Use

operations management in creating non-physical outputs in the
form of services (the activities of employees interacting with
customers).

18-9


Managing Productivity
Productivity
– The

overall output of goods or services produced divided by the
inputs needed to generate that output.

–A

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combination of people and operations variables.


Managing Productivity (cont’d)
Benefits of Increased Productivity
– Economic
– Higher

wages and profits without inflation

– Increased

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growth and development
competitive capability due to lower costs


Exhibit 18–2
Deming’s 14 Points for Improving Productivity
1. Plan for the long-term future.

7.

2. Never be complacent concerning
the quality of your product.

Raise the quality of your line
supervisors.

8.

Drive out fear.

3. Establish statistical control over
your production processes and
require your suppliers to do so
as well.

9.

Encourage departments to work
closely together rather than to
concentrate on departmental or
divisional distinctions.

4. Deal with the best and fewest
number of suppliers.

10. Do not adopt strictly numerical
goals.

5. Find out whether your problems
are confined to particular parts
of the production process or
stem from the overall process
itself.

11. Require your workers to do
quality work.

6. Train workers for the job that
you are asking them to perform.
Source: W.E. Deming, ―Improvement of Quality and Productivity Through
Action by Management,‖ National Productivity Review, Winter 1981–1982,
pp. 12–22. With permission. Copyright 1981 by Executive Enterprises,
Inc., 22 West 21st St., New York, NY 10010-6904. All rights reserved.
18-12


12. Train your employees to
understand statistical methods.
13. Train your employees in new
skills as the need arises.

14. Make top managers responsible
for implementing these principles.

Strategic Role of Operations Management
– The

era of modern manufacturing began in the U.S. over 100
years ago.

– After

WWII, U.S. manufacturers focused on functional areas other
than manufacturing.

18-13


Strategic Role of Operations Management
(cont’d)
– By

the 1970’s, German and Japanese competitors integrated
manufacturing technologies were producing quality goods at lower
costs.

– Today,

successful organizations recognize the crucial role that
operations management plays as part of the overall organizational
strategy to establish and maintain global leadership planning.

18-14


What Is Value Chain
Management and Why Is It
Important?
1. Define value chain and value chain management.
2. Describe the goal of value chain management.
3. Describe the benefits of successful value chain management.

18-15


Value Chain Management
Value
–

18-16

The performance characteristics, features and attributes, and any
other aspects of goods and services for which customers are
willing to give up resources (i.e., spend money).


Value Chain Management (cont’d)
The Value Chain
– The

entire series of organizational work activities that add value
at each step beginning with the processing of raw materials and
ending with the finished product in the hands of end users.

18-17


What is Value Chain Management?
Value Chain Management
– The

process of managing the entire sequence of integrated
activities and information about product flows along the entire
value chain.

18-18


Goal of Value Chain Management
– To

create a value chain strategy that fully integrates all members
into a seamless chain that meets and exceeds customers’ needs and
creates the highest value for the customer.

18-19


Benefits of Value Chain Management

Improved
Procurement

Improved
Logistics

Benefits of
Value Change
Management
Enhanced
Customer Order
Management

18-20


Improved
Product
Development

Managing Operations by
Using Value Chain
Management
1. Discuss the requirements for successful value chain
management.
2. Explain the obstacles to value chain management.

18-21


Exhibit 18–3 Value Chain Strategy Requirements

18-22


Requirements for Value Chain Management
Coordination and collaboration




Sharing information and being flexible throughout the value
chain.



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Collaborative relationships must exist among all chain
participants.

Requires open communication among the various value chain
partners.


(cont’d)
Investment in information technology




18-24

Successful value chain management is not possible without a
significant investment in information technology.
Information technology can be used to restructure the value
chain to better serve end users.


(cont’d)
Changes in organizational processes




Non-value-adding activities should be eliminated.



Better demand forecasting is necessary and possible because of
closer ties with customers and suppliers.



Selected functions may need to be done collaboratively with other
partners in the value chain.



18-25

Organizational processes must be critically evaluated, from
beginning to end, to see where value is being added.

New measures are needed for evaluating performance of various
activities along the value chain.


(cont’d)
Committed leadership




A culture focused on superb customer value requires serious
leadership commitment.



Managers need to outline expectations for what is involved in
value chain management.



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Value chain management requires managers’ continuous support,
facilitation, and promotion.

Managers should clarify expectations regarding each employee’s
role in the value chain.


(cont’d)
Employees/Human Resources

Design jobs that are flexible.


Hire employees who have the ability to learn and adapt.



Employees need to learn:



how to improve the flow of materials throughout the chain,



how to identify activities that add value,



how to make better decisions faster, or



18-27

how to use information technology software,

how to improve any number of other potential work activities.


(cont’d)
Organizational culture and attitudes


Cultural attitudes include:



openness



flexibility



mutual respect



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collaborating





sharing

trust

Attitudes encompass external partners as well.


Exhibit 18–4
Obstacles to Successful Value Chain Management

18-29


Obstacles to Value Chain Management
Organizational barriers
– Refusal

or reluctance to share information

– Reluctance
– Security

18-30

to shake up the status quo

issues


Obstacles to Value Chain Management (cont’d)
Cultural attitudes
– Lack

of trust and too much trust

– Fear

of loss of decision-making power

Required capabilities
– Lacking

or failing to develop the requisite value chain
management skills

18-31


Obstacles to Value Chain Management (cont’d)
People
– Lacking

commitment to do whatever it takes

– Refusing

to be flexible in meeting the demands of a changing

situation
– Not

being motivated to perform at a high level

– Lack

18-32

of trained managers to lead value chain initiatives


Current Issues in Operations
Management
1. Discuss technology’s role in manufacturing.
2. Explain ISO 9000 and Six Sigma.
3. Describe mass customization and how operations
management contributes to it.

18-33


Technology’s Role in Manufacturing
– Smart

companies are looking at ways to use technology to
improve operations management.

– To

connect more closely with customers, production must be
synchronized (i.e. well-coordinated) across the enterprise.

18-34


Technology’s Role in Manufacturing (cont’d)
– To

avoid bottlenecks and slowdowns, the production function must
be a full partner in the entire business system.

– Technology

18-35

is making such extensive collaboration possible.


Technology’s Role in Manufacturing (cont’d)
– Increased

automation and integration of production facilities
with business systems also helps in controlling costs.

– Predictive

maintenance, remote diagnostics, and utility cost

savings

18-36


The Concept of Quality
– The

ability of a product or service to reliably do what it’s supposed
to do and to satisfy customer expectations.

18-37


Exhibit 18–5

Product Quality Dimensions

1. Performance – Operating characteristics
2. Features – Important special characteristics
3. Flexibility – Meeting operating specifications over some
period of time
4. Durability – Amount of use before performance deteriorates

5. Conformance – Match with pre-established standards
6. Serviceability – Ease and speed of repair or normal service
7. Aesthetics – How a product looks and feels

8. Perceived quality – Subjective assessment of characteristics
(product image)
Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN: West Publishing Company, 1994); H.V.
Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press, 1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The
Free Press, 1988); and M.A. Hitt, R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.
18-38


Exhibit 18–5 (cont’d) Service Quality Dimensions
1.

Timeliness – Performed in promised period of time

2.

Courtesy – Performed cheerfully

3.

Consistency – Giving all customers similar experiences
each time

4.

Convenience – Accessibility to customers

5.

Completeness – Fully serviced, as required

6.

Accuracy – Performed correctly each time

Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN: West Publishing Company, 1994); H.V.
Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press, 1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The
Free Press, 1988); and M.A. Hitt, R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.
18-39


Quality initiatives and Quality Goals
Quality Initiatives
– Planning

for quality

– Organizing

and leading for quality

– Controlling

for quality

Quality Goals
– ISO
– Six

18-40

9000 certification
Sigma standards


Quality Initiatives – 1
Planning for quality
– Managers

must have quality improvement goals and
strategies and plans to achieve those goals.

– Goals

can help focus everyone’s attention on some objective
quality standard.

18-41


Organizing and leading for quality
– Because

quality improvement initiatives are carried out by
employees, managers need to look at how they can best organize
and lead them.

– Organizations

with extensive and successful quality improvement
programs tend to rely on two important people approaches:
– (1)
– (2)

18-42

cross-functional work teams; and
self-directed, or empowered, work teams.


Controlling for quality
– Quality

improvement initiatives are not possible without a means
of monitoring and evaluating their progress.

– This

involves implementing many standards such as those
related to inventory control, defect rate, raw materials
procurement, or other operations management areas.

18-43


Quality Goals – ISO 9000 certification
– ISO

9000 is a series of international quality management
standards established by the International Organization for
Standardization which sets uniform guidelines for processes to
ensure that products conform to customer requirements.

– These

standards cover everything from contract review to
product design to product delivery.

18-44


Quality Goals – ISO 9000 certification (cont’d)
– The

ISO 9000 standards have become the internationally
recognized standard for evaluating and comparing companies
in the global marketplace.

– This

type of certification can be a prerequisite for doing business
globally.

18-45


Quality Goals – Six Sigma
– Six

Sigma is a quality standard that establishes a goal of no more
than 3.4 defects per million units or procedures.

– Sigma

is a Greek letter used in statistics. The higher the sigma, the
fewer the deviations from the norm—that is, the fewer the defects.

– At

Six Sigma, you are about as close to defect free as you can get. It
is an ambitious quality goal!

– Many

quality-driven businesses are using it and benefiting from it
including many in the Arab region.

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Mass Customization
– Is

a design-to-order concept that provides consumers with a
product when, where, and how they want it.

– Makes

heavy use of technology (flexible manufacturing techniques)
and engages in a continual dialogue with customers.

18-47


Benefits of Mass Customization
– Creates

an important relationship between the firm and the
customer in providing loyalty-building value to the customer and in
garnering valuable market information for the firm.

18-48


Terms to Know
operations management

intellectual property

manufacturing organizations

quality

service organizations

ISO 9000

productivity

Six Sigma

value

mass customization

value chain

Cellular manufacturing

value chain management

organizational processes
RFID

18-49


18-50


Chapter 18ii 2011

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Chapter 18ii 2011