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Chapter 15

Chapter 15. Managing Service and Manufacturing Operations. What Would You Do? Productivity at Huffman Corporation. Sales in the machine tool industry are off by 60 percent Huffman wants to increase productivity How do you measure and improve productivity?

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Chapter 15

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  1. Chapter 15 Managing Service and Manufacturing Operations

  2. What Would You Do?Productivity at Huffman Corporation • Sales in the machine tool industry are off by 60 percent • Huffman wants to increase productivity • How do you measure and improve productivity? • Will improved productivity really matter to the customers?

  3. Learning ObjectivesManaging for Productivity and Quality • discuss the kinds of productivity and their importance in managing operations. • explain the role that quality plays in managing operations. After discussing this section, you should be able to:

  4. Productivity A measure of performance that indicates how many inputs it takes to produce or create an output Productivity Why Productivity Matters Kinds of Productivity

  5. Why Productivity Matters Higher Productivity Lower Costs Lower Prices Higher Standard of Living Higher Profits Higher Market Share

  6. Outputs Single Kind of Input Outputs Labor + Capital + Materials + Energy Kinds of Productivity • Partial productivity = • Multifactor productivity =

  7. Quality Quality-Related Product Characteristics Quality-Related Service Characteristics ISO 9000 Baldrige National Quality Award Total Quality Management

  8. Quality-Related Product Characteristics • Reliability • the average time between breakdowns • Serviceability • the ease with which a product is fixed • Durability • mean time to failure

  9. Reliability Quality Service Empathy Tangibles Assurance Responsiveness Quality-Related Service Characteristics Adapted from Exhibit 15.4

  10. ISO 9000 • A series of five international standards • Certifies quality processes • Managers often want this to improve customer satisfaction

  11. Baldrige National Quality Award • Given to U.S. companies • Recognizes achievement in quality • Winners have been financially successful

  12. Criteria for the Baldrige National Quality Award • Leadership • Strategic Planning • Customer and Market Focus • Information and Analysis • Human Resource Focus • Process Management • Business Results

  13. Total Quality Management Customer Focus and Satisfaction Continuous Improvement Teamwork

  14. Defects at Six Sigma Quality 3.4 defects per million 6 Sigma 230 defects per million 5 Sigma 6,210 defects per million 4 Sigma Sigma Quality Level 66,800 defects per million 3 Sigma 308,538 defects per million 2 Sigma 690,000 defects per million 1 Sigma 50 150 250 350 450 550 650 750 Defects Per Million Parts (000) Adapted from Exhibit 15.7

  15. Learning ObjectivesManaging Operations • explain the essentials of managing a service business. • describe the different kinds of manufacturing operations. • describe why and how companies should manageinventory levels. After discussing this section, you should be able to:

  16. Service Operations Service- Profit Chain Service Recovery and Empowerment

  17. Employee Satisfaction Service Capability Service-Profit Chain Internal Service Quality High Value Service Customer Satisfaction Customer Loyalty Profit and Growth Adapted From Figure 15.8

  18. Do they facilitate serving customers? Do service employees have tools needed? Is job-specific training available? Are good performers rewarded/recognized? Both vertical and horizontal communication? Does management aid or hinder employees? Are goals of senior management and frontline service employees aligned? Is there teamwork among individuals and departments? Components of Internal Service Quality Policies and Procedures Tools Effective Training Rewards and Recognition Communication Management Support Goal Alignment Teamwork Adapted from Exhibit 15.9

  19. Service Recovery and Empowerment • Service recovery is restoring customer satisfaction to strongly dissatisfied customers • Empowering workers is one way to speed up service recovery

  20. Costs of Empowering Service Workers for Service Recovery • Increased costs of selection • Increased training costs • Higher wages • Less emphasis on service reliability • Overly eager, empowered service workers may provide “giveaways” • Empowered service workers may be overly eager to make up for poor service

  21. Benefits of Empowering Service Workers for Service Recovery • Quicker response to customer complaints and problems • Employees feel better about their jobs • Employee interaction with customers will be warm and friendly • Employees more likely to offer ideas for improving service and preventing problems

  22. Manufacturing Operations Amount of Processing in Manufacturing Operations Flexibility of Manufacturing Operations

  23. Amount of Processing in Manufacturing Operations • Make-to-order operations • manufacturing doesn’t begin until an order is placed • Assemble-to-order operations • used to create semi-customized products • Make-to-stock operations • manufacture standardized products

  24. Flexibility of Manufacturing Operations Continuous- Flow Production Line- Flow Production Batch Production Job Shops Project Manufacturing Least Flexible Most Flexible Adapted From Figure 15.12

  25. Inventory Types of Inventory Measuring Inventory Costs of Maintaining an Inventory Managing Inventory

  26. Vendors Purchasing Component Parts Fabrication Work-in- Progress Final Assembly Customers Initial Assembly Finished Goods Retailers Field Warehouses Wholesalers Distribution Centers Types of Inventory Raw Materials Adapted From Figure 15.4

  27. Measuring Inventory • Average aggregate inventory • the average overall inventory for a certain time period • Stockout • running out of inventory • Inventory turnover • the number of times a year that a company sells its average inventory

  28. 30 Average Inventory Turn Rate 25 75th Percentile Inventory Turn 20 Rate 15 10 5 0 Average High Tech Chemicals Aerospace Automotive Construction Pharmaceuticals Printing and Publishing Consumer Product Durables Industrial Equipment & Machinery Consumer Packated Goods/Nondurables Inventory Turn Rates Across Industries Adapted from Exhibit 15.14

  29. Blast From The PastGuns, Geometry, and Fire • Whitney and standardized parts • interchangeable parts • fewer defects • Monge’s 3-dimensional drawings • more precise designs • Fire led to just-in-time at Oldsmobile

  30. Costs of Maintaining an Inventory • Ordering costs • all associated costs with ordering goods • Setup costs • changing goods produced • Holding costs • carrying inventory • Stockout costs • running out of inventory

  31. Dependent Demand Systems Independent Demand Systems Managing Inventory Economic Order Quantity Just-in-Time Materials Requirement Planning Kanban

  32. Been There, Done That Lean Manufacturing at Wiremold • Wiremold has used continuous improvement and just-in-time inventory systems • Quality has increased and costs have been reduced • The more inventory is turned, the better customer service gets

  33. What Really Happened?Productivity at Huffman Corporation • Labor hours to produce a machine tool is 33 percent less, allowing a 20 percent price drop • Ended most recent year with record sales and profits • Results find their way to customer performance, for example some medical machines that improve productivity of doctors

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