Production Operations Management

ProductionOperations Management

Task 1: Production Sketch Make a sketch of what you think the production processes are for one of the following: • McCain’s Frozen Pizza • Hockey Night in Canada • Big Mac Combo • Music Recording

Production / Operations Management Production Process Transformation Factors of Production Outputs • Production is the process of taking resources (FACTORS OF PRODUCTION) and changing them (TRANSFORMATION) into products (OUTPUTS) • When factors of production are transformed to produce a good or service, it is called ADDING VALUE

Factors of Production Factors of Production: Resources required for the production of goods and services. • Land: includes natural resources: agriculture, fishing, mining, water, fuel, energy,forestry • Labor: all physical and mental work needed to produce the good or service • Capital: types of property such as machinery and tools that can be uses to produce goods and services • Technology: Technology refers not just to robots and computers but to the entire body of knowledge or science that informs or improves a production process • Enterprise: It is the creativity and initiative needed to start a business, develop new goods/services, or improve on the development and distribution of existing products

The Production Process The production process are all the activities that are used from start to finish to make a good or service • Purchasing • Processing • Quality Control ADDING VALUE: Any production process involves a series of links in a production chain. At each stage value is added in the course of production. Adding value involves making a product more desirable to a consumer so that they will pay more for it.

Purchasing • Purchasing: acquiring all factors of production in a timely fashion (so that no one step in the production process is delayed or raw materials / components are waiting/spoiling before they are ready to be used) • In large companies, there is a department dedicated to purchasing and their role is to: • Determine requirements of the inputs (i.e. exact size, shape, qualities/abilities, quantity, delivery of product, quality of product, remedies for errors • Issue Request for Information/Proposal • Qualify suppliers • Negotiate with supplier(s) • Contract with supplier(s)

Processing • The production process is concerned with transforming a range of inputs into those outputs that are required by the market. • This involves two main sets of resources - the transforming resources, and the transformed resources • The TRANSFORMING RESOURCES include the buildings, machinery, computers, and people that carry out the transforming processes. • The TRANSFORMED RESOURCES are the raw materials and components that are transformed into end products.

Types of Production Processes: JOB There are three main types of processes that combine transformed resources and transforming resources to create goods and services with added value: • JOB Production: involves producing custom work and is the oldest method of production. • Benefits: • Good or service may be completely customizable • As the work is concentrated on a specific unit, supervision and inspection of work are relatively simple • Specifications for the job can change DURING the course of production

Types of Production Processes: BATCH BATCH Production: The term batch refers to a specific group of components, which go through a production process together. As one batch finishes, the next one starts. Batches are continually processed through each machine before moving on to the next operation. Benefits: • Most suitable for similar goods that use the same machinery on different settings. For example, a printing company would use the same machinery to print batches of letters for different customers • It economizes upon the range of machinery needed and reduces the need for a flexible workforce

Types of Production Processes: FLOW FLOW Production: Flow production is a continuous process of parts and sub-assemblies passing on from one stage to another until completion i.e. production line at Ford plant. Units are worked upon in each operation and then passed straight on to the next work stage without waiting for the batch to be completed Benefits: • Suitable for mass market products that are identical • Labor and other production costs will be reduced through detailed planning • Deviations in the line can be quickly spotted through ongoing quality control techniques

Activity 2 Step 1: In your assigned groups, review your production sketch with your team. Step 2: Draft a production process document using the terms from today. Example: _______________ Members of team: ________________________ • Name of product: KFC Fried Chicken • List as many of the Factors of Input as you are aware of using the five headings: • LAND: 2lb chicken, spices and herbs, vegetable oil; LABOR: 1 cook, 1 cashier; CAPITAL: 1 retail location, fryer, packaging • If you were the purchasing manager, what are your primary considerations/requirements for the purchase of your three most important factors of production • 1) the inputs that may spoil have to arrive in a timely fashion 2) the location of the facility has to meet guidelines for foot traffic and specific customer demographics • Which production process did you use and why? (Job, Batch, or Flow) • I used the batch process because we use the same equipment for chicken, nuggets, french fries etc • Write down your production steps • 1) Wash chicken 2) pour oil into fryer 3) heat oil to appropriate temperature 4) place chicken into oil for pre-set length of time etc. Step 3: Present your process to the class along with one of the sketches from your group

Quality Quality: is about the characteristics of a product or service that help satisfy customers’needs • Quality assurance • Setting and applying the standards across a business’ activities • Guaranteeing that these standards will be met • Best practice benchmarking: Targeting improvements to what a business organisation does so that: • The best in the field is identified • Their standards are copied, applied, and exceeded • Total Quality Management (TQM) • The whole process of meeting customers’ needs is analysed and quality standards are set to meet them • The entire organisation is responsible for quality (departments, units, individuals) • Warranties • To reassure customers, firms sometimes offer warranties, especially on products • During this period faulty goods will be repaired or replaced

International Standards Organization(ISO) International Standards Organisation (ISO) issues global standards that establishes a variety of standards across many industries that supplier(s) can meet or exceed and provides consumers with a degree of assurance for the quality of the products that they buy • ISO 9000 certification is concerned with quality management in relation to customer requirements, customer satisfaction, adherence to regulations and the pursuit of continuous improvement. • ISO 9000 Benefits • Controls Quality: Businesses, can base their activities (products and services offered) on requirements that are accepted globally • Satisfied Customers: consumers are served with an increasingly wide choice of products and services and greater competition benefits consumers • We all benefit as transport systems, machine, tools become safer

Productivity • Productivity – a measurement of output per unit of the factor used (labour, capital or land) • Productivity Improvement is changing the different elements of the equation to arrive at a change in productivity greater than it had been before • Productivity Improvement Processes • Training, Capital Investment, and Investment in Technology • Just in Time (JIT): Inventory management • TQM: Total Quality Management Total Output Productivity = Factors of Production

Training, Capital Investment, Investment in Technology • Training: Employees need to be trained on what they are to be doing to maximize productivity • Initial training • On-going training: when introducing new processes, training time must be allocated to for them to learn the new processes • Retraining: when employees transfer to a new role, they must often be trained in the new job • Specialized training: training that helps employees upgrade their skills is called professional development • Capital Investment: Investment in new machinery, equipment, facilities are all examples of capital investment intended to improve productivity • When considering capital investments, the gains in productivity must exceed the costs of the capital investment • Investment in Technology: new technology can improve productivity • Example: wireless point of sale terminals can increase transaction payments in a restaurant

Just In Time (JIT) Inventory Management This is an inventory management method whereby materials are delivered just as they are needed. JIT offers: • Benefit: Reduces need for storage • Benefit: Improves working capital as little cash tied up in stock • Benefit: Reduces risk of stocks becoming damaged or obsolete • Disadvantage: Relies on the reliability of the suppliers • Disadvantage: Limits ability to respond to an unexpected order or increase in demand

Total Quality Management (TQM) • Total quality management is a quality assurance approach whereby ALL workers are responsible for quality – it aims to “get it right the FIRST time” • TQM requires a change in the way in which businesses operate: • Management structures have to be more consultative and less hierarchical. • Workers have to be empowered to be able to make decisions at all levels of the organization. • Workers have to be trained and involved in the building of the philosophy. • Benefits: • Improved product quality can reduce cost of replacing damaged or faulty goods • The improved communication between suppliers and the firm should help to reduce defective components. • Positive effect on customer loyalty and repeat purchases, as well as winning over customers from rivals

Production Operations Management