Fundamentals of Management

Sixth Edition

Robbins and DeCenzo

with contributions from Henry Moon

CHAPTER

Part V: Controlling

14
2008 Prentice Hall, Inc. All rights reserved.

Operations Management
PowerPoint Presentation by Charlie Cook The University of West Alabama

LEARNING OUTCOMES After reading this chapter, you will be able to:
1. Define operations management and the transformation process. 2. Describe three reasons operations management is important to all managers. 3. Differentiate between a service and a manufacturing organization. 4. Define value chain management. 5. Explain the organizational and managerial requirements for value chain management. 6. Identify the benefits and obstacles to value chain management.
2008 Prentice Hall, Inc. All rights reserved. 142

L E A R N I N G O U T C O M E S (contd) After reading this chapter, you will be able to:

7. Discuss technologys role in operations management. 8. Explain what is meant by the term just-in-time management. 9. Describe what is meant by the term quality control. 10. Explain the concept of project management.

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The Importance Of Operations Management

Operations Management
The study and application of the transformation

process

OM Is Important Because It:

Encompasses processes in all organizations

services as well as manufacturing. Is important in effectively and efficiently managing productivity. Plays a strategic role in an organizations competitive success.

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Transformation and Organizations

Transformation Process
The process through which an organization creates

value by turning inputs (people, capital, equipment, materials) into outputs (goods or services).

Manufacturing Organization
Produces physical goods.

Service Organization
Produces nonphysical outputs such as educational,

medical or transportation services.

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EXHIBIT 141

The Transformation Process

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Productivity
Productivity Defined
The overall output of goods and services produced

divided by the inputs needed to generate that output.

Outputs Inputs
Benefits of High Productivity
Fosters economic growth and development Increases individual wages without inflation Lowers costs and makes firms more competitive
2008 Prentice Hall, Inc. All rights reserved. 147

What Is Value Chain Management?

Value
The performance characteristics, features and

attributes, or any other aspects of goods and services for which customers are willing to give up resources.

Value Chain
The entire series of organizational work activities that

add value at each step beginning with the processing or raw materials and ending with a finished product in the hands of end users.

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Value Chain Management versus Supply Chain Management

Value Chain Management
Improves the process of creating and transferring

documents by automating the flow of information.

Supply Chain Management

Is the management of facilities, functions, and

activities involved in producing and delivering a product or service, from suppliers to customers.

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The Goals Of Value Chain Management

Creating customer-defined value by:
Providing a unique combination that meets customer

needs and at a price that cant be matched by competitors. Having a sequence of participants work together as a team, each adding a component of value to the overall process.

Its all about providing value, not bargains, to the customer

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Value Chain Management Requirements

Business Model
A strategic design for how a company intends to

profit from its broad array of strategies, processes, and activities.

Value Chain Management Requirements

Coordination and collaboration Technology investment Organizational processes Leadership Employees/human resources management

Strong culture and attitudes

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EXHIBIT 142 Six Requirements for Successful Value Chain Management

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Steps in Collaboration

1. Look for common points of interest.

2. Listen to others.
3. Check for understanding. 4. Accept diversity.

5. Seek additional information.

6. Dont become defensive.

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Effect of Value Chain Management on Organizational Processes

Better demand forecasting is necessary and possible because of closer ties with customers and suppliers. Selected functions may need to be done collaboratively with partners in the value chain. New measures are needed for evaluating the performance of activities along the value chain.

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Implementing Value Chain Management

Benefits
Improved customer service Cost savings Accelerated delivery times Improved quality Inventory reduction Improved logistics

Obstacles
Organizational barriers Cultural attitudes Required capabilities People

management
Increased sales Increased market share

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EXHIBIT 143 Value Chain Benefits

Source: G. Taninecz, Forging the Chain, Industry Week (May 15, 2000), p. 44. 2008 Prentice Hall, Inc. All rights reserved.

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EXHIBIT 144 Obstacles to Successful Value Chain Management

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Contemporary Operations Management Issues

Technology Role in E-Manufacturing
How an organization will transform its inputs into

outputs.

Just-in-time (JIT) Inventory Systems

How to develop systems in which inventory items

arrive when needed in the production process instead of being stored in stock.

Kanban

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Quality and Operations Management

Quality Control
Monitoring qualityweight, strength, consistency,

color, taste, reliability, finish, or any one of myriad characteristicsto ensure that it meets some preestablished standard.

Continuous Improvement
A comprehensive, customer-focused program to

continuously improve the quality of the organizations processes, products and services.

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Managing Projects
Project
One-time-only set of activities with a definite

beginning and ending point in time.

Project Management
Task of getting the activities done on time, within

budget, and according to specifications.

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Popular Scheduling Tools

Gantt Chart
Shows in bar graph form when tasks are supposed

to be done and compares that with the actual progress on each task.

Load Chart
Is a modified version of a Gantt Chart; it lists either

whole departments or specific resources.

This information allows managers to plan and control for capacity utilization in the scheduling of individual work stations.

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EXHIBIT 145

A Sample Gantt Chart

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EXHIBIT 146

A Sample Load Chart

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PERT Network Analysis

Program Evaluation and Review Technique (PERT) Network Analysis
A flowchart-like diagram that depicts the sequence of

activities needed to complete a project and the time or costs associated with each activity.

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PERT Components
Events
End points represent the completion of activities

Activities
Actions that take place

Slack Time
The time difference between the critical path and all

other paths

Critical Path
The longest or most time-consuming sequence of

events and activities required to complete a project in the shortest amount of time
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EXHIBIT 147

Developing PERT charts

1. Identify every significant activity that must be achieved for a project to be completed. 2. Ascertain the precedence order in which these events must be completed and create a diagram reflecting the ordering of activities. 3. Compute a weighted average time estimate (expected time) for completing each activity. 4. Insert start and finish times into the diagram and inspect to determine the critical path.

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EXHIBIT 148 Major Activities in Building a Custom Home

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EXHIBIT 149

A PERT Network for Building a Custom Home

Critical Path

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