Chapter One

Introduction

Production Management
Production Management is: The management of systems or processes that create goods and/or provide services Production Management affects:
Companies ability to compete Nations ability to compete internationally

manufacturing process means

any process for

(i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, (ii) pumping oil, water, sewage or any other substance; or (iii) generating, transforming or transmitting power; or (iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding or

(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or

(vi) preserving or storing any article in cold storage

Historical Evolution of Production Management

Industrial revolution (1770s) Scientific management (1911)
Mass production Interchangeable parts Division of labor

Human relations movement (1920-60) Decision models (1915, 1960-70s) Influence of Japanese manufacturers

Conversion Process
The Production function involves the conversion of inputs into outputs
Value added
Inputs Land Labor Capital Transformation/ Conversion process
Feedback

Outputs Goods Services

Control
Feedback Feedback

Goods-service Continuum

Goods

Service Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile Repair, fast food

Home remodeling, retail sales Automobile assembly, steel making

Goods vs Service
Characteristic Customer contact Uniformity of input Labor content Uniformity of output Output Measurement of productivity Opportunity to correct problems Inventory Evaluation Patentable Goods Low High Low High Tangible Easy High Much Easier Usually Service High Low High Low Intangible Difficult Low Little Difficult Not usual 1-7

Types of Production
Production
Goods Producing Storage/Transportation

Examples
Farming, mining, construction , manufacturing, power generation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Retailing, wholesaling, banking, renting, leasing, library, loans Films, radio and television, concerts, recording Newspapers, radio and television newscasts, telephone, satellites

Exchange

Entertainment
Communication

Scope of Production Management

Production Management includes:
Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities Supply chain management And more . . .

Competitiveness:

How effectively an organization meets the wants

and needs of customers relative to others that

offer similar goods or services

Businesses Compete Using Production

Product and service design Cost Location Quality

Quick response

Businesses Compete Using Production

Flexibility Inventory management Supply chain management

Service and service quality

Managers and workers

Production Strategies
Low cost Scale-based strategies Specialization Flexible operations High quality Service

Examples of Strategies
Price Quality Time Flexibility Service Location
Low Cost U.S. first-class postage Motel-6, Red Roof Inns

High-performance design Sony TV or high quality Consistent Lexus, Cadillac quality Pepsi, Kodak, Motorola Rapid delivery On-time delivery Variety Volume Superior customer service Convenience Express Mail, Fedex, One-hour photo, UPS Burger King Supermarkets Disneyland Nordstroms Banks, ATMs

Quality and Time Strategies

Quality-based strategies

Focuses on maintaining or improving the quality of an organizations products or services Quality at the source Focuses on reduction of time needed to accomplish tasks

Time-based strategies

Business Environment

Simple Product Supply Chain

Suppliers Suppliers

Direct Suppliers

Producer

Distributor

Final Consumer

Supply Chain: A sequence of activities

And organizations involved in producing

And delivering a good or service

A Supply Chain for Bread

Stage of Production
Farmer produces and harvests wheat
Wheat transported to mill Mill produces flour Flour transported to baker

Value Added
$0.15
$0.08 $0.15 $0.08

Value of Product
$0.15
$0.23 $0.38 $0.46

Baker produces bread

Bread transported to grocery store Grocery store displays and sells bread Total Value-Added

$0.54
$0.08 $0.21 $1.29

$1.00
$1.08 $1.29

Productivity
Productivity
A measure of the effective use of resources, usually expressed as the ratio of output to input

Productivity ratios are used for

Planning workforce requirements Scheduling equipment Financial analysis

Productivity
Partial measures

output/(single input)

Multi-factor measures

output/(multiple inputs)

Total measure

output/(total inputs)

Outputs Productivity = Inputs

Productivity Growth

Productivity Growth =
Current Period Productivity Previous Period Productivity Previous Period Productivity

Measures of Productivity

Partial measures
Multifactor measures Total measure

Output Labor

Output Output Machine Capital

Output Energy

Output Labor + Machine

Output Labor + Capital + Energy

Goods or Services Produced All inputs used to produce them

Example 3
7040 Units Produced Cost of labor of $1,000 Cost of materials: $520

Cost of overhead: $2000

What is the multifactor productivity?

Example 3 Solution
MFP = Output Labor + Materials + Overhead

MFP = MFP =

(7040 units) $1000 + $520 + $2000 2.0 units per dollar of input

Ans. 2.0 units per dollar of input

Life Cycles of Products or Services

Saturation

Maturity

Demand

Decline Growth

Introduction

Time

Standardization
Standardization
Extent to which there is an absence of variety in a product, service or process

Standardized products are immediately available to customers

Mass Customization
Mass customization:
A strategy of producing standardized goods or services, but incorporating some degree degree of customization Delayed differentiation Modular design

Modular Design
Modular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged. It allows:

easier diagnosis and remedy of failures

easier repair and replacement simplification of manufacturing and assembly

Robust Design
Robust Design: Design that results in products or services that can function over a broad range of conditions

Reliability
Reliability: The ability of a product, part, or
system to perform its intended function under a prescribed set of conditions

Failure: Situation in which a product, part,

or system does not perform as intended

Normal operating conditions: The set of

conditions under which an items reliability is specified

Failure Rate

Failure Rate

Infant mortality

Few (random) failures Time, T

Failures due to wear-out

Rule 1
Lamp 1 Lamp 2

.90

.80

.90 x .80 = .72

Rule 2
.80
Lamp 2 (backup)

.90
Lamp 1

.90 + (1-.90)*.80 = .98

Rule 3
.70
Lamp 3 (backup for Lamp 2)

.80
Lamp 2 (backup for Lamp1)

.90
Lamp 1

1 P(all fail) 1-[(1-.90)*(1-.80)*(1-.70)] = .994

Production Simplification
(a) The original design

Assembly using common fasteners

Production Simplification
(a) The original design (b) Revised design

Assembly using common fasteners

One-piece base & elimination of fasteners

Production Simplification
(a) The original design (b) Revised design (c) Final design

Assembly using common fasteners

One-piece base & elimination of fasteners

Design for pushand-snap assembly

Breaking Down Barriers to Effective Design

Thank You