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Place Slide Title Text Here JOHN R. SCHERMERHORN, JR. MANAGEMENT 12 th Edition Chapter Place Slide Title Text Here JOHN R. SCHERMERHORN, JR. MANAGEMENT 12 th Edition Chapter 19 Operations and Services Management © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -

Place Slide Title Text Here Planning Ahead — Chapter 19 Study Questions • What Place Slide Title Text Here Planning Ahead — Chapter 19 Study Questions • What are the essentials of operations management? • What is value chain management? • How do organizations manage service and product quality? • How can work processes be designed for productivity? © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -2

Place Slide Title 19 Learning Dashboard Chapter Text Here 1. Operations Management Essentials 1. Place Slide Title 19 Learning Dashboard Chapter Text Here 1. Operations Management Essentials 1. Productivity and competitive advantage 2. Operations technologies 2. Value Chain Management 1. 2. 3. 4. Value chain analysis Supply chain management Inventory management Break-even analysis © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -3

Place Slide Title 19 Learning Dashboard Chapter Text Here 3. Service and Product Quality Place Slide Title 19 Learning Dashboard Chapter Text Here 3. Service and Product Quality 1. Customer relationship management 2. Quality management 3. Statistical quality control 4. Work Processes 1. Work process analysis 2. Process reengineering © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -4

Takeaway Title Text Here Place Slide 1: Operations Management Essentials Operations management – Managing Takeaway Title Text Here Place Slide 1: Operations Management Essentials Operations management – Managing productive systems that transform resources into finished products, goods, and services for customers. – Typical operations management decisions include: • • • Resource acquisition Inventories Facilities Workflows Technologies Product quality © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -5

Place Slide 1: Operations Management Essentials Takeaway Title Text Here • Manufacturing Organizations – Place Slide 1: Operations Management Essentials Takeaway Title Text Here • Manufacturing Organizations – Produce physical goods • Service Organizations – Produce services © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -6

Takeaway Title Text Here Place Slide 1: Operations Management Essentials • Productivity – Quantitative Takeaway Title Text Here Place Slide 1: Operations Management Essentials • Productivity – Quantitative measure of the efficiency with which inputs are transformed into outputs. – Productivity = Output / Input. • Competitive advantage – A core competency that allows an organization to outperform competitors © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -7

Takeaway Title Text Here Place Slide 1: Operations Management Essentials Companies may achieve competitive Takeaway Title Text Here Place Slide 1: Operations Management Essentials Companies may achieve competitive advantage in many ways, including: • • • Product innovations Customer service Speed to market Manufacturing flexibility Product/service quality © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -8

Takeaway Title Text Here Place Slide 1: Operations Management Essentials Technology – The combination Takeaway Title Text Here Place Slide 1: Operations Management Essentials Technology – The combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs. • Manufacturing technology • Service technology © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -9

Takeaway Title Text Here Place Slide 1: Operations Management Essentials Core manufacturing technologies: Small-batch Takeaway Title Text Here Place Slide 1: Operations Management Essentials Core manufacturing technologies: Small-batch production • A variety of custom products are tailormade to order. Mass production • A large number of uniform products are made in an assemblyline system. © 2013 John Wiley & Sons, Inc. All rights reserved. Continuous-process production • A few products are made by continuously feeding raw materials through a highly automated production system with largely computerized controls. 19 -10

Takeaway Title Text Here Place Slide 1: Operations Management Essentials Manufacturing technology trends – Takeaway Title Text Here Place Slide 1: Operations Management Essentials Manufacturing technology trends – Robotics – Flexible manufacturing systems – Mass customization – Cellular layouts – Computer-integrated manufacturing – Lean production – Design for disassembly – Remanufacturing © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -11

Takeaway Title Text Here Place Slide 1: Operations Management Essentials Service-Profit chain – All Takeaway Title Text Here Place Slide 1: Operations Management Essentials Service-Profit chain – All activities involved in the direct link between an organization’s service providers and customers or clients – Should produce • Satisfied and loyal customers • Efficient and productive use of resources © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -12

Takeaway Title Text Here Place Slide 1: Operations Management Essentials Core service technologies: Intensive Takeaway Title Text Here Place Slide 1: Operations Management Essentials Core service technologies: Intensive technology Mediating technology Long-linked technology • Focuses the efforts of many people with special expertise on the needs of patients or clients. • Links together parties seeking a mutually beneficial exchange of values. • Functions like mass production, where a client is passed from point to point for various aspects of service delivery. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -13

Place Slide Title Text Here Takeaway 2: Value Chain Management • Value creation – Place Slide Title Text Here Takeaway 2: Value Chain Management • Value creation – Occurs when the result of a work or task activity makes a product/service worth more • Value chain – Sequence of activities that creates products and services with value for customers • Supply chain management – The strategic management of all operations relating to an organization’s resource suppliers. Management 12 e Chapter © 2013 John Wiley & Sons, Inc. All rights reserved. 14 19 -14

Place Slide Title Text Here Figure 19. 1 Elements in an organization’s value chain Place Slide Title Text Here Figure 19. 1 Elements in an organization’s value chain © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -15

Place Slide Title Text Here Takeaway 2: Value Chain Management • Inventory is an Place Slide Title Text Here Takeaway 2: Value Chain Management • Inventory is an amount of materials or products kept in storage • Inventory management – Goal is to ensure that inventory is just the right size to meet performance needs, thus minimizing the cost. – Methods of inventory control: • Economic order quantity • Just-in-time scheduling © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -16

Place Slide Title Text Here Takeaway 2: Value Chain Management Inventory control – Economic Place Slide Title Text Here Takeaway 2: Value Chain Management Inventory control – Economic order quantity (EOQ) • Inventory replenished with fixed quantity order when inventory falls to predetermined level. – Just-in-time scheduling • Materials arrive at workstation or facility ‘just-in-time’ for use. • Virtually eliminates carrying costs of inventories. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -17

Place Slide Title Text Here Figure 19. 2 Inventory control by economic order quantity Place Slide Title Text Here Figure 19. 2 Inventory control by economic order quantity (EOQ) © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -18

Place Slide Title Text Here Takeaway 2: Value Chain Management • Break-even analysis • Place Slide Title Text Here Takeaway 2: Value Chain Management • Break-even analysis • Determination of the point at which sales revenues are sufficient to cover costs. – Break-Even Point = Fixed Costs / (Price – Variable Costs) – Used in evaluating: • New products • New program initiatives © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -19

Place Slide Title Text Here Figure 19. 3 Graphical approach to break-even analysis © Place Slide Title Text Here Figure 19. 3 Graphical approach to break-even analysis © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -20

Place Slide Title Service and Product Quality Takeaway 3: Text Here Customer relationship management Place Slide Title Service and Product Quality Takeaway 3: Text Here Customer relationship management – Establishes and maintains high standards of customer service in order to strategically build lasting relationships with and add value to customers. • External customers purchase the organization’s goods or utilize its services. • Internal customers are the persons and groups within an organization who depend on the results of others' work to do their own jobs. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -21

Place Slide Title Service and Product Quality Takeaway 3: Text Here Customer Relationship Management Place Slide Title Service and Product Quality Takeaway 3: Text Here Customer Relationship Management (CRM) – Uses latest technologies for intensive customer communication and collection of data regarding customer needs and desires. – Establishes and maintains high standards of customer service. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -22

Place Slide Title Text Here Figure 19. 4 The importance of external and internal Place Slide Title Text Here Figure 19. 4 The importance of external and internal customers © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -23

Place Slide Title Service and Product Quality Takeaway 3: Text Here • Total quality Place Slide Title Service and Product Quality Takeaway 3: Text Here • Total quality management (TQM) – Quality principles are an integral part of organization’s strategic objectives. • Applying them to all aspects of operations • Committing to continuous improvement • Striving to meet customers’ needs by doing things right the first time • Malcolm Baldrige award – Given to business, health care, education, and nonprofit organizations that meet quality criteria © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -24

Place Slide Title Service and Product Quality Takeaway 3: Text Here ISO (International Standards Place Slide Title Service and Product Quality Takeaway 3: Text Here ISO (International Standards Organization) certification – Adopted by many countries as quality benchmark. – Companies undergo rigorous audit to determine if ISO requirements are met. – Focus is on customer service and product quality. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -25

Place Slide Title Service and Product Quality Takeaway 3: Text Here Quality and Continuous Place Slide Title Service and Product Quality Takeaway 3: Text Here Quality and Continuous Improvement – W. Edwards Deming emphasized: • Constant innovation. • Use of Statistical methods. • Training in the fundamentals of quality assurance. – Continuous improvement – Quality circles © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -26

Place Slide Title Service and Product Quality Takeaway 3: Text Here Continuous improvement – Place Slide Title Service and Product Quality Takeaway 3: Text Here Continuous improvement – Constant search for new ways to improve current performance. – Reduce cycle time between order receipt and delivery. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -27

Place. Takeaway 3: Text Here Product Quality Slide Title Service and Statistical quality control Place. Takeaway 3: Text Here Product Quality Slide Title Service and Statistical quality control – Uses rigorous statistical analysis for checking processes, materials, products, and services to ensure that they meet high standards. • • • Takes random work samples Measures quality in samples Determines acceptability Unacceptable quality results in corrective action “Six Sigma” common example of SQC © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -28

Place Slide Title Text Here Figure 19. 5 Sample control chart showing upper and Place Slide Title Text Here Figure 19. 5 Sample control chart showing upper and lower control limits. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -29

Takeaway 4: Work Place Slide Title Text Here Processes • Process reengineering – Systematic Takeaway 4: Work Place Slide Title Text Here Processes • Process reengineering – Systematic and complete analysis of work processes. – Design of new and better work processes. • Work process – “A related group of tasks that create a result of value for the customer. ” (Michael Hammer) • Workflow – Movement of work from one point to another in the manufacturing or service delivery process. © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -30

Takeaway 4: Work Place Slide Title Text Here Processes Process value analysis – Core Takeaway 4: Work Place Slide Title Text Here Processes Process value analysis – Core processes are identified and evaluated for their performance contributions. • Each step in workflow is examined • Step is eliminated if not found to be important, useful, and contributing to the value added © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -31

Takeaway 4: Work Place Slide Title Text Here Processes Steps in reengineering core processes: Takeaway 4: Work Place Slide Title Text Here Processes Steps in reengineering core processes: Identify core processes. Map core processes in respect to workflows. Evaluate all tasks for core processes. Search for ways to eliminate unnecessary tasks or work. Search for ways to eliminate delays, errors, and misunderstandings. – Search for efficiencies in how work is shared and transferred among people and departments. – – – © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -32

Place Slide Title Text Here Figure 19. 6 How reengineering can streamline work processes Place Slide Title Text Here Figure 19. 6 How reengineering can streamline work processes © 2013 John Wiley & Sons, Inc. All rights reserved. 19 -33