chapter
7
Managing
Operations
McGraw-Hill/Irwin
Principles of Management © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
7-2
Operations
• Operations: The different
activities involved in creating
an organization’s products
and services.
• Operations managers:
People who manage
operations.
7-3
Productivity and Efficiency
• Productivity: The output produced by a given
input.
• Productivity = Output/Input
• Productivity of labor: Unit output divided by
some measure of labor input.
• Productivity of capital: Sales divided by the
total capital (money) invested in a business.
7-4
Production System
• Production system: How the flow of work is configured.
• Job shop: Production systems used when items are ordered
individually.
• Small batch: Production systems used when customers order
in small batches but when each order is different.
• Assembly-line production: Systems used to mass-produce
large volumes of a standardized product.
• Continuous flow production: Production systems that
continuously produce a standardized output that flows out of
the system.
7-5
Production Systems –
Costs and Flexibility
Flexible/
standardized
New
production Job
Nature of technology/product
technologies shop
Small
batch
Assembly
line
Continuous
flow
Inflexible/
standardized
Low cost High cost
7-6
New Production
Technologies
• Flexible production technology: A set of
methodologies that allows enterprises to produce a
wider range of end products from a given
production system without incurring a cost
penalty.
• Mass customization: The ability to customize
the final output of a product to individual customer
requirements without suffering a cost penalty.
7-7
Managing Inventory
• Inventory holding costs: The capital cost of
money tied up in inventory and the cost of the
warehouse space required to store inventory.
• Just in time: Inventory that enters a production
process just in time to be used.
• Inventory turnover: The speed with which
inventory is replaced.
7-8
Build to Order and
Inventory
• Build-to-stock: Stocking a distribution
channel in the anticipation that a customer will
purchase those products.
• Build-to-order: Taking an order first, then
building the product.
7-9
Question
When Toyota puts more emphasis on
manufacturing a larger proportion of their cars
once the order is received or the car is actually
sold, they are moving toward the model of
a. licensing.
b. build-to-order.
c. global standardization.
d. build-to-stock.
7 - 10
Supply Chain Management
and Information Systems
• Supply chain: The chain that provides raw
materials, partly finished products, or finished
products to an organization.
• Electronic data interchange (EDI):
Coordinates the flow of materials into
manufacturing, and out to customers.