Transcript Slide 1

Chapter Twelve
Operations and
Materials Management
McGraw-Hill/Irwin
Introduction to Business
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
Learning Objectives
1. Describe the nature of the operations and
materials management process and explain
how it can create a competitive advantage for
a company.
2. Identify the five main components of
operations and materials management costs
and the methods companies use to reduce
them.
3. Differentiate between the three major kinds of
operating systems companies use to produce
goods and services.
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Learning Objectives
4. Understand the way total quality management
can significantly improve both quality and
productivity.
5. Describe three materials management
methods companies use to improve the flow of
resources into and out of production and
increase operations efficiency.
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The Nature of Operations and
Materials Management
• Operations
- a company’s system of value-creation
activities used to transform inputs into
finished goods and services
• Materials management
- the set of activities that control the flow of
resources into and out of a firm’s operating
system
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The Operations and Materials
Management Process
• Input
• Operations
• Output
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The Operations and Materials
Management Process
Figure 12.1
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Operations, Materials Management,
and Competitive Advantage
Figure 12.2
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Productivity
• Quality
• Innovation
• Responsiveness to customers
• Balancing costs versus revenues
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Five Major Components of
OMM Costs
Figure 12.3
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Operations and Materials
Management Costs
• Raw Materials and Component Costs
• Plant Costs
• Labor Costs
• Inventory Costs
• Distribution Costs
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Question?
Which cost is the cost of getting products to
customers?
A. Plant cost
B. Distribution cost
C. Inventory cost
D. Labor cost
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Operations and Materials
Management Costs
• Raw Materials and Component Costs
- comprise a significant percentage of
companies’ total operating costs,
particularly companies that make physical
products
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Operations and Materials
Management Costs
• Plant Costs
- cost of the machinery, computers, tools,
buildings, and equipment needed to
transform inputs into finished products
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Operations and Materials
Management Costs
• Labor Costs
- number of employees needed to produce a
given quantity of outputs
- amount each employee must be paid
- health and social insurance benefits each
employee is given
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Labor Costs
• Maquiladoras
- U.S. companies’ manufacturing plants in
cities along the Mexican border
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Operations and Materials
Management Costs
• Inventory
- the resources – materials, supplies, and
goods – a company holds in stock
• Work-in-process goods
- the semifinished goods that move through
a company’s production process
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Three Types of Inventory
Figure 12.4
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Operations and Materials
Management Costs
• Distribution Costs
- the cost of
getting products
to customers
Find some small
business distribution
solutions at ups.com
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Types of Operating Systems
• Small-Batch Production
• Mass Production
• Flexible Production
• Total Quality Management
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Three Types of Operating Systems
Figure 12.5
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Question?
What is an operating system based on the
use of automated machines and
standard operating procedures?
A. Flexible production
B. Mass production
C. Small-batch production
D. Elastic production
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Types of Operating Systems
• Small-batch production
- an operating system designed to make
one-of-a-kind or small quantities of
customized products
• Customized products
- products designed to match the need of
individual customers
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Types of Operating Systems
• Mass production
- an operating system based on the use of
automated machines and standard
operating procedures to make work routine
and create a large number of standardized
products
• Standardized products
- products that are identical
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Types of Operating Systems
• Flexible production
- an advanced operating system that
combines the benefits of mass production
with the benefits of small-batch production
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Flexible Production
• Computer-integrated manufacturing
- a manufacturing technique that controls the
changeover of machines from one
operation to another via computer software
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Flexible Employees and
Work Groups
• Flexible work team
- a team of self-managed employees who
assume responsibility for performing the
operating tasks necessary to make a part,
or all, of a product
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The Use of Flexible Work Teams to
Assemble Cars
Figure 12.6
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Flexible Employees and
Work Groups
• Production layout
- the way teams of employees are physically
grouped into work cells or pods to
assemble a product
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Improving Operations Quality
• Total quality management
- an operations technique to continuously
improve the production process, increase
the quality of products, and help companies
lower their operating costs
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Improving Operations Quality
• Quality control circles
- team meetings in which production
employees discuss ways to improve
operating quality and productivity
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Advanced Materials
Management Methods
• Computer-Aided Materials Management
• Computer-Based Global Supply Chain
Management
• Just-in-Time Inventory System
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Advanced Materials and
Management Methods
• Computer-aided materials management
- a technique that relies on computers to
manage the flow of raw materials and
component parts into and out of a
company’s operating system
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Advanced Materials
Management Methods
• Global supply chain management
- the coordination of the flow of raw
materials, semifinished goods, and finished
products around the world
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Advanced Materials
Management Methods
• Just-in-Time Inventory System
- an inventory management system whereby
inputs are delivered to the firm just when
they are needed rather than being
purchased and warehoused prior to their
use
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Just-in-Time Inventory Systems
Figure 12.7
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Video: Jet Blue
•
•
Jet Blue defines itself as a “customer
service company.” From its innovative
mission statement to the teamwork
displayed by its employees, Jet Blue is
focused on its customers.
How does Jet Blue differentiate its
service from that of its competitors?
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