Chapter 9 Production and Operations Management

CHAPTER 9 – PRODUCTION AND OPERATIONS MANAGEMENT

LEARNING GOALS

After you have read and studied this chapter, you should be able to:

1. Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive.

2.Describe the evolution from production to operations management.

3.Identify various production processes and describe techniques that improve productivity, including computer aided design and manufacturing, flexible manufacturing, lean manufacturing, and mass customization.

4. Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control and quality control.

5. Explain the use of PERT and Gantt charts to control manufacturing processes.

LEARNING THE LANGUAGE

Listed below are important terms found in the chapter. Choose the correct term for each definition and write it in the space provided.

Assembly process / Form utility / Process manufacturing
Computer-aided design (CAD) / Gantt chart / Production
Computer- aided manufacturing (CAM) / Intermittent process / Production management
Computer integrated manufacturing (CIM) / ISO 9000 / Program evaluation and review technique (PERT)
Continuous process / ISO 14000 / Purchasing
Critical path / Just-in-time (JIT) inventory control / Quality
Enterprise resource planning (ERP) / Lean manufacturing / Six Sigma quality
Facility layout / Mass customization / Statistical process control (SPC)
Facility location / Materials requirement planning (MRP) / Statistical quality control (SQC)
Flexible manufacturing / Operations management / Telecommuting

1.A bar graph showing production managers what projects are being worked on and what stage they are in at any given time is called a ______.

2.A quality measure known as ______allows only 3.4 defects per million opportunities.

3.A computer application called ______is a newer version of MRP, and combines the computerized functions of all the divisions and subsidiaries of the firm, such as finance, materials requirement planning, human resources, and order fulfillment, into a single integrated software program that uses a single database.

4.A production process called the ______puts together components into a finished product.

5.The term______is used to describe all the activities managers do to help their firms create goods.

6.Some managers use the process known as ______to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning.

7.The use of computers in the design of products is called ______.

8.A concept known as ______means tailoring products to meet the needs of individual customers.

9.A specialized area in management called ______converts or transforms resources into goods and services.

10.The function in a firm that searches for quality material resources, finds the best suppliers and negotiates the best price for goods and services is known as ______.

11.The term ______refers to the physical arrangement of resources in the production process.

12.The use of computers in the manufacturing of products is known as ______.

13.Consistently producing what the customer wants while reducing errors before and after delivery to the customer is known as ______.

14.The value added by the creation of finished goods and services, or ______, refers to the value added, for example, by taking silicon and making computer chips or putting services together to create a vacation package.

15.The production process known as ______physically or chemically changes materials.

16.Designing machines to do multiple tasks so that they can produce a variety of products is

called ______.

17.______is the production of goods using less of everything compared to mass production.

18.In a PERT network, the ______is the sequence of tasks that takes the longest time to complete.

19.A computer application called ______uses sales forecasts to make sure the needed parts and materials are available at the right time and place.

20.Uniting computer-aided design with computer- aided manufacturing is called ______.

21.Production processes known as ______have long production runs that turn out finished goods over time.

22.The common name given to quality management and assurance standards is ______.

23.The process of ______consists of taking statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards.

24.When a minimum of inventory is kept on the premises, and parts, supplies and other needs are delivered just in time to go on the assembly line, the company is using ______

25.The process of ______is selecting a geographic location for a company’s operations.

26.A method called ______means analyzing the tasks involved in completing a given project, estimating the time needed to complete each task, and identifying the minimum time needed to complete the total project.

27.______is the creation of finished goods and services using the factors of production: land, labor, capital, entrepreneurship and knowledge.

28.A(n) ______is a production process in which the production run is short and the machines are changed frequently to make different products.

29.A collection called ______identifies the best practices for managing an organization’s impact on the environment.

30.Working from home via computer and modem is known as ______.

ASSESSMENT CHECK

Learning Goal 1

Manufacturing and Services in Perspective

1.Describe the current state of manufacturing in the U.S. compared to the beginning of this decade. Is the U.S. still a manufacturing based economy?

2.What are 7 areas American manufacturers and service organization do to maintain a competitive edge in the world marketplace?

a.______

b.______

c.______

d. ______

e.______

f. ______

g. ______

Learning Goal 2

From Production to Operations Management

3.What is the difference between production management and operations management?

4.What is the focus of operations management in the service sector?

5.What has become the quality standard in the services industry?

Learning Goal 3

Production Processes

6.What are the three basic requirements of production, according to Andrew Grove?

a.______

b.______

c.______

7.What is the difference between process manufacturing and assembly process?

8.What is the difference between a continuous production process and an intermittent process, in manufacturing?

9. Why do many manufacturers today use intermittent processes?

10.The ultimate goal of operations management is to ______

______

11.What four major developments have radically changed the production process in the United States?

a. ______c. ______

b. ______d. ______

12.What is made possible with the use of CAD/CAM?

13.What is CIM and what is the benefit?

14.How can flexible manufacturing reduce labor costs?

15.How does a company become “lean”?

16.What are the characteristics of lean companies?

a. ______

b. ______

c. ______

d. ______

e. ______

17.What are some examples of how companies have used mass customization?

Learning Goal 4

Operations Management Planning

18.What are the problems solved by operations management planning?

a. ______d. ______

b. ______e. ______

c. ______f. ______

19.One strategy in selecting a facility location is to find a location that ______

______.

20.What do brick and mortar stores have to do to compete with services offered over the Internet?

21.List the major considerations in the site selection process.

a. ______

b. ______

c. ______

d. ______

e. ______

f. ______

g. ______

h. ______

i. ______

22.What is the key reason why firms move their plants?

23.Other key reasons that firms move their production facilities include:

a. ______

b. ______

24.In reducing time to market, what do manufacturers need?

25.What is the benefit, for companies, of locating close to their suppliers?

26.Why do businesses build factories in foreign countries? What do U.S. firms consider in choosing a site in a foreign country?

27.Identify the quality of life questions that firms consider in the facilities location process.

28.Describe the concept of “interfirm process”, as it relates to operations management.

29.What impact is technology having on facilities location?

30.How do manufacturing and services differ with respect to facilities layout?

31.What’s the difference between an assembly line layout and a modular layout?

32.Describe:

a. A process layout:

b. A fixed position layout:

33.How is ERP different from MRP?

34.What are the results from using ERP?

35.How is the purchasing function different today from the past?

36.What is required in order for a JIT (just-in-time inventory) program to work effectively? What problems could be encountered?

37.JIT systems make sure the: ______

______.

38.What problems resulted when quality control was conducted at the end of the production line?

a. ______

b. ______

c. ______

39.a: Six sigma quality detects ______.

b. Statistical quality control is the process used to______

______.

c. Statistical process control reduces the need for ______

______.

40.What are the seven key areas in which a company must show quality in order to qualify for the Baldrige Awards?

a. ______e. ______

b. ______f. ______

c. ______g. ______

d. ______

41.Name the two major criteria for earning the Baldrige Awards.

a. ______

b. ______

42.Describe the International Organization for Standardization.

43.What do the new ISO 9004: 2000 standards require?

44.Why is ISO certification so important for U.S. firms?

45.What is the difference between ISO 9000 and ISO 14000?

46.What are the requirements for ISO 14000 certification?

Learning Goal 5

Control Procedures: PERT and Gantt charts

47.List the four steps in designing a PERT chart:

a.______

b.______

c.______

d.______

48.Why is it “critical” to identify the critical path?

49.What is the difference between a Gantt Chart and a PERT Chart?

50.How can a manager use a Gantt Chart?

CRITICAL THINKING EXERCISES

Learning Goal 1

1.We have been reading throughout the text of the move toward a global marketplace, and the need for U.S. firms to make changes to be competitive. How are production processes and productivity fundamental to the process?

Learning Goal 2

2.Why has the term “production management” been changed to “operations management”? What are some examples of operations management?

Learning Goal 3

3.In manufacturing, two types of manufacturing processes are:

a) process manufacturing , which is changing materials

b) assembly process which is putting together components

In addition, production processes are either: continuous or intermittent

Match the correct type of production process to each of the following, according to the description:

a. ______The steel industry never shuts down its ovens.

b. ______In the furniture industry, a store will sell custom designed furniture and pass the order on to the manufacturer, who then custom makes each piece.

c. ______The Ford Mustang is assembled piece by piece along an assembly line.

d. ______In the steel industry, ore is melted down, poured into forms, and then cooled.

4.How can CAD/CAM be related to mass customization?

5.You have learned in earlier chapters that one advantage small businesses often have over larger, less flexible companies is the ability to move quickly to serve the needs of their markets and provide more customized service. As increasing numbers of large businesses implement the modern production techniques discussed in this chapter, what potential impact could this have on small businesses?

6.Five radically different production techniques have emerged in recent years:

Just-in-time inventory controlMass customization

Flexible manufacturingLean manufacturing

Distinguish the differences between each technique in the following:

a. ______At the Harley Davidson motorcycle plant in York Pennsylvania the suppliers are electronically linked to the Harley plant and parts go straight from the delivery truck to the assembly floor. There is no inventory storage area in the plant.

b. ______Volvo uses modular construction in their plants, where workers are grouped into autonomous teams working on mobile assembly platforms that carry the cars to the workers. Each worker has been trained to do a whole cluster of tasks. This system enabled Volvo to build quality cars with fewer workers in more space efficient plants, and has reduced the number of hours need to assemble a car.

c. ______You can design your own athletic shoes at nike.com, personalize your M&Ms at mm.com and even custom design your own Mini Cooper because of today’s production technology.

d. ______At Dynalink Industries, 15 machines are used to make, test and package component parts for stereo and quadraphonic sound systems. The parts are never touched by human hands.

Learning Goal 4

7.Businesses may choose to locate close to where the buying power for their product is located, where labor is inexpensive and/or skilled, where land and other resources are inexpensive and readily available, close to their markets or where quality of life is high.

Evaluate the area in which you live based on the site-selection criteria discussed in the text. Does your area have an advantage in the variables considered for site selection? If so, which ones? Are you located close to markets? What could you say to convince a producer or service business to locate in your area? In some areas there will be an organization that addresses these very issues. In St. Louis, Missouri, for example, the Regional Chamber and Growth Association ( addresses many of the site selection factors for the St. Louis region.

8.How has increased global competition forced U.S. firms to “rethink” quality?

Learning Goals 3, 4

9.Sun-2-Shade, a company that makes self-darkening windshields for automobiles, is beginning to gear up for production. It has 2 main product lines: a windshield that is designed to be installed during the automotive assembly process, and an "after-market" product, to be sold in auto parts stores, which can be installed by companies that repair and install windshields after manufacture. These windshields are made from a lightweight, specially formulated plastic. Sun-2-Shade buys the raw material from a plastic supplier. The plastic is melted down and poured into molds, which are then allowed to cool. The windshields are then transformed into the self-darkening type windshield using proprietary processes. For added durability the last stage of manufacturing applies a scratch resistant hard coat to all windshields. The process is similar for both product lines, with some alterations needed for the retail version. What type of production process is Sun-2-Shade likely to be using? How can the company ensure their product is available when the assembly plant needs it, and when the retailer wants to sell it?

Learning Goal 5

10.PERT, Critical Path and Gantt charts are control measures used to ensure that products are manufactured and delivered on time.

Draw a PERT Chart for cooking and serving a breakfast of 3-minute eggs, buttered toast and coffee and identify the critical path.

PRACTICE TEST

MULTIPLE CHOICE – Circle the best answer

Learning Goal 1

1.What statement is most accurate in describing the trend in manufacturing in the United States?

a.The U.S. is expected to become a manufacturing based economy.

b.Traditional manufacturing techniques have proved to be the most efficient and effective.

c.Jobs in the U.S. manufacturing have declined significantly.

d.Foreign competition has not affected U.S. manufacturers.

2.When looking at how American manufacturers have regained a competitive edge, which of the following would not be included?

1. Reducing product quality to keep costs low.
2. Relying on the Internet to unite companies.
3. Practicing continuous improvement.
4. Focusing on customers.

Learning Goal 2

3.The United States has:

a.has begun to focus on lower quality products in order to provide the lowest priced products to customers.

b.has seen a change in manufacturing from operations management to production management.

c.become a service based economy.

d.begun to see a major resurgence in U.S. manufacturing jobs.

4.New production techniques have:

a.been difficult and costly to implement, and so have been largely ignored.

b.made it possible to custom-make products for individual buyers.

c.have been implemented primarily by foreign manufacturers.

d.have not been shown to be effective in making U.S. manufacturers competitive.

5.______is a specialized area in management that converts or transforms resources into goods and services and includes the areas of inventory management, quality control, production scheduling, follow-up services and more.

a.Lean manufacturing

b.CAD/CAM

c.Flexible manufacturing

d.Operations management

Learning Goal 3

6.Paul Klabber designs and makes custom wood furniture. The process Paul uses in his business is an example of a(n):

a.assembly process.

b.intermittent process.

c.analytic system.

d.continuous process.

7.Quon Ho believes that there must be a way to cut down on the amount of resources his company uses in the production process. Quon feels that the company uses more space, tools and time to make their product than is necessary. Quon should examine the benefits of:

a.lean manufacturing.

b.CAD/CAM.

c.mass customization.

d.facilities layout.

8.______makes it possible to custom-design products to meet the needs of small markets with very little increase in cost.

a.CAD/CAM

b.Site selection

c.Production management

d.Process manufacturing

Learning Goal 4

9.Which of the following is not considered a strong reason for companies to move production facilities from one area to another?

a.availability of cheap labor

b.cheaper natural resources

c.the level of unemployment in a geographic area

d.reducing the time it takes to deliver products to the market

10.Sun-2-Shade is beginning to see some competition for their self-darkening windshield. In order to remain competitive, Sun-2-Shade must be sure to:

a.replace all workers with automated equipment.

b.move all manufacturing to foreign countries.

c.train all salesmen in aggressive selling techniques.

d.keep the costs of manufacturing down.

11.Quantum Industries is a maker of component parts in heating and cooling ventilation systems. The company is looking for a site on which to build a new production facility. They are considering areas that have adequate rail access, and are at the hub of major highways. Quantum’s major consideration appears to be:

1. inexpensive resources.
2. time to market.
3. access to cheap land.
4. finding low cost labor.

12.The idea of facility layout is to:

1. make it easy for workers to find their work stations.
2. have offices, machines, and storage areas in the best position to enable workers to produce goods and services for their customers.
3. ensure that the building meets all building codes for the area in which they are located.
4. facilitate the assembly line process.

13.The U.S. award that recognizes firms that meet customer needs, produce high quality products and have high quality internal operations, is known as:

1. ISO 9000 standards.
2. The Customer Excellence Award.
3. The Malcolm Baldrige National Quality Award.

d.ISO 14000 standards.