Nickels – Chapter 10 Summary
1. Operations management is a specialized area in management that converts or transforms
resources (including human resources) into goods and services.
What kinds of firms use operations managers?
Firms in both manufacturing and the services sectors use operations managers.
2. Functions involved in both the manufacturing and the service sectors include facility
location, facility layout, and quality control.
What is facility location and how does it differ from facility layout?
Facility location is the process of selecting a geographic location for a company’s operations.
Facility layout is the physical arrangement of resources (including people) to produce goods and
services effectively and efficiently.
Why is facility location so important and what criteria are used to evaluate different sites?
The very survival of manufacturing depends on its ability to remain competitive, and that
means either making inputs less costly (reducing costs of labour and land) or increasing outputs
from present inputs (increasing productivity). Labour costs and land costs are two major
criteria for selecting the right sites. Other criteria include whether (1) resources are plentiful
and inexpensive, (2) skilled workers are available or are trainable, (3) taxes are low and the local
government offers support, (4) energy and water are available, (5) transportation costs are low,
and (6) the quality of life and quality of education are high.
What are the latest quality control concepts?
Six sigma quality (just 3.4 defects per million products) detects potential problems before they
occur. Statistical quality control (SQC) is the process that some managers use to continually
monitor all processes in production to ensure that quality is being built into the product from
the beginning. Statistical process control (SPC) is the process 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.
What quality standards do firms use in Canada?
International standards that Canadian firms strive to meet include ISO 9004:2000 (ISO 9000)
and ISO 14000. The first is a European standard for quality and the second is a collection of the
best practices for managing and organization’s impact on the environment.
3. There’s strong evidence that productivity in the service sector is rising, but this is difficult to
Why is productivity so hard to measure?
The traditional way to measure productivity involves tracking inputs (worker hours) compared
to outputs (dollars). Quality improvements are not weighed. New information systems must be developed to measure the quality of goods and services, the speed of their delivery, and
How is technology creating productivity gains in service organizations?
Computers have been a great help to service employees, allowing them to perform their tasks
faster and more accurately. ATMs make banking faster and easier; automated checkout
machines enable grocery clerks (and customers) to process items more quickly. In short,
operations management has led to tremendous productivity increases in the service sector bu