Chapter 10 Production and Operation Management
Utility—the want-satisfying power of a good or service
Businesses can create or improve four basic kinds of utility: time , place , ownership and form
What is production?
Uses resources ,including workers and machinery, to convert materials into finished
goods and services
What is production and operations management?
Is to oversee the firm’s production process by managing the people and machinery
that convert materials and resources into finished goods and services.
Production and manufacturing is not the same thing
Production is used in both manufacturing and nonmanufacturing industries.
The production process can result in a tangible good.
Both production processes create a useful good or service.
This chapter describe the process of producing goods and services.
The importance of production and operations management
Tasks of production and operation managers
The importance of quality
Methods businesses use to ensure high quality
17.1 The Strategic importance of production
Production is a vital business activity
Lower a firm’s production cost ; increase the quality of goods and services; allow it to be
dependable when meeting customers’ needs ; enable it to renew itself by providing new
Three kinds of production:
A system for manufacturing products in large quantities by using effective
combinations of employees with specialized skills ,mechanization and
Mass production begins with the specialization of labour, by dividing work into the
simplest forms so that each worker can focus on one task.
Standardization, the third element of mass production, involves producing identical,
interchangeable goods and parts
Three principles specialization, mechanization and standardization led to the
development of the assembly line.
Moves the product along a conveyor belt past many workstations, where
workers perform specialized tasks
Created by Henry Ford
High efficient for producing large amount of goods
Highly inefficient when producing small batches of different items
Repeat the boring jobs
Flexible production and customer-driven production lead to improve product
quality and greater job satisfaction. ( may improve mass production as well)
It is usually more cost- effective for producing small runs.
It has many forms, generally it use three sources
Information technology to share the details of customer orders Programmable equipment to fill the orders
Skilled people to carry out the tasks needed to complete an order
Even work better if combined with lean production methods that use automation(
自自) and information technology to reduce the need for workers and inventory.
Needs lots of communication between every one in the organization.
Now widely used in the auto industry
Produce different kinds of cars in the same plant Eg. Honda in NA
Assesses customer demands to make a connection between the products that are
manufactured and the products people want to buy
One method: to set up computer links between factories and retailers’ scanners
Are used to create short-term forecasts and design production schedules to
meet those forecasts.
Another approach to meet customer-driven production system is to wait until a
customer orders a product and then produce it – whether it is a taco or a computer
Custom- design products
17.2 Production processes
Production processes use either an analytic or a synthetic system
Time requirements use either a continuous or an intermittent process
Reduce a raw material to its components , or individual, parts to extract one or more
Eg. Petroleum, corn ( can be made into all kinds of finished goods)
REVERSE OF analytic system
Combine two or more raw materials or parts, or transforms raw materials, to produce
finished goods (Eg. Canon camera etc.)
Creates finished goods over a long period of time
Costly outcome if shutdown
Creates products in short production runs
Can be shut down frequently
Most services results from intermittent systems
Do not have a standardized services because customer want various services
However some offered ( for efficiency and cost-effectiveness)
Fast food chain ( McDonald ) ( advance technology create food more quickly)
10.3 Technology and the production process
Production changed rapidly
Nowadays many manufacturing plants are completely automated; available jobs in
manufacturing less and less
It also means that companies can design, produce and adapt products more quickly to meet
customers’ changing needs.
Green manufacturing process
Investing resources into developing processes that result in less wastes, lower energy use , and little or no pollution ( Green)
Seventh Generation (Example) ; Environmentally friendly
Firms are thinking to build new construction or new buildings or new plants are turning
their attention to LEED (Leadership in Energy and Environmental Design) certification
It is a voluntary certification program which is offered by Canadian Green Building
Aimed to promoting the most sustainable construction processes available
Meeting standards in energy savings, water efficiency, carbon dioxide( CO2)
emissions reduced ,improved indoor environmental quality ( including air
and natural light) and other categories.
Boring and dangerous jobs replaced with robots
A robot is a machine that can be programmed to perform tasks that require the repeated
use of materials and tools.
Works much quicker than humans ( Eg, Consolidated Technologies)
Robots are popular used in production line
Field robots assist people in nonmanufacturing and dangerous environment
Computer aid design and manufacturing
CAD Computer aid design
Is a process used by engineers to design parts and entire products on the computer
Work faster and fewer mistake
Make major or minor design changed
Car Manufacturing and Dentistry used it
CAM computer aided manufacturer
Picks up where the CAD system leaves off
Use CAM to analyze the steps a machine must take to produce a needed product or
These so-called CAD/CAM systems are linked electronically so they can automatically
transfer computerized designs to the production facilities.
Flexible Manufacturing system
Is a production facility that workers can quickly change to manufacture different
Are controlled electronically
Have improved by powerful new software that allows machine tools to be
reprogrammed while they are running.
Eg. Nissan expanded its foreign markets
Computer –integrated manufacturing
Use computers to help workers design products, controls machines, handle
materials and control the production function.
The key to CIM is a centralized computer system running software that integrates and
controls separate processes and functions.
Adv: increased productivity, decreased design costs, increased equipment utilization and
Widely used in printing industry
Save costs and combine jobs into one larger job
10.4 The location Decision Depends on transportation, human factors and physical factors
Closeness to the market
Closeness to the raw material
Availability of transportation options
Hazardous wastes ( weather )
A manufacturing business that wants to locate near a community must prepare
an environmental impact study
Labour supply ( Eg. qualified skilled people to do )
Local zoning regulations
Community living conditions
A production and operation manager always choose from the following condition:
Closeness to suppliers ,warehouses and service operations
Costs of insurance and taxes
Availability of employee needs
Sizes, skills ,and costs of the local labour force
Enough space for current and future needs of the firm
Distance to the market for goods
Receptiveness of the community
Economical transportation for incoming materials and supplies and for outgoing finished
Climate change and environment that matched the industry’s needs and employees’
Amount and cost of energy services
The recent trend is to bring production facilities closer to the final markets where the goods
will be sold. ( for timesaving and culture reasons)
Governments sometimes offer incentives to businesses that are willing to locate in their
In forms of tax breaks, agreements to improve infrastructure , and similar activities.
10.5 The Jobs of production manager
Managers perform 4 major tasks: ( in an order)
Planning the overall production process
Begins with choose the goods and services offer to customer
Machinery purchases, pricing decisions, and selection of retail outlets etc.
Satisfied customer & be produced as efficient and inexpensive as possible
Focus on the planning the production process in two ways
By converting original product ideas into final specifications
Designing the most efficient facilities to produce those products
Need to understand how a project fits into the company's structure ( because it can affect the
success of the project )
More companies are moved to teamoriented structure. ( eliminate internal conflict) The two approaches have two major difference:
All workers on the team are responsible for their output , and teamwork avoids
competitiveness between managers often found in traditional structures. ( only one
manager which is the p