Chapter 16 – Producing World-Class Goods and Services
We are one of the largest producers of forest products in the world.
Research and development
Research and development (R&D): work directed toward the innovation, introduction
and improvement of products and processes.
Technology is know-how, knowing how to make and use the tools for the job. An
innovation is a new product or process that can be purchased – an idea may lead to an
invention, but it cannot be called an innovation until it is commercialized.
The 3 most important objectives of innovation are to improve product quality, increase
production capacity and extend product range.
Canada’s evolving manufacturing and services base
What Canadian manufacturers have done to regain a competitive edge:
Focusing on customers
Maintaining close relationships with suppliers and other companies to satisfy
Practicing continuous improvement
Focusing on quality
Saving on costs through site selection
Relying on the Internet to unite companies
Adopting production techniques such as enterprise resource planning, computer
integrated manufacturing, flexible manufacturing and lean manufacturing
Manufacturing is not only important in employing Canadians (7%), it is critical to our
economy, as manufacturers perform 75% of private sector R&D.
From production to operations management
Production: the creation of finished goods and services using the factors of production:
land, labor, capital, entrepreneurship and knowledge.
Production management: the term used to describe all of the activities that managers do
to help their firms create goods.
The term production often has been replaced by operations to reflect both goods and
Operations management: a specialized area in management that converts or transforms
resources (including human resources) into goods and services.Manufacturers turn to a customer orientation and services for profit
Many manufacturers have spent an enormous amount of money on productivity and
Operations management has become much more focused on services, because by
redirecting corporate thinking towards satisfying customer needs better than the
competition, they retain their customers.
Operations management planning
Operations management planning involves many of the same issues in both the service and
manufacturing sectors. These issues include facility location, facility layout, and quality
Facility location: the process of selecting a geographic location for a company’s
Facility location for manufacturers
One of the most common reasons for a business move is the availability of inexpensive
labor or the right kind of skilled labor.
Inexpensive resources are another major reason for moving production facilities.
Reducing time to market is another decision-making factor.
Canada’s auto industry
Auto sector is Canada’s biggest contributor to manufacturing GDP.
Facility layout: the physical arrangement of resources (including people) in the
Facility layout depends greatly on the processes that are to be performed. For services, the
layout is usually designed to help the consumer find and buy things.
Many companies are moving from an assembly line layout, in which workers do only a few
tasks at a time, to a modular layout, in which teams of workers combine to produce more
complex units of the final product.
A process layout is one in which similar equipment and functions are grouped together.
A fixed position layout allows workers to congregate around the product to be completed.
Quality: consistently producing what the customer wants, while reducing errors before
and after delivery to the customer.Before, quality control was often done by a quality control department at the end of the
production line. Products were completed and then tested.
This resulted in several problems:
1. There was a need to inspect other people’s work. This required extra people and
2. If an error was found, someone would have to correct the mistake or scrap the
product, which was costly.
3. If the customer found the mistake, he or she might be dissatisfied and might even
buy from someone else thereafter.
Quality control should be part of the operations management planning process rather than
simply an end-of-the-line inspection.
Six sigma quality: a quality measure that allows only 3.4 defects per million events, it
detects potential problems to prevent their occurrence.
Statistical quality control (SQC): the process that some managers use to continually
monitor all phases of the production process to ensure that quality is being built into the
product from the beginning.
Statistical process control (SPC): 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 if beyond the set
SQC and SPC save companies much time and many dollars. Some companies call such an
approach to quality control the Deming cycle.
The cycle steps are: Plan, Do, Check, Act (PDCA).
Deming’s approach, including implementing standards, was used for many years before the
International Organization for Standardization (ISO).
Quality award: the Canada awards for excellence
The Canada Awards for excellence (CAE) are presented annually to private, public and not-
for-profit organizations that have displayed outstanding performance in the areas of
quality and healthy workplace.
ISO 9000 and ISO 14000 standards
The ISO is a worldwide federation of national standards bodies from more than 140
countries that set the global measures for the quality of individual products. It is a non-