Chapter 10 Operations Textbook Notes

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University of Waterloo
Accounting & Financial Management
AFM 131
Robert Sproule

Chapter10–Operations Canada Today  Canada’s biggest industry is focused on natural resources o Good growth in good times, and retraction in recessions o Dramatic impact on Canada when things happen in US, India, and China  Challenges: o Rapid changes in technologies and increasing global competition o Lagging productivity increases compares to other countries o Inadequate education/retraining of our workforce o Branch plant economy problem  A lot companies opened in Canada are foreign subsidiaries  Profits not re-invested in Canada, going back to parent country o Lack of research and development expenditures o Stronger Canadian dollar, kills advantage of exporting to US  Need to focus on R&D more to remain competitive Research and Development  Research and Development: work directed towards the innovation, introduction and improvement of products and processes o Along with related organizational change and its communication  Objectives of innovation: improve product quality, increase production capacity, and extend product range o Vital to economic growth and development  Top corporate R&D spenders: RIM, BCE, IBM, Magna, AMD Canada’s Evolving Manufacturing and Services Base  Recently, foreign manufactures took over a huge market share in manufacturing  To regain competitive edge Canadian manufacturers have: o Focused on customers o Improved logistics o Practice continuous improvement o Focus on quality o Saving on cost in site selection o Relying on the internet to unite companies o Adopting other modern production techniques, such as mean manufacturing  Debatable issues: moving to cheaper foreign countries, robots replacing workers, protectionism vs. fee trade, environmental issues, operations in the service sector From Production to Operations Management  Production: creation of finished goods and services using the factors of production o Historically meat manufacturing, now evolving  Production Management: all of the activities that managers do to help firms create goods  Operations Management: specialized area in management that converts resources (raw materials) into goods and services o Inventory management, quality control, production scheduling, and follow-up services  Customer orientation has led many organizations to focus more on offering value adding services o IBM selling less computer hardware and more computer services/software o Also more focus on CRM and branding o Satisfying customer needs better than competitors, more retention Operations Management in the Service Sector  All about creating a good experience for those who use the service o Knowing/anticipating the customer’s needs and then satisfying them Measuring Quality in the Service Sector  Productivity are increasing but metrics tied to improvements in quality which aren’t being measured o Ex: speed of delivery and customer satisfaction o Traditional way is tracking inputs vs. outputs  Productivity can be improved through the use of technology and automation o Ex: ATM machines in banks and self-checkout in grocery stores  Controlling costs and improving service  Cons: losing jobs to machines just like in manufacturing o Need to have a good education and training, as well as continued education to avoid being replaced Operations Management Planning Facility Location  Definition: process of selecting a geographic location for a company’s operations  Makes it easy for customers to use company’s services o Make products more accessible  Coffee shops everywhere  Using the internet to complete everyday tasks at the comfort of home Facility Location for Manufacturers  Trend of relocation to other countries o Leads to unemployment and economic growth in different areas  Reasons to move: o Availability of resources, access to transportation, proximity to suppliers and end users, quality of life, quality of workforce, cost of living, level of infrastructure Outsourcing  Becoming a hot practice in North America o Call centres, software development, back office jobs, moving to developing countries  Leaving a business to focus its scarce human capital on core business activities o Also reduces or controls costs, gain access to IT resources, and improve business or customer focus  Outsourcing can become a problem when certain issues such as language, culture and expectations are not looked after  US outsource to Canada due to: o Highly skilled and stable workforces o Similar culture and language o Familiar business processes, o Same time zones -> support real time communication  Auto industry critical to Canada’s manufacturing economy o Incentives to open shop in Canada: public medicare and low currency o Reasons to close shop: high labour and pension costs o Now all new expansion projects are all moving to US, better incentives Taking Operations Management to the Internet  Internet now facilitates coordination between firms to work closely together o As opposed to within firms in the past o Due to growth of outsourcing  Leads to the idea of supply chain management Facility Location in the Future  IT giving firms and employees more flexibility regarding location o Telecommuting an increasing trend  New influences of facility location: tax breaks, reductions, government support Facility Layout  Definition: physical arrangement of resources in the production process o Depends on the processes performed  Focus on helping customers in service business; including buying online  Also on improving efficiency of production process o Trend of movement from assembly-line layout to modular layout  Four layout designs o Assembly: workers do a few, repetitive tasks o Modular: teams of workers produce more complex units, can accommodate changes in design or customer demand o Process: similar equipment grouped together, serve different customers’ different needs o Fixed Position: major construction projects, workers congregate around the product  Statistical Quality Control: process managers use to continually monitor all phases of the production process to ensure quality  Statistical Process Control: process of taking samples of the product at each stage of production to ensure quality o Catches mistakes early  Deming cycle: Plan, Do, Check, Act Materials Requirement Planning  Materials Requirement Planning: computer based production management system that uses sales forecasts to schedule material inputs  Enterprise Resource Planning: enables multiple firms to manage all of their operations on the basis of a single, integrated set of corporate data o Results in shorter time period between orders and payment, less staff to do ordering and order processing, reduced inventories, better customer service o Also enables firms to monitor quality and customer satisfaction o Issues of managing all this dat
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