Managing operations in improving quality -- summary

business essentials -- part 7 -- summary

production, operations into four kinds of utilitys

Service operations provided intangible a intangible service products, such as entertainment, transportation, education, and food preparation. Firms that make tangible products -- radios, newspapers, buses, textbooks -- are engaged in goods production. Because the term production is associated just with manufacturing, we now use operations to refer to both service and goods production. Operations (or production) management is a systematic direction and control of the processes that transform resources into finished services and goods that create value for and provide benefits to customers. Resources include knowledge, physical materials, equipment, and labor that are systematically combined into production facility to create four kinds of utility for customers: time utility (which makes products available when customers want them), place utility (which makes products available where they are convenient for customers), possession or ownership utility (by which customers benefit from possessing and using the product), and form utility (which results from the creation of the product).

Service operations and goods production.

Both service and manufacturing operations transform raw materials into finished products. In service production, the raw materials are people who have either unsatisfied needs or possessions needing some form of care or alteration. "Finished products" are thus people with needs met and possessions serviced. The focus of service operations differs from that of goods production in four ways: (1) focus on performance: because goods are produced and services performed, customer oriented performance is crucial to a service company. (2) focus on process and outcome: because most service products are combinations of goods and services, services focus on both the transformation process and its outcome. (3) focus on service characteristics: service transactions reflect the three key qualities of service products -- (a) intangibility: because service usually can't be touched, tasted, smelled, or seen, they provide intangible value experienced as pleasure, satisfaction, or a feeling of safety. (b) customization: each customer expects a service to be designed (customized) to his or her specific needs. (c) unstorability: because many services cannot be produced ahead of time and then stored, they have a high degree of unstorability. (4) focus on service quality considerations: service providers know that quality of work and quality of service are not necessarily the same thing (a properly repaired cars one thing, but getting it back when you need it is another).

Operations planning

Operations planning involves the analysis of five key factors. In capacity planning, the firm analyzes how much of a product it must be able to produce. In high contact services, managers must plan capacity to meet key demand. Capacity planning for goods means ensuring that manufacturing capacity slightly exceeds the normal demand for its product. Location planning for goods and for low contact services involves analyzing proposed facility sites in terms of proximity to raw materials and markets, availability of labor, energy, and transportation costs. Location planning for high contact services involves locating the service near customers, who are part of the system. Layout planning involves designing a facility so that customer needs are supplied for high contact services and to enhanced production efficiency. Alternatives include product, process, and cellular layouts. In quality planning, systems are developed to ensure that products meet a firm's quality standards. Finally, in methods planning, specific production steps and methods for performing them are identified. In methods planning, process flowcharts are helpful for identifying all operations activities and eliminating wasteful steps from production.

Total quality management

Total quality management (TQM) includes any activity forgetting quality products to the marketplace. TQM tools include statistical process control (SPC)-- methods whereby employees gather data and analyze variations in production activities. One SPC tool is the control chart, which plots the results of sample measurements from operations to identify when a process is beginning to depart from normal conditions, so that corrections can be made. Quality/cost studies are useful because improvements in products or production processes always entail additional costs. This method helps identify areas in which quality can be maintained with the greatest cost savings from making, finding, repairing, for preventing defective goods and services. Getting closer to the customer involves maintaining contact so that the company knows what the customers want in the products they consume. It involves communicating with customers so that products are designed to meet their needs. Business process reengineering focuses on improving both the productivity and quality of business practices. It involves the fundamental rethinking and radical redesign of business processes to gain dramatic performance improvement. Outsourcing -- paying suppliers and distributors to perform certain business processes or to provide needed materials or services -- often saves time and money, increasing effectiveness in a firm's core business, and results in more value for customers and owners.

Supply chain strategy

The supply chain strategy is based on the idea that members of the supply chain -- the stream of all activities in companies that creates a product -- can gain competitive advantages by working together as a coordinated system of units. In contrast, traditional strategies assume that companies are managed as individual firms, each acting in its own interests. By managing the chain is a whole -- using supply chain management -- companies can more closely coordinate activities in the chain. By sharing information, overall costs and inventories can be reduced, and deliveries to customers can be faster. Provided with better service and at lower prices, the supply chain's products are preferred, was supply chain members gaining an advantage over competitors whose operations are less effective.