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Chapter Review

Key Takeaways

  1. Production refers to the process of transforming inputs (such as labour, capital, and raw materials) into outputs (goods and services) that a firm wishes to sell.
  2. Value is the customer’s perception of the benefits they receive compared to the cost or effort required to obtain the product. It is subjective and influenced by factors like branding, emotional appeal, and customer experience.
  3. Utility refers to the inherent usefulness or the ability of a product or service to satisfy a customer’s needs and wants. It is often measurable and tied directly to functionality.
  4. Operations Management is a vital component of any business, encompassing the practices, techniques, and tools that organizations use to produce and deliver goods and services efficiently and effectively.
  5. A supply chain refers to the network of individuals, organizations, resources, activities, and technologies involved in the production and distribution of a product or service. It encompasses every stage from sourcing raw materials to delivering the final product or service to the consumer.
  6. Supply chain management (SCM) is the monitoring and optimization of the production and distribution of a company’s products and services. It seeks to improve and make more efficient all processes involved in turning raw materials and components into final products and getting them to the ultimate customer.
  7. The circular economy represents a paradigm shift from the traditional linear model of “take-make-dispose” to a regenerative approach that emphasizes the restoration and regeneration of products, materials and energy. It challenges conventional metrics of value creation and encourages manufacturers to design products and business models with durability, repairability and recyclability in mind.
  8. Outsourcing in business refers to the practice of contracting out certain business functions, tasks, or processes to external vendors or service providers, rather than handling them in-house.
  9. Operations managers manage the process that transforms inputs into outputs. Their responsibilities can be grouped as follows: production planning, production control, and quality control. Managing service operations is about more than the efficiency of service.
  10. Effective production planning requires a thorough analysis of market demand, capacity capabilities, and available resources.
  11. Products are customized to meet the needs of the buyers who order them. This process is called a make-to-order strategy.
  12. Mass production (or make-to-stock strategy) is the practice of producing high volumes of identical goods at a cost low enough to price them for large numbers of customers.
  13. Mass customization combines the advantages of customized products with those of mass production. This approach requires that a company interact with the customer to find out exactly what the customer wants and then manufacture the goods, using efficient production methods to hold down costs.
  14. Site selection involves measuring the needs of a new project against the merits of potential locations. Site selection is also critical in the service industry, but not for the same reasons as in the manufacturing industry. Service businesses need to be accessible to customers.
  15. The facility layout is the physical arrangement of resources. In the service sector, most businesses must design their facilities with the customer in mind: they must accommodate the needs of their customers while keeping costs as low as possible.
  16. The capacity requirements of the production facility refers to the maximum number of goods that it can produce over a given time under normal working conditions. Estimating the capacity needs for a service business isn’t the same thing as estimating those of a manufacturer. Service providers can’t store their products for later use: hairdressers can’t “inventory” haircuts, and amusement parks can’t “inventory” roller-coaster rides. Service firms have to build sufficient capacity to satisfy customers’ needs on an “as-demanded” basis.
  17. The process of acquiring the materials and services to be used in production is called purchasing (or procurement).
  18. Businesses that provide both goods and services, such as retail stores and auto-repair shops, have the same inventory control problems as manufacturers: keeping levels too high costs money, while running out of inventory costs sales. Businesses must strike a balance between two threats to productivity: not enough inventory and carrying too much inventory. The process of striking this balance is called inventory control, and companies now regularly rely on a variety of inventory-control methods.
  19. In manufacturing, managers focus on scheduling the activities needed to transform raw materials into finished goods. In service organizations, managers focus on scheduling workers so that they’re available to handle fluctuating customer demand.
  20. With Just-in-Time (JIT) production, the manufacturer arranges for materials to arrive at production facilities just in time to enter the manufacturing process.
  21. A software tool called Material Requirements Planning (MRP), relies on sales forecasts and ordering lead times for materials to calculate the quantity of each component part needed for production and then determine when they should be ordered or made.
  22. A Gantt chart, named after the designer, Henry Gantt, is an easy-to-use graphical tool that helps operations managers determine the status of projects.
  23. PERT (Program Evaluation and Review Technique) charts are designed to diagram the activities required to produce a good, specify the time required to perform each activity in the process, and organize activities in the most efficient sequence. It also identifies a critical path: the sequence of activities that will entail the greatest amount of time.
  24. Computer-Aided-Design (CAD) refers to the use of computer software to create, modify, analyze, or optimize a design.
  25. Computer-Aided-Manufacturing (CAM) refers to the use of computer software and hardware to control and automate manufacturing processes.
  26. Computer-Integrated-Manufacturing (CIM) represents a comprehensive approach to manufacturing where CAD, CAM, and other business and manufacturing processes are integrated using computer systems.
  27.  Enterprise Resource Planning (ERP) is a broader, integrated system that manages and automates a company’s core business processes across multiple departments, including finance, HR, manufacturing, supply chain, sales, and customer relationship management (CRM). It often incorporates MRP as a module.
  28. Quality is defined as the degree to which a product or service meets or exceeds customer expectations and adheres to established standards or specifications. It is a multifaceted concept that can be viewed through different lenses, such as product characteristics, customer satisfaction, and continuous improvement.
  29. Total Quality Management (TQM) is the continual process of detecting and reducing or eliminating errors in manufacturing. It streamlines supply chain management, improves the customer experience, and ensures that employees are up to speed with training.
  30. Statistical Process Control (SPC) is defined as the use of statistical techniques to control a process or production method. SPC tools and procedures can help you monitor process behaviour, discover issues in internal systems, and find solutions for production issues. Statistical process control is often used interchangeably with Statistical Quality Control (SQC).
  31. Operations management in service companies and manufacturing companies differs significantly due to the nature of their outputs, processes, and customer interaction. Three main differences include: 1) Intangibility. Manufacturers produce tangible products—things that can be touched or handled, such as automobiles and appliances. Service companies provide intangible products, such as banking, entertainment, or education. 2) Customization. Most manufactured goods are standardized. Services, by contrast, are often customized to satisfy the specific needs of a customer. For example, when you go to the hairdresser, you ask for a haircut that looks good on you because of the shape of your face and the texture of your hair. 3) Customer contact. You could spend your entire working life assembling cars in Detroit and never meet a customer who bought a car that you helped to make. But if you were a restaurant server, you’d interact with customers every day. In fact, their satisfaction with your product is determined in part by the service that you provide. Unlike manufactured goods, many services are bought and consumed at the same time.
  32. Managing service operations is about more than efficiency of service. It is about finding a balance between profitability, innovation, customer satisfaction and associate satisfaction, sometimes referred to as the balanced scorecard. The balanced scorecard model utilizes 360 degree feedback, a process of collecting feedback from all of a business’s stakeholders, in order to improve operational efficiency.
  33. The SERVQUAL model is commonly used in service industries to measure quality across five dimensions: reliability, responsiveness, assurance, empathy, and tangibles. This framework allows businesses to identify specific areas where they can improve to meet or exceed customer expectations.

Download the “Chapter in Review” for
Chapter 11: Operations Management [PDF].

End-of-Chapter Exercises

 

  1. Product and Service Company. Use the Internet to research why GE and IBM (or other companies as assigned by your professor) are considered manufacturing companies, and at the same time, considered two of the largest, most competitive, service operations in the world. What did you discover? Share your findings with your class and/or professor.
  2. Utility. Use the Internet to research a product or service you use. Which of the four types of utility does this product or service hold?  How do the attributes of the product or service (list the product or service features) bring the benefits you want or need ( think about what’s important to you), and thus, the value you appreciate (consider which benefits are valuable to you)? Discuss with your class and/or professor.
  3. Manufacturing Facility Layout. Use the Internet to research the types of facility layouts for manufacturing: process layout, product layout, fixed-position, and cellular layout.  Provide an example of when each type of layout would be the best choice. (Pick an example that’s not already mentioned in the chapter.) Explain. Share your findings with the class and/or professor.
  4. Service Facility Layout. Use the Internet to research the types of facility layout for ONE of the following: bank, hair salon, automobile repair shop, supercenter department store (or another as assigned by your professor).  Explain how the layout enhances production, service, and overall capacity. Share your findings with the class and/or professor.
  5. Site Location. Use the Internet to research how a service company, Starbucks (or another), determines where to locate. Which tools does the company use to help make decisions? What research does the company do before making a decision? Share your findings with the class and/or professor.
  6. Quality Certification for Businesses. Use the Internet to research ONE of the well-known company quality certifications such as ISO14001, ISO9001, ISO14000, Six Sigma, IATF16949, ISO13485, UKCA/CE Mark, LEED, Fair Trade, Green Seal, TRUE, Cradle to Cradle, and Forest Stewardship Council. Why would a company want this certification? What are the certification requirements?  Share your findings with the class and/or professor.
  7. Quality Management Professional Certification. Use the Internet to research ONE of the well-known personal quality certifications such as CMQ/OE, CSQP, CQIA, CQPA, CCT, CQI, CQT, CSSBB, CSSGB, CSSYB, DMBB, CFSQA, CMDA, CPGP, CQA, CRE, and CSSQE. Why would an individual want this certification? What are the certification requirements?  Share your findings with the class and/or professor.
  8. Total Quality Management (TQM). Use the Internet to locate information on how a company can implement total quality management (TQM) successfully. Provide tips, benefits, and a company example. Share your findings with your class and/or professor.
  9. ERP. Use the Internet to research enterprise resource planning (ERP) systems. Which are the most popular? What does a system cost? Can businesses customize ERP systems for their own industry or type of business? Provide an example of a company using a specific ERP. Share your findings with your class and/or professor.
  10. Outsourcing. Use the Internet to research three (3) ways in which a company can maintain control over outsourced operations. Share your findings with your class and/or professor.
  11. CAD/CAM. Use the Internet to locate specific examples of how CAD/CAM and/or CIM is used in ONE of these industries: healthcare, construction, jewellery design, or aerospace. Share your findings with the class and/or professor.
  12. Industrial Robots. Use the Internet to search for several industrial robot production companies. What kinds of functions are these robots being used for? Which industries are these robots best suited for? Share your findings with the class and/or professor.
  13. Cafeteria Facility Layout. Visit your college or university cafeteria and redesign the layout (pencil and paper will do) so that the facility (employees included) could serve its customers more effectively and efficiently. Share your layout with your class and/or professor.
  14. Quality Problem. Use the Internet to research ONE company that has had a recent recall on a product. What went wrong? Does the company apply quality measures? How did the company correct the issue? How might the company have avoided this issue? Share your findings and conclusions with the class and/or professor.
  15. Bill of Material (BOM). Use the Internet to learn about BOM. What software might be used to record a BOM? How could this information be used in an ERP system? Create a manufacturing bill of materials for each of the following products: baby carriage, chocolate chip cookies, and a pair of leather sneakers. Share your BOMs with the class and/or professor.
  16. Company Research. Choose a Global 500 company to research (or another as assigned by your professor). Write a short report that includes the following:
    • Identify the company and its inputs and outputs.
    • Identify suppliers and any electronic data interchange (EDI) setup they may have.
    • Identify Quality Control systems and Credentials (if any).
    • Identify transportation methods used and costs of transportation methods.
    • Identify the ERP this company uses.

Self-Check Exercise: Operations Management Quiz

Check your understanding of this chapter’s concepts by completing this short self-check quiz.

Self-Check Exercise: Operations Management Terms Drag-the-Words

Check your understanding of this chapter’s concepts by completing this short self-check quiz.

Additional Resources

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