《Contemporary Management》chpt18 Operations Management

18 Operations Managemente Managing uality Efficiency, and Responsiveness to Customers Technolo OThe McGraw-Hill Companies. Inc, 2000

18-1 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Operations Management: Managing Quality, Efficiency, and Responsiveness to Customers Technology 18

18-2 Operations Management Refers to the management of the production system that transforms inputs into finished goods and services o Production system: the way a firm acquires inputs then converts and disposes outputs o Operations managers: responsible for the transformation process from inputs to outputs Operations management seeks to increase the quality efficiency, and responsiveness of the firm Seeks to provide a competitive advantage " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-2 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Operations Management ◼ Refers to the management of the production system that transforms inputs into finished goods and services. ◆ Production system: the way a firm acquires inputs then converts and disposes outputs. ◆ Operations managers: responsible for the transformation process from inputs to outputs. ◼ Operations management seeks to increase the quality, efficiency, and responsiveness of the firm. ◆ Seeks to provide a competitive advantage

18-3 The Purpose of Operations Management Figure 18.1 The Production System Inputs— Conversion— Outputs raw materials skills .goods component parts. machines eservices labor computers " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-3 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 The Purpose of Operations Management The Production System Inputs Conversion Outputs •raw materials •labor •component parts • skills • machines • computers •goods •services Figure 18.1

18-4 Operations Management Concepts Quality: goods and services that are reliable and perform correctly Quality allows customers to receive the performance that they expect Eficiency: the amount of input to produce a given output o Less input required lowers cost and waste Responsiveness to customers: actions taken to respond to customer needs Firm can react quickly and correctly to customer needs as they arise " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-4 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Operations Management Concepts ◼ Quality: goods and services that are reliable and perform correctly. ◆ Quality allows customers to receive the performance that they expect. ◼ Efficiency:the amount of input to produce a given output. ◆ Less input required lowers cost and waste. ◼ Responsiveness to customers: actions taken to respond to customer needs. ◆ Firm can react quickly and correctly to customer needs as they arise

18-5 Improving Responsiveness to Customers Without customers, organizations cease to exist Non-profit and for-profit firms all have customers o Managers need to identify who the customer is and their needs a What do customers want? Usually customers prefer o A lower price to a higher price o High quality over low quality e Fast service over slow service a Also good after sale support o Many features over few features o Products tailored to their specific needs " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-5 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Improving Responsiveness to Customers ◼ Without customers, organizations cease to exist. ◆ Non-profit and for-profit firms all have customers. ◆ Managers need to identify who the customer is and their needs. ◼ What do customers want? Usually customers prefer: ◆ A lower price to a higher price. ◆ High quality over low quality. ◆ Fast service over slow service. ◼ Also good after sale support. ◆ Many features over few features. ◆ Products tailored to their specific needs

18-6 Price/Attribute Relationship Figure 18.2 Price P2/A2 At price Pl, a firm offer a product with Al attributes and PI cover costs. To offer A2 attributes, firm must charge p2 or lose money Al A2 Attributes " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-6 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Price/Attribute Relationship A1 A2 Attributes Price P1 P2 P2/A2 At price P1, a firm offer a product with A1 attributes and cover costs. To offer A2 attributes, firm must charge P2 or lose money. Figure 18.2

18-7 Price v. Attributes Firms offering high quality, fast service and other customer desires, often must raise price Customers must tradeoff price for attributes Operations management tries to push the price/attribute curve to the right with better production e Provides more attributes at the same cost By enhancing the price/attribute relationship the firm can Increase its competitive position " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-7 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Price v. Attributes ◼ Firms offering high quality, fast service and other customer desires, often must raise price. ◼ Customers must tradeoff price for attributes. ◼ Operations management tries to push the price/attribute curve to the right with better production. ◆Provides more attributes at the same cost. ◼ By enhancing the price/attribute relationship, the firm can increase its competitive position

18-8 Price/Attribute Relationship Figure 18.3 Federal-Mogul was able rice to offer products with more attributes at a Federal-Moguy lower price 1987 P2/1 Federal-Mogul 1993 P P1/2 Al A2 Attributes " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-8 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Price/Attribute Relationship Figure 18.3 Price Attributes P1 P2 A1 A2 P1/A2 P2/A1 Federal-Mogul 1987 Federal-Mogul 1993 Federal-Mogul was able to offer products with more attributes at a lower price

18-9 Customer Responsive Production Systems An output' s attributes is determined by the production system e firms must strike a balance between cost and attributes Improving Quality: can apply to firms producing goods and services o A firm that provides higher quality than others at the same price is more responsive to customers o Higher quality can also lead to better efficiency Lowers waste levels and operating costs " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-9 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Customer Responsive Production Systems ◼ An output’s attributes is determined by the production system. ◆Firms must strike a balance between cost and attributes ◼ Improving Quality: can apply to firms producing goods and services. ◆A firm that provides higher quality than others at the same price is more responsive to customers. ◆Higher quality can also lead to better efficiency. ◼ Lowers waste levels and operating costs

三 18-10 Impact of Increased Quality on Organizational performance Figure 18.4 Increased Higher Reliability Prices Increased er Quality Profits Increased Lower Productivity Costs " win/MeGraw-HHill CThe McGraw-Hill Companies, Inc, 2000

18-10 Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Impact of Increased Quality on Organizational Performance Increased Quality Increased Reliability Higher Prices Increased Productivity Lower Costs Higher Profits Figure 18.4