operations and value chain management

ninth edition
STEPHEN P. ROBBINS
© 2007 Prentice Hall, Inc.
© 2007 Prentice Hall, Inc.
All rights reserved.
All rights reserved.
PowerPoint Presentation by Charlie Cook
PowerPoint Presentation by Charlie Cook
The University of West Alabama
The University of West Alabama
MARY COULTER
Operations and Value
Operations and Value
Chain Management
Chain Management
Chapter
Chapter
19
19
© 2007 Prentice Hall, Inc. All rights
reserved. 19–2
L E A R N I N G O U T L I N E
L E A R N I N G O U T L I N E
Follow this Learning Outline as you read and study this chapter.
Follow this Learning Outline as you read and study this chapter.
What Is Operations Management and Why Is It
What Is Operations Management and Why Is It
Important?
Important?
•
Explain what operations management is.

Explain what operations management is.
•
Contrast manufacturing and services organizations.
Contrast manufacturing and services organizations.
•
Describe managers’ role in improving productivity.
Describe managers’ role in improving productivity.
•
Discuss the strategic role of operations management.
Discuss the strategic role of operations management.
Value Chain Management
Value Chain Management
•
Define value chain and value chain management.
Define value chain and value chain management.
•
Describe the goal of value chain management.
Describe the goal of value chain management.
•
Discuss the requirements for successful value chain
Discuss the requirements for successful value chain
management.
management.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–3
L E A R N I N G O U T L I N E (cont’d)
L E A R N I N G O U T L I N E (cont’d)
Follow this Learning Outline as you read and study this chapter.
Follow this Learning Outline as you read and study this chapter.
Value Chain Management (cont’d)

Value Chain Management (cont’d)
•
Describe the benefits that result from value chain
Describe the benefits that result from value chain
management.
management.
•
Explain the obstacles to value chain management.
Explain the obstacles to value chain management.
Current Issues in Operations Management
Current Issues in Operations Management
•
Discuss technology’s role in manufacturing.
Discuss technology’s role in manufacturing.
•
Tell some of the various quality dimensions.
Tell some of the various quality dimensions.
•
Explain ISO 9000 and Six Sigma.
Explain ISO 9000 and Six Sigma.
•
Describe mass customization and how operations
Describe mass customization and how operations
management contributes to it.
management contributes to it.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–4
What Is Operations Management?
What Is Operations Management?
•

Operations Management
Operations Management

The design, operation, and control of the
The design, operation, and control of the
transformation process that converts such resources
transformation process that converts such resources
as labor and raw materials into goods and services
as labor and raw materials into goods and services
that are sold to customers.
that are sold to customers.
•
The Importance of Operations Management
The Importance of Operations Management

It encompasses both services and manufacturing.
It encompasses both services and manufacturing.

It is important in effectively and efficiently managing
It is important in effectively and efficiently managing
productivity.
productivity.

It plays a strategic role in an organization’s
It plays a strategic role in an organization’s
competitive success.
competitive success.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–5
Exhibit 19–1

Exhibit 19–1
The Operations System
The Operations System
© 2007 Prentice Hall, Inc. All rights
reserved. 19–6
Manufacturing and Services
Manufacturing and Services
•
Manufacturing Organizations
Manufacturing Organizations

Use operations management in the transformation
Use operations management in the transformation
process of turning raw materials into physical goods.
process of turning raw materials into physical goods.
•
Service Organizations
Service Organizations

Use operations management in creating nonphysical
Use operations management in creating nonphysical
outputs in the form of services (the activities of
outputs in the form of services (the activities of
employees interacting with customers).
employees interacting with customers).
© 2007 Prentice Hall, Inc. All rights
reserved. 19–7
Managing Productivity
Managing Productivity
•

Productivity
Productivity

The overall output of goods or services produced
The overall output of goods or services produced
divided by the inputs needed to generate that output.
divided by the inputs needed to generate that output.

A composite of people and operations variables.
A composite of people and operations variables.
•
Benefits of Increased Productivity
Benefits of Increased Productivity

Economic growth and development
Economic growth and development

Higher wages and profits without inflation
Higher wages and profits without inflation

Increased competitive capability due to lower costs
Increased competitive capability due to lower costs
© 2007 Prentice Hall, Inc. All rights
reserved. 19–8
Exhibit 19–2
Exhibit 19–2
Deming’s 14 Points for Improving Productivity
Deming’s 14 Points for Improving Productivity
•
Plan for the long-term future.

Plan for the long-term future.
•
Never be complacent concerning the
Never be complacent concerning the
quality of your product.
quality of your product.
•
Establish statistical control over
Establish statistical control over
your production processes and
your production processes and
require your suppliers to do so as
require your suppliers to do so as
well.
well.
•
Deal with the best and fewest
Deal with the best and fewest
number of suppliers.
number of suppliers.
•
Find out whether your problems are
Find out whether your problems are
confined to particular parts of the
confined to particular parts of the
production process or stem from the
production process or stem from the
overall process itself.
overall process itself.
•

Train workers for the job that you
Train workers for the job that you
are asking them to perform.
are asking them to perform.
•
Raise the quality of your line
Raise the quality of your line
supervisors.
supervisors.
•
Drive out fear.
Drive out fear.
•
Encourage departments to work
Encourage departments to work
closely together rather than to
closely together rather than to
concentrate on departmental or
concentrate on departmental or
divisional distinctions.
divisional distinctions.
•
Do not adopt strictly numerical
Do not adopt strictly numerical
goals.
goals.
•
Require your workers to do quality
Require your workers to do quality
work.

work.
•
Train your employees to understand
Train your employees to understand
statistical methods.
statistical methods.
•
Train your employees in new skills
Train your employees in new skills
as the need arises.
as the need arises.
•
Make top managers responsible for
Make top managers responsible for
implementing these principles.
implementing these principles.
Source: W.E. Deming, “Improvement of Quality and Productivity Through
Action by Management,” National Productivity Review, Winter 1981–1982,
pp. 12–22. With permission. Copyright 1981 by Executive Enterprises, Inc.,
22 West 21st St., New York, NY 10010-6904. All rights reserved.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–9
Strategic Role of
Strategic Role of
Operations Management
Operations Management
•
The era of modern manufacturing began in the U.S over
The era of modern manufacturing began in the U.S over
100 years ago.

100 years ago.
•
After WWII, U.S. manufacturers’ focused on functional
After WWII, U.S. manufacturers’ focused on functional
areas other than manufacturing.
areas other than manufacturing.
•
By the 1970’s, foreign competitors’ integrated
By the 1970’s, foreign competitors’ integrated
manufacturing technologies were producing quality
manufacturing technologies were producing quality
goods at lower costs.
goods at lower costs.
•
U.S manufacturers responded by investing in updated
U.S manufacturers responded by investing in updated
technology, restructuring organizations, and including
technology, restructuring organizations, and including
production requirements in their strategic planning.
production requirements in their strategic planning.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–10
Value Chain Management
Value Chain Management
•
Value
Value

The performance characteristics, features and
The performance characteristics, features and

attributes, and any other aspects of goods and
attributes, and any other aspects of goods and
services for which customers are willing to give up
services for which customers are willing to give up
resources (i.e., spend money).
resources (i.e., spend money).
•
The Value Chain
The Value Chain

The entire series of organizational work activities that
The entire series of organizational work activities that
add value at each step beginning with the processing
add value at each step beginning with the processing
of raw materials and ending with the finished product
of raw materials and ending with the finished product
in the hands of end users.
in the hands of end users.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–11
Value Chain Management (cont’d)
Value Chain Management (cont’d)
•
What is Value Chain Management?
What is Value Chain Management?

The process of managing the entire sequence of
The process of managing the entire sequence of
integrated activities and information about product
integrated activities and information about product

flows along the entire value chain.
flows along the entire value chain.
•
Goal of Value Chain Management
Goal of Value Chain Management

To create a value chain strategy that fully integrates
To create a value chain strategy that fully integrates
all members into a seamless chain that meets and
all members into a seamless chain that meets and
exceeds customers’ needs and creates the highest
exceeds customers’ needs and creates the highest
value for the customer.
value for the customer.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–12
Exhibit 19–3
Exhibit 19–3
Six Requirements for Successful Value Chain Management
Six Requirements for Successful Value Chain Management
© 2007 Prentice Hall, Inc. All rights
reserved. 19–13
Value Chain Management (cont’d)
Value Chain Management (cont’d)
•
Requirements for Value Chain Management
Requirements for Value Chain Management

A new business model incorporating:
A new business model incorporating:


Coordination and collaboration
Coordination and collaboration

Investment in information technology
Investment in information technology

Changes in organizational processes
Changes in organizational processes

Committed leadership
Committed leadership

Flexible jobs and adaptable, capable employees
Flexible jobs and adaptable, capable employees

A supportive organizational culture and attitudes
A supportive organizational culture and attitudes
© 2007 Prentice Hall, Inc. All rights
reserved. 19–14
Benefits of Value Chain Management
Benefits of Value Chain Management
Improved
Improved
Procurement
Procurement
Improved
Improved
Procurement
Procurement

Improved
Improved
Logistics
Logistics
Improved
Improved
Logistics
Logistics
Enhanced
Enhanced
Customer Order
Customer Order
Management
Management
Enhanced
Enhanced
Customer Order
Customer Order
Management
Management
Improved
Improved
Product
Product
Development
Development
Improved
Improved
Product
Product

Development
Development
Benefits of
Benefits of
Value Change
Value Change
Management
Management
Benefits of
Benefits of
Value Change
Value Change
Management
Management
© 2007 Prentice Hall, Inc. All rights
reserved. 19–15
Exhibit 19–4
Exhibit 19–4
Obstacles to Successful Value Chain Management
Obstacles to Successful Value Chain Management
© 2007 Prentice Hall, Inc. All rights
reserved. 19–16
Value Chain Management (cont’d)
Value Chain Management (cont’d)
•
Obstacles to Value Chain Management
Obstacles to Value Chain Management

Organizational barriers
Organizational barriers


Refusal or reluctance to share information
Refusal or reluctance to share information

Reluctance to shake up the status quo
Reluctance to shake up the status quo

Security issues
Security issues

Cultural attitudes
Cultural attitudes

Lack of trust and too much trust
Lack of trust and too much trust

Fear of loss of decision-making power
Fear of loss of decision-making power

Required capabilities
Required capabilities

Lacking or failing to develop the requisite value chain
Lacking or failing to develop the requisite value chain
management skills
management skills
© 2007 Prentice Hall, Inc. All rights
reserved. 19–17
Value Chain Management (cont’d)
Value Chain Management (cont’d)

•
Obstacles to Value Chain Management (cont’d)
Obstacles to Value Chain Management (cont’d)

People
People

Lacking commitment to do whatever it takes
Lacking commitment to do whatever it takes

Refusing to be flexible in meeting the demands of a changing
Refusing to be flexible in meeting the demands of a changing
situation
situation

Not being motivated to perform at a high level
Not being motivated to perform at a high level

Lack of trained managers to lead value chain initiatives
Lack of trained managers to lead value chain initiatives
© 2007 Prentice Hall, Inc. All rights
reserved. 19–18
Current Operations Management Issues
Current Operations Management Issues
•
Technology’s Role in Manufacturing
Technology’s Role in Manufacturing

Increased automation and integration of production
Increased automation and integration of production

facilities with business systems to control costs.
facilities with business systems to control costs.

Predictive maintenance, remote diagnostics, and utility cost
Predictive maintenance, remote diagnostics, and utility cost
savings
savings
•
The Concept of Quality
The Concept of Quality

The ability of a product or service to reliably do what
The ability of a product or service to reliably do what
it’s supposed to do and to satisfy customer
it’s supposed to do and to satisfy customer
expectations.
expectations.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–19
Current Issues… (cont’d)
Current Issues… (cont’d)
•
Quality Initiatives
Quality Initiatives

Planning for quality
Planning for quality

Organizing and leading for quality
Organizing and leading for quality


Controlling for quality
Controlling for quality
•
Quality Goals
Quality Goals

ISO 9000 certification
ISO 9000 certification

Six Sigma standards
Six Sigma standards
© 2007 Prentice Hall, Inc. All rights
reserved. 19–20
Exhibit 19–5
Exhibit 19–5
Product Quality Dimensions
Product Quality Dimensions
1.
1.
Performance—Operating characteristics
Performance—Operating characteristics
2.
2.
Features—Important special characteristics
Features—Important special characteristics
3.
3.
Flexibility—Meeting operating specifications over some
Flexibility—Meeting operating specifications over some

period of time
period of time
4.
4.
Durability—Amount of use before performance deteriorates
Durability—Amount of use before performance deteriorates
5.
5.
Conformance—Match with preestablished standards
Conformance—Match with preestablished standards
6.
6.
Serviceability—Ease and speed of repair or normal service
Serviceability—Ease and speed of repair or normal service
7.
7.
Aesthetics—How a product looks and feels
Aesthetics—How a product looks and feels
8.
8.
Perceived quality—Subjective assessment of characteristics
Perceived quality—Subjective assessment of characteristics
(product image)
(product image)
Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN:
West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press,
1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt,
R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–21

Exhibit 19–5 (cont’d)
Exhibit 19–5 (cont’d)
Service Quality Dimensions
Service Quality Dimensions
1.
1.
Timeliness—Performed in promised period of time
Timeliness—Performed in promised period of time
2.
2.
Courtesy—Performed cheerfully
Courtesy—Performed cheerfully
3.
3.
Consistency—Giving all customers similar experiences each
Consistency—Giving all customers similar experiences each
time
time
4.
4.
Convenience—Accessibility to customers
Convenience—Accessibility to customers
5.
5.
Completeness—Fully serviced, as required
Completeness—Fully serviced, as required
6.
6.
Accuracy—Performed correctly each time
Accuracy—Performed correctly each time

Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN:
West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press,
1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt,
R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–22
Current Issues… (cont’d)
Current Issues… (cont’d)
•
Mass Customization
Mass Customization

Is a design-to-order concept that provides consumers
Is a design-to-order concept that provides consumers
with a product when, where, and how they want it.
with a product when, where, and how they want it.

Makes heavy use of technology (flexible
Makes heavy use of technology (flexible
manufacturing techniques) and engages in a
manufacturing techniques) and engages in a
continual dialogue with customers.
continual dialogue with customers.
•
Benefits of Mass Customization
Benefits of Mass Customization

Creates an important relationship between the firm
Creates an important relationship between the firm
and the customer in providing loyalty-building value to

and the customer in providing loyalty-building value to
the customer and in garnering valuable market
the customer and in garnering valuable market
information for the firm.
information for the firm.
© 2007 Prentice Hall, Inc. All rights
reserved. 19–23
Terms to Know
Terms to Know
•
operations management
operations management
•
manufacturing
manufacturing
organizations
organizations
•
service organizations
service organizations
•
productivity
productivity
•
value
value
•
value chain
value chain
•

value chain management
value chain management
•
organizational processes
organizational processes
•


intellectual property
intellectual property
•
quality
quality
•
ISO 9000
ISO 9000
•
Six Sigma
Six Sigma
•
mass customization
mass customization