how the managers of the organization manage the operation in the organization

1. chapter
7
Managing
Operations
McGraw-Hill/Irwin
Principles of Management

2. 7 - 2
Operations
• Operations: The different
activities involved in creating
an organization’s products
and services.
• Operations managers:
People who manage
operations.

3. 7 - 3
Productivity and
Efficiency
• Productivity: The output produced by a given
input.
• Productivity = Output/Input
• Productivity of labor: Unit output divided by
some measure of labor input.
• Productivity of capital: Sales divided by the
total capital (money) invested in a business.

4. 7 - 4
Traditional Production
System
• Production system: How the flow of work is configured.
• Job shop: Production systems used when items are ordered
individually.
• Small batch: Production systems used when customers order
in small batches but when each order is different.
• Assembly-line production: Systems used to mass-produce
large volumes of a standardized product.
• Continuous flow production: Production systems that
continuously produce a standardized output that flows out of
the system.

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Production Systems –
Costs and Flexibility
Continuous
flow
Assembly
line
Small
batch
Job
shop
New
production
technologies
Low cost High cost
Inflexible/
standardized
Flexible/
standardized
Natureoftechnology/product

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New Production
Technologies
• Flexible production technology: A set of
methodologies that allows enterprises to produce a
wider range of end products from a given
production system without incurring a cost
penalty.
• Mass customization: The ability to customize
the final output of a product to individual customer
requirements without suffering a cost penalty.

7. 7 - 7
Managing Inventory
• Inventory holding costs: The capital cost of
money tied up in inventory and the cost of the
warehouse space required to store inventory.
• Just in time: Inventory that enters a production
process just in time to be used.
• Inventory turnover: The speed with which
inventory is replaced.

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Economic Order
Quantity
• EOQ = (2 X D X FC)/(VC X K)
• D = Annual demand
• FC = Fixed costs of producing/procuring inventory
• VC = Variable costs of inventory
• K = Inventory holding costs

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Build to Order and
Inventory
• Build-to-stock: Stocking a distribution
channel in the anticipation that a customer will
purchase those products.
• Build-to-order: Taking an order first, then
building the product.

10. 7 - 10
Question
When Toyota put s more emphasis on
manufacturing a larger proportion of their cars
once the order is received or the car is actually
sold, they are moving toward the model of
a. licensing.
b. build-to-order.
c. global standardization.
d. build-to-stock.

11. 7 - 11
Supply Chain Management
and Information Systems
• Supply chain: The chain that provides raw materials, partly
finished products, or finished products to an organization.
• Electronic data interchange (EDI): Coordinates the flow of
materials into manufacturing, and out to customers.