Fundamentals of Management

Sixth Edition

Robbins and DeCenzo

with contributions from Henry Moon

CHAPTER Part V: Controlling

14
Operations Management

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All rights reserved. The University of West Alabama
 LEARNING OUTCOMES
After reading this chapter, you will be
1. able
Defineto:
operations management and the transformation
process.
2. Describe three reasons operations management is
important to all managers.
3. Differentiate between a service and a manufacturing
organization.
4. Define value chain management.
5. Explain the organizational and managerial requirements
for value chain management.
6. Identify the benefits and obstacles to value chain
management.
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 L E A R N I N G O U T C O M E S (cont’d)
After reading this chapter, you will be
1. able to:technology’s role in operations management.
Discuss
2. Explain what is meant by the term just-in-time
management.
3. Describe what is meant by the term quality control.
4. Explain the concept of project management.

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The Importance Of Operations Management
• Operations Management
 The study and application of the transformation
process
• OM Is Important Because It:
 Encompasses processes in all organizations—
services as well as manufacturing.
 Is important in effectively and efficiently managing
productivity.
 Plays a strategic role in an organization’s competitive
success.

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Transformation and Organizations
• Transformation Process
 The process through which an organization creates
value by turning inputs (people, capital, equipment,
materials) into outputs (goods or services).
• Manufacturing Organization
 Produces physical goods.
• Service Organization
 Produces nonphysical outputs such as educational,
medical or transportation services.

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EXHIBIT 14–1 The Transformation Process

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Productivity
• Productivity Defined
 The overall output of goods and services produced
divided by the inputs needed to generate that
output.
Outputs
Inputs
• Benefits of High Productivity
 Fosters economic growth and development
 Increases individual wages without inflation
 Lowers costs and makes firms more competitive

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What Is Value Chain Management?
• Value
 The performance characteristics, features and
attributes, or any other aspects of goods and
services for which customers are willing to give up
resources.
• Value Chain
 The entire series of organizational work activities that
add value at each step beginning with the processing
or raw materials and ending with a finished product
in the hands of end users.

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Value Chain Management versus Supply
Chain Management
• Value Chain Management
 Improves the process of creating and transferring
documents by automating the flow of information.
• Supply Chain Management
 Is the management of facilities, functions, and
activities involved in producing and delivering a
product or service, from suppliers to customers.

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The Goals Of Value Chain Management
• Creating customer-defined value by:
 Providing a unique combination that meets customer
needs and at a price that can’t be matched by
competitors.
 Having a sequence of participants work together as
a team, each adding a component of value to the
overall process.

It’s all about providing value, not

bargains, to the customer

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Value Chain Management Requirements
• Business Model
 A strategic design for how a company intends to
profit from its broad array of strategies, processes,
and activities.
• Value Chain Management Requirements
 Coordination and collaboration
 Technology investment
 Organizational processes
 Leadership
 Employees/human resources management
 Strong culture and attitudes

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EXHIBIT 14–2 Six Requirements for Successful Value Chain Management

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Steps in Collaboration

1. Look for common points of interest.

2. Listen to others.
3. Check for understanding.
4. Accept diversity.
5. Seek additional information.
6. Don’t become defensive.

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Effect of Value Chain Management on
Organizational Processes
• Better demand forecasting is necessary and
possible because of closer ties with customers
and suppliers.
• Selected functions may need to be done
collaboratively with partners in the value chain.
• New measures are needed for evaluating the
performance of activities along the value chain.

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Implementing Value Chain Management
• Benefits • Obstacles
 Improved customer  Organizational barriers
service  Cultural attitudes
 Cost savings
 Required capabilities
 Accelerated delivery times
 People
 Improved quality
 Inventory reduction
 Improved logistics
management
 Increased sales
 Increased market share

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EXHIBIT 14–3 Value Chain Benefits

Source: G. Taninecz, “Forging the Chain,” Industry Week (May 15, 2000), p. 44.
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EXHIBIT 14–4 Obstacles to Successful Value Chain Management

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Contemporary Operations
Management Issues
• Technology Role in E-Manufacturing
 How an organization will transform its inputs into
outputs.
• Just-in-time (JIT) Inventory Systems
 How to develop systems in which inventory items
arrive when needed in the production process
instead of being stored in stock.
 Kanban

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Quality and Operations Management
• Quality Control
 Monitoring quality—weight, strength, consistency,
color, taste, reliability, finish, or any one of myriad
characteristics—to ensure that it meets some
preestablished standard.
• Continuous Improvement
 A comprehensive, customer-focused program to
continuously improve the quality of the organization’s
processes, products and services.

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Managing Projects
• Project
 One-time-only set of activities with a definite
beginning and ending point in time.
• Project Management
 Task of getting the activities done on time, within
budget, and according to specifications.

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Popular Scheduling Tools
• Gantt Chart
 Shows in bar graph form when tasks are supposed
to be done and compares that with the actual
progress on each task.
• Load Chart
 Is a modified version of a Gantt Chart; it lists either
whole departments or specific resources.
 This information allows managers to plan and control for
capacity utilization in the scheduling of individual work
stations.

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EXHIBIT 14–5 A Sample Gantt Chart

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EXHIBIT 14–6 A Sample Load Chart

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PERT Network Analysis
• Program Evaluation and Review Technique
(PERT) Network Analysis
 A flowchart-like diagram that depicts the sequence of
activities needed to complete a project and the time
or costs associated with each activity.

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PERT Components
• Events
 End points represent the completion of activities
• Activities
 Actions that take place
• Slack Time
 The time difference between the critical path and all
other paths
• Critical Path
 The longest or most time-consuming sequence of
events and activities required to complete a project
in the shortest amount of time

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EXHIBIT 14–7 Developing PERT charts

1. Identify every significant activity that must be achieved for a

project to be completed.
2. Ascertain the precedence order in which these events must be
completed and create a diagram reflecting the ordering of
activities.
3. Compute a weighted average time estimate (expected time) for
completing each activity.
4. Insert start and finish times into the diagram and inspect to
determine the critical path.

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EXHIBIT 14–8 Major Activities in Building a Custom Home

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EXHIBIT 14–9 A PERT Network for Building a Custom Home

Critical Path

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