Operations Management: Processes and Technology

Chapter Overview

• Focus on Operations Management in the context of Processes, Technology, and Capacity
• Authors: Roberta Russell & Bernard W. Taylor, III
• Emphasizes the creation of value along the supply chain

Key Concepts in Processes

• Process Definition: A group of related tasks with specific inputs and outputs.
• Process Design: Coordination of tasks among functions, people, and organizations.
• Process Strategy: Overall approach to producing goods/services.
• Process Planning: Converts designs into workable instructions for production or delivery.

Process Strategy Explained

• Capital Intensity: Balance of capital (equipment, automation) and labor in the production process.
• Process Flexibility: Ability to adjust resources based on demand, technology, and availability.
• Vertical Integration: Degree to which a company controls production stages, from input to output.
• Customer Involvement: Role customers play in the production process.

Process Planning Insights

• Determines how products/services will be produced:
• Make-or-Buy Decisions: Choosing between in-house production vs. outsourcing.
• Process Selection: Defines types of production processes: Projects, Batch, Mass, Continuous.
• Specific Equipment Selection: Factors include purchase cost, operating cost, revenue enhancement.

Types of Production Processes

• Project: Unique, one-of-a-kind production.
• Batch Production: Groups different jobs processed together.
• Mass Production: Large volumes of standardized products.
• Continuous Production: Very high-volume products like commodities.

Financial Considerations in Process Selection

• Cost Types:
• Fixed Costs: Constant, regardless of production volume.
• Variable Costs: Fluctuate with production volume.
• Profit Calculation: Profit = Total Revenue - Total Cost
• Break-Even Analysis: Determines the volume at which total revenue equals total cost.

Making Decisions using Break-Even Analysis

• Calculate total cost and revenue.
• Determine point of indifference to choose between processes:
• Above point: Select process with lower variable costs.
• Below point: Select process with lower fixed costs.

Developing Process Plans

• Process Plans: Documents detailing manufacturing/delivery specs including:
• Blueprints
• Bill of materials
• Assembly charts
• Operations process charts
• Routing sheets

Process Analysis Techniques

• Process Flowcharts: Analyze efficiency broadly; includes both productive and nonproductive activities.
• Detailed Process Diagrams: Visual depiction of individual steps in a process.
• Process Maps: More complex diagrams illustrating processes.

Continuous Improvement and Innovation

• Continuous monitoring and redesign when existing processes fail to meet performance goals.
• Steps to innovate:

1. Goals & Specifications: Benchmark current performance.
2. High-Level Process Map: Essential components visualized.
3. Detailed Process Map: Focuses on resource allocation and performance measures.
4. Pilot Study: Testing new processes on a small scale.
5. Full-Scale Implementation: Transitioning to new processes within regular operations.

Conclusion

• Continual analysis and innovation are crucial for improving operational efficiency.
• Instruments such as flowcharts and maps guide effective decision-making in process management and strategy implementation.