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.