CHAPTER-5_Production-and-Operation-Management

Page 1: Learning Objectives and Overview of Operations Management

Learning Objectives

1. Understand operations management: definition, background, current issues.

2. characteristics of agricultural commodities and products impacting operations management.

3. Key elements in plant and facility location decisions.

4. Factors determining plant or facility capacity.

5. Different facility layouts: process, product, hybrid, and fixed-position.

6. Key elements of job design.

7. Objectives and functions of supply chain management.

8. Steps in the supply chain management process.

9. Role of purchasing/procurement in food and agribusiness.

10. Distinction between MRP and JIT production operations.

11. Role of inventory in agribusiness and inventory types.

12. Inventory tracking systems in agribusiness.

13. Role of physical distribution in agribusiness.

14. Impact of information technology on supply chain management.

Understanding Operations Management

• Operations management: Direction and control of processes in agribusiness for goods/services production.

• Shift from traditional manufacturing focus to service sectors (e.g., supermarkets, consulting).

• Key components: production planning and supply chain management.

• Historical significance: Frederick W. Taylor's scientific management concepts from the early 1900s.

Page 2: Scientific Management and Modern Developments

Scientific Management Principles

1. Standardized job procedures.

2. Efficient procedures via scientific tests.

3. Screening and training workers for compatibility with jobs.

4. Functional division of labor with management-worker cooperation.

Modern Advances in Operations Management

• Post-Taylor focus included technological advancements (1940s onwards) like:

  • Introduction of computers and linear programming (George Dantzig).

  • Development of MRP in the 1970s.

  • ERP systems integrating manufacturing and finance.

Production Planning in Operations Management

• Encompasses quality programs, location, capacity, layout design, process design, job tasks/responsibilities.

• Requires congruence with supply chain management processes (aggregated planning, scheduling, purchasing, inventory management, transport).

Page 3: Operations Management System and Issues

Operations Management Systems

• Interrelated activities managed through suppliers, inputs, processes, and customer feedback.

• Distinction: Production management focuses on internal processes; supply chain management optimizes processes across the value chain.

Current Issues in Operations Management

• Shift from cost/efficiency focus to five major concerns:

  1. Rapidly growing service sector.

  2. Time-based competition.

  3. Continuous productivity improvement.

  4. Global competition challenges.

  5. Quality expectations.

Page 4: Service Sector Growth and Competition

Service Sector Growth

• Operations management has expanded beyond production into services, reflecting a 62% contribution to U.S. GDP.

• Differences between service and manufacturing:

  • Goods: physical, durable, inventoried vs. services: intangible, high customer contact.

  • Examples: Restaurants blend product and service delivery.

Time-Based Competition

• Uses time to compete for market share; firms respond faster to customer needs.

• Importance of agility in product/service development and delivery in the agribusiness sector.

Productivity Definition and Challenges

• Productivity: Output per unit of resource input.

• Service sector productivity improvement remains challenging.

Global Competition

• Expanding U.S. exports require understanding global market complexities.

• Necessitates flexible plant layouts and production capabilities.

Quality Importance

• High-quality products/services lead to business success; compromised quality can lead to increased costs and market loss.

Page 5: Strategic Location Decisions in Agribusiness

Strategic Location Issues

• Location decisions significantly affect competitive pricing, operating costs, and productivity.

• Example: Beef packing industry shifted towards feedlots for reduced costs and increased efficiency.

Factors Influencing Location Decisions

1. Proximity to raw materials/suppliers.

2. Market locations.

3. Labor climate.

4. Agglomeration benefits.

5. Taxes/incentives.

6. Location relative to other facilities.

Proximity to Raw Materials and Transportation

• Businesses benefit from being close to suppliers to reduce shipping costs, especially in the canning and meatpacking industries.

Page 6: Labor Climate and Agglomeration Impact

Importance of Labor Climate in Location

• Favorable labor conditions influence plant location decisions: wages, productivity, training, and union strength.

Agglomeration Benefits

• Businesses cluster for operational efficiencies in shared resources and services.

• Example: Common infrastructure utilization like water systems, enhancing service delivery and operational cost savings.

Role of Taxes and Incentives

• States use tax incentives to attract and retain industries, fostering significant economic contributions as seen in North Carolina's hog industry growth.

Proximity to Other Company Facilities

• Strategic location decisions account for proximity to existing operations for coordination and efficiency.

Page 7: Capacity Planning Considerations

Understanding Capacity Planning

• Identifying optimal facility size for production requires balancing cost and demand forecasting.

Key Factors in Capacity Planning

1. Economies of scale.

2. Flexibility in operations.

3. Seasonal demand variations.

4. Fluctuations in production demand.

5. Labor shifts scheduling.

Economies of Scale vs. Flexibility

• -A larger facility can spread fixed costs; however, smaller factories enhance performance and adaptability (focused factory concept).

Addressing Seasonality and Demand Fluctuations

• Seasonal products necessitate unique operational adjustments for peak and off-peak periods, impacting capacity utilization and profitability.

Implementing Shifts for Efficiency

• Utilizing multiple shifts can maximize production while decreasing space needs in sectors like agricultural chemicals and processing facilities.

Page 8: Layout Planning in Operations Management

Layout Planning Objectives

• Design facility layouts to achieve efficiency in workflows and information flow.

Types of Facility Layouts

1. Process Layout: Group tasks/functionally; suited for varied production.

2. Product Layout: Linear arrangement for continuous production of single product types.

3. Hybrid Layout: Combines both process and product layouts for flexibility.

4. Fixed Position Layout: Used for large items that cannot move; assembly on-site.

Page 9: Advantages and Disadvantages of Layouts

Process Layout Pros and Cons

• Advantages: Flexibility for changes; caters to diverse production.

• Disadvantages: Slower processing times; more inventory, higher handling costs.

Product Layout Pros and Cons

• Advantages: Faster processing; lower inventory needs; reduced labor costs.

• Disadvantages: Less flexible; higher capital costs; vulnerable to downtime issues.

Hybrid Layout Applications

• Effective in sectors needing adaptations, utilizing principles of each layout type for optimized performance.

Page 10: Understanding Process Design

Importance of Process Design

• Involves selecting inputs/methods crucial for cost, service flexibility, and customer experience.

Essential Aspects of Process Design

1. Capital Intensity: Balance of machine vs. human tasks; impacts costs and services.

2. Resource Flexibility: Addressing the demand for diversified skills.

3. Vertical Integration: Owning production stages for better control.

4. Customer Involvement: Engaging customers in the production process boosts satisfaction.

Page 11: Focus on Job Design

Job Design Elements

• Determines employee tasks, environment, and processes to meet organizational production and quality standards.

Job Design Objectives

1. Fulfill organizational production and quality goals.

2. Enhance safety, satisfaction, and motivation of employees.

Evolution of Job Design

• Traditional approaches influenced by scientific management have evolved into considerations of social and physical work environments.

Page 12: Supply Chain Management Overview

Shift in Supply Chain Management Focus

• Evolved from narrow distribution to integration of production, scheduling, inventory, and distribution.

Current Supply Chain Objectives

1. Enhancing information technology for better logistics.

2. Improving customer service as a competitive advantage.

3. Collaborating with other firms to share risks.

4. Embracing globalization for supply chain operations.

Information Technology Advancements

• Adoption of RFID and automation in supply chain processes for efficiency in ordering and inventory management.

Building Customer Relationships

• Effective supply chain management emphasizes excellent customer service and reliable delivery, giving firms a competitive edge.