This is the chapter 9 lecture for the course Introduction to Business at De Anza College. My name is Byron Lilly. Chapter 9 is about production and operations management.
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Production management is the art and science of making goods efficiently and effectively. Goods of course are things that are tangible, like cellphones and cars. Services are things that are intangible, like haircuts and tax preparation services. Operations management is the art and science of making any combination of goods and/or services effectively and efficiently.
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A good example of operations management is a restaurant. Even though the food a restaurant sells you is tangible, most of what you’re paying for is the service of preparing a hot meal for you that is ready to eat and is the right amount for a single meal. They will also let you use one of their tables to eat your meal. So although restaurants are selling you a blend of goods and services, we classify them as part of the service sector of the economy and we classify the art and science of designing and managing a restaurant kitchen as operations management, not production management.
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Hotels and motels are also classified as part of the service sector of the economy, and the art and science of providing services to hotel guests effectively and efficiently we would also call operations management.
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As the book mentions on page 231, the U.S. economy is no longer manufacturing based. On that page, the book says that about 70% of U.S. GDP and about 85% of U.S. jobs now come from the service sector. I agree with their figure on the percentage of U.S. GDP that comes from the service sector, but I do (enter) not agree with their figure about the percentage of U.S. jobs that come from the service sector.
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Here are the figures I want you to learn: 68% of U.S. GDP and 69% of U.S. jobs now come from the service sector.
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Here’s the detail behind the 69% figure I am asking you to remember for the percent of U.S. jobs that come from the service sector. The service industries are all the ones highlighted in yellow. All the yellow sectors together comprise 69% of U.S. jobs. 9% of U.S. jobs are found in the manufacturing sector – that’s the top blue sector. That leaves 16% of U.S. jobs in government – that’s the two pink sectors ‐ and 6% of U.S. jobs in construction, agriculture, fishing and mining – those are the remaining three blue sectors. Actually agriculture includes forestry, fishing, and hunting as well. Restaurants are grouped into the Services: leisure and hospitality group, along with hotels. Most of this chapter is about manufacturing, which is 9% of U.S. employment and about 12.5% of U.S. GDP now, but there’s a little bit about operations management in this chapter, which is important in some of the services sectors ‐ health care, leisure and hospitality, and transportation are three sectors where operations management is particularly important. (Enter) I have placed a link to a YouTube video under optional materials on the course website in Catalyst where you can see how Emirates Airlines unloads and reloads meal trays for its Airbus A380 flights. That’s an example of operations management.
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Here is a quote from your book on page 230. From 2001 until…2008, manufacturing output rose 4 percent a year…(and) the United States was still the world’s leading manufacturer, accounting for almost 25 percent of the goods produced in the world each year. Let me give you an update on what’s been happening with U.S. manufacturing since 2008.
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on page 230, your book says that the US. Produces almost 25% of the world’s manufactured goods, but that is no longer true. China took over the number one spot in 2009, and the U.S. now produces about 16% of the world’s manufactured goods. We are still number two, and Japan is number 3.
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Here are the world’s top 9 manufacturers as of 2011. The rightmost column shows the percentage of the world’s manufacturing GDP they produced. China produced 21%, we produced 16%, Japan produced 10%, and Germany produced 7%. Together, the top 4 producers made 54% of the world’s manufactured goods!
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Manufacturing steps typically divide into three major phases. First, you have to fabricate the piece parts, then you assemble them; then, depending what you’re making, you either do the painting and finishing, or you do some extensive testing before you ship the product.
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On page 235, your book defines process manufacturing as that part of the production process that physically or chemically changes materials. (Enter) But I would rather use the expression “Fabrication process” for this part of the production process. (Enter)
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I think most professionals would recognize this part of the production process as the fabrication phase, and not recognize the expression process manufacturing in this context. So in this class, a fabrication step will be a step that physically or chemically alters some materials. It will be a step that changes the shape of the material, or its size, or changes it from a liquid to a solid, or changes it from rough to smooth.
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Examples of fabrication processes would include injection molding, curing, sawing, sanding, cutting, lathing, routing, drilling, and tempering. If you do any of these things, you are performing a fabrication step, which belongs in the fabrication phase of the manufacturing process.
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Once you’ve fabricated the piece‐parts, you can assemble them. An assembly process will be any process that puts together components into larger sub‐assemblies or an entire usable unit of the product.
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There are two main types of manufacturing: continuous process manufacturing and intermittent process manufacturing.
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Continuous process manufacturing is a type of manufacturing in which long production runs turn out finished goods over time. The way gasoline is made from crude oil is an example of continuous process manufacturing. In continuous process manufacturing, the manufacturing process occurs steadily and continuously most days of the year, and all the manufacturing employees do is tweak it to make the octane higher or lower, or to change the mix of regular grade and premium grade gasoline being made each day.
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Intermittent process manufacturing is any production process in which the production run is short and the machines are changed frequently to make different products. A key feature of intermittent process manufacturing is that goods are made for a while and then the equipment is idle for a while, while the manufacturing staff reconfigure the line to make a different product.
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Another type of intermittent process manufacturing is where workers sit at individual workstations making subassemblies and placing them on a rolling cart. These subassemblies will sit idle until the next worker needs them to continue the assembly of the finished unit.
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On page 236, your book talks about Computer‐Aided Design and Manufacturing. Two of the terms defined on that page are computer‐aided design and computer‐aided manufacturing. Computer‐Aided Design is the use of computers in the design of products. Computer‐Aided Manufacturing is the use of computers in the manufacturing of products. The U.S. has the world’s most productive manufacturing labor force. One of the reasons for the higher productivity of the U.S. manufacturing labor force is that they are given the very best tools to work with, and plenty of them!
De Anza College has two programs to help train U.S. workers to use the most advanced Computer‐Aided Design and Computer‐Aided Manufacturing tools. De Anza’s Computer‐ Aided Design and Digital Imaging program offers courses and certificates in the use of SolidWorks, a 3D drawing program, and Creo Parametric, formerly known as Pro/ENGINEER. Both of these programs are Computer‐Aided Design programs.
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De Anza’s Manufacturing and CNC Program Offers classes in CAD/CAM, mostly using a program called Mastercam, but they also offer an opportunity to learn a different CAD/CAM program called NX. They also offer training in the use of Computer Numerical Control or CNC‐based machine tools, such as mills and lathes.
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Flexible manufacturing is defined as designing machines to do multiple tasks so they can produce a variety of products. The trend especially in U.S. manufacturing is to replace dedicated single‐purpose manufacturing equipment with flexible manufacturing equipment, which can basically be thought of as robotic or computer‐controlled manufacturing equipment. The setup, operation, and maintenance of equipment like this requires highly‐skilled employees, and De Anza’s Manufacturing and CNC Program addresses this need.
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Lean manufacturing is defined as the production of goods using less of everything than in mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. Lean manufacturing is a production philosophy derived from Japanese manufacturing techniques of the 1980s, and particularly the Toyota Production System, or TPS. Lean manufacturing defines any expenditure of resources that does not contribute directly to the creation of value for the end customer as wasteful. A company becomes lean by implementing a process of continuous improvement in which every opportunity to eliminate wasted time or other resources is taken.
It used to be, manufacturers had to DECIDE BETWEEN mass production and custom production. But now, more and more, with innovative use of technology, and particularly computer‐controlled manufacturing equipment, companies are able to produce products on a massive scale while at the same time customizing those products to fit individual customers’ needs. This is called mass customization. The National Bicycle Industrial Company of Japan was one of the first companies in the world to embrace mass customization. In 1987, they implemented a state‐of‐the‐art system that enabled them to make custom bicycles for their customers at reasonably low cost. The customer would choose the model, size, color, and design. The retailer would take various measurements of the customer and fax this data to the factory, and then robots would handle the bulk of the assembly. They were able to offer their customers 2 million possible configurations of bicycle. Dell Computers was another early adopter of mass customization. While their competitors were making PCs using a make‐to‐stock model, wherein the company guesstimates how many units of each model and configuration customers will want, and builds to those estimates, Michael Dell invested heavily in an automated parts warehousing and picking system because he wanted to be able to wait until he had the customer order in hand before he began the final assembly of the computer. This risk paid of handsomely for Dell. Customers loved Dell’s fast delivery, low prices, reliable computers, and wide variety of configuration options. Dell’s revenues and profits rose so fast that their stock price went up 400‐fold during the 10 year period from 1990 to 1999.
Operations management planning helps solve problems like: Facility location Facility layout Materials requirement planning Purchasing Inventory control and Quality control
The factors service businesses need to think about in deciding where to put their next facility are fundamentally different than the factors that manufacturing businesses need to consider. For service businesses, it has been true for hundreds of years that you want to be located in a place that is convenient to your customers, or where your customer normally goes.
This is still true for (enter) gas stations (enter) florists, and (enter) liquor stores, and certain other types of businesses such as check cashing businesses.
In the restaurant business, there has for many years been a saying that there are three factors critical to the success of any new restaurant. (Enter) location (enter) location (enter) and location. Now that’s a joke of course, because the tastiness of the food, the aesthetic qualities of the dining environment (meaning how pretty and quiet the dining room is), the prices the restaurant is charging and the quality of the service are also important, but there’s a grain of truth to it. (Enter) That’s why the company that owns the Mercado shopping center is able to charge the restaurants that are located there such high rents…
Because they have a 20 theater multiplex called AMC Mercado there; and when people come out of a movie, sometimes they aren’t in the mood to go home yet. They’d rather hang out together for a while, and that means that many of them will choose to eat at (enter) one of the (enter) restaurants located there. And that makes the restaurant willing to pay more, if they have to, for that location.
Most manufacturing businesses do not have nearly the same level of need to locate close to customers that service businesses have. A tiny handful of them to. Mostly those whose product is heavy and not very valuable per pound, such as gravel and sand. Driving those products a long way just costs too much, so you want to produce them close to where the customer is. But for most manufacturers, the primary drivers of where to locate their next manufacturing facility are the availability of an abundance of the right kind of labor resources, and the cost of renting space in the area, which is driven by the land values in the area. In the 1980s, many high tech companies headquartered here in the South Bay area did all or most of their manufacturing in this area. This was convenient for them as it meant that their manufacturing facility could be located in the same city as their engineering team. This enabled greater interaction between engineering and manufacturing and helped ensure good product quality efficient production. However, as land values in South Bay cities have risen, the cost of renting space here has also risen. For this reason, more and more manufacturing firms headquartered here in the South Bay have moved their manufacturing operations to other states or other countries where rents are lower.
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Once you’ve decided what CITY to put your next manufacturing facility in, you will have to decide how to organize the machines, people, and processes inside that building. That’s called facility layout, and its part of operations management. Facility layout is the physical arrangement of resources (including people) in the production process. The oldest and still perhaps the most widely used method of laying out a facility is called “assembly line layout.” Assembly lines were pioneered by the Ford Motor Company in the early 1900s. Ford was so successful in his implementation of assembly line layout that in 1914, the Ford Motor Company produced more cars than all other companies in the world combined. He was able to roll a new car off the assembly line every 24 seconds. Some of his assembly lines assembled each car in only 93 minutes. Assembly line layout is also called Product Layout. At the bottom of this slide is a picture from the top of page 275 of your textbook. When a company uses assembly line layout, the workers and their tools remain stationary and the product comes to them. Each station in the assembly line has a team of workers ready to complete the same limited number of steps on the next vehicle as they performed on the previous one. Each team’s list of steps is designed to take just as long as every other team’s. Thus, each team finishes their steps within just a few minutes of each other and the assembly line can be advanced by one station, then each team sets to work again on the next vehicle in the line. In the past, assembly line layout has worked best when you were producing large quantities of identical items, and doing long production runs of one model of product before taking the time to re‐tool the assembly line to make a different model. However, robotic equipment is making it possible to do mass customization on an assembly line today.
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Besides assembly line layout, we also want to learn about fixed‐position layout and modular layout.
In fixed position layout, the product remains stationary and the workers and their tools come to it. A good example of this is the construction tract housing. Teams of workers move around the land, carrying their specialized tools with them. Each team specializes in just one or a few steps. One team will come in a grade the land flat. on the house’s location, one team at a time, and perform their specialties. First, a team comes in and lays the foundation of a house. Then a team comes in an builds the wood frame of a house. Then a team comes in and installs the electrical wiring and fixtures, and a different team comes in and installs the plumbing. Then a team comes in and does the drywall and wood siding of the house. Then a team comes in and installs windows, while another team puts the roof on the house, and so on. Each successive team of workers brings their own specialized set of tools with them. They also take their tools with them when they leave.
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One team will come in and grade the land flat. (enter) The next team will come in and build the wood frame for the home. (enter) Then a team will come in to do the plumbing and electrical. (Enter) Then a team will come in and install the particleboard and so on.
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Until finally the home is finished. The product remains stationary and various teams of workers come to it to perform the steps they specialize in. Then they leave to make room for the next team. That’s fixed position layout.
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Jumbo jets are built the same way. The product remains stationary and teams of workers come to it in waves and perform the steps they specialize in. This is better than an assembly line for at least two reasons: 1. One, an assembly line plant that made products of this size would be have to be very, very large, and the monthly rent for that facility would therefore be very, very expensive; and 2. When the plane is only partially built, it’s very fragile. After you install the hydraulic lines that control the ailerons and before you put the skin on the wings, if you tried to move the plane along an assembly line, the wings would probably bounce up and down a little bit. That could introduce fractures into the hydraulic lines, which could compromise the plane’s ability to fly safely. So you keep the plane still and make the workers come to it.
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The book’s explanation of modular layout is a layout in which “teams of workers combine to produce more complex units of the final product. For example, there may have been a dozen or more workstations on an assembly line to complete an automobile engine in the past, but all of that work may be done in one module today. When the engine is finished, it is moved to another part of the plant and installed into the engine compartment of a car.” Here is a flowchart of what they’re talking about. This plant uses four modular assembly locations and two linear assembly lines to get the job done. Engines are assembled from start to finish by one or more teams working in engine assembly areas 1 and 2. Meanwhile, frames are built on linear assembly line 1. These frames are moved to car assembly areas 1 and 2, where one or more teams of workers install the engines and do everything involved in the assembly of the car except the painting. Nearly‐finished cars are brought from these two assembly areas to the painting and finishing line for the final steps. For this to really work there would have to be at least ten engine and car assembly areas instead of just two. Otherwise they would not be able to keep up with the two linear assembly lines. I am only showing four of the twenty assembly areas for simplicity. Car companies that have switched to modular layout report they are able to produce the same number of cars per day with a smaller factory. This enables them to save money on rent. One way to think about modular layout is as “temporary fixed position layout.” Each of the four assembly areas works on the principle of fixed‐position layout: the engine subassembly for example remains stationary while it takes shape. Workers bring various tools and parts to that location to complete the next steps needed by the product. When its done, the engine is moved to where it will be dropped into a car and the workers begin again building a new engine. Workers report they find working in modular layout more enjoyable than working in assembly line layout because they get to build a whole engine and get the satisfaction of watching it take shape under their hands. This can increase worker satisfaction and product quality.
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Materials Requirement Planning, or MRP, is a computer‐based operations management system that uses sales forecasts to make sure parts and materials are available when needed. It’s based on sales forecasts and bills of materials. A bill of materials is a list of all the piece parts you need to make one finished goods unit. When you combine that with a forecast of the number of finished goods units you will need for each model of product you sell, you can come up with a shopping list to hand off to your purchasing department. It is the responsibility of the Materials Requirement Planning people to make sure that all the needed parts are available to support manufacturing. At the same time, they have to try not to order anything that isn’t needed, because unneeded parts tie up money and require storage space, both of which are bad. If there are not enough parts to finish production, the materials requirement planning people get yelled at. If there are too many parts, they get yelled at. That’s why they are well paid, because there is a lot of pressure on them to get it right, even though the number of finished goods units the company plans to make constantly changes on a day to day and even sometimes an hour‐by‐hour basis.
On page 242, in their definition of Enterprise Resource Planning, the authors of your textbook say that ERP is a newer version of materials requirement planning. They’re wrong. But the rest of their definition is correct. So the definition I want you to learn is this: Enterprise Resource Planning, or ERP, combines the computerized functions of all the divisions and subsidiaries of the firm – such as finance, human resources, and order fulfillment ‐ into a single integrated software program that uses a single database. The world’s most successful ERP vendor is (enter) SAP, a German company. The world’s second‐ most successful ERP vendor is (enter) Oracle. They are headquartered in Redwood Shores, about 21 miles north of De Anza College.
SAP calls its ERP system “R/3”. Here’s a list of the major modules that make up the R/3 system. For my last three years before coming here to De Anza College as a teacher, I was an SAP consultant specializing in customizing the Sales and Distribution module of the R/3 system to support the business processes of different kinds of businesses.
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Let’s see what you know about Just in Time Inventory control. True or False: A major advantage of a just‐in‐time inventory system is that it reduces costs and the effort for both the producer and its suppliers. (Pause, enter) This is false. Just‐time‐time lowers the producer’s costs but actually increases the supplier’s costs. That’s why, when a producer negotiates with their supplier to switch to Just‐in‐Time, some increase in the price per unit purchased is usually involved.
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Just‐In‐Time Inventory Control, or JIT for short, is a purchasing and manufacturing strategy in which a minimum of inventory of your more expensive or bulkier parts is kept on hand, and your suppliers make more frequent, smaller deliveries of those parts and raw materials than they would have using more traditional methods. For the manufacturer, this lowers the cost of storing inventory, and it also lowers costs associated with excess and obsolete inventory, because the risk of purchasing the WRONG parts is lower when you wait until the day you NEED the parts to have them delivered. But it RAISES costs for the supplier, because they now have to make more frequently deliveries and process more frequent, smaller orders from you. So it needs to be the case that the COST SAVINGS to the manufacturer are GREAT enough to enable the manufacturer to pay a SLIGHT PREMIUM to the supplier per unit purchased to help offset the supplier’s extra costs.
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There was a big push in the ‘70s and ‘80s to improve manufactured product quality. Autos and electronics are two of the product categories that have benefited from the great leap forward made by manufacturing firms in many nations in how they manage product quality and quality control programs. To start with the basics, let’s define quality as “Consistently producing what the customer wants while reducing errors before and after delivery.” Among the most important and impactful quality systems and methods that have been invented and/or used by companies over the past four decades are Six Sigma quality, Statistical quality control, Statistical process control, and the Deming Cycle.
Your book says that six sigma quality is a quality measure that allows only 3.4 defects per million opportunities or products made, but there’s really a lot more to it than that. The Six Sigma approach to quality was pioneered by Motorola in 1986. Jack Welch made it central to his business strategy at General Electric in 1995. It seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization ("Champions", "Black Belts", "Green Belts", "Yellow Belts", etc.) who are experts in these methods.
Each Six Sigma project carried out within an organization follows a defined sequence of steps and has a specific set of quantified improvement targets it is aiming for. For example: reduce process cycle time, reduce pollution, reduce costs, increase customer satisfaction, and increase profits. In recent years, some companies have combined Six Sigma ideas with lean manufacturing to create a methodology called Lean Six Sigma. The Lean Six Sigma methodology views lean manufacturing, which addresses process flow and waste issues, and Six Sigma, with its focus on variation and design, as complementary disciplines aimed at promoting "business and operational excellence.” General Electric, Verizon, and IBM are among the companies using Lean Six Sigma.
PDCA, or plan–do–check–act, is an iterative four‐step management method used in business for the control and continuous improvement of processes and products. It is also known as the Deming Cycle, which is what your book calls it. PDCA was made popular by Dr W. Edwards Deming, who is considered by many to be the father of modern quality control; however, he always referred to it as the "Shewhart cycle,“ in deference to Walter A. Shewhart which he credits with inventing the method. The concept of PDCA is based on the scientific method, as developed from the work of Francis Bacon in 1620. The scientific method can be written as "hypothesis"–"experiment"–"evaluation" or plan, do and check. Shewhart then added the “Act” step because businesses must Act upon the knowledge they have gained from careful experimentation and observation in order to derive benefits from that knowledge.
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The Baldrige Award is the only formal recognition of the performance excellence of a set of public and private U.S. organizations given by the President of the United States. It is administered by the Baldrige Performance Excellence Program, which is based at and managed by the National Institute of Standards and Technology, an agency of the U.S. Department of Commerce. Up to 18 awards may be given annually across six eligibility categories—manufacturing, service, small business, education, health care, and nonprofit. As of 2011, 90 organizations had received the award. In 2010, the program's name was changed to the Baldrige Performance Excellence Program to reflect the evolution of the field of quality from a focus on product, service, and customer quality to a broader, strategic focus on overall organizational quality—called performance excellence. To receive a Baldrige Award, an organization must have a role‐model organizational management system that ensures continuous improvement in delivering products and/or services, demonstrates efficient and effective operations, and provides a way of engaging and responding to customers and other stakeholders. The Seven Criteria are a set of questions about seven critical aspects of managing and performing as an organization. These questions work together as a unique, integrated performance management framework. Answering the questions helps you align your resources, identify strengths and opportunities for improvement, improve communication, productivity, and effectiveness, and achieve your strategic goals. As a result, You deliver ever‐improving value to your customers and stakeholders, which contributes to organizational sustainability. You improve your organization's overall effectiveness and capability. Your organization improves and learns. And your workforce members learn and grow.
ISO stands for the “International Organization for Standardization.” The International Organization for Standardization is a developer and publisher of a variety of International Standards on various topics. Most of their standards are highly technical, meaning they are specific to a particular product, material, or process. ISO 9000 and ISO 14000 are fundamentally different from most of the work the International Organization for Standardization does. They are "generic management system standards". "Generic" means that the same standard can be applied to any organization, large or small, whatever its product or service, in any sector of activity, and whether it is a business enterprise, a public administration, or a government department. ISO 9000 contains a generic set of requirements for implementing a quality management system. To become ISO 9000 certified, an organization must hire a consulting firm that has been certified by the International Organization for Standardization as being qualified to evaluate its compliance with ISO 9000 standards. The ISO 9000 standards are pretty general. They include things like: Does your company emphasize Quality and Customer Satisfaction in its mission statement, goals, and/or objectives? Does your company have Written Procedures and Guidelines for all if its major processes? Does your company regularly and carefully assess your customers’ needs? Is there a good flow of information between departments on matters that affect customer satisfaction and product quality? Does your company keep detailed records of the work it performs for customers? In looking at this list, I am reminded of Max Weber’s emphasis on the importance of (enter) written procedures and guidelines, (enter) good flow of information between departments, and (enter) detailed record‐keeping. And Max Weber’s work was written about 70 years before ISO 9000 was invented. He was a smart guy. Many major European customers, such as Siemens‐Nixdorf, will not even consider a company as a supplier unless they are ISO 9000 certified. Much of the popularity of ISO 9000 since its invention has been driven by European customers’ insistence that it is important. Over 1,000,000 companies worldwide have been ISO 9000 certified. Of course, just because you’re ISO 9000 certified, that does not necessarily mean that every single product you make will be of adequately high quality. For example, Bridgestone/Firestone, a maker of car and truck tires, was ISO 9000 certified when several of its tire models were implicated in more than 100 fatalities involving Ford Explorers and other SUVs. These tires had higher‐than‐normal tread separation rates when run at low pressures. However, being ISO 9000 certified hopefully does increase the chances that the customer will be completely satisfied with the quality of the company’s products.
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ISO 14000 is the other set of "generic management system standards” developed by the International Organization for Standardization. They have NOTHING to do with quality. ISO 14000 contains a generic set of requirements for implementing an environmental impacts management system at a company. It does not prescribe specific emission standards or goals for specific companies or industries. Instead, it is a set of generic requirements, such as •Does your company have a written environmental policy? •Has your company set specific improvement targets for reducing its impact on the environment? •Does your company follow up and check on a regular basis to see if it is achieving its own improvement targets, and take corrective actions if it is not? •Are the top managers of your company aware that your company has a written environmental policy? •Do they have some idea what’s in that policy? •Do they ever see the company’s improvement targets? •Do they know if the company has recently met its improvement targets or not? Things like that. ISO 14000 is not nearly as popular as ISO 9000. Whereas over 1,000,000 companies worldwide have been ISO 9000 certified since these ISO 9000 was invented in 1987, only about a quarter of a million companies have become ISO 14000 certified so far.
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This is the example of a PERT chart given in your book on page 247. The product being made here is a music video. To draw a PERT chart, first you have to break down the total project into steps or separate actions. Then you put each step into its own box, and figure out how long each step will take, and you write that number next to the box. The 1 WEEK on the left goes with the “Star and song chosen” box. The 4 weeks above that goes with the “set designed” box. The top 2 WEEKS goes with the “set materials purchased” box. Then you join the boxes with arrows. The arrows always have to mean the same thing. They have to mean that you have to FINISH the step at the beginning of the arrow before you can START the step at the end of the arrow. Let’s take an example: The “set designed” box is at the end of an arrow that comes out of the “star and song chosen” box. What do you think: do you have to FINISH choosing the star and the song before you can START designing the set? Well, yes, actually, that kind of makes sense. I mean, if it’s going to be Maroon 5 singing “Maps,” then its probably going to be a completely different set than if it’s going to be Sam Smith singing “Stay with Me.” So you have to FINISH choosing the star and the song before you can START designing the set. That’s what all the arrows HAVE to mean. If that’s not true for one of the arrows, then you have to break down the steps in that area of the chart into sub‐steps until you’re cutting it fine enough that every arrow can mean that. Otherwise, the results you get from your PERT analysis will not be accurate. When you’re done drawing the PERT chart, you’re ready to determine which path is the CRITICAL PATH. The CRITICAL PATH consists of the sequence of steps that will take the LONGEST, running from the beginning of the project through to the end. In this example, the top path is the critical path – the things related to designing and building the SET. Of the three sets of activities that can occur in parallel, designing and building the SET is expected to take the longest. So all the activities related to building the SET are on the critical path. Notice that the arrows joining the activities on the critical path are darker and thicker than all the other arrows. That’s the critical path. So the critical path is the path that takes the longest. Why? Why would the tasks on the critical path be of greater interest to the project manager than the tasks that are NOT on the critical path? (Pause.) Did you figure it out? It’s because if ANY ONE OF THE TASKS ON THE CRITICAL PATH TAKES ONE DAY LONGER TO COMPLETE than was expected, then the whole project – in this case the completed music video – will be delivered one day late. Do you know how much it costs to deliver something one day late in the video production business? Well, if you’re really at the low end of the budget scale, then it will only costs you tens of thousands of dollars extra. But for NORMAL things, hundreds of thousands of dollars extra. Late means over‐budget in this industry. If you want to get re‐hired as a project manager, you should deliver the project you are managing both on time and on or under budget. If one of the tasks that are NOT on the critical path end up taking one day longer than planned, does that mean that the video will be delivered one day late? Probably not. They’d have to be very, very late to become the items on the critical path. Whatever sequence of steps is currently projected to take the LONGEST is the critical path. That can change during a project as estimated completion dates are revised, but at the beginning of THIS project, the project manager should be calling up the person who is responsible for designing and building the set EVERY DAY once the star and song are chosen, and asking them how things are going. They actually can leave the people responsible for the dancers and the costumes alone for a while. They can focus ALL THEIR ATTENTION on helping the person responsible for designing the SET stay on schedule. When the SET PERSON has a problem, the project manager should DROP EVERYTHING and help them solve that problem. So PERT analysis helps the project manager know where to focus their attention and effort. That’s one of its main benefits – besides helping the project manager come up with an overall estimate on cost and timing for the project.
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The other control procedure we learn about in chapter 9 is called a Gantt chart. When I first learned these two, I thought they were pretty similar – confusingly similar in fact. You will find this picture – or one a lot like it – on page 248 of your book. The project represented by this Gantt chart is the production of a specified number of dolls. To draw an Gantt chart, you need to break the total project down into tasks or steps, much like you had to do to draw a PERT chart. In this chart, making the dolls has been divided into 6 steps: molding the heads of the dolls, machining or molding the bodies of the dolls, cutting the fabric for the clothing the dolls will wear, sewing those cut pieces of fabric together, assembling the heads, bodies, and clothing together to make the dolls, and then painting the faces, fingernails, toenails, and other exposed portions of the dolls’ bodies. The duration, start date, and stop date of each task is then determined, and the tasks are placed into the Gantt chart as bars, stretching from their start date to their estimated completion date. You can see from this chart, that the first step was to begin molding the heads. The second step was to begin molding the bodies. Each day, the project manager updates the Gantt chart with the work completed. The work completed is indicated by the white portion of the top two bars. Assuming today’s date is the end of week 3, then the bodies are molded, and that was done on time, but the heads are not done being molded yet. That portion of the project is behind schedule. So if I’m the project manager, my first phone call this morning will be to the person responsible for getting the heads molded. Again, a Gantt chart helps the project manager know where to focus his or her attention and problem‐solving skills. One ADVANTAGE of a Gantt chart compared to a PERT chart is that the Gantt chart shows the percentage completion level of each task, and which tasks are ahead of or behind schedule. One DISADVANTAGE of a Gantt chart compared to a PERT chart is that the Gantt chart does not show the logical dependencies between the tasks. One might ASSUME that the assembly cannot be started until all the piece parts are made in the preceding four steps, but the Gantt chart doesn’t actually show you that, and in fact, it MAY NOT be true! If this is a very large number of dolls, then you can probably begin assembling the dolls as soon as you have SOME of each of the three types of parts you need: heads, bodies, and clothing. You actually don’t need to FINISH all four of the steps that you are PLANNING to complete first before you can BEGIN the assembly. As you get towards the END of the assembly process you will need all of the piece parts to be completed, but when you first BEGIN the assembly process you do not. The point is that the dependency relationships simply are not visible from the Gantt chart. Consequently, it is not possible to determine which tasks are on the critical path from the Gantt chart.
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