Business in Action: Thriving in the Digital

Enterprise
Ninth Edition

Chapter 9

Production Systems

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Learning Objectives (1 of 2)
9.1 Explain the systems perspective, and identify seven
principles of systems thinking that can improve your skills as
a manager.
9.2 Describe the value chain and value web concepts, and
discuss the controversy over off shoring.
9.3 Define supply chain management, and explain its
strategic importance.
9.4 Identify the major planning decisions in production and
operations management.

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Learning Objectives (2 of 2)
9.5 Explain the unique challenges of service delivery.
9.6 Define quality, explain the challenge of quality and
product complexity, and identify four major tools and
strategies for ensuring product quality.
9.7 Explain the concept of Industry 4.0 and the smart factory.

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The Systems View of Business
• System
– An interconnected and coordinated set of elements and
processes that converts inputs to desired outputs

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Exhibit 9.1 From Point to Line to Circle:
The Systems View

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Managing Systems for Peak
Performance (1 of 2)
• Help everyone see the big picture
• Understand how individual systems really work and how
they interact
• Understand problems before you try to fix them
• Understand the potential impact of solutions before you
implement them

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Managing Systems for Peak
Performance (2 of 2)
• Don’t just move problems around—solve them
• Understand how feedback works in the system
• Use mistakes as opportunities to learn and improve

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Exhibit 9.2 Business Transformation
Systems

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Value Chains and Value Webs
• Value chain
– All the elements and processes that add value as raw
materials are transformed into the final products made
available to the ultimate customer

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Redefining Organizations with Value
Webs
• Outsourcing
– Contracting out certain business functions or operations
to other companies
• Value webs
– Multidimensional networks of suppliers and outsourcing
partners

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The Offshoring Controversy
• Offshoring
– Transferring a part or all of a business function to a
facility (a different part of the company or another
company entirely) in another country

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Supply Chain Management (1 of 2)
• Supply chain
– A set of connected systems that coordinates the flow of
goods and materials from suppliers all the way through
to final customers

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Supply Chain Management (2 of 2)
• Supply chain management (SCM)
– The business procedures, policies, and computer
systems that integrate the various elements of the
supply chain into a cohesive system

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Strategic Impact of SCM
• Managing risks
• Managing relationships
• Managing trade-off
• Promoting sustainability

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Supply Chain Systems and Methods (1 of 3)
• Inventory
– Goods and materials kept in stock for production or
sale
• Inventory control
– Determining the right quantities of supplies and
products to have on hand and tracking where those
items are

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Supply Chain Systems and Methods (2 of 3)
• Procurement
– The acquisition of the raw materials, parts,
components, supplies, and finished products required
to produce goods and services
• Material requirements planning (MRP)
– A planning system that works backward from a
company’s sales forecasts to make sure it has enough
of everything required to build those goods or perform
those services in a timely manner

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Supply Chain Systems and Methods (3 of 3)
• Manufacturing requirements planning (M RP)
– A planning system that works backward from a
company’s sales forecasts to make sure it has enough
of everything required to build those goods or perform
those services in a timely manner
• Enterprise resource planning (ERP)
– A planning system that addresses the needs of the
entire organization, from manufacturing to sales to
human resources

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Production and Operations
Management (1 of 3)
• Production and operations management
– Overseeing all the activities involved in producing
goods and services

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Production and Operations
Management (2 of 3)
• Facilities location and design
• Forecasting and capacity planning
• Scheduling
• Lean systems

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Production and Operations
Management (3 of 3)
• Capacity planning
– Establishing the overall level of resources needed to
meet customer demand
• Critical path
– In a PERT network diagram, the sequence of
operations that requires the longest time to complete

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Lean Systems (1 of 2)
• Productivity
– The efficiency with which an organization can convert
inputs to outputs
• Lean systems
– Systems (in manufacturing and other functional areas)
that maximize productivity by reducing waste and
delays

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Exhibit 9.3 Gantt Chart

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Lean Systems (2 of 2)
• Just-in-time (JIT)
– Inventory management in which goods and materials
are delivered throughout the production process right
before they are needed

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Mass Production, Customized Production,
and Mass Customization (1 of 2)
• Mass production
– The creation of identical goods or services, usually in
large quantities
• Customized production
– The creation of a unique good or service for each
customer

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Mass Production, Customized Production,
and Mass Customization (2 of 2)
• Mass customization
– A manufacturing approach in which part of the product
is mass produced and the remaining features are
customized for each buyer

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Exhibit 9.4 Simplified PERT Diagram for
a Store Opening

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The Unique Challenges of Service
Delivery
• Perishability
• Location constraints
• Scalability challenges
• Performance variability and perceptions of quality
• Customer involvement
• Service provider interaction

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Product and Process Quality (1 of 4)
• Quality
– The degree to which a product or process meets
reasonable or agreed-on expectations
• Quality control
– Measuring quality against established standards after
the good or service has been produced and weeding
out any defective products

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Product and Process Quality (2 of 4)
• Quality assurance
– A more comprehensive approach of companywide
policies, practices, and procedures to ensure that every
product meets quality standards
• Total quality management
– An approach to quality assurance that encompasses
every aspect of a company’s operations

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Product and Process Quality (3 of 4)
• Statistical process control (SPC)
– The use of random sampling and tools such as control
charts to monitor the production process
• Six sigma
– A rigorous quality management program that strives to
eliminate deviations between the actual and desired
performance of a business system

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Exhibit 9.5 The DMAIC Process in Six
Sigma Quality Management

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Product and Process Quality (4 of 4)
• ISO 9000
– A globally recognized family of standards for quality
management systems

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Thriving in the Digital Enterprise:
Industry 4.0 and the Smart Factory
• Industry 4.0
– The digital transformation of manufacturing, moving
from automated factories to smart factories that
emphasize the use of cyber-physical systems

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Applying What You’ve Learned (1 of 2)
1. Explain the systems perspective, and identify seven
principles of systems thinking that can improve your skills
as a manager.
2. Describe the value chain and value web concepts, and
discuss the controversy over off shoring.
3. Define supply chain management, and explain its strategic
importance.
4. Identify the major planning decisions in production and
operations management.

Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved
Applying What You’ve Learned (2 of 2)
5. Explain the unique challenges of service delivery.
6. Define quality, explain the challenge of quality and product
complexity, and identify four major tools and strategies for
ensuring product quality.
7. Explain the concept of Industry 4.0 and the smart factory.

Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved
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