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36 views40 pagesChapter 10 Canadian Business
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/ 40
CHAPTER 10
Producing World-Class Goods and Services
LEARNING OBJECTIVES
[After you have read and studied this chapter, you should be able to:
computer n and manufacturing, flexible manufacturing, lean manufacturing, mas
customization, robotics, and 30 printing
PEM ©ssi0in the use of PERT and uring proce
PROFILE
GETTING TO KNOW: SHAHID KHAN, OWNER, FLEX-N-GATE
At just 16 years old, Shahid Khan moved to C? fears subsided the next morning when he
paign,Ilinois, ready to ive the American Dream. discovered a notice about an opening for a dish
However the young Pokiston! immigrant quickly last washing job in the YMCA kitchen, With a starting
his confidence when he discovered an enormous salary of $1.20 per hour, Khan was shocked that
blizzard had hit his new Midwestern home. To make he cauld ree os from the previous night
matters worse, the the University a linis 50 quickly. “ts ike, wow” said Khan, “if you put the
hadn't opened yet, forcing Khan to pay $3 for a $1.20 per hour in terms of Pakistan, you're making
room snd # meal atthe local YMCA. With precious more than 99% ofthe people ov
en forthe fist time The new opportu
a4 Michal eke apes
‘oraduating he landed job overseeing production
for @ local aftermarket auto parts company called
Flox/N-Gate, At fist Khan couldn’ belleve the inf
lent manufacturing methods the company used to
make is bumpers, which sometimes involved weld
ing together as many as 15 diferent pars. Using his.
‘engineering expertise, Khan refined the process to
‘make it less complicated. His hard work pad off in
the fo1m of @ revolutionary new product: a bumper
stamped ftom a singe piece of ste! that manages
to slim down the rear end of a ruck
‘Aer seven yeas in the aftermarket business,
Khan realized thatthe value focused industy didn't
provide much oom for innovation. Khan wantes
fis product to succeed, he knew he had to sell
treaty to automakers insteed of to consumers. So,
‘armed wit itie more than a post ofce box and a
‘small business loan, Khan stated his own company.
Within two years he earned enough money to buy
the faling Fe:N-Gate from his old boss giving him
Additional revenue streams as well as an estab
lished brand name. While business boomed at fst,
soles eventual ground to a halt when its biggest
(CHAPTER 10 Producing Wor: Cioss Goods ane Services
lent, General Motors, passed off his bumper
Information technology (IT) has had a major
influence on the entre production process from put-
chasing to final delivery. Many TT advances have been
add-ons to ERP. To solve its difficulties, the Mint
turned to Cognos for its enterprise solution, Cogns’
Analytic Applications solution made it possible for
‘users to access data right othe day, as well as to create
new reporting opportunites. The Mints self-service,
web-enabled, enterprise-wide solution allowed it to
act quickly and thereby improve customer service,
performance to omice strategy. The analysis will include
the use of player performance data to help hockey
‘oxecutives make better decisions atthe National Hockey
‘League entry draft and trade deasdine.””
‘According to Ali Khan, “Buying a prepackaged solu-
tion and customizing it to our own unique business
requitements has saved us a Jot of time and a lot of
‘money
Purchasing
Purchasing ithe fnesion tat searches for high-quality material resources, Finds the hes
Snplicn, and negotiates th Best price fr quality goods and services. In the pas. max
neue da wth may supers so hat if one sould ot deliver, the Gm eo get
nur om a ifferent suplice. Toy, however, manaactaers fly moe ei on
Jratone or wo supe, because th elatonshi between soppliers and manure
‘much closer than before.”” Producers share a great deal of information and consequently,
they waa ew splits as possible hrowing. their business, The Hons Bay Com
pry aie single mechani byes fora growing uber of departments its Bay,
Sake ith Avenue, and Home Outiters chains. This move was designed o Bp improve
‘product selection and save money through less duplication and larger purchase orders. ee:
“The Inrnthasraormed th purchasing anton. bins looking fo supe
can comact an nernctasd purchasing Service an find the est tems at he Bes rice
Samira company wishing osll suplics can use the Inert to ind ll companies
ooking for sich suppicn. Tus the ime and dar cost of purchasing items hs ben
reluced tremendously
purchasing
The functional area in
ffm that searches
{or quay material
resources, finds the
best suppliers, and
regotiotes the best
pce for goods and
Just-in-Time Inventory Control
One major cost of production is holding parts and ter tems in storage or ater use. Stor
age not only subjects such tems to obsolescence, ifr, and damage, ut also requis
am and systems at
ts "They're
ud 2 major
ftom pur
ave been
the Mint
Cognos’
posible for
astocreate
sf service,
ed it 0
solu-
bsiness
alo of
construction and maintenance of costly warehouses. To
cut such costs, many companies have implemented a
concept called just-in-time (JIT) inventory control
JIT systems keep a minimum of inventory onthe prem
ises and delivers pars, supplies, and ther needs just in
time to go on the assembly line. To work effectively,
however, the process requires an accurate production
Schedule (using ERP) and excellent coordination with
carefully selected suppliers, who are usually connected
electronically so they know what is needed and wh
Sometimes the supplier uilds new facilities close
ie distribution time, JIT
to the main producer ton
o problems when suppliers are father away.
Weather may delay shipments, for example, as hap-
pened when weather (earthquakes and the resulting
tsunami) disrupted the supply chain of materials from
Japan to Canada in 2011
Delays require that companies adjust their J
schedules. Today, the longer delays at border crossings due to increased traffic and security
CHAPTER 10 Producing World-Class Goods and Services
Huge warehouses suchas the one depicted inthe
‘Photo Would become a thing ofthe past fall companies
limplemented justn-sime (1) inventory control. What
are the advantages and disadvantages of having large
‘amounts of inventory available?
justinstime (7)
inventory contro!
measures have forced companies todo just that. Other limitations are that JIT works best production process
with standard products, needs a high and stable demand to justify the cost and savings, and _ in which a minimum of
requires extremely reliable suppliers,
Inventory s kept on the
premises and pa,
JIT systems ensure that the right materials are at the right place at the right time atthe Shee. and ether
cheapest cost in order to meet both customer and production needs. That isa key step in needs ae delivered
‘modern production innovation,
Quality Control
Mainining quality means consistently. producin
wat the eastomer wants wile educing errs before
and after delivery to the customer. Ia the past, firms
‘often conducted quality control at the end of the pro:
duction line. Products were completed and then tested
for quality. This resulted in several problems, inclu
the need to:
4, Uilize extra workers and resources 1 inspect
work.
2. Correct the mistake or srap the product ifan error
‘was found, resulting in higher cost.
3. Risk customer dissatisfaction if she or he found
firm
the mistake, and decided to buy from anothy
thoreaer
Such problems Jed to the realization that quality
is not an outcome: it is « never-ending process of eon-
tinually improving what a company produces. Quality
Justin time for use on
the acsembly ine
‘what happens when you combine the zeal of technical
Innovators withthe Six Sigma discipline of large
company lke General Electric? You get a medical
breakthrough, Janet Burk and her 280-person operations
‘team developed the work's fastest CT scanner. t works
‘ten times faster thon other systems and produces clear
3.0 images of the beating heart. Can you see how efforts
te buildin quality lead to beter (and faster) products? PART 3. Leadership, Organization, and Production to Satisy Customers
cqatty onl shouldbe part of he operations mangement planing proces a
Consistently producing an end-of-the-line inspection.
atte customer Companies have tuned 1 5 uaity contol stndads, sich a Si
SONICS"? sigma. Se Sigma quale, which sets benchmark of jus 3.4 dfets er milion opp
ther every othe nies, detets potential problems o prevent their aecurenc. That is import cae
, ome pany that makes 4 million transactions « day, like some banks. The Spotlight on Small
Six Sigma qulty Business box explores how smal businesses can apply Six Sigma to ther operations
pep lapped Statistical quality control (SQC) is the process some managers use to continually
coo aay aA GetS monitor all phases ofthe production process and assure guaity is bul into the prt
from the begining. Stalstical proces control (SPC) isthe proces of ttn tii
er than singly
Seo AR OUI i}
Meeting the Six Sigma Standard
Sh Sigma Is 2 qualty measure that allows only 3.4
etects per milion opportunites. Here Is ow Six
Sigma works f you can make it to the level of one
Sige, two out of three products wil meet specifica
‘ions. you can reach the two sigma love, then more
‘than 95 percent of products wil qualify. But when you
meet Six Sigma qualty, 35 we have said, youhave only
34 defects in a millon opportunities (which means
that 99.99966 percent of your products will qualify,
‘8 quality standard that approaches perfection. Service
‘organizations are also adopting Six Sigma standards
through the elimination of any activity involved wih buyin fora Sk Sigma intatve may be easirin smal
‘the service they provide that does not add valueto the business, resource commitment and employee ting
customer ‘are more challenging compared large companies.
IR one thing for Motorola (often cited as the ceive
Ing force behind the devetopment of this standard) or
‘General Electric (GE to reach for such standards given
their vast cesources, but what about a small company
tke Dolan Induses? Dolan is a 41-person manutac-
‘rer of fasteners. t spent a few years trying to meet
150 9000 standards, which ere compereble to Six
‘Sigma, Dolan hed to do that because its customers
‘were demanding that level of quay.
‘Small companies can successtuly implement Six
‘Sigma ifthe owner is committed, the company has @
routine core of work that can benef ftom the stan-
‘ard and the company's cure is open o change. Any
change tat is part of Sb Sigma project shoulé not 8 much tobe gained trom ding cost-tlective meth-
be s0 significant that any problem would have a major ods 0 deliver quality goods and services. a
‘Soren Cores Wn Si Sgn utr Large Companies? Wha abut mal competes 5 Signe, 2015 hp:
‘animes sionatetngsanedsisgnestnge compares sovsnat conga acesed My 11, 2075 Vg at
“Tha hn deta inl sete eat specs Tre Gebe ond Mo, Ags 15. 2073. pwnatapdsanamal content.
‘ortsinaninerveneeradvcolt at warns Semana ee specinblotse¥3795394/oné “ng Sie SMa Canad
‘haem sgnacanadanethoningy accessed ny 15,2018,
374 sniher than simply
such as Six
milion opportu-
10 a.com.
elght on Small
operations
‘0 continually
tothe product
esting statistical
CHAPTER 10. Producing Worl-Class Goods and Services
sales of product component at cach tage of production ni plating he est elon statin quay
2 graph, Managers can ths se and corect any deviation fom qui standards. Mak- control SOC)
ing sure products meet standards all along the production process reduces the need for cnceraeee
2 quality-control inspection atthe end because mistakes are caught much cali inthe Tamron osnor
process. Consequently, SQC and SPC save companies much time and money, Some com- phase fhe
panies use a quliy-contol approach called the Deming eycle (after the late W. Bdvards PYdtlon process
Deming. the fiero the movement toward quality) Is eps are: Pla, Do, Check, At 1225540 tat uty
(PDCAY. Again eden isto find potential rors before they happen. Deming’ approach, the prove rm the
including implementing standards, was used for many years before the International Orga- beginning.
nization for Standardization ISO), which we will alk about shorty, came into being, sotsticat
statistical process
Businesses are getting serious about providing top customer service and many are Sonar egpey
already doing it. But while physical goods can be designed and manufactured to near per- Tye process af testing
fection, theres no similar process that can be applied to services. Service organizations statistical somples of
product components
at each stage of the
production process
perfection when designing and providing a gnd plotting those
Find it difficult vo provide outstanding service every time because the process is so labour
intensive, Physical goods (e & gold ring) can be designed and manufactured to near
perfection, However, it is hard to reach
service experience such asa dance on a cruise ship ora cab drive through Vancouver. results on graph,
[Any variances trom
‘uaity standards are
QUALITY AWARD: THE CANADA AWARDS FOR EXCELLENCE” recognized and can be
corrected beyond the
sot standeres.
Excellence Canada isthe leading authority in Canada on organizational excellence based
‘on quality systems, innovation, and healthy workplace criteria. The Canada Awards for
Excellence (CAE) are presented annually 1 private, public, and not-for-profit organi
tions that have demonstrated continual innovation and sustainable improvement across
all business drivers and all departments, including: Leadership and Governance, Corpo-
rate Social Responsibility, Planning and Strategy, People Engagement, Psychological and
Physical Health & Safety, Customer Experience. Process and Project Management, and
relationships with Partners and Suppliers,
The award has honoured hundreds of Canadian organizations, including Manulife
Investment, Toronto East General Hospital, Hill & Knowlton Strategies Canada, and
the Peel Regional Police. Recent recipients also include Ceridian HCM Canada, British
Columbia Pension Corporation, the Canadian Forces Housing Agency, and the Toronto
“Transit Commission,
CAB awards categories are: Excellence, Innovation and Wellness; Healthy Workplace:
‘and Mental Health at Work. For more information, visit the Excellence Canada website
Y EXCELLENCE+*CANADA
improving performance, recagnizing excellence | améliorer le rendement, reconneitre excellence
Excellence Canada formally the National Quality institute isan independent, not-for profit organization founded
by Industry Canada. It helps companies understand and apply a focus an excellence through the adoption ofthe
Excellence, novation and Wellness Standard. This approach will help companies reduce waste and costs whi
improving productivity and competitiveness. Do you see how this framework incorporates principles discussed inthis,
textbook?
278 PART 3 Leadership, Organization, end Production to Setsy Customers
'50 9001
‘The common name
iver to quality
management anc
assurance standards
150 14001
‘collection of he best,
rates for managing
an organization’
Impact onthe
1SO 9000 AND ISO 14000 SERIES AND STANDARDS
‘The International Organization for Standardization (ISO) is a worldwide federation of
ational standards bodies from more than 160 countries that set the global measures for
‘the quality of individual products.” ISO isa nongovernmental ganization established in
1947 to promote the development of world standards to facilitate the international exchange
of goods and services (ISO isnot an acronym. Itcomes from the Greek word isos, meaning
‘cqual). Within the ISO 9000 series are specific standards, such as ISO 9001. 10 9001 is
the common name given to quality management and assurance standards. A more recent
standard that focuses upon sustained suceess, ISO 90042018, primarily targets the strate:
sic and operational management of organizations.”
‘The standards require that a company must determine customer needs, including reg-
‘latory and legal requirements, and make communication arrangements to handle issies
such as complains. Other standards involve process control, product testing, storage, and
delivery. Improving quality isan investment that can pay off in better customer relations
and higher sales,
tis important to know that ISO did not start as a quality certification, the way many
People think. In the beginning. it simply meant that your process was under coatrl. In
short. it looked to see that companies were consistently producing the same products each
time. There isa difference between consistency (flawed products every time) and quality
(products free from defects). Today, ISO has developed over 22.000 international standards
and includes 162 member countries.”
‘What makes 1S 9001 so important is thatthe European Union (EU) demands that
‘companies that want to do business with the EU be certified by ISO standards. Some
‘major Canaan companies are also demanding that suppliers meet these standards, Sev-
eral accreditation agencies in Europe and in North America will certify that a company
mets the standards for all phases of is operations, from product development through
production and testing to installation,
SSNC-Lavalin Group Ine., one of the leading groups of engineering and constrction
‘companies in the world, has met such standards. It provides engineering, procurement,
‘consiruction, project management, and project financing services toa variety of industry
sectors in more than 120 countries. The Quality Policy at SNC-Lavalin i to “achieve cliat
Satisfaction through the careful management of our work processes, with due attention to
ion through scope, schedule, cost contro, and with emphasis on safety and the
ronment." To best serve is various siakeholders, the company has implemented Client
‘Satisfaction and Continual Improvement Programs in every division, business unt, geo-
raphic office, and subsidiary. These programs are based on the applicable requirements of
180 9001 International Standard for Quality Management Systems.™
Another series, the ISO 14008 series, deals with environmental management, Within
this series, IO 14001 isa collection of specific standards that adress the hest practices for
‘managing an organization's impact onthe environment. Asan environmental management
system, it does not prescribe a performance level, Requirements for certification inclade
having an environmental policy, having specific improvement targets, conducting audits of
environmental programs, and maintaining top management review of the processes.
Certification in both 150 9001 and ISO 14001 would show that a firm has a world
lass management system in both quality and environmental standards. Inthe pas, firms
sssigned employees separately (0 meet each set of standards, Today, ISO 9001 and IO ide federation of
tal measures for
gon established in
gional exchange
ed fos, mea
001. 1S0 9001 is
A more recent
agts the strate
the way many
der contro In
products each
inact. Sev
iat company
et theough
procurement,
of industry
ements of
Within
pocices or
CHAPTER 10 Producing Worl Class
sanization ean work on both at once, ISO
edo
14001 standards have been blended so that an 0
76000 standards, which are des jive guidance on social
s now working on ISO
responsibilty.”
rey, eansumers have begun support companies tat prods eVinane
cussed earlier in Chapter 5).
ee rer at operation inorder cet sssimaberrsution proves,
w published the book Cradle to Cradle:
William MeDonough and Dr. Michael Braungar
4 to shift rom a linear cradle
We Make Things which discusses the need
duction process.” The sustai
‘As a result, businesses have Begun
tally friendly goods (as dis
2007,
Remaking the Ws
to-grave production process 19a
he licence to provid
soa: prfit organizatonealled the Cra to Cra Proves
rot te Corifed Mark demonstrates a manufacture’ commitment 1 sit
You know C2C certification has made an impact when
as Nike take notice, The company respond
design ethos where the company
included
endless, eco-efective prod
ie Cradle to Cradle (C2C) certification to the
Innovation Institute. The Cradle
bility
ability advocates gifted th
{you see a major multi-national
rmamfacturer such Jed to the sustainable man-
movement through its “Nike Considered!
> its footwear innovation. Its product rede
1 is endorsed by former NBA player Steve Nash, that is
‘erap-ground foam, and envronmentaly-preferred
rubber made with fewer toxins. ThE 6 nugh its Nike Free
re educa waste by nearly 2 millon pounds through its Nike Flynt
vent to develop a closed-loop business
materials in order to decrease its
ufactrin
adopts sustainable approach 10
the Nike Trash Talk shoe, which
od from leather waste and
‘ompany continued this tend thro
footwear line which hi
> The company has made a commit
reducing, and compost
technolog}
model that includes reusing
‘waste production."
Supply Chain Management
nO
the low
re create and evra goo OF Vie
Before we discuss this next topic. tant to introduce some terms. Logistics
ht amount of the Fight products oF
«possible cost, A supply can is
involves those activities that focus 0
services tothe right place atthe right time at
sequence of firms that perform activities requ
ws of industrial users. Some companies hav
management efficiencies. Supply chal
fe heen successful in attracting more
‘customers due to their supply chai
1 organization of information and
Wi delivering goods and services that provide
chs how one company ereated &
ygement
2 supply eain forthe purpose of ereating 3m
Adapting to Char
value to customers. The
que business that resolved a ogsis iss inter supply choi
Jude factories, processing cenlfes, Ware
silts in supply chain management ine
owes, isribuion eens, and retail owes (Figure 105) Funtions a8 activities
snagement, information management, qual
., Today, the major
yurchasing, inventory ma
production, delivery, and customer servic
n management include: (1) the need
include forecast
ity assurance, scheduling,
rributing wo the importance of supply chain
factors cont
sve, (2) the increase in outsourcing, (3) shorter prod
for improvement to remain competi
1 increased customization,
complexity through JIT inventory. and (7)
elobalization, (5) the growth of tech
ct life cycles and
rand e-commerce, (6) the increase in
cement of inventories, When implementing
oxts, increase flexibility and sp
nol
the need for better mana
sims try to improve quality, eduee e
supply chain man
and
agement, f
Goods ane Services
logistics
focus on geting he
Fight mount ofthe
services to the eh
piace a the right ime
supply chain
supply chain
management
pcross fs in 9 SUppN
delverng goods and PART 3 Leadership, Organization, ana Production to Satty Customers
eer hk cs
Your Own Farm in a Box
Imagine siting In your favourite restaurant in Calgary
In te middle of winter with @ *2inch snowel coming
your way. You crave some of the fresh, locally grown
produce you enjoy so much in the warmer months
Unfortunately, i's winter so probably wort be onthe
menu. Well crave no more. Help fs onthe way thanks
‘to. couple of entrepreneurs.
Brad MeNomara and on Friedman could not get
the results they wanted growing produce ina rooftop
Greenhouse. Frustrated, Jon came up with the idea
that using a shipping container to grow produce might
bbe move appropriate. Thanks to hs insight, Freight
Faims' customers can now gfow leaty greens, vine
crops, and mushrooms fydropenicaly in insulated,
cimate-contoled containers, The compeny uses
320-square-foot shipping containers that are retroft-
ted and converted Into modula, stackable farms that
can produce 900 heads of leaty greens per container
f20ch wook. The ent hydroponic system és simple
fenough that it can be digitally monitored and con
‘woled om a smartphone. The weekly output fom one
of Freight Farms containers Is approximately equiva-
lento the annual yield ofa one-acre farm,
The immediate goa! of Freight Farms isto create an
appropriate infrastructure that fosters local food econ
lomies. The company targets small and mediumsized
Fret as |
food dstibutors such 8s wholesalers and restaurants
with revenues between $3 milion and $75 millon. The
‘result is 2 simpler and shorter supply chain for geting
ocd rom “arm to table”
Friedman and McNamara also want to atact on:
profit groups involved in food cistrbution in depressed
for disstersoiet areas as buyers for thelr $60,000
farms-iv2-box. But they dont want o stop here. Whe
_atacting enough customers to make local forming &
costerective option is the key goal of Freight Farms
today the founders nave a much broader objective for
the future. Pricing a global food shortage In 2050,
they believe Freight Farms sth frst stp in the rede:
‘sign ofthe global fod system. Bon Appett!
Seu: eemy Outer “Ane Ar Fam e320 ScuneFot Bx he, Maren 2013 Pt! Cohan. “iow Produce Anynere 9
Fett rams’ 80.000 shpping Conn” res re 2,201: Len eye," Ubon Faring Took OF, Wha Wee Bosan
i LUE The Bot Gate oany 18.2084
improve customer service while atthe same time reduce the number of suppliers used.
‘Two examples fllow:
| + The Coca-Cola Company sought to streamline and simplify it supply chain through
| 1 number of measures. Historically, the company has worked with independent
| boaters to produce and distribute its products. That changed in 2010 when Coca
Cola purchased its largest ottler and began to reduce its bottling operations. Since
2010, the company’s bottling plant network has dropped from 353 ownerships to 73
‘ownerships with only 100 plants. This change is even more difficult given Coca-Col's
entire Tine includes 3500 produets. In order to respond to changes, the planners are
constantly adjusting the supply chain through one guiding principle—DOIP (Demand,
Operations, and Inventory Planning). Given Coca-Cola’s global reach, operation
‘management is a eritieal part of the company's success, Their mantea—
person atthe end of our supply chain”—clearly highlights this priority! eh operation
Thee is a
CHAPTER 10 Producing World-Class Goods and Services
FIGURE 10.5
‘SUPPLY CHAIN MANAGEMENT
This san image
of supply chain
management
showing the
interrlationships
between a of
‘the types offs
involved inthe
rowsion ofa good
orasewieetoo
customer
Source for Sports is a national brand with over 150 independently owned and operated
sport retailers across Canada. Its approach is to enable independents to purchase prod:
ucts ata cheaper price than if stores owners had to buy products on their own, No two
stores are ale and therefore operations management isan important part of making
this approach a success, In order to build retailer-supplier collaboration, the company
adopted a big data analytes platform, called Askuity. The software will help the head
‘office be more responsive to supply needs for each store and better manage the avail:
ability of stock as products change from one season to the nex, For example, Askuity
will identify which types of hockey equipment sold the best at different times of the
season, which in turn improves purchase and distribution planning the following year?
PROGRESS ASSESSMENT
Can you name and define three functions that are common to operations
‘management in both the service and the manufacturing sectors?
What are the major criteria for facility location?
What isthe alfference between materials resource planning (MRP) and
enterprise resource planning (ERP)?
What is justin-time inventory contro?
\Whatis involved in implementing each ofthe following: Sx Sigma, SOC, SPC,
SO 9000, and iSO 140002 PART 3. Leadership, Organization, and Production to Satsty Customers
Production Processes
fentily various
eee ‘Common sense and some experience have already taught you much of what you neo
raduction
Roden | knw tot raucos poses Yuko neo wim ee ep
ese jes ic YOU noel mony by he ari, ou mee ple er anon maa
that improve NQ4eS be organized to ‘get the task done, The same is true of the production process in industry
Hse bas iaptsto pric oups se Fe 10, Prada ee
productivity, pais to prod tput ig fo
to materials o processes,
Form utility is the value producers add to materials in the ereation of finished
‘Boods and services, such as the transformation of silicon into computer chips or puting
services together to ereate a vacation package. Form utility can exist tthe retail levelas
‘well. For example, a butcher can produce a specific cut of beef from a whole cow oe
baker can make a specific type of cake out of basic ingredients,
‘To be competitive, manuficturers must keep the costs of inputs down, That i, te
costs of workers, machinery, and so on must be kept as low as possible. Similarly, the
amount of output must be relatively high. The question today is: How does a producer keep
costs low and sil increase output? This question will dominate thinking in the manufx-
form utity turing and service sectors for years to come. In the next Few sections, we explore prc
Thevalue added by thon processes and the latest technology used to cut costs,
the creation offished Manufacturers use several different processes to produce goods. Andrew S. Grint
Including computer-
aided design and
‘manufacturing,
flexible
manufacturing, lean
manufacturing,
‘mass customization,
robotics, and 30
printing.
_ coe ‘chairman of computer chip manufacturer Intel, offers a great analogy to explain production;
Image th oe che. an tht Your tk sto er ek com
roceee ing of teeminate stoi ee, bee os an eto, Yur
froutecrog Perper cad dlr he Some ealieemayeoch of em ah sada
Tae tte Groves this tk cocompunes th ne tac rene of rodeo il
traenacebrr”tldan deliver produ in apne ots demas te canomer ot na ll
chemically changes:
era ‘ery time, (2) to provide an acceptable quality level, and (3) to provide everything atthe
lowest possible cost.
‘assembly process Let's use the breakfast example to understand process and assembly, Process mane
Thatpatot the facturing physically or chemically changes mata. For example, bling pysaly
Tieceteeer camps thocgg,Siaiiny, ocees mumfacarieg ture and ity sho compara
oore ‘The asembly proces ps topsthercomponem (Ee ost, and cof) 0 make «pda
1 FIGURE 106
THE PRODUCTION PROCESS
‘The production process consists of taking the factors of production and using the inputs to produce goods, services,
{and ideas. Planing, routing, scheduling, an the ther actives ae the means to accomplish the objective out ‘CHAPTER 10 Producing World-Class Goods and Services
(breakfast), Cas are made through an assembly process
‘that puts together the frame, engine, and other parts.
if what you need to Production processes are either continuous or
Paper or prepare intermittent. A continuous process is one in which
and you need to Jong production runs (lots of eggs) turn out finished
Jpecess in industry ‘goods over time. As the chef, you could have a con-
value, or uility ‘eyor belt that lowers eges into boiling water for three
minutes and then lifts them out. A thre
tion of finished ‘would be available whenever you want, A chemical
chips or puting plan, for example, is run on a continuous process.
the retail level as 1 usually makes more sense when responding
lawhole cow or a to specific customer orders to use an intermittent cramseonstye/Shatentack com
process. Het
the production run is shor (one oF (Wo Production lines allow forthe efficient and speedy
‘That is, the ‘ezg5) and the producer adjusts machines frequenly to preduction of goods that are consistent in size, weight
Similarly, the rake different products (ike the oven ina bakery or the COU and other measures of quality. How many products
‘an you think ofthat are key made on a production line?
ricer keep toutr inthe diner. Manufactures of custom-designed
int manu furniture would use an intermitent proces
‘An example of product shat uses both lng and short production runs is Kok boots. continuous process
In 2006, the company re-