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TABlE 1.1 Operations Decisions- A Framework

Operations Decision

1. Process

2. Quality

3. Capacity

4. Inventory

Focus

• Process-related decisions determine the physica l process used to produce the product or service and the associated workforce policies and practices. Many of these decisions are long-range in nature and cannot be reversed easily, particularly w hen significant capita l in­ vestment is needed. It is therefore important that the transformation process be designed in re lation to the long-term strategic posture of the organization and the capabilit ies of the workforce.

• Since many process decisions requ ire large capita l investments, financial managers are con­ cerned with the investments in assets requ ired by the operations function. Human resource managers are concerned w ith recruiting, hiring, staffing, and evaluation decisions concern ing the workers in operations.

• The operations function typica lly manages more employees and physica l assets than does any other funct ion in the f irm.

• Quality-related decisions affect the value and functiona lity of the goods or services pro­ duced and delivered to customers. These decisions determine whether and to w hat extent customer specif ications are sat isfied.

• The operations function is responsible for the qua lity of goods and services produced. Deci­ sions must ensure that quality is designed and bu ilt into all stages of producing and deliver­ ing goods and servi ces to customers.

• Quality requires total organizat iona l support. Managers f rom all functions should be con­ cerned w ith quality and should parti cipate in setting the specif ications for all new products and in defining the levels of customer service required.

• Capacity-related decisions are aimed at providing the right resources at t he right place at the right time.

• Long-range capacity is determined by the size of the physical facilities or by outsourcing to a reliable supplier. In the short run, capacity sometimes can be augmented by subcont racting, extra shifts, or rental of space. Capacity planning also determines the proper number of peo­ ple in operations. Staffing levels are set to meet the needs of market demand and the desire to mainta in a stable workforce. In the short run, capacity must be allocated to specific tasks and jobs in operations by scheduling people, equ ipment, and faci lit ies.

• Inventory-related decisions determine the type and level of inventory to be held.

• Inventory control systems are used to manage materials from purchasing through raw ma­ terials, work in process, and finished goods inventories. Inventory managers decide how much inventory is needed, where to locate the inventory, and a host of related decisions.

Examples

• What type of equipment and technology should be used7

• How should materials f low be designed and managed?

• What shou ld the layout of the facil ity be 7

• W hat specif ic tasks are to be performed by front-li ne workers?

• When should sh ift changes occur?

• What should the level of quality standards be for goods or services?

• Which workers need training?

• Shou ld incoming inspection from suppl iers be used ?

• How shou ld ongoing process performance be monitored?

• Where shou ld facil ities be located?

• How large shou ld facilit ies be?

• How many shifts should be schedu led7

• What priori ty rule should be used to select jobs for processing 7

• What activit ies can be outsourced or subcon­ tracted?

• How much inventory should be held?

• How should inventory be monitored- internally or by vendors?

• What shou ld the order size be?

• How f requently shou ld rep len ishment occur?

• Who should hold the inventory?