Montgomery and his team at PowerSki enjoyed taking their well-deserved bows for the job they did designing the product. But having a product was only the beginning for the company. The next step was developing a system that would produce high-quality Jetboards at reasonable prices. Before putting this system in place, PowerSki managers had to address several questions: What kind of production process should they use to make the Jetboards? How large should their production facilities be, and where should they be located? How should the plant be laid out? Should every component be made in-house, or should some be furnished by subcontractors? Where should they buy the materials they needed to build Jetboards? What systems would they need to ensure that production was as efficient as possible and that quality standards were maintained? Answering these questions helped PowerSki set up a manufacturing system through which it could accomplish the most important task that it had set for itself: efficiently producing quality Jetboards.<\/p>\r\nhttps:\/\/youtu.be\/kEo3VP5wDT0\r\n
Like PowerSki, every organization\u2014whether it produces goods or provides services\u2014sees job number one\u00a0as furnishing customers with quality products. Thus, to compete with other organizations, a company must convert resources (materials, labor, money, information) into goods or services as efficiently as possible. The upper-level manager who directs this transformation process is called an operations manager<\/em>. The job of operations management (OM)<\/span>, then, consists of all the activities involved in transforming a product idea into a finished product, as well as those involved in planning and controlling the systems that produce goods and services. In other words, operations managers manage the process that transforms inputs into outputs. Figure 1 below illustrates this traditional function of operations management.<\/p>\r\n\r\n In the rest of this module, we\u2019ll discuss the major activities of operations managers. We\u2019ll start by describing the role that operations managers play in the various processes designed to produce goods and offer services. Next, we\u2019ll look at the production of goods in manufacturing firms; then, we\u2019ll describe operations management activities in companies that provide services. We\u2019ll wrap up by explaining the role of operations management in such processes as quality control and outsourcing.<\/p>\r\n\r\n Like PowerSki, all manufacturers set out to perform the same basic function: to transform resources into finished goods<\/em>. To perform this function in today\u2019s business environment, manufacturers must continually strive to improve operational efficiency. They must fine-tune their production processes to focus on quality, to hold down the costs of materials and labor, and to eliminate all costs that add no value to the finished product. Making the decisions involved in the effort to attain these goals is the job of the operations manager. That person\u2019s responsibilities can be grouped in the following way:<\/p>\r\n\r\n Let\u2019s take a closer look at each of these responsibilities.<\/p>\r\n\r\n<\/div>\r\n The decisions made in the planning stage have long-range implications and are crucial to a firm\u2019s success. Before making decisions about the operations process, managers must consider the goals set by marketing managers. Does the company intend to be a low-cost producer and to compete on the basis of price? Or does it plan to focus on quality and go after the high end of the market? Perhaps it wants to build a reputation for reliability. What if it intends to offer a wide range of products? To make things even more complicated, all these decisions involve tradeoffs. Upholding a reputation for reliability isn\u2019t necessarily compatible with offering a wide range of products. Low cost doesn\u2019t normally go hand in hand with high quality.<\/p>\r\n With these factors in mind, let\u2019s look at the specific types of decisions that have to be made in the production planning process. We\u2019ve divided these decisions into those dealing with production methods, site selection, facility layout, and components and materials management.<\/p>\r\n\r\n The first step in production planning is deciding which type of production process is best for making the goods that your company intends to manufacture. In reaching this decision, you should answer questions such as the following:<\/p>\r\n\r\n One way to appreciate the nature of this decision is by comparing three basic types of processes or methods: make-to-order, mass production<\/em>, and mass customization<\/em>. The task of the operations manager is to work with other managers, particularly marketers, to select the process that best serves the needs of the company\u2019s customers.<\/p>\r\n\r\n At one time, most consumer goods, such as furniture and clothing, were made by individuals practicing various crafts. By their very nature, products were customized<\/em> to meet the needs of the buyers who ordered them. This process, which is called a make-to-order strategy<\/span>, is still commonly used by such businesses as print or sign shops that produce low-volume, high-variety goods according to customer specifications.<\/p>\r\n\r\n<\/div>\r\n By the early twentieth century, however, a new concept of producing goods had been introduced: mass production (or make-to-stock strategy)<\/span>is the practice of producing high volumes of identical goods at a cost low enough to price them for large numbers of customers. Goods are made in anticipation of future demand (based on forecasts) and kept in inventory for later sale. This approach is particularly appropriate for standardized goods ranging from processed foods to electronic appliances.<\/p>\r\n\r\n<\/div>\r\n But there\u2019s a disadvantage to mass production: customers, as one contemporary advertising slogan puts it, can\u2019t \u201chave it their way.\u201d They have to accept standardized products as they come off assembly lines. Increasingly, however, customers are looking for products that are designed to accommodate individual tastes or needs but can still be bought at reasonable prices. To meet the demands of these consumers, many companies have turned to an approach called mass customization<\/span>, which (as the term suggests) combines the advantages of customized products with those of mass production.<\/p>\r\n This approach requires that a company interact with the customer to find out exactly what the customer wants and then manufacture the good, using efficient production methods to hold down costs. One efficient method is to mass-produce a product up to a certain cutoff point and then to customize it to satisfy different customers.<\/p>\r\n The list of companies devoting at least a portion of their operations to mass customization is growing steadily. One of the best-known mass customizer is Nike, which has achieved success by allowing customers to configure their own athletic shoes, apparel, and equipment through Nike\u2019s iD program. The Web has a lot to do with the growth of mass customization. Levi\u2019s, for instance, lets a woman find a pair of perfect fitting jeans by going through an online fitting process that first identifies her \u201ccurve\u201d type: slight<\/em> (straight figure), demi<\/em> (evenly proportioned), bold<\/em> (curvy figure, which experiences waist gapping in the back), and supreme (curviest shape, which needs a higher rise in the back). Oakley offers customized sunglasses, goggles, watches, and backpacks, while Mars, Inc. can make M&M\u2019s in any color the customer wants (say, school colors) as well as add text and pictures to the candy.[footnote]See these websites for examples of customized products: Nike<\/a>, Levi<\/a>, Oakley<\/a>, and Mars\u2019s M&M\u2019s<\/a>\u00a0(accessed November 2, 2011).<\/span>[\/footnote]<\/p>\r\n Naturally, mass customization doesn\u2019t work for all types of goods. Most people don\u2019t care about customized detergents or paper products (although a customized Kleenex tissue box with your picture on it and a statement that says, \u201cgo ahead . . . cry over me!\u201d might come in handy after a relationship breakup with your significant other.[footnote]Anita Windisman, \u201cPersonalized Packaging: Kleenex Offers Customizable Tissue Boxes<\/em><\/a>,\u201d One of a Kind Publishing, Inc., January 3, 2008,\u00a0(accessed November 1, 2011).<\/span>)[\/footnote] And while many of us like the idea of customized clothes, footwear, or sunglasses from Levi\u2019s, Nike, or Oakley, we often aren\u2019t willing to pay the higher prices they command.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n After selecting the best production process, operations managers must then decide where the goods will be manufactured, how large the manufacturing facilities will be, and how those facilities will be laid out.<\/p>\r\n\r\n In choosing a location, managers must consider the following factors:<\/p>\r\n\r\n Managers rarely find locations that meet all these criteria. As a rule, they identify the most important criteria and aim at satisfying them. In deciding to locate in San Clemente, California, for instance, PowerSki was able to satisfy three important criteria: (1) proximity to the firm\u2019s suppliers, (2) availability of skilled engineers and technicians, and (3) favorable living conditions. These factors were more important than operating in a low-cost region or getting financial incentives from local government. Because PowerSki distributes its products throughout the world, proximity to customers was also unimportant.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n Now that you know where<\/em> you\u2019re going to locate, you have to decide on the quantity of products that you\u2019ll produce. You begin by forecasting<\/em> demand for your product. As you may know, forecasting isn\u2019t easy. To estimate the number of units that you\u2019re likely to sell over a given period, you have to understand the industry that you\u2019re in and estimate your likely share of the market by reviewing industry data and conducting other forms of research.<\/p>\r\n Once you\u2019ve forecasted the demand for your product, you can calculate the capacity<\/span> requirements of your production facility\u2014the maximum number of goods that it can produce over a given time under normal working conditions. In turn, having calculated your capacity requirements, you\u2019re ready to determine how much investment in plant and equipment you\u2019ll have to make, as well as the number of labor hours required for the plant to produce at capacity.<\/p>\r\n Like forecasting, capacity planning is difficult. Unfortunately, failing to balance capacity and projected demand can be seriously detrimental to your bottom line. If you set capacity too low (and so produce less than you should), you won\u2019t be able to meet demand, and you\u2019ll lose sales and customers. If you set capacity too high (and turn out more units than you should), you\u2019ll waste resources and inflate operating costs.<\/p>\r\n\r\n The product development process can be complex and lengthy. It took sixteen years for Bob Montgomery and others at his company to develop the PowerSki Jetboard, and this involved thousands of design changes. It seemed worth it: the Jetboard, an exciting, engine-propelled personal watercraft that\u2019s a cross between a high-performance surfboard and a competition water-ski\/wakeboard, received extensive media attention and earned rave reviews. It was showered with honors, including Time<\/em> magazine\u2019s \u201cBest Invention of the Year\u201d award. Stories about the Jetboard appeared in more than fifty magazines around the world, and it appeared in several movies, in over twenty-five TV shows, and on YouTube.[1]<\/sup><\/a>\u00a0One reviewer of the Jetboard exclaimed, \u201cUp, up and away. PowerSki’s the closest you’ll get to being Superman on the water. With 40 hp under your toes, the 100-pound board literally flies. You supply the cape.\u201d[2]<\/sup><\/a><\/p>\n Montgomery and his team at PowerSki enjoyed taking their well-deserved bows for the job they did designing the product. But having a product was only the beginning for the company. The next step was developing a system that would produce high-quality Jetboards at reasonable prices. Before putting this system in place, PowerSki managers had to address several questions: What kind of production process should they use to make the Jetboards? How large should their production facilities be, and where should they be located? How should the plant be laid out? Should every component be made in-house, or should some be furnished by subcontractors? Where should they buy the materials they needed to build Jetboards? What systems would they need to ensure that production was as efficient as possible and that quality standards were maintained? Answering these questions helped PowerSki set up a manufacturing system through which it could accomplish the most important task that it had set for itself: efficiently producing quality Jetboards.<\/p>\n![\"Operations](\"http:\/\/2012books.lardbucket.org\/books\/an-introduction-to-business-v2.0\/section_15\/b9eb79728da1ca4376960078646b6d78.jpg\")
Figure 1. The Transformation Process[\/caption]\r\n\r\n<\/div>\r\nOperations Management in Manufacturing<\/h2>\r\n
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Planning the Production Process<\/h3>\r\n
Production-Method Decisions<\/h3>\r\n
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Make-to-Order<\/h4>\r\n
Mass Production<\/h4>\r\n
Mass Customization<\/h4>\r\n
Facilities Decisions<\/h2>\r\n
Site Selection<\/h3>\r\n
\r\n\t
Capacity Planning<\/h3>\r\n
KEY TAKEAWAYS<\/h3>\r\n
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Check Your Understanding<\/h2>\r\nAnswer the question(s) below to see how well you understand the topics covered in this section. This short quiz does not<\/strong> count toward your grade in the class, and you can retake it an unlimited number of times.\r\n\r\nUse this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.\r\n\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/216","rendered":"
The Challenge: Producing Quality Jetboards<\/h2>\n