How does scheduling shape the production process? When it comes to production, scheduling refers to the efficient organization of equipment, facilities, labor, and materials. There are two different types of scheduling: forward and backward. With forward scheduling, you start with the date that materials are available, create the most efficient production schedule, and then determine a shipping date based on that schedule. Backward scheduling is the opposite: you are given a shipping or due date, and you determine the start date and the most efficient production schedule based on when everything must be finished.

What tools are available to help with scheduling? Two major components go into making an effective schedule: loading and sequencing. Loading is assigning a job to a specific machine or an entire work center. Sequencing is assigning the order in which jobs are processed. Software systems are used to put together a cohesive schedule of loading and sequencing to ensure that all the right tools are working on the right jobs at the right times. But no matter how complex the system, all configurations are just estimates based on the data input into the system and the rules it uses. Having a person oversee scheduling is still invaluable because he or she can bring experience and judgment that cannot be programmed into a computer.

How are the individual tasks of a process tracked? One way to keep tabs on the progress of a given project is a Gantt chart, a tool developed by Henry Gantt in the 1920s. A Gantt chart looks similar to a horizontal bar graph. It depicts each project task in a separate bar, in the order in which each task must be completed, and marking the length of each task.

Figure 11.2 shows an example of a Gantt chart for a remodeling project. Originally used for large-scale construction projects, such as building the Hoover Dam in the 1930s, Gantt charts are used to manage a variety of both large-scale and small-scale projects. At any point in the process, project managers and manufacturers can see at a glance which tasks have been completed, which tasks are in the process of being completed, and which tasks have yet to begin. In addition, a Gantt chart helps to identify which tasks were completed on schedule and which are lagging behind.

Figure 11.2

Sample Gantt Chart

What is a PERT chart? The program evaluation and review technique (PERT) maps out the steps involved in a project, differentiating tasks that must be completed in a certain order from tasks that may be completed simultaneously. A PERT chart is like a flowchart (see Figure 11.3) and to a greater extent emphasizes the relationships between tasks rather than the time line of the tasks.

Figure 11.3

Sample PERT Chart

A PERT chart identifies the critical path, or the path of sequential tasks that will take the most time to complete. This helps managers determine an overall time line for completing a project or, from a manufacturing standpoint, producing a particular good or service. However, because delays can cause the critical path in a project to change, PERT charts are limited in their ability to predict project completion times.

How are materials used in the production process acquired? Purchasing is the task of acquiring the materials and services needed in the production process. Production managers need to find reliable suppliers who can provide high-quality resources at the best price. The Internet has made purchasing a much more competitive process. Just like you might use the Internet to search for the best price before buying a particular product, purchasing managers can compare prices and services between suppliers online before embarking in a service agreement.

How does a company maintain inventory control? Inventory control includes receiving, storing, handling, and tracking everything in a company’s stock. There are four main types of stock: raw materials, unfinished products, finished products, and consumables (such as pens and paper). Inventory often is a business’s largest expense. Therefore, maintaining records on each type of stock ensures that all necessary materials are on hand and are easily located. Proper inventory management also helps a company manage products with specific shelf lives that could deteriorate as well as products that have become obsolete. Good inventory management also helps prevent the pilferage (theft) of inventory.

What methods are used to manage inventory? Inventory can be managed in a number of different ways. No single method works best for every business, and sometimes multiple methods are used to manage different types of inventory. Factors such as the size of a business, the amount of inventory it needs, and its proximity to suppliers, as well as the amount of storage space available for the inventory, and its perishability will all affect which inventory control method will work best.

• The least complicated way to manage inventory is to simply visually assess it. When the supply is low, it is time to reorder. This method works well for companies that do not maintain large amounts of stock.

• When an accurate count is necessary, a stock book solution may be the best method. The stock on hand is accounted for along with the stock that has been ordered and the stock that has been sold.

• A less complicated management system is a reserve stock system. With this method, a certain amount of stock is set aside in reserve so that it cannot be used. The company goes through its inventory as it regularly would, and when it has to dip into the reserve stock, it knows it is time to reorder that item. It is important for managers to keep in mind when using this system that the amount of reserve should be enough to last the length of time it takes to resupply it.

• The just-in-time (JIT) inventory management enables a firm to maintain the smallest amount of inventory possible, with inventory being ordered as it is actually needed. With JIT, rarely is inventory sitting around without a specific purpose. Dell Computers made its mark in the PC manufacturing industry by embracing JIT inventory control. Because the company adopted a build-to-order system, the huge expense of holding potentially obsolete inventory components that may not be used and subsequently become obsolete and useless was reduced. Over a four-year period after adopting this system, Dell’s revenues grew from $2 billion to $16 billion.12 Storing fewer items for shorter periods of time can also reduce a firm’s storage costs. JIT systems are not without their drawbacks. To work properly, a company must have a very good relationship with its suppliers to ensure that appropriate quantities of the right goods are delivered to where they are needed and arrive on time.

How is technology used to streamline the control of inventory? Many organizations rely on computerized inventory systems that use bar codes or radio frequency identification (RFID) tags attached to products. Both bar codes and RFID tags store all the specific information for each item, such as its cost, stock number, and storage location. The tags are electronically scanned as the items come in and out of a firm’s or supplier’s facilities. Using these systems, inventory items are scanned when they are used or sold, and the computer continuously updates the information for each item as the quantities change. Computerized inventory makes it easier to analyze the quantitative factors of managing stock, such as how quickly each item is sold, how much really needs to be held in inventory at one time, and how often inventory is restocked.

What is materials requirement planning? More appropriate to the production side of inventory management is materials requirement planning (MRP), a computer-based program used for inventory control and production planning. When an order is made, the specifics of that order are input into the MRP system. It uses previous manufacturing data to break the job into components, then the MRP system determines which parts will be needed to complete the job and compares these findings to current inventory. Based on this information, the MRP highlights what parts need to be produced or obtained through a supplier, as well as when the parts will be needed. Knowing these estimates helps determine if a firm has a shortage of the parts and labor needed for a project before it even starts.

There are many limitations to MRP, the biggest being that it is only as effective as its data. So if the data are not well maintained, the estimates will become increasingly useless. Another limitation to MRP is its scope: It focuses only on the management of needed component parts in the manufacturing processes of a company and not in any other business areas.

What is enterprise resource planning? One way around the limitations of MRP is to use enterprise resource planning (ERP). Like MRP systems, ERP systems are used to monitor a firm’s inventory and process schedules but can integrate these functions with other aspects of the business, such as finance, marketing, and human resources. A typical ERP system consolidates information into a central database, and different types of information are accessible to different types of functional areas. Information can be shared across departments, which can streamline work flows and improve the productivity of employees. Various departments can work together without worrying if their software is compatible. Oracle, SAP, and Microsoft are companies that offer ERP systems.

Has quality control always been part of the operations control process? The techniques, activities, and processes used to guarantee products meet specified levels of quality is referred to as quality control. In the past, most firms had separate quality control departments that would inspect and test products for flaws at the end of the manufacturing process. But inspecting at the end of the process creates several problems. For one, it is expensive. Because inspection is performed by outside people instead of by the workers making the product, each inspector can pass or fail a product using his or her own standards and procedures. This can introduce extra costs and inefficiencies. Moreover, defective products have to be scrapped or completely reworked, adding more costs and waste to the process.

What methods are being used to improve quality? Merely controlling for quality by monitoring employees and inspecting products after they are finished is like a doctor treating the symptoms of an illness as opposed to remedying it. So, since the 1980s, firms have been focusing on building quality into every step of the production process instead of scrapping products or fixing them after they are produced. Building “total quality” into a product at every stage of production was fully embraced by U.S. companies after Japanese manufacturers had done so and strengthened their presence in the global market.13 The market for cars is an example. Japanese models gained a reputation for quality that American car manufacturers were finding hard to compete with. The Japanese produced exports not only at higher levels of quality but also at lower prices. In response, and to remain competitive, companies in the United States began to demand that everyone involved in the production process, including managers, customers, employees, and suppliers, adopt a total quality management (TQM) approach.

How is TQM carried out? TQM involves making ongoing improvements to products, services, and processes by identifying the fundamental sources of problems and provide lasting solutions. This can be accomplished by undertaking a plan-do-check-act (PDCA) cycle, created by American statistician W. Edwards Deming (see Figure 11.4). After identifying the problem(s) in the system, organizations formulate a plan using the PDCA cycle to reduce the identified errors, carry out the plan on a small scale, check the outcome and effectiveness of the change, and then implement the plan on a larger scale while monitoring the results continually.

Figure 11.4

Plan-Do-Check-Act

What is needed to implement TQM? Statistical quality control (SQC) describes the set of statistical tools used to analyze each stage of the production process to ensure that quality standards are being met. Statistical process control (SPC) is one of the tools used with SQC. With SPC, random samples of products are checked at each phase of production to see if there are any variations that need to be corrected. If there is, this signals to managers that something is wrong with that phase of the production process and must be corrected.

How does TQM cater to the customer? It is not enough to simply implement quality management tools. A significant aspect of TQM is catering to customers’ needs and desires. SGL Carbon, a manufacturer of graphite specialties, adheres to a TQM approach by giving its customers the final say in determining whether a product meets their requirements of high-quality standards. Although firms may define in the beginning what makes products high quality or low quality, those companies that learn how to simultaneously emphasize quality throughout the production process and incorporate the desires of customers will be more competitive in the global marketplace.

Is there another quality control method? TQM is based on a strategic approach that strives to maintain quality while making incremental improvements. Another quality control method is Six Sigma, a method that seeks to virtually eliminate defects by implementing a quality focus in every aspect of the organization. Although similar to TQM in many aspects, Six Sigma strives for continuous improvement for achieving near perfection. TQM often reaches a stage where no further quality improvements can be made. Six Sigma differs as it continuously looks for quality improvements. Employees are trained in the Six Sigma methodologies and are responsible for implementing any necessary changes in the production process to ensure that total quality is met. A company with Six Sigma quality produces at a low defect rate of just 3.4 defects per 1 million opportunities. Motorola managed to achieve Six Sigma quality in 1992 after adopting continuous quality improvement methods in the 1980s.14 Other large corporations, such as GE and Honeywell, followed suit.

Are there global quality standards? The International Organization for Standardization (ISO) is an organization dedicated to creating worldwide standards of quality for goods and services. The ISO was created in 1947 and is headquartered in Geneva, Switzerland. As barriers to free trade between markets began to be removed among the European countries especially, ISO standards enabled markets and companies to trade with each other and be assured that all goods and services meet a consistent set of quality standards. Because each country has its own set of standards, companies adopting ISO standards ensures that there will be consistency across borders. The organization has published more than 19,500 standards, and more than 1,000 new standards are published every year. ISO’s objective is to develop production processes that are equal in quality and capability in all participating countries. More than 161 countries have adopted these standards, and thousands of companies require their products to be ISO certified. Some industries have even developed their own industry-specific set of ISO standards.15

The ISO standards apply not to the products themselves but to the production methods and systems used to manufacture them, as well as to other areas, such as communication within the company and leadership. Most of the ISO standards are product or industry specific, but there are two “generic” standards that can be applied to any organization regardless of size, product/service, sector, or type of business enterprise. These standards are ISO 9001 and ISO 14001. ISO 9001 implements a quality management system, and ISO 14001 implements an environmental management system.

What is the ISO certification process? Certification is usually done by a third-party registrar who conducts an assessment of a company’s quality assurance manuals and practices. First, a preliminary assessment is conducted during which the registrar reviews the documents that outline a company’s standards and processes. If the manual and other printed documents pass the review, a company can proceed with the rest of the assessment. If the registrar finds errors in these documents, further review is delayed until the mistakes are corrected. During the formal assessment, the registrar reviews the corrected documents and interviews employees and administrators in the company. The goal of this part of the assessment is to ensure that written policies and procedures are being implemented in the company’s production methods. Finally, the registrar issues an audit report that summarizes the results of the assessment and lists any areas that need improvement. If corrections are required at this stage, the company can make them and document them in a report to the registrar. After satisfactory corrections have been made, the registrar can then award certification to the company. Once it has earned certification, the company can put the ISO seal on its promotional materials and its letterhead.

After certification, the registrar returns to the company twice a year to make sure the company is still in compliance with ISO standards. These spot checks are conducted without advance warning, and the registrar focuses on areas that were notably weak during the initial assessment. Every three years, the registrar will complete another assessment and issue a new audit report. The company must also establish an internal auditing program that is responsible for keeping ISO standards in practice.

What are the benefits of ISO certification? Companies that have successfully achieved ISO certification have indicated significant benefits, including improved customer satisfaction and international recognition. More tangible benefits include increased efficiency, procedural consistency, and a factual approach to decision making, all of which are a result of the guidelines and training that need to be established to obtain certification. Companies with ISO certification also enjoy marketing advantages because they can publicize that their company has reached this quality standard to attract new and maintain existing customers. As a result, companies have reported increased revenue due to improved financial performance, increased productivity, and a boost in customer satisfaction. After implementing ISO 14001 environmental standards, Ford Motor Company reduced its water consumption by nearly 1 million gallons per day and saved more than $65,000 in electricity costs by no longer using fluorescent light bulbs. The company also began to recycle paint waste, thus reducing disposed paint sludge, and began to use reusable plastic or metal containers instead of cardboard and plywood boxes.16