Ch 1 Operations and Productivity

1
Operations and Productivity
PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl

What Is Operations Management?

Production is the creation of goods and services
Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs

Feedback loop

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Goods andservices
Transformation
The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is the result of a mix of capital (38% of 2.5%), labor (10% of 2.5%), and management (52% of 2.5%).
The Economic System
Inputs
Labor,capital,management
Figure 1.6


Organizing to Produce Goods and Services
Essential functions:Marketing – generates demandProduction/operations – creates the productFinance/accounting – tracks how well the organization is doing, pays bills, collects the money

Why Study OM?

OM is one of three major functions of any organization, we want to study how people organize themselves for productive enterprise
We want (and need) to know how goods and services are produced We want to understand what operations managers do OM is such a costly part of an organization

What Operations Managers Do

Planning Organizing Staffing Leading Controlling
Basic Management Functions

The Critical Decisions

Design of goods and services Managing quality Process and capacity design Location strategy Layout strategy Human resources and job design Supply-chain management Inventory, MRP (Material Requirements planning) and JIT (Just In Time) Intermediate and short-term scheduling Maintenance

The Critical Decisions

Design of goods and services What good or service should we offer? How should we design these products and services? Managing quality How do we define quality? Who is responsible for quality?
Table 1.2 (cont.)

The Critical Decisions

Process and capacity design What process and what capacity will these products require? What equipment and technology is necessary for these processes? Location strategy Where should we put the facility? On what criteria should we base the location decision?
Table 1.2 (cont.)


The Critical Decisions
Layout strategy How should we arrange the facility? How large must the facility be to meet our plan? Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce?
Table 1.2 (cont.)

The Critical Decisions

Supply-chain management Should we make or buy this component? Who should be our suppliers and how can we integrate them into our strategy? Inventory, material requirements planning, and JIT How much inventory of each item should we have? When do we re-order?
Table 1.2 (cont.)

The Critical Decisions

Intermediate and short–term schedulingAre we better off keeping people on the payroll during slowdowns?Which jobs do we perform next?MaintenanceHow do we build reliability into our processes?Who is responsible for maintenance? Table 1.2 (cont.)

Differences Between Goods and Services

Characteristics of Goods
Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction

Characteristics of Service

Intangible product Inconsistent product definition Produced and consumed at same time High customer interaction Often unique Often knowledge-based Frequently dispersed


Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/ investment management
Consulting service/ teaching
Counseling
Percent of Product that is a Good Percent of Product that is a Service
100% 75 50 25 0 25 50 75 100% | | | | | | | | |

New Trends in OM

Ethics Global focus Rapid product development Environmentally sensitive production Mass customization Empowered employees Supply-chain partnering Just-in-time performance

Productivity Challenge

Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)
The objective is to improve productivity!
Important Note! Production is a measure of output only and not a measure of efficiency
Efficiency means doing the job well : with a minimum resources and waste



Measure of process improvement Represents output relative to input Only through productivity increases can our standard of living improve
Productivity
Productivity =
Units produced Input used

How productivity increase?

Productivity Calculations
Productivity =
Units produced Labor-hours used
= = 4 units/labor-hour
1,000 250
Labor Productivity
One resource input  single-factor productivity

Multi-Factor Productivity

Output Labor + Material + Energy + Capital + Miscellaneous
Productivity =
Also known as total factor productivity Output and inputs are often expressed in dollars
Multiple resource inputs  multi-factor productivity


Measurement Problems
Quality may change while the quantity of inputs and outputs remains constant
External elements may cause an increase or decrease in productivity

Productivity Variables

Labor - contributes about 10% of the annual increase
Capital - contributes about 38% of the annual increase
Management - contributes about 52% of the annual increase

Key Variables for Improved Labor Productivity

Basic education appropriate for the labor force Diet of the labor force Social overhead that makes labor available
Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge

Service productivity

Labor intensive Focused on individual attributes or desires Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality

Ethics andSocial Responsibility

Challenges facing operations managers:
Developing and producing safe, quality products Maintaining a clean environment Providing a safe workplace Honoring stakeholder commitments