1 – 1 course name: operations management course code: mgt 411 reference books: operations...

1 – 1

Course Name: Operations Management

Course code: MGT 411

Reference books: 1. Operations Management, bOperations Management, by y

Krajewski/Ritzman/Malhotra Krajewski/Ritzman/Malhotra 2. Production and Operations Management by2. Production and Operations Management by

S.Anil kumar and S. SureshS.Anil kumar and S. Suresh

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

1 – 2Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

CCOMPETINGOMPETING WITHWITH OOPERATIONSPERATIONS

For For Operations Management, bOperations Management, by y Krajewski/Ritzman/Malhotra Krajewski/Ritzman/Malhotra © 2010 Pearson Education© 2010 Pearson Education


Operations ManagementOperations Management

According to Krajewski / Ritzman / Malhotra:According to Krajewski / Ritzman / Malhotra:

Operations Management the direction and control of the process that transform inputs into products and services.

The systematic design, direction, and control of processes that transform inputs into services and products for internals, as well as external, customers

Processes can be linked together to form a supply chain – interrelated processes within a firms and across different firms that produce a service or product to the satisfaction of the customers

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According to S. Anil Kumar and N. Suresh:

Operations management is the process, which combines and transforms various resources used in the operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization.

Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level.


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Process:

Any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides one or more outputs for its customers.



Across the OrganizationAcross the Organization

Material & Service Inputs

Sales Revenue

Product & Service Outputs

Finance

Acquires financial resources and capital

for inputs

Marketing

Generates sales of outputs

Operations

Translates materials and service into

outputs

Support Functions

• Accounting• Information Systems• Human Resources• Engineering

Figure 1.1


A Process ViewA Process View

External environment

Information on performance

Internal and external customers

Processes and operations

1

2

3

4

5

Inputs• Workers• Managers• Equipment• Facilities• Materials• Land• Energy

Outputs• Goods• Services

Figure 1.2


A Process ViewA Process View

• Physical, durable output• Output can be inventoried• Low customer contact• Long response time• Capital intensive• Quality easily measured

• Intangible, perishable output• Output cannot be inventoried• High customer contact• Short response time• Labor intensive• Quality not easily measured

More like a manufacturing

process

More like a service process

Figure 1.3

Continuum of characteristics of manufacturing and service organizations


The Supply Chain ViewThe Supply Chain View

Support Processes

Ext

ern

al s

up

pli

ers

Exte

rnal cu

stom

ers

Supplier relationship process

New service/ product development

Order fulfillment process

Customer relationship management

Figure 1.4


The Supply Chain ViewThe Supply Chain View

Core processes are sets of activities that deliver value to external customers

1. Supplier relationship process

2. New service/product development process

3. Order fulfillment process

4. Customer relationship process

Support processes provide vital resources and inputs to the core processes

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Job shops productionJob shops production


Job shops are typically small manufacturing systems that handle job production, that is, custom/bespoke or semi-custom/bespoke manufacturing processes such as small to medium-size customer orders or batch jobs

-A typical example would be a machine shop, which may make parts for local industrial machinery, farm machinery and implements, boats and ships, or even batches of specialized components for the aircraft industry. continuous flow manufactures such as textile, steel, food manufacturing and manual labor.

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Batch productionBatch production


Batch production occurs when many similar items are produced together. Each batch goes through one stage of the production process before moving onto next stage. Good examples include:

Cricket bat manufactureBaking / meal preparationClothing production


Some common continuous processes are the following:•Oil refining•Chemicals•Synthetic fibers•Fertilizers•Pulp and paper•Blast furnace (iron)•Metal smelting•Power stations•Natural gas processing•Sanitary waste water treatment•Continuous casting of steel•Rotary kilns for calcining lime or cement•Float glass

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Scope of operations managementScope of operations management


1.Product design: product design and development provides link between marketing, customer needs and expectations and the activities required to manufacture the product.2.Process design: an overall process route for converting the raw materials in finished goods.3.Production planning and control: the process of planning the production in advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to give production orders and follow up the progress of products according to orders.


4.Planning: Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.

5.Routing ( direction-finding): selection of path which each part of the product will follow, which being transformed from raw materials to finished products.

6.Scheduling: the fixation of time and date for each operation.7.Dispatching: release of orders and instruction for the starting of

production for any item in acceptance with the route sheet and schedule charts.

8.Quality control: a system that is used to maintain a desired level of quality in a product or service.

9.Materials management: 10.Maintenance management


Productivity ImprovementProductivity Improvement

EXAMPLE 1.1

Calculate the productivity for the following operations:

a. Three employees process 600 insurance policies in a week. They work 8 hours per day, 5 days per week.

SOLUTION

a. Labor productivity = Policies processed

Employee hours

= = 5 policies/hour600 policies

(3 employees)(40 hours/employee)


Productivity ImprovementProductivity Improvement

EXAMPLE 1.1

Calculate the productivity for the following operations:

b. A team of workers makes 400 units of a product, which is sold in the market for $10 each. The accounting department reports that for this job the actual costs are $400 for labor, $1,000 for materials, and $300 for overhead.

SOLUTION

a. Multifactor productivity = Value of output

Labor cost + Materials cost + Overhead cost

= = = 2.35(400 units)($10/unit)$400 + $1,000 + $300

$4,000$1,700


ApplicationApplication

Calculate the year-to-date labor productivity:

Calculate the multifactor productivity:

This Year Last Year Year Before Last

Factory unit sales ($) 2,762,103 2,475,738 2,175,447

Employment (hrs) 112,000 113,000 115,00

Sales of manufactured products ($)

$49,363 $40,831 —

Total manufacturing cost of sales ($)

$39,000 $33,000 —

factory unit sales

employment

This Year

2,762,103= 24.66/hr

112,000

Last Year

2,475,738 =

21.91/hr113,000

Year Before Last

2,175,447= $18.91/hr

115,000

sales of mfg products

total mfg cost

This Year

$49,363= 1.27

$39,000

Last Year

$40,831= 1.24

$33,000


Solved Problem 1Solved Problem 1

Student tuition at Boehring University is $150 per semester credit hour. The state supplements school revenue by $100 per semester credit hour. Average class size for a typical 3-credit course is 50 students. Labor costs are $4,000 per class, material costs are $20 per student per class, and overhead costs are $25,000 per class.

a. What is the multifactor productivity ratio for this course process?

b. If instructors work an average of 14 hours per week for 16 weeks for each 3-credit class of 50 students, what is the labor productivity ratio?



SOLUTION

a. Multifactor productivity is the ratio of the value of output to the value of input resources.

Value of output =50 student

class

$150 tuition +$100 state support

credit hour3 credit hours

student

Value of inputs = Labor + Materials + Overhead

Multifactor productivity = = = 1.25$37,500/class

$30,000/class

Output

Input

= $37,500/class

= $4,000 + ($20/student 50 students/class) + $25,000

= $30,000/class



SOLUTION

b. Labor productivity is the ratio of the value of output to labor hours. The value of output is the same as in part (a), or $45,000, so

Labor hours of input =14 hours

week16 weeks

class

Labor productivity = = $45,000/class

224 hours/class

Output

Input

= 224 hours/class

= $200.89/hour



Natalie Attire makes fashionable garments. During a particular week employees worked 360 hours to produce a batch of 132 garments, of which 52 were “seconds” (meaning that they were flawed(defective)). Seconds are sold for $90 each at Attire’s Factory Outlet Store. The remaining 80 garments are sold to retail distribution at $200 each. What is the labor productivity ratio of this manufacturing process?



SOLUTION

Labor productivity = = $20,680

360 hours

Output

Input

Labor hours of input = 360 hours

Value of output = (52 defective 90/defective) + (80 garments 200/garment)

= $20,680

= $57.44 in sales per hour

1 – 1 course name: operations management course code: mgt 411 reference books: operations...

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