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To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition 2004 Prentice Hall, Inc. All rights reserved.

Chapter 1Chapter 1

Operations as aOperations as a

Competitive WeaponCompetitive Weapon

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Process View of an Ad AgencyProcess View of an Ad Agency

Figure 1.1Figure 1.1

Accounting process

Production process Prepare ad for publication

and deliver to media outlets

Advertisement design

and planning process Create the ad to the

needs of the client andprepare a plan formedia exposure

Client interface process

Communicate with client,get needs, andcoordinate progress

Inputs

Clients

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Nested ProcessesNested Processes


Advertisement Design and Planning Process

Creative design process Receive work request Create team Prepare several designs Receive inputs from

Account Executive Prepare final concept

Revise concept perclients inputs

Media planning process Receive work request Prepare several media

plans Receive inputs from

Account Executive Prepare final plan

Revise plan per clientsinputs

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Internal Value-Chain LinkagesInternal Value-Chain LinkagesShowing Work and Information FlowsShowing Work and Information Flows


Externa

lsuppliers

E

xterna

lcustom

ers

Support processes

Supplier

relationship

process

Order

fulfillment

process

New service/

product

development

process

Customer

relationship

process

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Support ProcessesSupport Processes

Capital Acquisition The provision of financial resources for the organization to do its work and toexecute its strategy

Budgeting The process of deciding how funds will be allocated over a period of time

Recruitment and Hiring The acquisition of people to do the work of the organization

Evaluation andCompensation

The assessment and payment of the people for the work and value theyprovide to the company

Human ResourceSupport andDevelopment

The preparation of the people for their current jobs and future skill andknowledge needs

Regulatory Compliance The process that insure the company if meeting all laws and legal obligations

Information Systems The movement and processing of data and information to expedite businessoperations and decisions

Enterprise andFunctional Management

The systems and activities that provide strategic direction and ensureeffective execution of the work of the business

Table 1.1 Examples of Support ProcessesTable 1.1 Examples of Support Processes

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Types of OM DecisionsTypes of OM Decisions

Strategic choicesStrategic choices New ProcessesNew Processes QualityQuality Value ChainsValue Chains

Operating DecisionsOperating Decisions ProcessProcess

ManagementManagement Project ManagementProject Management InventoryInventory SchedulingScheduling

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7/20To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition 2004 Prentice Hall, Inc. All rights reserved.

Operations ManagementOperations Management

as a Functionas a Function


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ProductivityProductivity

Productivity =

Output

Input

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Labor productivity = Policies processedEmployee hours

Example 1.1aExample 1.1a

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Labor productivity = 600 policies(3 employees)(40 hours/employee)


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Labor productivity = 5 policies/hour


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Multifactor productivity =

Quantity at standard costLabor cost + Materials cost + Overhead cost

Example 1.1bExample 1.1b

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Multifactor productivity =

(400 units)($10/unit) $4000$400 + $1000 + $300 $1700

= = 2.35

Example 1.1bExample 1.1b

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Productivity MeasuresProductivity Measures

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Figure 1.5aFigure 1.5a

OM ExplorerOM Explorer

Tutor 1.1Productivity Measures

The state ferry service charges $18 per ticket plus a $3 surcharge to fund planned

equipment upgrades. It expects to sell 4,700 tickets during the eight-week summerseason. During that period, the ferry service will experience $110,000 in laborcosts. Materials required for each passage sold (tickets, a tourist-informationsheet, and the like) cost $1.30. Overhead during the period comes to $79,000.

a. What is the multifactorproductivity ratio?

b. If ferry-support staff work an average of 310 person-hours per week for the 8weeks of the summer season, what is the laborproductivity ratio? Calculate laborproductivity on an hourly basis.

Click here to continue.Click here to continue.

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Tutor 1.1Productivity MeasuresEnter data in yellow areas. Use Tab to advance from one input cell to the next.

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

Step 1. Enter the number of tickets sold during a season, the price per ticket, and thesurcharge per ticket. To compute value of output, multiply tickets sold by the sum of priceand surcharge.

Tickets sold: 4,700 Value of output:Price: $18Surcharge: $3

Step 2. Enter labor costs, materials costs per passenger, and overhead cost. For value ofinput, add together labor costs, materials costs times number of passengers, and overheadcosts.

Labor costs: $110,000 Materials costs: $1.30 Overhead: $79,000

Value of input:

Step 3. To calculate multifactor productivity, divide value of output by value of input.

Multifactor productivity:

Figure 1.5bFigure 1.5b

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Tutor 1.1Productivity MeasuresEnter data in yellow areas. Use Tab to advance from one input cell to the next.

b. Labor productivity is the ratio of the value of output to labor hours The value of output iscomputed in part a, step 1.

Step 1. Enter person-hours per week and the number of weeks in the season; multiply the twotogether to calculate labor hours of input.

Hours per week: 310 Weeks: 8

Labor hours of input:

Step 2. To calculate labor productivity, divide value of output by labor hours of input.

Labor productivity:

Click here to view the Results sheet.Click here to view the Results sheet.


Figure 1.5bFigure 1.5b

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Tutor 1.1Productivity MeasuresPlace cell pointer on green shaded areas to examine formulas.

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

Step 1. Enter the number of tickets sold during a season, the price per ticket, and thesurcharge per ticket. To compute value of output, multiply tickets sold by the sum of priceand surcharge.

Tickets sold: 4,700 Value of output: $98,700Price: $18Surcharge: $3

Step 2. Enter labor costs, materials costs per passenger, and overhead cost. For value ofinput, add together labor costs, materials costs times number of passengers, and overheadcosts.

Labor costs: $110,000 Materials costs: $1.30 Overhead: $79,000

Value of input:$195,110

Step 3. To calculate multifactor productivity, divide value of output by value of input.

Multifactor productivity: 0.51

Figure 1.5cFigure 1.5c

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Tutor 1.1Productivity MeasuresPlace cell pointer on green shaded areas to examine formulas.

b. Labor productivity is the ratio of the value of output to labor hours The value of output iscomputed in part a, step 1.

Step 1. Enter person-hours per week and the number of weeks in the season; multiply the twotogether to calculate labor hours of input.

Hours per week: 310 Weeks: 8

Labor hours of input: 2,480

Step 2. To calculate labor productivity, divide value of output by labor hours of input.

Labor productivity: $39.80


Figure 1.5cFigure 1.5c

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Operations RoadmapOperations Roadmap


Competing with Operations

Operations As aCompetitive Weapon

1

Operations Strategy

2

Process Design Strategy3

Designing Value Chains

Supply ChainDesign

9

Lean Systems11

Location10

Designing andImproving Processes

Process Analysis4

ProcessPerformance and

Quality5

ProcessCapability6

ProcessLayout7

Planning andManaging Projects

8

Operating Value Chains

Information Technologyand Value Chains

12

Forecasting13

InventoryManagement

15

ResourcePlanning

16

Scheduling17

Aggregate Planning14

Outcomes

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