week 1
DESCRIPTION
operational managmentTRANSCRIPT
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Operations and Productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
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Define operations managementExplain the distinction between goods and servicesExplain the difference between production and productivityCompute single-factor productivityCompute multifactor productivityIdentify the critical variables in enhancing productivity
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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
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Essential functions:
Marketing generates demand
Production/operations creates the product
Finance/accounting tracks how well the organization is doing, pays bills, collects the money
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Commercial Bank
2011 Pearson Education, Inc. publishing as Prentice Hall
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Airline
2011 Pearson Education, Inc. publishing as Prentice Hall
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Manufacturing
2011 Pearson Education, Inc. publishing as Prentice Hall
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OM is one of three major functions of any organizationWe want (and need) to know how goods and services are producedWe want to understand what operations managers doOM is such a costly part of an organization
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Planning
Organizing
Staffing
Leading
Controlling
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Design of goods and servicesManaging qualityProcess and capacity designLocation strategyLayout strategyHuman resources and job designSupply-chain managementInventory, material requirements planning, and JITIntermediate and shortterm schedulingMaintenance
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GoodsservicesTangible productProduction usually separate from consumptionLow customer interactionCan be inventoriedHigh in search characteristics
Intangible productProduced & consumed at the same timeOften uniqueHigh customer interactionFrequently dispersedperishableHigh in experience characteristics
2011 Pearson Education, Inc. publishing as Prentice Hall
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2011 Pearson Education, Inc. publishing as Prentice Hall
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2011 Pearson Education, Inc. publishing as Prentice Hall
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Service SectorExample% of all JobsEducation, Legal, Medical, otherSan Diego Zoo, Arnold Palmer Hospital25.8Trade (retail, wholesale)Walgreens, Wal-Mart, Nordstroms14.9Utilities, TransportationPacific Gas & Electric, American Airlines5.2Professional and Business ServicesSnelling and Snelling, Waste Management, Inc.10.7
2011 Pearson Education, Inc. publishing as Prentice Hall
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Service SectorExample% of all JobsFinance, Information, Real EstateCiticorp, American Express, Prudential, Aetna9.6Food, Lodging, EntertainmentOlive Garden, Motel 6, Walt Disney8.5Public AdministrationU.S., State of Alabama, Cook County4.6
Total78.8
2011 Pearson Education, Inc. publishing as Prentice Hall
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Other SectorsExample% of all JobsManufacturing SectorGeneral Electric, Ford, U.S. Steel, Intel11.2Construction SectorBechtel, McDermott8.1Agriculture SectorKing Ranch1.4Mining SectorHomestake Mining0.5Total21.2
2011 Pearson Education, Inc. publishing as Prentice Hall
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Traditional ApproachReasons for ChangeCurrent ChallengeEthics and regulations not at the forefrontPublic concern over pollution, corruption, child labor, etc.High ethical and social responsibility; increased legal and professional standardsLocal or national focusGrowth of reliable, low cost communication and transportationGlobal focus, international collaborationLengthy product developmentShorter life cycles; growth of global communication; CAD, InternetRapid product development; design collaboration
2011 Pearson Education, Inc. publishing as Prentice Hall
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Traditional ApproachReasons for ChangeCurrent ChallengeLow cost production, with little concern for environment; free resources (air, water) ignoredPublic sensitivity to environment; ISO 14000 standard; increasing disposal costsEnvironmentally sensitive production; green manufacturing; sustainabilityLow-cost standardized productsRise of consumerism; increased affluence; individualismMass customization
2011 Pearson Education, Inc. publishing as Prentice Hall
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Traditional ApproachReasons for ChangeCurrent ChallengeEmphasis on specialized, often manual tasksRecognition of the employee's total contribution; knowledge societyEmpowered employees; enriched jobsIn-house production; low-bid purchasingRapid technological change; increasing competitive forcesSupply-chain partnering; joint ventures, alliancesLarge lot productionShorter product life cycles; increasing need to reduce inventoryJust-In-Time performance; lean; continuous improvement
2011 Pearson Education, Inc. publishing as Prentice Hall
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Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labour and capital)The objective is to improve productivity!Important Note!Production is a measure of output only and not a measure of efficiency
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2011 Pearson Education, Inc. publishing as Prentice Hall
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A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25Saved 8 seconds per transactionChange the size of the ice scoopSaved 14 seconds per drinkNew espresso machinesSaved 12 seconds per shot
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One resource input single-factor productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
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Also known as total factor productivityMultiple resource inputs multi-factor productivity
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Collins title wants to evaluate its labor and multifactor productivity with a new computerized title search system. The company has a staff of 4, each working 8 hours per day ( for a payroll cost of $640/day) and overhead expenses of $400 per day. Collins processes and closes on 8 titles each day. The new system will allow the processing of 14 tiles per day. Although the staff, their work hours, and pay are the same, the overhead expenses are now $800 per day.
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2011 Pearson Education, Inc. publishing as Prentice Hall
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2011 Pearson Education, Inc. publishing as Prentice Hall
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= .25 titles/labor-hr
2011 Pearson Education, Inc. publishing as Prentice Hall
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2011 Pearson Education, Inc. publishing as Prentice Hall
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2011 Pearson Education, Inc. publishing as Prentice Hall
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2011 Pearson Education, Inc. publishing as Prentice Hall
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= .0077 titles/dollar
2011 Pearson Education, Inc. publishing as Prentice Hall
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= .0077 titles/dollar= .0097 titles/dollar
2011 Pearson Education, Inc. publishing as Prentice Hall
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Quality may change while the quantity of inputs and outputs remains constantExternal elements may cause an increase or decrease in productivityPrecise units of measure may be lacking
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Labor - contributes about 10% of the annual increaseCapital - contributes about 38% of the annual increaseManagement - contributes about 52% of the annual increase
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Basic education appropriate for the labor forceDiet of the labor forceSocial overhead that makes labor availableChallenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
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About half of the 17-year-olds in the U.S. cannot correctly answer questions of this type
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Typically labor intensiveFrequently focused on unique individual attributes or desiresOften an intellectual task performed by professionalsOften difficult to mechanizeOften difficult to evaluate for quality
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Improvements:Revised the menu Designed meals for easy preparationShifted some preparation to suppliersEfficient layout and automationTraining and employee empowermentNew water and energy saving grills
2011 Pearson Education, Inc. publishing as Prentice Hall
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Challenges facing operations managers:Developing and producing safe, quality productsMaintaining a clean environmentProviding a safe workplaceHonouring stakeholder commitments
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