1. education

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Introduction to Operations
Management
Heizer and Render
Operations Management, 10E, Global Edition
Principles of Operations Management, 10e, Global Edition
1-1
Outline
 What Is Operations Management?
 Organizing to Produce Goods and Services
 Why Study OM?
 What are the operation managers Doing?
 The Differences between Goods and Services
 New Trends in Operations Management
 The Productivity ChallengeEthics and Social
Responsibility
 Ethics and Social Responsibility
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Learning Objectives
When you complete this chapter
you should be able to:
1. Define operations management
2. Explain the distinction between
goods and services
3. Explain the difference between
production and productivity
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Learning Objectives
When you complete this chapter
you should be able to:
4. Compute single-factor
productivity
5. Compute multifactor productivity
6. Identify the critical variables in
enhancing productivity
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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 (goods & services)
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Organizing to Produce
Goods and Services
Three functions are essential :
 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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Why Study OM?
1. OM is one of major functions of any
organization, we want to study how
people organize themselves for
productive enterprise
2. To know how goods and services
are produced
3. to understand what operations
managers do
4. OM is such a costly part of an
organization
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What Operations
Managers Do
Basic Management Functions
 Planning
 Organizing
 Staffing
 Leading
 Controlling
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Ten Critical Decisions
Ten important decisions must be performed by OM
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Design of goods and services
Managing quality
Process and capacity
Location strategy
Layout strategy
Human resources and job design
Supply-chain management
Inventory control
Scheduling
Maintenance
Table 1.2
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Certifications
 American Production and Inventory
Control Society (APICS)
 American Society of Quality (ASQ)
 Institute for Supply Management (ISM)
 Project Management Institute (PMI)
 Council of Supply Chain Management
Professionals
 Charter Institute of Purchasing and
Supply (CIPS)
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Goods & Services
Operation management are focused
on goods and services (production)
TV, automobiles , laptop ….etc are
examples of goods
Education , wash cars, hairdressing,
healthcare,……etc are example of
services
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Characteristics of Goods
 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction
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Characteristics of Service
 Intangible product
 Produced and
consumed at same time
 Often unique
 High customer
interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed
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Differences between G&S
Operation Factors
Goods
Services
Value
Value is provided by
physical processing
during manufacturing
Value is provided by
availability of the
service leading to
customer satisfaction
Tangibility
Are tangible;
specification are easily
defined
Are intangible ;
specification and
operational
characteristics are
difficult to specify
Process design
Easy
It can be designed in
isolated from customer
Difficult
It must be designed in
the presence of
customer
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Differences between G&S
Inventory
goods can be stored
for later time
Service are consumed
at the same time of
creation
Capacity
Capacity can be
designed for average
of demand
Capacity must be
designed for maximum
demand
Quality
Location
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Quality control is easy
Facilities can be
located to minimize
operation and
transportation costs
Quality control is
difficult
Service facilities must
be located near the
customer
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The Production System
Inputs
Transformation
processes
Outputs
Labour,
capital,
management
location – transportation –
construction --------etc.
Goods
and
services
Feedback loop
Figure 1.6
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Assignment (1)
 Explain
with
examples
the
difference between the system of
commodity production and the
service production (one service and
one commodity)
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Production & Productivity
Efficiency & Effectiveness
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Production & productivity
production is represented by number of
output
Productivity is the ratio of outputs (goods
and services) divided by the inputs
(resources such as labour , capital,..etc)
Important Note!
Production is a measure of output
only
while productivity is a measure of
efficiency so our goal is to increase
productivity
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Production & productivity
High production may imply only that more
people are working and the employment
levels are high but it doesn’t imply high
productivity
High production is interested in
quantity/numbers of goods & services
while productivity is related to the quality
of the output
The measurement of productivity is a good
way to evaluate country's’ ability to
improve standard of living for its people
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Efficiency & Effectiveness
Efficiency means doing the job well
with a minimum of resources and
waste (doing things right)
Effectiveness means only doing the
right things
Organization may be effective but
not efficient
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How can we increase
Productivity
Productivity =
output unit
input unit
Three ways can be undertaken to increase
productivity:1. Reducing input while keeping output constant
2. Increasing output while keeping inputs constant
3. Reducing input and increasing output at the
same time
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Productivity Measurement
Single-Factor productivity
 Multi-Factor Productivity
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Productivity Measurement
single-factor productivity
Labor Productivity
Productivity =
=
Units produced
Labor-hours used
1,000
250
= 4 units/labor-hour
One resource input  single-factor productivity
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Multi-Factor Productivity
Output
Productivity =
Labor + Material + Energy
+ Capital…etc
 Also known as total factor productivity
 Output and inputs are often expressed
in dollars
Multiple resource inputs  multi-factor productivity
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Computing single factor and
multifactor gains in
productivity
Example p.47
 Collins Title wants to evaluate its labor and
multifactor productivity with a new computerized
title-search system . The company has a staff of
four , each working 8 hours per day (for a payroll
cost of $640/day) and overhead expenses of
$400/day . Collins processes and closes on titles
each day . The new computerized title- search
system will allow the processing of 14 titles per
day . Although the staff , their work hours and
pay are the same , the overhead expenses are
now $ 800 per day . Which system is better ?
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
8 titles/day
Old labor
= 32 labor-hrs
productivity
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
8 titles/day
Old labor
=
productivity 32 labor-hrs = .25 titles/labor-hr
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor
=
productivity 32 labor-hrs = .25 titles/labor-hr
14 titles/day
New labor
=
productivity
32 labor-hrs
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor
=
productivity 32 labor-hrs = .25 titles/labor-hr
14 titles/day
New labor
=
= .4375 titles/labor-hr
productivity
32 labor-hrs
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
productivity
$640 + 400
© 2011 Pearson Education
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
© 2011 Pearson Education
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
14 titles/day
New multifactor
=
productivity
$640 + 800
© 2011 Pearson Education
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
14 titles/day
New multifactor
=
= .0097 titles/dollar
productivity
$640 + 800
© 2011 Pearson Education
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Conclusion
The new system is better
because it shows increase
in both the single –factor
(labor) productivity - and
multifactor productivity
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Productivity Measurement
Problems
1. Quality may change while the
quantity of inputs and outputs
remains constant
2. External elements may cause an
increase or decrease in
productivity
3. Precise units of measure may be
lacking
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Productivity Variables
1. Labor - contributes
about 10% of the
annual increase
2. Capital - contributes
about 38% of the
annual increase
3. Management contributes about 52%
of the annual increase
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Key Variables for Improved
Labor Productivity
1. Basic education appropriate for the
labor force
2. Diet of the labor force
3. some overhead that makes labor
available (transportation)
4. Maintaining and enhancing skills
through (training – motivation- team
building ……etc)
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Capital Productivity
Capital investment is necessary for
increased productivity
Inflation and taxes rate affect the
capital investment (increase the cost
of capital )
 When the capital invested per
employee drop we expect drop in
productivity
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Investment and Productivity
Percent increase in productivity
10
8
6
4
2
0
10
15
20
25
30
35
Percentage investment
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Management Productivity
Management is responsible for more than
50% of productivity
Management is responsible for ensuring
that labor and capital are effectively used
to increase productivity
Management is responsible for change the
society into knowledge- society by using
knowledge and technology
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Service Productivity
productivity of the service sector is
more difficult to improve because the
service sector work is :1. Typically labor intensive (teaching)
2. Frequently focused on unique
individual attributes or desires
(investment)
3. Often an intellectual task performed by
professionals (medical)
4. Often difficult to evaluate for quality
(law firm)
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Ethics and
Social Responsibility
Challenges facing operations
managers:
 Efficiently developing and producing
safe, quality products
 Maintaining a sustainable clean
environment
 Providing a safe workplace
 Honoring stakeholders commitments
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The End of Chapter
One
Assignment (2)
problems no. 1.1,1.3,1.5,1.6,1.8,1.9
,1.11, 1.17
Pages 53-54
Good luck
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