1-1McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved

1. Operations and 1. Operations and

ProductivityProductivity

Outline

• Operations Management

• Roles of OM

• The OM Heritage

• Goods vs. Services

• Productivity

• Productivity Measures

Operations Management?

• Operations Management is the set of activities that creates value in the form of goods/services by transforming inputs into outputs.

• OM is defined as the design, operation, and improvement of the systems that create & deliver firm’s primary products/services.

What is a Transformation Process?

A transformation process is defined as a user of resources to transform inputs into some desired outputs

• Physical - Manufacturing

• Locational - Transportation

• Exchange - Retailing

• Storage - Warehousing

• Physiological - Health Care

• Informational - Telecommunications

Transformation Process (6-ways)

Roles of OM

• Design of Goods/Services• Managing Quality• Process Design• Facility Location & Layout• Job Design & Measurement

• Supply Chain Management• Inventory Management• Sales & Operations Planning • Scheduling/Maintenance• Project Management

The Heritage of OM

• COST FOCUS

– Early Concepts (1776-1880)

– Scientific Management Era (1880-1910)

– Mass Production Era (1910-1980)

• QUALITY FOCUS

– Lean Production Era (1980-1995)

• CUSTOMIZATION FOCUS

– Mass Customization Era (1995-till date)

Legends of OM

• Adam Smith (1776)

– Labor Specialization

• Eli Whitney (1800)

– Standardized Parts

Legends of OM

• F.W. Taylor (1881)

– The Principles of

Scientific Management

• Frank/Lillian Gilbreth

– Motion Study (Therbligs)

Legends of OM

• Henry Gantt

– Gantt Chart/Project

Activity

• Agner Erlang

– Queuing Theory/Traffic

Engg.

Legends of OM

• Henry Ford

– Model-T/Moving

Assemble Line

• F.W. Harris (1913)

– Economic Order Quantity

(EOQ)

Legends of OM

• Walter Shewhart (1924)

– Statistical Sampling

• W. Edward Deming

(1950)

– 14-points to Management

Goods vs. Services

• Tangible vs. Intangible

• Customer Interaction….Low vs. High

• Homogeneous vs. Heterogeneous

• Process….Perishable & Time Dependent

• Evaluation….Package of Features

The Goods-Services Continuum

• “If you drop it on your foot, it won’t hurt you.” (Good or Service?)

• “Services never include goods and goods never include services.” (True or False?)

= Outputs Inputs

Productivity

• Productivity is the ratio of outputs (goods and services) divided by inputs (resources such as labor and capital).

• Productivity Variables: Labor, Capital, and Management

Total Measure Productivity

Total Measure Productivity = Outputs

Inputs

or

= Goods and Services Produced

All Resources Used

Partial Measure Productivity

Partial Measures of Productivity

= Output or Output or Output or Output

Labor Capital Materials Energy

Multifactor Measure Productivity

Multifactor Measures of Productivity =

Output

Labor + Capital + Energy

or

Output

Labor + Capital + Materials

Problem

• An automobile manufacturing company has provided the following data. Compare the labor, raw materials & supplies, and total productivity of 2007 and 2008.

Solution

What’s Next?

• Chapter-2

– Forecasting

– Importance of

Forecasting