1. 1 – 1 Course Name: Operations Management Course code: MGT 411 Reference books: Operations Management, by Krajewski/Ritzman/Malhotra  1. Operations Management, by Krajewski/Ritzman/Malhotra  2. Production and Operations Management by S.Anil kumar and S. Suresh Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

2. 1 – 2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. C OMPETING WITH O PERATIONS For Operations Management, by Krajewski/Ritzman/Malhotra © 2010 Pearson Education

3. 1 – 3 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Operations Management 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

4. 1 – 4 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. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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6. 1 – 6 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. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

7. 1 – 7 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Across 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

8. 1 – 8 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. A 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

9. 1 – 9 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. A 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

10. 1 – 10 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Supply Chain View Support Processes External suppliers External customers Supplier relationship process New service/ product development Order fulfillment process Customer relationship management Figure 1.4

11. 1 – 11 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The 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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15. 1 – 15 Job shops production Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 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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18. 1 – 18 Batch production Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 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 manufacture Baking / meal preparation Clothing production

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23. 1 – 23 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 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 cementcalcining Float glass

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30. 1 – 30 Scope of operations management Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 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.

31. 1 – 31 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 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

32. 1 – 32 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Productivity 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/hour 600 policies (3 employees)(40 hours/employee)

33. 1 – 33 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Productivity 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

34. 1 – 34 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Application  Calculate the year-to-date labor productivity:  Calculate the multifactor productivity: This YearLast YearYear Before Last Factory unit sales ($)2,762,1032,475,7382,175,447 Employment (hrs)112,000113,000115,00 Sales of manufactured products ($) $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/hr 113,000 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

35. 1 – 35 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved 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?

36. 1 – 36 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 1 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 hour 3 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

37. 1 – 37 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 1 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 week 16 weeks class Labor productivity= = $45,000/class 224 hours/class Output Input = 224 hours/class = $200.89/hour

38. 1 – 38 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2 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?

39. 1 – 39 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2 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