1 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall 1 1 Operations and Productivity PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl

1 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

1 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

1 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall What Is Operations Management? Production Production is the creation of goods and services Operations management (OM) Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs

1 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall Organizing to Produce Goods and Services  Essential functions: 1.Marketing 1.Marketing – generates demand 2.Production/operations 2.Production/operations – creates the product 3.Finance/accounting 3.Finance/accounting – tracks how well the organization is doing, pays bills, collects the money

1 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Organizational Charts Operations Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Finance Investments Security Real estate Accounting Auditing Marketing Loans Commercial Industrial Financial Personal Mortgage Trust Department Commercial Bank Figure 1.1(A)

1 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall Organizational Charts Operations Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science Finance/ accounting Accounting Payables Receivables General Ledger Finance Cash control International exchange Airline Figure 1.1(B) Marketing Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising

1 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall Marketing Sales promotion Advertising Sales Market research Organizational Charts Operations Facilities Construction; maintenance Production and inventory control Scheduling; materials control Quality assurance and control Supply-chain management Manufacturing Tooling; fabrication; assembly Design Product development and design Detailed product specifications Industrial engineering Efficient use of machines, space, and personnel Process analysis Development and installation of production tools and equipment Finance/ accounting Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall Manufacturing Figure 1.1(C)

1 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall Why Study OM? 1.OM is one of three major functions of any organization, we want to study how people organize themselves for productive enterprise 2.We want (and need) to know how goods and services are produced 3.We want to understand what operations managers do 4.OM is such a costly part of an organization

1 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall What Operations Managers Do  Planning  Organizing  Staffing  Leading  Controlling Basic Management Functions

1 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall Ten Critical Decisions Ten Decision AreasChapter(s) 1.Design of goods and services5 2.Managing quality6, Supplement 6 3.Process and capacity 7, Supplement 7 design 4.Location strategy8 5.Layout strategy9 6.Human resources and 10 job design 7.Supply-chain 11, Supplement 11 management 8.Inventory, MRP, JIT12, 14, 16 9.Scheduling13, Maintenance17 Table 1.2

1 - 12© 2011 Pearson Education, Inc. publishing as Prentice Hall Where are the OM Jobs?  Technology/methods  Facilities/space utilization  Strategic issues  Response time  People/team development  Customer service  Quality  Cost reduction  Inventory reduction  Productivity improvement

1 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall Opportunities Figure 1.2

1 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall Characteristics of Goods  Tangible product  Consistent product definition  Production usually separate from consumption  Can be inventoried  Low customer interaction

1 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall Characteristics of Service  Intangible product  Produced and consumed at same time  Often unique  High customer interaction  Inconsistent product definition  Often knowledge-based  Frequently dispersed

1 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall Productivity Challenge Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital) The objective is to improve productivity! Important Note! Production is a measure of output only and not a measure of efficiency

1 - 17© 2011 Pearson Education, Inc. publishing as Prentice Hall  Measure of process improvement  Represents output relative to input  Only through productivity increases can our standard of living improve Productivity Productivity = Units produced Input used

1 - 18© 2011 Pearson Education, Inc. publishing as Prentice Hall Productivity Calculations Productivity = Units produced Labor-hours used = = 4 units/labor-hour 1, Labor Productivity One resource input  single-factor productivity

1 - 19© 2011 Pearson Education, Inc. publishing as Prentice Hall Multi-Factor Productivity Output Labor + Material + Energy + Capital + Miscellaneous Productivity =  Also known as total factor productivity  Output and inputs are often expressed in dollars Multiple resource inputs  multi-factor productivity