1. Operations Management Operations and Productivity Chapter 1
At this point:
1. Introduce yourself - your students are likely to want to know something about your qualifications and interests - overall, where you are coming from.
2. Have students introduce themselves. Ask why they are taking this class. If you are fortunate enough to have a Polaroid camera, take pictures of each student for later posting on a class “board” so both they and you get to know each other.
3. Discuss both choice of textbook and development of syllabus.
4. If you are expecting students to work in teams, at east introduce the choice of team members. If at all possible, have students participate in a team building or team study exercise. It works wonders. Most student have been told to work in teams in prior classes, but have never examined exactly what a team is and how it works. One hour spent in a team building/examination exercise saves many hours and avoids many problems later on.

2. Outline Operations in the service sector The Productivity challenge
Global company profile
What is Operations Management?
The heritage of Operations Management
Why study OM?
What Operations Managers do
Organizing to produce goods and services
Where are the OM jobs?
Exciting new trends in Operations Management
Operations in the service sector
The Productivity challenge

3. Learning Objectives
When you complete this chapter, you should be able to:
Identify or Define:
Production and productivity
Operations Management (OM)
What operations managers do
Services
Describe or Explain:
A brief history of operations management
The future of the discipline
Measuring productivity

4. What Is Operations Management?
Operations management is the business function that manages that part of a business that transforms raw materials and human inputs into goods and services of higher value.
Production is the creation of goods and services
Two additional points:
1. Any activity is an “operation”
2. No company produces only “goods” - service is a greater or lesser part of any product. (Discuss this in more detail later)

5. Significant Events in OM
Division of labor (Smith, 1776)
Standardized parts (Whitney, 1800)
Scientific management (Taylor, 1881)
Coordinated assembly line (Ford 1913)
Gantt charts (Gantt, 1916)
Motion study (the Gilbreths, 1922)
Quality control (Shewhart, 1924)
Gives you a chance to summarize some of the critical events in the evolution of OM.

6. Significant Events CPM/PERT (Dupont, 1957) MRP (Orlicky, 1960) CAD
Flexible manufacturing systems (FMS)
Manufacturing automation protocol (MAP)
Computer integrated manufacturing (CIM)

7. The importance of OM
For any organization are necessary three basic functions (marketing, finance, and operations).
How goods and services are produced?
OM is such a costly part of an organization
One might ask students to consider:
- marketing => deciding what is needed
- finance => securing resources
- operations => doing it!
What are the limitations of this perspective?

8. The Work of OM Plan Organize Staff Lead Control
This is the typical breakdown one finds in many business courses. It may be helpful to the students if you discuss each of these elements in relationship to something you or they have done. Work on a group project, for example, can provide a useful vehicle for the discussion.

9. Ten Critical Decisions
Service, product design
Quality management
Process, capacity design
Location
Layout design
Human resources, job design.
Supply-chain management
Inventory management
Scheduling
Maintenance
The Critical Decisions - These decision areas form the structure of the text.
Quality management - Who is responsible for quality? - How do we define quality?
Service and product design - What product or service should we offer?
How should we design these products and services?
Process and capacity design - What processes will these products require and in what order?
What equipment and technology is necessary for these processes?
Location - Where should we put the facility
On what criteria should we base this location decision?
Layout design - How should we arrange the facility? - How large a facility is required?
Human resources and job design - How do we provide a reasonable work environment?
How much can we expect our employees to produce?
Supply chain management - Should we make or buy this item?
Who are our good suppliers and how many should we have?
Inventory, material requirements planning, JIT “just-in-time” inventory,
How much inventory of each item should we have?
When do we re-order?
Intermediate, short term, and project scheduling - Is subcontracting production a good idea?
Are we better off keeping people on the payroll during slowdowns?
Maintenance - Who is responsible for maintenance?

10. Organizational Functions
Marketing
Need to get customers to sell the products and offer services
Operations
Need to create goods and services
Finance/Accounting
Improvement of benefits
Here is the point at which you can add to your discussion of the three business functions. In an effort to encourage student participation, you might allow students to lead the discussion as to the nature of each function, while you lead the discussion as to the relationship of the individual functions to the larger business.
Initiate a class discussion about how these functions expand as the firm grows and how new activities have become important (i.e., MIS and Human Resources)

11. 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
Ask your students for input here. Look for positions that they or their parents have filled. You might also ask them (a) what positions they are seeking upon graduation; and (b) to “predict” how demand for workers in each of these areas is likely to change over time, and why. Finally, have them consider the skills required of the occupants of each position

12. New Challenges in OM From To Local or national focus Batch shipments
Low bid purchasing
Lengthy product development
Standard products
Job specialization
Global focus
Need to produce on time goods and services
Supply chain partnering
Rapid product development, alliances
Mass customization
Empowered employees, teams
Use this and the subsequent slide to get students thinking about some of the changes taking place in OM. Try to help them understand both the causes of the changes and the implications. In particular, have them consider the role of information and of information technology.

13. Goods Versus Services DEFINITION
GOODS: Any company generates a tangible product that customers use
For example a car is produced by a company and is sold afterwards.
SERVICES:Any company offers a intangible output to the customers
For example a company offers internet service.

14. Goods Versus Services Intangible Product Reselling unusual
Goods Service
Tangible product
Can be resold
Can be inventoried
Some aspects of quality measurable
Selling is distinct from production
Intangible Product
Reselling unusual
Difficult to inventory
Quality difficult to measure
Selling is part of service
At this point, you might approach this and the next several slides by asking students to identify a product (good or service as appropriate) that illustrates each characteristic. You might also ask them to identify products that violate one or more of these distinctions between goods and services.

15. Goods Versus Services - Continued
Goods Service
Product is transportable
Site of facility important for cost
Often easy to automate
Revenue generated primarily from tangible product
Provider, not product is transportable
Site of facility important for customer contact
Often difficult to automate
Revenue generated primarily from intangible service.

16. The Economic System Transforms Inputs to Outputs
Land, Labor, Capital, Management
Goods and Services
Feedback loop
Inputs
Process
Outputs
Ask your students to consider why the rate of growth of productivity in the U.S. is so low. As they identify factors, have them link these factors to the resources of capital, labor, and management.
This may also be a good point at which to introduce the notions of efficiency (doing a job well), and effectiveness (doing the right job). It may be especially helpful to discuss the conditions under which efficiency or effectiveness becomes the more important.

17. Productivity Units produced Productivity = Input used
Measure of process improvement
Represents output relative to input
Productivity increases improve standard of living
From 1889 to 1973, U.S. productivity increased at a 2.5% annual rate
Productivity
Units produced
Input used =
The productivity discussion can continue with this slide.
One question for students might be: Why is the present rate of productivity improvement in the U.S. less than in the period 1889 to 1973?
You might also ask them to consider what happens as the rate of productivity improvement approaches zero. Does this simply mean that the standard of living ceases to rise, or are there more ominous manifestations?

18. Measurement Problems
Quality may change while the quantity of inputs and outputs remains constant
External elements may cause an increase or decrease in productivity
Precise units of measure may be lacking
Ask the students to think about why productivity is so difficult to measure. Have them identify several tasks or jobs, and help them identify some possible productivity measures. Ask them how they would go about making these measurements. Student and faculty productivity certainly provide examples that can generate discussion! You might ask your students if they believe “grades” measure student productivity.

19. Productivity Variables
Labor - contributes about 10% of the annual increase
Capital - contributes about 32% of the annual increase
Management - contributes about 52% of the annual increase
Here again, faculty and student productivity make useful discussion generators. Students can certainly look at the role of both capital and management in the classroom - and they are likely to be able to tie the three productivity variables to the presentation or teaching methodologies of different faculty.
Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force
Social overhead that makes labor available
Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
You might first ask students to consider the conditions under which each of the key variables is most important. Once the conditions are identified, you might list the conditions on the board or screen and ask students to develop a method for comparing various countries on the basis of these conditions. Where would they place the U.S.? Developing countries? Etc.

20. Jobs in the U.S
You might ask the students, how, in general, they might expect the figures shown in this graph to change over the next twenty years.
In addition, initiate a discussion of how we have moved from “hunting and gathering” to “agriculture” to “manufacturing” to “service.”

21. Productivity Growth 1971- 1992 Labor % per year Whole Economy
Manufacturing
% per year
Labor
Have the students consider why the productivity growth rate in the U.S. is so much lower than that in Germany or Japan.

22. Service Productivity Typically labor intensive
Frequently individually processed
Often an intellectual task performed by professionals
Often difficult to mechanize
Often difficult to evaluate for quality
You can use this slide to frame a discussion of service productivity.
Ask students to provide examples of services having each characteristic. Once they have done this, ask if they can think of a way to overcome or change the characteristics for that service so as to increase productivity.