1. Operations Management Operations and Productivity A-Team
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
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?
Production is the creation of goods and services
Operations management is the set of activities that creates goods and services by transforming inputs into outputs
Operations management focuses on carefully managing the processes to produce and distribute products 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. Adam Smith
He suggests that the huge increases in productivity obtainable from technology or technological progress are possible because human and physical capital are matched, usually in an organisation.

7. Eli Whitney
Whitney's defenders have claimed that he invented the American system of manufacturing-- the combination of power machinery, interchangeable parts, and division of labor that would underlie the nation's subsequent industrial revolution.

8. Frederick Winslow Taylor
He developed the theory of management that analyzes and synthesizes processes, improving labor productivity.

9. Henry Ford
An assembly line is a manufacturing process in which interchangeable parts are added to a product in a sequential manner using optimally planned logistics to create a finished product much faster than with handcrafting-type methods.

10. Henry Gantt
A Gantt chart is a popular type of bar chart that illustrates a project schedule. Gantt charts illustrate the start and finish dates of the terminal elements and summary elements of a project.

11. The Gilbreths
The Gilbreths' motion studies were more focused on how a task was done, and how best to eliminate unneeded, fatiguing steps in any process.

12. Walter Shewhart
Shewhart framed the problem in terms of assignable-cause and chance-cause variation and introduced the control chart as a tool for distinguishing between the two. Shewhart stressed that bringing a production process into a state of statistical control, where there is only chance-cause variation, and keeping it in control, is necessary to predict future output and to manage a process economically.

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

14. Why Study OM?
OM is one of three major functions (marketing, finance, and operations) of any organization
We want (and need) to know how goods and services are produced
We want to know what operations managers do
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?

15. Why Study OM? Related activities: managing purchases inventory control
quality control
storage
logistics
evaluations
and we need to comunicate them with each others.

16. Why Study OM?
OM often includes substantial measurement and analysis of internal processes, because a great deal of focus is on efficiency and effectiveness of processes.
Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization.

17. What Operations Managers Do by Henri Fayol:
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.

18. Planning
The process of deciding what to do. Effective planning seeks to answer questions such as:
What should the firm do? The output of this process are goals and objectives.
When must the firm achieve these goals? The output is a schedule defining milestones and due dates.
Who is responsible for doing it? The outputs are assigned responsibilities.
How should this be done? The outputs may be directions or plans of action.
How should performance be measured? The output includes standards of performance.
Planning is forward looking. When planning is operational, the planning horizon is shorter and the level of detail within is greater. When strategic, the planning horizon is long and done in less detail.

19. Analysing The process of making sense of data that is often: poorly
structured, incomplete, inconsistent, inaccurate,
and/or available in overwhelming quantities.
Analysis supports the planning process by
providing the “facts” in useful formats that can then be
used to evaluate business alternatives.
Analyzing also supports management’s control activity by
providing the basis for corrective actions.

20. Organizing
The process of building organization structures and interrelated task coordination teams. In the past, organizing dealt mostly with humans, but increasingly it involves data-getting:
the right person
the right information
in the right form
at the right time
is a key success factor in organization design.

21. Directing/Implementing
An action-oriented process that carries out the outputs of the first three management activities.
This is where money is made and lost.
In this process, management expends resources to perform the tasks defined by the planning process.

22. Controlling
The process of measuring the results of the other four management activities.
Were the plans any good?
Did the analysis provide meaningful information to the other processes?
How well did we organize our resources to get the job done?
How well did we do it?
We might even add, how well did we measure the performance of our control function?

23. 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?

24. Section of OM Procurement (Purchasing) Practices
reviews guidelines for buying various materials from suppliers and vendors - materials, including computers, services from lawyers, insurance, etc.
Management Control and Coordinating Function
includes a broad range of activities to ensure that organizational goals are consistently being met in an effective and efficient fashion

25. Section of OM Product and Service Management Quality Management
the major activities involved in product and service management are similar to those in operations management. However, operations management is focused on the operations of the entire organization, rather than managing a product or service.
Quality Management
is crucial to effective operations management, particularly continuous improvement. More recent advancements in quality, such as benchmarking and Total Quality Management, have resulted in advancements to operations management as well.

26. Section of OM Inventory Management
Costs can be substantial to store and move inventory. Innovative methods, such as Just-in-Time inventory control, can save costs and move products and services to customers more quickly.
Logistics and Transportation Management
is focused on the flow of materials and goods from suppliers, through the organization and to the customers, with priority on efficiency and cost effectiveness.

27. Section of OM Facilities Management Configuration Management
depnds a great deal on effective management of facilities, such as buildings, computer systems, signage, lighting, etc.
Configuration Management
It's important to track the various versions of products and services. Consider the various versions of software that continually are produced, each with its own version number. Tracking these versions is configuration management.
Distribution Channels
The means of distribution depend very much on the nature of the product or service.

28. Organisational Functions
Marketing
Gets customers
Operations
creates product or service
Finance/Accounting
Obtains funds
Tracks money
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)

29. 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

30. New Challenges in OM From To Global focus Local or national focus
Just-in-time
Supply chain partnering
Rapid product development, alliances
Mass customization
Empowered employees, teams
Local or national focus
Batch shipments
Low bid purchasing
Lengthy product development
Standard products
Job specialization
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.

31. Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction
You might pick a company that produces a physical product that will be familiar to the students, ask students to identify the product, and discuss its characteristics. Once the students have identified the physical characteristics of the product, you can ask “What other characteristics does the company believe its product possesses?” This question will often raise the issue of “service.”
Companies which might it be helpful to consider include:
Xerox - an information management company (not just copiers)
McDonalds, Burger King, Wendys - either compare the viewpoints of the three companies, or contrast them to a gourmet restaurant
Volkswagen versus Volvo, Mercedes or Rolls Royce.

32. Characteristics of Service
Intangible product
Produced & consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based
Frequently dispersed
Here it is probably useful to look to the students to identify both company and product. You might use the approach of taking one characteristic at a time and asking the students to identify a service that has that characteristic:
Unique - wedding planning
High customer interaction - health care
Inconsistent definition - “consulting”
etc.

33. Goods Versus Services Goods Service Can be resold Can be inventoried
Reselling unusual
Difficult to inventory
Quality difficult to measure
Selling is part of service
Can be resold
Can be inventoried
Some aspects of quality measurable
Selling is distinct from production
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.

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

35. The Economic System Transforms Inputs to Outputs
The economic system transforms inputs to outputs at about an annual 1.7% increase in productivity (capital 38% of 1.7%), labor (10% of 1.7%), management (52% of 1.7%)
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.

36. Inputs/Outputs

37. 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?

38. 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.

39. 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.

40. 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.