1. AIMS 3770: Production Operations Analysis
Dr. Linda Leon
Spring 2015

2. 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

3. Why Study OM?
OM is one of three major functions (marketing, finance, and operations) of any organization
You need to know how goods and services are produced
OM is a costly part of an organization

4. Options for Increasing Contribution

5. Functions - Bank Commercial Bank Operations Finance/ Accounting
Marketing
Facilities
Layout
Teller
Scheduling
Transactions
Processing
Security
Commercial Bank
© T/Maker Co.
Functions - Bank

6. Functions - Airline Airline Operations Finance/ Accounting Marketing
Ground
Support
Flight
Aircraft
Maintenance
Catering
Airline
© T/Maker Co.

7. Functions - Manufacturer
Operations
Finance/
Accounting
Marketing
Production
Control
Facilities
Quality
Supply Chain
Management
Manufacturing

8. Efficiency = Value added to good or service
Productivity = Output/Input
where inputs are
Labor + material + energy + capital
+ time + information

9. Location Strategy & Labor Cost Example
Employees earn $12/hour and produce 1.25 units per hour
Location 2:
Employees earn $10/hour and produce 1.0 units per hour
Measure of Productivity = Labor Cost per Unit

10. Productivity Increases
Productivity increases when output increases more than input or when input decreases more than output.
Increases in productivity measure process improvement and are correlated with improved standard of living
Since 1869, U.S. productivity increased at an average rate of 2.5% per year.
In 21st century, U.S. productivity has been slightly lower than 2.5 % per year on average

11. Variables that Create Productivity Increases
Labor (10%)
Capital (38%)
Management (52%)
Examples of changes identified by Starbuck’s management: larger scooper size for ice, espresso machines that grind and brew, credit card signatures

12. Operations Course Objectives
To understand the common principles of production and operations management
To apply strategies dealing with various problems encountered in the production of goods and services
To be aware of current issues and trends encountered in the production of goods and services
To communicate persuasively in written form an effective strategy for managing a company’s operations

14. New Challenges in OM Local or national focus Batch shipments
From To
Local or national focus
Batch shipments
Low bid purchasing
Lengthy product development
Standard products
Short-term low costs
Global focus
Just-in-time
Supply chain partnering
Rapid product development, alliances
Mass customization
Sustainability

15. CBA Core Outcomes
To utilize quantitative techniques to model and evaluate business decisions
To effectively utilize information technology and productivity software to analyze a business problem, recommend possible solutions, and communicate results to the appropriate audience
To demonstrate critical thinking skills by defining, modeling, analyzing and evaluating complex business problems