1. Introduction to Operations Management1
Heizer and Render
Operations Management, 10E, Global Edition
Principles of Operations Management, 10e, Global Edition

2. Outline What Is Operations Management?
Organizing to Produce Goods and Services
Why Study OM?
What are the operation managers Doing?
The Differences between Goods and Services
New Trends in Operations Management
The Productivity ChallengeEthics and Social Responsibility
Ethics and Social Responsibility
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3. Learning Objectives
When you complete this chapter you should be able to:
Define operations management
Explain the distinction between goods and services
Explain the difference between production and productivity
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4. Learning Objectives
When you complete this chapter you should be able to:
Compute single-factor productivity
Compute multifactor productivity
Identify the critical variables in enhancing productivity
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5. What Is Operations Management?
Production is the creation of goods and services
Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs (goods & services)
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6. Organizing to Produce Goods and Services
Three functions are essential :
Marketing – generates demand
Production/operations – creates the product
Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
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7. Why Study OM?
OM is one of major functions of any organization, we want to study how people organize themselves for productive enterprise
To know how goods and services are produced
to understand what operations managers do
OM is such a costly part of an organization
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8. What Operations Managers Do
Basic Management Functions
Planning
Organizing
Staffing
Leading
Controlling
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9. Ten Critical Decisions
Ten important decisions must be performed by OM
Design of goods and services
Managing quality
Process and capacity
Location strategy
Layout strategy
Human resources and job design
Supply-chain management
Inventory control
Scheduling
Maintenance
Table 1.2
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10. Certifications
American Production and Inventory Control Society (APICS)
American Society of Quality (ASQ)
Institute for Supply Management (ISM)
Project Management Institute (PMI)
Council of Supply Chain Management Professionals
Charter Institute of Purchasing and Supply (CIPS)
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11. Goods & Services
Operation management are focused on goods and services (production)
TV, automobiles , laptop ….etc are examples of goods
Education , wash cars, hairdressing, healthcare,……etc are example of services
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12. Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction
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13. Characteristics of Service
Intangible product
Produced and consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based
Frequently dispersed
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14. Differences between G&S
Services
Goods
Operation Factors
Value is provided by availability of the service leading to customer satisfaction
Value is provided by physical processing during manufacturing
Value
Are intangible ; specification and operational characteristics are difficult to specify
Are tangible; specification are easily defined
Tangibility
Difficult
It must be designed in the presence of customer
Easy
It can be designed in isolated from customer
Process design
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15. Differences between G&S
Service are consumed at the same time of creation
goods can be stored for later time
Inventory
Capacity must be designed for maximum demand
Capacity can be designed for average of demand
Capacity
Quality control is difficult
Quality control is easy
Quality
Service facilities must be located near the customer
Facilities can be located to minimize operation and transportation costs
Location
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16. The Production System Inputs Transformation processes Outputs
Labour, capital, management
Transformation
processes
location – transportation – construction etc.
Outputs
Goods and services
Feedback loop
Figure 1.6
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17. Assignment (1)
Explain with examples the difference between the system of commodity production and the service production (one service and one commodity)
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18. Production & Productivity Efficiency & Effectiveness
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19. Production & productivity
production is represented by number of output
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labour , capital,..etc)
Important Note!
Production is a measure of output only
while productivity is a measure of efficiency so our goal is to increase productivity
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20. Production & productivity
High production may imply only that more people are working and the employment levels are high but it doesn’t imply high productivity
High production is interested in quantity/numbers of goods & services while productivity is related to the quality of the output
The measurement of productivity is a good way to evaluate country's’ ability to improve standard of living for its people
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21. Efficiency & Effectiveness
Efficiency means doing the job well with a minimum of resources and waste (doing things right)
Effectiveness means only doing the right things
Organization may be effective but not efficient
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22. How can we increase Productivity
output unit
input unit
Three ways can be undertaken to increase productivity:-
Reducing input while keeping output constant
Increasing output while keeping inputs constant
Reducing input and increasing output at the same time
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23. Productivity Measurement
Single-Factor productivity
Multi-Factor Productivity
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24. Productivity Measurement single-factor productivity
Labor Productivity
Productivity =
Units produced
Labor-hours used
= = 4 units/labor-hour
1,000
250
One resource input  single-factor productivity
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25. Multi-Factor Productivity
Output
Labor + Material + Energy + Capital…etc
Productivity =
Also known as total factor productivity
Output and inputs are often expressed in dollars
Multiple resource inputs  multi-factor productivity
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26. Computing single factor and multifactor gains in productivity
Example p.47
Collins Title wants to evaluate its labor and multifactor productivity with a new computerized title-search system . The company has a staff of four , each working 8 hours per day (for a payroll cost of $640/day) and overhead expenses of $400/day . Collins processes and closes on titles each day . The new computerized title- search system will allow the processing of 14 titles per day . Although the staff , their work hours and pay are the same , the overhead expenses are now $ 800 per day . Which system is better ?
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27. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
8 titles/day
32 labor-hrs =
Old labor productivity
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28. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
8 titles/day
32 labor-hrs =
Old labor productivity
= .25 titles/labor-hr
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29. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day
32 labor-hrs
14 titles/day Overhead = $800/day
New System:
8 titles/day
32 labor-hrs =
Old labor productivity
= .25 titles/labor-hr =
New labor productivity
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30. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
32 labor-hrs =
Old labor productivity
= .25 titles/labor-hr
14 titles/day
32 labor-hrs =
New labor productivity
= titles/labor-hr
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31. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
8 titles/day $
14 titles/day Overhead = $800/day
New System: =
Old multifactor productivity
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32. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day $ =
Old multifactor productivity
= titles/dollar
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33. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
14 titles/day $
8 titles/day $ =
Old multifactor productivity
= titles/dollar =
New multifactor productivity
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34. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day $ =
Old multifactor productivity
= titles/dollar
14 titles/day $ =
New multifactor productivity
= titles/dollar
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35. Conclusion The new system is better because it shows increase in both the single –factor (labor) productivity - and multifactor productivity
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36. Productivity 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
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37. Productivity Variables
Labor - contributes about 10% of the annual increase
Capital - contributes about 38% of the annual increase
Management - contributes about 52% of the annual increase
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38. Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force
some overhead that makes labor available (transportation)
Maintaining and enhancing skills through (training – motivation- team building ……etc)
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39. Capital Productivity
Capital investment is necessary for increased productivity
Inflation and taxes rate affect the capital investment (increase the cost of capital )
When the capital invested per employee drop we expect drop in productivity
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40. Investment and Productivity10 8 6 4 2
Percent increase in productivity
Percentage investment
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41. Management Productivity
Management is responsible for more than 50% of productivity
Management is responsible for ensuring that labor and capital are effectively used to increase productivity
Management is responsible for change the society into knowledge- society by using knowledge and technology
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42. Service Productivity productivity of the service sector is more difficult to improve because the service sector work is :-
Typically labor intensive (teaching)
Frequently focused on unique individual attributes or desires (investment)
Often an intellectual task performed by professionals (medical)
Often difficult to evaluate for quality (law firm)
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43. Ethics and Social Responsibility
Challenges facing operations managers:
Efficiently developing and producing safe, quality products
Maintaining a sustainable clean environment
Providing a safe workplace
Honoring stakeholders commitments
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44. The End of Chapter One Assignment (2)
problems no. 1.1,1.3,1.5,1.6,1.8,1.9 ,1.11, 1.17
Pages 53-54
Good luck
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