CONTACT US

If you have questions regarding the content of this module, please contact any of the following persons
or offices for clarification. Please channel questions to rightful persons/offices.

A. Professor

Name : CHARMAINE S. LAVARITTE, DBA

Email Address : smcbdo.bsbaprogramhead@gmail.com
Phone Number : 09179513031
Facebook : www.facebook.com/charmainelavaritte

B. Program Head

Name : CHARMAINE S. LAVARITTE, DBA

Email Address : Smcbdo.bsbaprogramhead@gmail.com
Phone Number : 019179513031
Facebook : www.facebook.com/charmainelavaritte

C. Reproduction In-Charge

Name : ANNIE M. MADUAY

Email Address : anniemaduay@gmail.com
Phone Number : +639094401026/+639759219372
Facebook : www.facebook.com /annie.maduay

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |1
 The Marian Way
God listens to true prayers. During this trying time, we encourage our
Marians to religiously ask for the guidance of our Almighty.

The plague dramatically breaks out borders to borders. Millions of people died, and overwhelming numbers
of infected people caused fear and panic amongst us. Let us continue to pray and practice the Ignacian-
Marian way. Together, we will survive and heal as one.

Vision Mission

Dynamic and Holistically We commit ourselves to:

developed individuals actively
witnessing the gospel values
in the community.
1. promote the total formation of persons through quality
instruction and integration of activities
2. form vibrant, responsible community leaders inspired by
the virtues of Mo. Ignacia and imbued with the Gospel
values;
3. provide development programs for the acquisition of
appropriate skills, promotion of positive attitudes and
enhancement of personal discipline;
4. foster the development of multiple and holistic
competencies to ensure work effectiveness.

GOAL STATEMENT

St. Mary’s College is a Catholic School that is an instrumentality of the Congregation of the Religious of
the Virgin Mary that aims to provide within its community of students and personnel Catholic values. Its
goal is to provide an educational program and environment animated by Catholic doctrine, beliefs,
teachings, traditions, and practices, the exercise of which is protected by, among others, Article III,
Section 5 of the 1987 Philippine Constitution. In order for us to approximate our vision and live our
mission, we dedicate to produce graduates who are God-fearing, capable of independent learning and
critical thinking, enabling them to respond successfully by continuing education in a technologically
advanced world and to serve the society, promoting justice and peace and protecting the youth against
harassment and immorality.

QUALITY POLICY

We, at the St. Mary’s College, commit to provide quality Catholic Ignacian Marian education to mold
students to be Ignacian Marian leaders of faith, excellence, and service wherever they are at all times.
We commit to collaboratively comply and maintain an effective quality management system by
periodically reviewing and validating the processes and services in line with the quality objectives and
standards for continual improvement.

Course Code/Name : CBMEC2 OPERATIONS MANAGEMENT

Course Credits : 3 units
1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |2
 Course Description The course is an introduction to the concepts, principles, problems and
practices of operation management. Topics include operations
: strategy, process design, capacity planning, facilities location and
design, forecasting, production scheduling, inventory control, quality
assurance.
Prerequisite : CBMEC1
Timeframe : Seven (7) weeks
Course Objectives/ At the end of the term, you will be able to:
Outcomes 1. Develop an understanding of and an appreciation for the
production and operations management function in any
organization.
2. Understand the importance of an effective production and
operations strategy to an organization
3. Understand the importance of product and services design
:
decisions and its impact other design decisions and operations.
4. Understand the contemporary operations and manufacturing
organizational approaches and the supply-chain management
activities and the renewed importance of this aspect of
organization strategy.

Course Requirements :
Grading System Quiz 30%
Performance Task 40%
: Major Exam 30%
-------------
100%

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |3
 How to Use the Module

In this module, you will undergo through a series of learning/ experiential activities to accomplish
requirements as projected in each lesson and subtopics. Each term period contains Assessment Sheets,
Lesson or topic exercise sheet, and Performance Task Exercises Sheet.

Summative Assessments such as Term Period Examinations will be separated from the module. The
accomplishment of each task is on your comfort, however following the scheduled submission of every
module.

THINGS TO REMEMBER!

1.) Carefully read all the information sheets,

2.) Follow the directions in answering all the tasks, or exercises,
3.) Answer all the exercises, and accomplish your performance task,
4.) Submit the module based on the scheduled date,
5.) Do not write unnecessary markings inside the module,
6.) All questions should only be answered on the given worksheet after every lesson.
7.) Lastly, inform your parents/guardians to affix their signatures on the sheet that will be provided
on the scheduled day of module distribution.

Should you have any questions about this module, please do not hesitate to reach us via email, group chat,
or mobile number as projected on the instructor’s information above.

For the schedule of module distribution/submission and date of examination, refer to the information box
below.

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |4
 Overview
Operations is the area of business management concerned with the production of goods and services. This
can include designing manufacturing systems, employee training, facilities planning, supply chain
management, inventory management, product design, quality control. It carefully focuses on managing
processes to produce and distribute products and services. A great deal of focus is on efficiency and
effectiveness of processes. Therefore, operations management often includes substantial measurement
and analysis of internal processes.

Operations Managers are responsible for managing activities within the production of goods and services,
utilizing resources from staff, materials, equipment and technology. It gives the business administration
students the opportunity to learn the skills and tools needed to bring these innovations to life.

COURSE OUTLINE
Program : BSBA Term Period : Prelim, Midterm and
Final
Year Level : Third year Time Frame : Five (5) Weeks

Desired Learning Outcomes

At the end of the topic, you will be able to:

1. discuss the nature and concepts of Operations Management

2. define the meaning of Operations Management
3. determine the activities that transform inputs into goods and services that add value to the
customer
4. Know and apply the Quantitative techniques in Management
5. Learn how to design operations
6. Know how to manage the operations

Subject Requirements
• Accomplished Worksheets
• Essays
• Performance Tasks
• Quiz
• Major Exam

Week Lesson Topics

Week 1- 1.) What is Operations Management?
Week2 2.) Nature and concepts of Operations
Lesson1: Course Introduction Management
3.) Differentiate goods and services
4.) Productivity Measurement
Week 3– Lesson 2: Quantitative Techniques in 1.) Forecasting Models
Week 4 Management 2.) Regression Analysis
3.) Correlation

Week 5- Lesson 3: Quantitative Techniques in 1.) Inventory Control Model

Week 6 Management

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |5
 MY TIMELINE
January 27-28, 2022
January 19, 2022 Prelim Exam
Distribution of Module

February 3, 2022
Submission of Performance Task &
Exercises

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |6
 Operations Management
LESSON
1

Operations management (OM) is a discipline that applies to restaurants like Hard Rock Café as well as to factories
like Sony, Ford. The techniques of OM apply throughout the world to virtually all productive enterprises. It doesn’t
matter if the application is in an office, a hospital, a restaurant, a department store, or a factory-the production of
goods and services requires operations management. And the efficient production of goods and services requires
effective applications of the concepts, tools, and techniques of OM that are spelled out in this module.

Learning Outcomes:

At the end of the lesson, it is expected that the students will be able to:

1. Know and define Operations Management

2. Discuss the concept and relevance of Operations Management
3. Know the history of Operations Management and its contribution
4. Distinguish between products and services
5. Define the concepts of Operations Management
6. Know the different definitions of Operations Management by different authors
7. Explain the role of operations management

Let’s Discuss!

WHAT IS OPERATIONS MANAGEMENT?

OPERATIONS MANAGEMENT – is the management of processes that transform inputs into goods and
services that add value for the customers.

Different definitions of Operations Management (OM)

Operations Management – is the administration of business practices to create the highest level of
efficiency possible within an organization. It is concern with converting materials and labor into goods and
services as efficiently as possible to maximize the profit of an organization. (Investopedia)

Operations Management researches efficiencies in planning, organizing, and supervising in production

and manufacturing. It is delivery-focused, ensuring that an organization successfully turns inputs to
outputs in an effective manner. The inputs themselves count represent anything from materials,
equipment, and technology to human resources such as staff or workers. (MIT Sloan School of
Management.)

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |7
Operations Management – is the business function responsible for managing the process of creation of
goods and services. It involves planning, organizing, coordinating, and controlling all the resources needed
to produce a company’s goods and services. Because operations management is a management function,
it involves managing people, equipment, technology, information, and all the other resources needed in
the production of goods and services. (Inform IT)

Operation Management -

The goal of operations management is to maximize efficiency while producing goods and services that
effectively fulfill customer needs.

Countless operating decisions must be made that have both long-term and short-term impacts on the
organization’s ability to produce goods and services that provide added value to customers. If the
organization has made mostly good operating decisions in designing and executing its transformation
system to meet the needs of customers, its prospects for long-term survival are greatly enhanced.

For example, if an organization makes furniture, some of the operations management decisions involve the
following:
- Purchasing wood and fabric
- Hiring and training workers
- Location and layout of the furniture factory.
- Purchase cutting tools and other fabrication equipment.
If the organization makes good operations decision, it will be able to produce affordable, functional, and
attractive furniture that customers will purchase at a price that will earn profits for the company.

Production – is the creation of goods and services. Operations Management (OM) is the set of activities
that creates value in the form of goods and services by transforming inputs into outputs. Activities creating
goods and services take place in all organizations. In manufacturing firms, the production activities that
create goods are usually quite obvious. In them, we can see the creation of a tangible products such as
Sony TV or a Harley-Davidson motorcycle.

In an organization that does not create a tangible good or product, the production function may be less
obvious. We often call these activities services. The services may be “hidden” from the public and even
from customer. The product may take such forms as the transfer of funds from a savings account to a
checking account, the transplant of a liver, the filling of an empty seat on an airplane, or the education of
a student. Regardless of whether the end product is a good or service, the production activities that go on
in the organization are often referred to as operations, or operations management.

ORGANIZING TO PRODUCE GOODS AND SERVICES

To create goods and services, all organizations perform three functions (see figure 1.1) These functions
are the necessary ingredients not only for production but also for an organization’s survival. They are:

1. Marketing, which generates the demand, or at least takes the order for a product or service
(nothing happens until there is a sale).
2. Production/operations, which creates the product
3. Finance/accounting, which tracks how well the organization is doing, pays the bills, and collects
the money.

Universities, churches or synagogues, and business all perform these functions. Even a volunteer group
which you may know is organized to perform these three-basic functions.

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |8
The Role of Operations Management in Organization

Operations is one of the three strategic functions of any organization. This means, that it is a vital part of
accomplishing the organization’s strategy and ensuring its long-term survival. The other two areas of
strategic importance to the organization are marketing and finance. The operations strategy should support
the overall organization strategy. Many companies prepare a 5-year pro-forma to assist in their operation
planning. The pro-forma uses information from past and current financial statements in an effort to predict
future events such as sales, and capital investments.

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e |9
 (A)

Commercial Bank

Marketing
Operations Finance

Teller scheduling Investments Loan

Check clearing Securities Commercial
Collection Real estate Industrial
Transaction processing Financial
Facilities design/layout Accounting Personal
Vault operations mortgage
Maintenance
Auditing Trust department
Security
(B)

Airline

Operations Finance/accounting
Marketing
Ground support equipment Accounting
Maintenance Accounts payable Traffic administration
Ground operations Accounts receivable Reservations
Facility maintenance General ledger Schedules
Catering Finance Tariffs (pricing)
Flight operations Cash control Sales
Crew scheduling International Advertising
Flying exchange
Communications
Dispatching
Management science (C)

Manufacturing

Operations Finance/accounting Marketing

Facilities Construction; maintenance Disbursements/credits
Production and inventory control Accounts receivable Sales promotion
scheduling; materials control Quality Accounts payable Advertising
assurance and control Supply-chain General ledger Sales
management Market research
Manufacturing Funds management
Figure 1.
Tooling; fabrication; assembly Money market
Design International exchange Organization charts
Product development and design capital requirements for two service
detailed product specifications Stock issue organizations and one
Industrial engineering Bond issue and recall manufacturing
Efficient use of machines, space, and Organization
personnel (A) A bank, (B) an airline,
Process analysis and (C) a manufacturing
organization. The blue areas
Development and installation of
are OM activities
production tools and equipment

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 10
WHY STUDY OPERATIONS MANAGEMENT (OM)?

As business administration students it is required to study OM for four reasons:

1. OM is one of the three major function of any organization, and it is integrally related to all other
business functions. All organizations market (sell), finance (account), and produce (operate), and
it is important to know how the OM activity functions. Therefore, business administration students
study how people organize themselves for productive enterprise.
2. To know how goods and services are produced. The production function is the segment of our
society that creates the products and services we use.
3. To understand what operations managers, do. By understanding what these managers do, you
can develop the skills necessary to become such a manager. This will help you explore the
numerous and lucrative career opportunities in OM>
4. OM is costly and is part of an organization. A large percentage of the revenue of most firms is
spent in the Operations management function. Indeed, OM provides a major opportunity for an
organization to improver its profitability and enhance its service to society. Consider how a firm
might increase its profitability via production function. See Example 1

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 11
 Example 1
Examining the options for increasing contribution

FLZ Technologies is a small firm that must double its dollar contribution to fixed cost and profit in order to be profitable
enough to purchase the next generation of production equipment. Management has determined that if the firm fails to
increase contribution, its bank will not make the loan and the equipment cannot be purchased. If the firm cannot purchase
the equipment, the limitations of the old equipment will force Fisher to go out of business and, in doing so, put its employees
out of work and discontinue producing goods and services for its customers.
Approach. Table 1.1 shows a simple profit-and-loss statement and three strategic options (marketing, finance/accounting,
and operations) for the firm. The first option is a marketing option, where good marketing management may increase sales
by 50%. By increasing sales by 50%, contribution will in turn increase 71%. But increasing sales 50% may be difficult; it may
even be impossible.
Marketing Option (a) Finance/Accounting OM options
Options (b) ©
Current Increase Sales Reduce Finance Costs Reduce production
Revenue 50% 50% costs 20%
Sales $ 100,000 $ 150,000 $ 100,000 $ 100,000
Cost of Goods - 80,000 - 120,000 - 80,000 - 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance costs - 6,000 - 6,000 - 3,000 - 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% - 3,500 - 6,000 - 4,250 - 7,500
Contribution (d) $ 10,500 $ 18,000 $ 12,750 $ 22,500
Option a – Increasing sales 50% increase contribution by $7,500 or 71% (7,500/10,500)
Option b- Reducing finance costs 50% increases contribution by $2,500 or 21% (2,250/10,500)
Option c- Reducing production costs 20% increase contribution by $12,000 or 114% (12,000/10,500)
Contribution d- Contribution to fixed cost (excluding finance costs) and profit

The second option is a finance/accounting option, where finance costs are cut in half through good financial management.
But even a reduction of 50% is still inadequate for generating the necessary increase in contribution. Contribution is
increased by only 21%.

Solution. Given the condition of our brief example, FLZ Technologies has increased contribution from $10,500 to $22,500.
It may now have a bank willing to lend it additional funds.

Insight: The OM option not only yields the greatest improvement in contribution but also may be the only feasible option.
Increasing sales by 50% and decreasing finance cost by 50% may both be virtually impossible. Reducing operations cost by
20% may be difficult but feasible.

Learning Exercises. What is the impact of only a 15% decrease in costs in the OM option? Your answer should be written
with the same format above. Write your answer provided in Exercises 1 page 30.

Example 1 underscores the importance of an effective operations activity of a firm. Development of

increasingly effective operations is the approach taken by many companies as they face growing global
competition.

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 12
 Table 1 Ten Decision Areas
TEN DECISION AREAS
1.Design of goods and services
2. Managing quality
3.Process and Capacity design
4.Location Strategy
5.Layout Strategy
6.Human Resources and job design
7.Supply Chain Management
8.Inventory, material requirements
planning, and JIT (just-in-time)
9.Intermediate and short-term scheduling
10. Maintenance
Source: Jay Heizer & Barry Render
Introduction to Operations and Productivity
1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program
ISSUES
1.What good or service we should offer?
2.How should we design these products?
1. How do we define the quality?
2.Who is responsible for quality?
1.What process and what capacity will these products
require?
2.What equipment and technology is necessary for
these processes?
1.Where should we put the facility?
2.On what criteria should we base the location
decision?
1.How should we arrange the facility?
2.How large must the facility be to meet our plan?
1.How do we provide a reasonable work environment
2.How much can we expect our employees to
produce?
1.Should we make or buy this component?
2.Who are our suppliers and who can integrate into
our e-commerce program?
1.How much inventory of each items should we
have?
2.When do we reorder?
1.Are we better off keeping people on the payroll
during slowdowns?
2.Which job do we perform next?
1.Who is responsible for maintenance?
2.When do we do maintenance?
P a g e | 13
THE HERITAGE OF OPERATIONS MANAGEMENT

The field of OM is relatively young, but its history is rich and interesting. Our lives and the OM discipline
have been enhanced by the innovations and contributions of numerous individuals. Let us now introduce
a few of these people, and let us provide a summary of significant events in operations management in
Figure 2.

Eli Whitney (1800) is credited for the early popularization of interchangeable parts, which was achieved
through standardization and quality control. Through a contract he signed with the US government for
10,000 muskets, he was able to demand a premium price because of their interchangeable parts.

Frederick W. Taylor (1881) is known as the father of scientific management, contributed to

personnel selection, planning and scheduling, motion study, and the now popular field of
ergonomics. One of his major contribution was his belief that management should be much more
resourceful and aggressive in the improvement of work methods. Taylor and his colleagues, Henry L. Gantt
and Frank and Lilian Gilbreth, were among the first to systematically seek the best way to produce.

Another Taylor’s contribution was the belief that management should assume more responsibility for:
1. Matching employees to the right job.
2. Providing the proper training.
3. Providing proper work methods and tools.
4. Establishing legitimate incentives for work to be accomplished.

By 1913, Henry Ford and Charles Sorensen combined what they knew about standardized parts with
the quasi-assembly lines of the meatpacking and mail-order industries and added the revolutionary concept
of the assembly line, where men stood still and material moved.

Quality control is another historically significant contribution to the field of OM.

Walter Shewhart (1942) combined his knowledge of statistics with the need for quality control and
provided the foundations for statistical sampling in quality control.

Edward Deming (1950) believed, as did Frederick Taylor, that management must do more to improve
the work environment and processes so that quality can be improved.

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 14
 Table 2
Significant Events in Operations Management

ERA EVENTS/CONCEPTS DATES ORIGINATOR

INDUSTRIAL REVOLUTION Steam Engine 1769 James Watt

Division of Labor 1776 Adam Smith
Interchangeable parts 1790 Eli Whitney
Principles of Scientific Management 1911 Frederick W. Taylor
SCIENTIFIC MANAGEMENT Time and Motion Study 1911 Frank and Lilian Gilbreth
Activity Scheduling Chart 1912 Henry Gantt
Moving Assembly Line 1913 Henry Ford
HUMAN RELATIONS Hawthorne Studies 1930 Elton Mayo
1940s Abraham Maslow
Motivation theory 1950s Frederick Herzberg
1960s Douglas McGregor
Operations Research Linear Programming 1947 George Dantzig
Digital Computer 1951 Remington Rand
Simulation, Waiting line theory, Decision 1950s Operations Research
theory, PERT/CPM Group
MRP, EDI, EFT, CIM 1960s Joseph Orlicky.
1970s IBM & others
(JIT)Just-In-Time 1970s Taiichi Ohno (Toyota)
(TQM)Total Quality Management 1980s W. Edward Deming,
Joseph Juran
Quality Revolution Strategy and Operations 1990s Wickham Skinner
Robert Hayes
Business Process Reengineering 1990s Michael Hammer
James Champy
Globalization WTO, EUROPEAN UNION, and other Trade 1990s Numerous countries
Agreements &
2000s Companies
Internet Revolution Internet, WWW, ERP, Supply Chain 1990s ARPANET, Tim Berners-
Management Lee SAP, i2
Technologies, ORACLE,
PeopleSoft
E-commerce 2000s Amazon, Yahoo, eBay
and others
Source: Coursehero.com

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 15
 Figure 2 Significant Events in Operations Management

COST FOCUS
Early Concepts (1776-1880) Mass Production Era (1910-1980)
Labor Specialization (Smith & Babbage) Moving Assembly Line (Ford/Sorensen
Standardized Parts (Whitney) Statistical Sampling (Shewhart)

Scientific Management Era(1880-1910) Economic Order Quantity (Harris)

Gantt Charts (Gantt) Linear Programming
Motion & Time Studies (Gilbreth) PERT/CPM (Dupont)
Process Analysis (Taylor) Material Requirements
Queuing Theory (Erlang) Planning

QUALITY FOCUS

Lean Production Era (1980-1995)

Just-in-Time Baldrige Award
Computer-Aided Design Empowerment
Electronic Data Interchange Kanbans
Total Quality Management

CUSTOMIZATION FOCUS

Mass Customization Era (1995-2010)

Globalization Finite Scheduling
Internet/E-Commerce Supply Chain Management
Enterprise Resource Planning Mass Customization
Learning Organization Build-to-Order
International Quality Standards

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 16
Operations Management will continue to progress with contributions from other disciplines, including
industrial engineering and management science. These disciplines, along with statistics, management, and
economics, contribute to improve models and decision making.

Innovations form the physical sciences (biology, anatomy, chemistry, physics) have also contributed to
advances in OM. These innovations include new adhesives, faster integrated circuits, gamma rays to
sanitize food products, and higher-quality glass for LCD and plasma TVs. Innovation in products and
processes often depends on advances in physical sciences.

Especially important contributions to OM have come from information technology, which we define as the
systematic processing of data to yield information. Information technology-with wireless links, internet,
and e-commerce- is reducing costs and accelerating communication.

Decisions in operations management require individuals who are well versed in management science, in
information technology, and often in one of the biological or physical sciences.

OPERATIONS IN THE SERVICE SECTOR

Manufacturers produce a tangible product, while service products are often intangible. But many products
are a combination of a good and a service, which complicates the definition of a service.

This module describes services as including repair and maintenance, government, food and lodging,
transportation, insurance, trade, financial, real estate, education, legal, medical, entertainment, and other
professional occupations.

DIFFERENCES BETWEEN GOODS AND SERVICES

1.) Services are usually intangible (for example, you purchase of a ride in an empty airlines seat
between two cities) as opposed to a tangible goods.
2.) Services are often produced and consumed simultaneously; there is no stored inventory. For
example, the beauty salon produces a haircut that is “consumed” simultaneously, or the doctor
produces an operation that is “consumed” as it is produced.
3.) Services are often unique. Your mix of financial coverage, such as investments and insurance
policies, may not be the same as anyone else’s, just as the medical procedure or a haircut produced
for you is not exactly like anyone else’s.
4.) Services have high customer satisfaction. Services are often difficult to standardize, automate, and
make as efficient as we would like because customer interaction demands uniqueness. In fact, in
many cases this uniqueness is what the customer is paying for; therefore, the operations manager
must ensure that the product is designed (i.e., customized) so that it can be delivered in the
required unique manner.
5.) Services have inconsistent product definition. Product definition may be rigorous, as in the case of
an auto insurance policy, but inconsistent because policyholders change cars and mature.
6.) Services are often knowledge based, as in the case of educational, medical and legal services, and
therefore hard to automate.
7.) Services are frequently dispersed. Dispersion occurs because services are frequently brought to the
client/customer via a local office, a retail outlet, or even a house call.

Table 4 indicates some additional differences between goods and services that affect OM decisions.
Although service products are different form goods, the operations function continues to transform
resources into products. Indeed, the activities of the operations functions are often very similar for both
goods and services. For instance, both goods and services must have quality standards established, and
both must be designed and processed on a schedule in a facility where human resources are employed.

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 17
 Having made the distinction between goods and services, we should point out that in many cases, the
distinction is not clear-cut. In reality, almost all services and almost all goods are a mixture of a service
and a tangible product. Even services such as consulting may require a tangible report. Similarly, the sale
of most goods includes a service. For instance, many products have the service component of financing
and delivery (i.e., automobile sales). Many also require after-sale training and maintenance (i.e., office
copiers and machinery). Service activities, may also be an integral part of production. Human Resource
activities, logistics, accounting, training, field service, and repair are all service activities, but they take
place within a manufacturing organization.

When a tangible product is not included in the service, we may call it pure service. Although there are not
very many pure services, in some instances counseling may be an example.

Table 4 Difference between Goods and Services

ATTRIBUTES OF GOODS (TANGIBLE PRODUCT ATTRIBUTES OF SERVICES (INTANGIBLE PRODUCT)

Product can be resold Reselling a service is unusual
Product can be inventories Many services cannot be inventoried
Some aspects of quality are measurable Many aspects of quality are difficult to measure
Selling is distinct form production Selling is often a part of the service
Product is transportable Provider, not product, is often transportable
Site of facility is important for cost Site of facility is important for customer contact
Often easy to automate Service is often difficult to automate
Revenue is generated primarily form the tangible Revenue is generated primarily from the intangible
product services

Figure 3-Most Goods contain a Service, and Most Services Contain a Good

GOODS SERVICE

AUTOMOBILE

COMPUTER

INSTALLED CARPETING
FAST-FOOD MEAL

RESTAURANT MEAL/AUTO REPAIR

HOSPITAL CARE

ADVERTISING AGENCY/INVESTMENT MANAGEMENT

CONSULTING SERVICES/TEACHING

COUNSELING

100% 75% 50% 25% 0 25% 50% 75% 100%

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 18
NEW TRENDS IN OPERATIONS MANAGEMENT

1.) GLOBAL FOCUS- The rapid decline in communication and transportation costs has made markets
global. At the same time, resources in the form of capital, materials, talent, and labor have also
become global. Contributing to this rapid globalization are countries throughout the world that are
vying for economic growth and industrialization. Operations managers are responding with
innovations that generate and move ideas, production, and finished goods rapidly.
2.) JUST-IN-TIME – Vast financial resources are committed to inventory, making it costly. Inventory
also impedes response to rapid changes in the marketplace. Operations managers are viciously
cutting inventories at every level, from raw materials to finished goods.
3.) SUPPLY CHAIN PARTNERING- Shorter product life cycles, driven by demanding customers, as
well as rapid changes in material and processes, require suppliers to be more in tune with the
needs of the end user. And because suppliers often have unique expertise, operations managers
are outsourcing and building long-term partnerships with critical players in the supply chain.
4.) RAPID PRODUCT DEVELOPMENT- Rapid international communication of news, entertainment,
and lifestyles is dramatically chopping away at the life span of products. Operations managers are
responding with management structures and technology that are faster and alliances (partners)
that are more effective.
5.) MASS CUTOMIZATION- Once managers begin to recognize the world as the marketplace, then
the individual differences become quite obvious. Cultural differences, compounded by individual
differences, in a world where consumers are increasingly aware of innovation and options, places
substantial pressure on firms to respond. Operations managers are responding with production
processes that are flexible enough to cater to individual whims of consumers. The goal is to
produce customized products, whenever and wherever needed.
6.) EMPOWERED EMPLOYEES- The knowledge explosion and a more technical workplace have
combined to require more competence at the workplace. Operations manager are responding by
moving more decision making to the individual worker.
7.) ENVIRONMENTALLY SENSITIVE PRODUCTION- The operations manager’s continuing battle
to improve productivity is increasingly concerned with designing products and processes that are
environmentally friendly. That means designing products that are biodegradable, or automobile
components that can be reused or recycle, or making packaging more efficient.
8.) ETHICS- Operations managers are taking their place in the continuing challenge to enhance ethical
behavior.

THE PRODUCTIVITY CHALLENGE

The creation of goods and services requires changing resources into goods and services. The more
efficiently we make this change, the more productive we are and the more value is added to the good or
service provided.

Productivity- is the ratio of outputs (goods and services) divided by the inputs (resources, such as labor
and capital) See Figure 2. The operations manager’s job is to enhance (improve) this ratio of outputs to
inputs. Improving productivity means improving efficiency.

Measurement of Productivity -is an excellent way to evaluate a country’s ability to provide an improving
standard of living for its people. Only through increases in productivity can the standard of living improve.
Moreover, only through increases in productivity can labor, capital, and management receive additional
payments. If returns to labor, capital or management are increased without increased productivity, prices
rise. On the other hand, downward pressure is placed on prices when productivity increases, because more
is being produced with the same resources.

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 Figure 4. The Economic System Adds Value by Transforming inputs to Outputs.

Inputs Process Value Add Outputs

Labor, Capital, Goods and

Transformation/conversion process
Management Services

Measurement and Feedback Measurement and Feedback

Measurement and Feedback

CONTROL

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PRODUCTIVITY MEASUREMENT

The measurement of productivity can be quite direct. Such is the case when productivity is measured by
labor-hours per ton of specific type of steel. Although labor-hours are a common measure of input, other
measures such as capital (dollar invested), materials (tones of ore), or energy (kilo-watts of electricity) can
be used.

FORMULA 1. Productivity = Units produced

Input Used

For example 1, if units produced = 1,000 and labor-hours used is 250 then:

Productivity = Units produced = 1,000 = 4 units per labor-hour

Labor-hours used = 250

The use of just one resource input to measure productivity, as shown in Formula 1, is known as single-
factor productivity. However, a broader view of productivity is multifactor productivity, which
includes all inputs (i.e., capital, labor, material, energy). Multifactor productivity is also known as total
factor productivity.

Multi-factor productivity is calculated by combining the input units as shown here:

FORMULA 2. Productivity = Output __________________

Labor +Material +Energy +Capital +Miscellaneous

To aid in the computation of multifactor productivity, the individual inputs (the denominator) can be
expressed in dollars and summed as showed in Example 2.

Example 2 Computing single and multifactor gains in productivity.

Quela 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 per day. Quela processes and closes on 8 titles each day. The new
computerized title-search system will allow the processing of 14 tittles per day. Although the staff, their
work hours, and pay are the same, the overhead expenses are now $800 per day.

Approach: Quela uses Equation or formula 1 to compute labor productivity and equation or formula 2 to
compute multifactor productivity.

Solution:

Labor productivity with the old system 8 titles per day =.25 titles per labor-hour
32 labor-hours

Labor productivity with the new system 14 titles per day = .4375 title per labor-hours
32 labor-hours

Multifactor productivity with the old system 8 titles per day = .0077 titles per dollar
$640 + 400

Multifactor productivity with the new system 14 titles per day = .0097 titles per dollar
$640+ 800

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Labor productivity has increase from .25 to .4375. The change is .4375/.25 = 1.75, or 75% increase in
labor productivity. Multifactor productivity has increased from .0077 to .0097. this change is .0097/.0077
= 1.26 or a 26% increase in multifactor productivity.

Insight: Bothe the labor (single-factor) and multifactor productivity measures show an increase in
productivity. However, the multifactor measure provides a better picture of the increase because it includes
all the costs connected with the increase in output.

Learning Experience. If the overload goes to $960 (rather than $800), what is the multifactor
productivity? Answer this as part of your exercises 2 in page 31. Follow format.

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PRODUCTIVITY VARIABLES

Figure 4, productivity increases are dependent on three productivity variables

1. Labor, which contributes about 10% of the annual increase

2. Capital, which contributes about 38% of the annual increase
3. Management, which contributes about 52% of the annual increase.

Labor. Improvement in the contribution of labor to productivity is the result of a healthier, better-
educated, and better-nourished labor force. Some increase may also be attributed to a shorter workweek.
Historically, about 10% of the annual improvement in productivity is attributed to improvement in the
quality of labor. The three key variables for improved labor productivity are:

1. Basic Education appropriate for an effective labor force.

2. Diet of the labor force
3. Social overhead that makes labor available, such as transportation and sanitation.

Capital. Human beings are tool-using animals. Capital investment provides those tools. Capital
investment has increased in the U.S every year except during a few very severe recession periods. Annual
capital investment in the U.S. has increased at an annual rate of 1.5% after allowances for depreciation.
In particular unique situation now that the world is experiencing COVID-19 pandemic. If we are going to
measure productivity, certainly, it has an effect in productivity.

Management. Management is a factor of production and an economic resource. Management is

responsible for ensuring that labor and capital are effectively used to increase productivity. Management
accounts for over half of the annual increase in productivity. This increase includes improvements mad
through the use of knowledge and the application of technology.

Using knowledge and technology is critical in postindustrial societies. Consequently, post industrial
societies are also known as knowledge societies. Knowledge societies are those in which much of the labor
force has migrated from manual work to technical and information-processing tasks requiring ongoing
education.

ETHICS AND SOCIAL RESPONSIBILITY

Operations managers are subjected to constant changes and challenges. The systems they build to convert
resources into goods and services are complex. The physical and social environment changes, as do laws
and values. These changes present a variety of challenges that come from the conflicting perspectives of
stakeholders such as customers, distributors, suppliers, owners, lenders and employees. These
stakeholders, as well as government agencies at various levels, require constant monitoring and thoughtful
responses.

Identifying ethical and socially responsible responses while building productive systems is not always clear-
cut. Among the many ethical challenges facing operations managers are:

1. Efficiently developing and producing safe, quality products.

2. Maintaining a clean environment.
3. Providing a safe workplace.
4. Honoring community commitments.

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Key terms: Strategy, tactic, operations management.

Strategy -: A plan of action intended to accomplish a specific goal.

Tactic : A maneuver or action calculated to achieve some end.
Operations Management: Management of processes that transform inputs into goods and services that add
value for the customer.

Strategic Versus Tactical Operation

Operations decisions include decisions that are strategic in nature, meaning and they have long-term
consequences and often involves a great deal of expense and resource commitments.

Strategic operation decisions include the following:

- Facility location decisions,
- The type of technologies that the organization will use
- Determining how labor and equipment are organized.
- How much long-term capacity the organization will provide to meet customer demand.

Tactical operations decisions have short to medium term impact on the organization, often involve less
commitment of resources, and can be changed more easily than strategic decisions. The following are
some tactical decisions:
- Work scheduling
- Establishing quality assurance procedures
- Contracting with vendors
- Managing inventory
-
Strategic and tactical operations decisions determine how well the organization an accomplish its
goals. They also provide opportunities for the organization to achieve unique competitive advantages that
attract and keep customers.

For example, United Parcel Services (UPS), an international package delivery service, formed a partnership
with its customer, Toshiba computers. Toshiba needs to provide a repair service to its laptop computer
customers. The old approach of providing this service as cumbersome and time-consuming:
1. UPS picked up the customer computers.
2. UPS delivered the computers to Toshiba
3. Toshiba repaired the computers.
4. UPS picked up the repaired computers and delivered them back to the customers.

Under this traditional approach, the total time to get a laptop computer repaired was two-weeks a long
time for people to be without their laptop. Then they came up with an innovative idea for Toshiba to
provide better service to its customers.

UPS hired, trained, and certified its own employees to repair Toshiba laptop computers. The new repair
process is much more efficient:
1. UPS picks up computers from Toshiba owners.
2. UPS repairs the computers.
3. UPS delivers the computer repaired is now about two days.

Most Toshiba customers think that Toshiba is doing a great job of repairing their computers, when in fact
Toshiba never touches the computers. The result of this operations innovation is better service to Toshiba
customers and a strong and profitable strategic partnership between UPS and its customer, Toshiba.

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 Figure 5. Commercial Operations Management Areas

Brand Brand Management

Product Customer Innovation Product Channel &
Interaction Management Management Sales
Management Management
Marketing Marketing
Operations
Management
Talent & skills Management
People

Characteristics of Strategy

a.) Strategy is traditionally meant to be a grand plan made in the light of what it was believed an
adversary might or might not do.
b.) Strategy derives its relevance given from the existence competition in business.
c.) It is done on the presumption of the existence of a negative scenario.
d.) It also connotes general program of action and deployment of emphasis and resources to attain
comprehensive objectives

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NAME:________________________________EXPERIENCIAL EXERCISES 1
DR. CHARMAINE S. LAVARITTE

Solved Problem 1.1

Productivity can be measured in a variety of ways, such as by labor, capital, energy, material
usage, and so on. At North Wuang Chung Lumber Co. Inc. Mr. Chuan Ching, President and
producer of apple crates sold to growers, has been able, with his current equipment, to
produce 240 crates per 100 logs. He currently purchases 100 logs per day, and each log
requires 3 labor-hours to process. He believes that he can hire a professional buyer who can
buy a better-quality log at the same cost. If this is the case, he can increase his production to
260 crates per 100 logs. His labor-hours will increase by 8 hours per day.

What will be the impact on productivity (measured in crates per labor-hour) if the buyer is
hired?

SOLUTION:

a.) Current labor productivity = 240 crates_________

100 logs x 3 hours/log
= 240
300
= .8 crates per labor-hour

b.) Labor productivity = 260 crates_________________

(100 logs x 3hours/log) + 8 hours
= 260
308
= .844 crates per labor-hour

Using current productivity (.80 from (a) as a base, the increase will be 5.5% (.844/.8 = 1.055,
or a 5.5% increase).

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NAME:____________________________________ MOULE 1
DR. CHARMAINE S. LAVARITTE PRELIM

Processing Your Knowledge

1. Figure 1 in page 9 of this module outlines the operations, finance/accounting, and

marketing functions of three organizations. Prepare a chart similar to figure 1
outlining the same functions for of the following:
1.1 College Library
1.2 BLRDC
2. Why should one study operations management?

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 27
ANSWER SHEET OF page 25:

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 28
 Check Your Progress
PERFORMANCE TASK SHEET 1

Name : Lesson No. 1

Grade
: Module No: 1
Level/Section
Professor : Subject: CBMEC 2

Let’s Get Started

CASE STUDY- ZYCH CHEMICALS CORPORATION

Tom Vramkhe, the production manager of ZYCH chemicals, in Texas is preparing his quarterly
report, which is to include a productivity analysis for his department. One of the inputs is
production data prepared by Sharon Welson, his operations analyst. The report, which she gave
him this morning, showed the following:

2016 2017
Production (units) 4,500 6,000
Raw material used (barrels of 700 900
petroleum by-products)
Labor hours 22,000 28,000
Capital Cost applied to the $375,000 $620,000
department

Tom Vramkhe knew that his labor cost per hour had increased from an average of $13 per hour to
an average of $14 per hour, primarily due to a move by management to become more competitive
with a new company that had just opened a plant in the area. He also knew that his average cost
per barrel of raw material had increased from $320 to $360. He was concerned about the
accounting procedures that increased his capital cost from $375,999 to $620,000, but earlier
discussion with his boss suggested that there was nothing that could be done about that allocation.

Tom Vramkhe wondered if his productivity had increased at all. He called Sharon Welson into the
office and conveyed the above information to her and asked her to prepare this part of the report.
Then you are Sharon Welson’s associate, definitely she asked you to prepare in her behalf.

Process Questions

1. Prepare the productivity part of the report for Mr. Vramkhe. He probably expects some
analysis of productivity inputs for all factors, as well as a multifactor analysis for both years
with the change in productivity (up or down) and the amount noted.
2. The producer price index had increase from 120 to 125, and this fact seemed to indicate
to Mr. Tom Vramkhie that his costs were too high. What do you tell him are the implications
of this change in the producer price index?
3. Management expectations for departments such as Mr. Tom Vramkhie’s is an annual
productivity increase of 5%. Did he reach his goal? SHOW YOUR SOLUTIONS.

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ANSWER SHEET OF PAGE 27

Process Questions

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1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 30
SOLUTIONS: SHOW YOUR SOLUTION HERE.
ANSWER SHEET OF PAGE 27

Full Name and Signature

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 31
 Check Your Progress

Answer sheet of Exercises 1 (page 11)

_________________________________________
FULL NAME AND SIGNATURE

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 32
 Check Your Progress

Answer sheet of Exercises 2 (page 21)

______________________________________
FULL NAME AND SIGNATURE

1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 33
 References

Printed Sources

Jay Heizer and Barry Render. Operations Management. Ninth Edition. Prentice Hall

Internet Sources

www.studocu.com.net
www.slideshare.net
www.usagarzonedu.files.wordpress.com

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1ST TERM 2ND SEM SY2021-2022 CBMEC2 OPERATION MANAGEMENT BSBA Program P a g e | 35