Chapter 1 – p.

Huynh Ai Van, MIT

In this chapter, you will learn about:
1. The Operations Function
2. The Evolution of Operations Management
3. Internationalization and Globalization

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 Operations:

INPUT TRANSFORMATION PROCESS OUTPUT

Feedback
Requirements 3
Operations management:
physical

locational

exchange
TRANSFORMATION PROCESS

physiological

psychological

informational
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 Value chain: The role of operations is to create value:
• ensure that the transformation process is performed
efficiently
• the output is of greater value than the sum of the inputs.

Supplier Manufacturer Warehouse Consumer

Distributors
Input #1 à value #1
Input #2 à value #2 Operations Output #A à value #A
Input #3 à value #3
Sum = value 123 value #A > value 123
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 Activity: Group discussion

Organization Inputs Transformati Outputs

on
Post Office ? ? ?

Bank ? ? ?

Manufacturer ? ? ?

(e.g. shoe,
paper)
School ? ? ?

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7
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Craft production: Division of labor:

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Mass production:

e f it s
Ben • Products are made precisely and quickly
• Labor costs can be reduced
Disa
dvan
tage §Workers carry out boring and repetitive tasks
s §If the machinery breaks down it can be costly

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 Why do we need
globalization?

1. Cost: low cost among not only domestic rivals, but also global competitors
2. Flexibility: the ability to change manufacturing products and services to respond
to fluctuations of global demand in the dimensions of both time and scope
3. Quality: maintaining a significantly high level of quality among competitive
products or service worldwide
4. Time: the shortest intercontinental physical distance, shortest manufacturing and
shipping time, rapid respond to local customers in different regions
5. Integration: access to international markets, approach latest trends and
technologies
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Competitiveness:
the degree to which a
𝑂𝑢𝑡𝑝𝑢𝑡
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
nation can produce 𝐼𝑛𝑝𝑢𝑡
goods and services that
meet the test of
international markets.

Productivity:
the ratio of output to
input.

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(a) LP = 100.000/10.000 = 10 U/H

(b) MP = 100.000/5.000 = 20 U/H

(c) Mul.P = 100.000/(10.000x$15

+ 5.000x$10 + $35.000 +
$15.000) = 0.4 U/$

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Figure 1.9
Productivity Growth, 2008
(output per labor hours)

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https://data.oecd.org/lprdty/multifactor-productivity.htm#indicator-chart
Figure 1.10
Percent Change in
Input and Output,
2008
Productivity statistics
assume that if more
input were available,
output would
increase at the same
rate
à Not true

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LP of US = 136/89.5 = 1.5
LP of GM = 100/83.6 = 1.2
LP of JP = 102/72.7 = 1.4
--> US is the most productive country

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Jake = 100/40 = 2.5
Josh = 50/15 = 3.3
Jennifer = 200/85 = 2.4
John = 35/10 = 3.5
--> John is the most productive seller

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 Anna = $40.000/250 = 160
Black = $12.000/60 = 200
Char = $60.000/500 = 120
Dan = $25.000/200 = 125
--> Blacksburg has the highest labot productivity

Productivity is defined as output per unit of input

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given
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 Last year This year • By number, Jim was
more productive last
Hours fishing 4 6 year.
Bass caught 12 15 • By weight, Jim was
Average weight 20 25 more productive this
year.
Bass/hour 60 62.5
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