− Outputs goods services

Lesson 1 − Value added – difference between the cost of inputs and the value/price of outputs
Operations management − Feedback -from customers; negative or positive

− The management of systems or processes that creates goods and/or provide processes The scope of operations management
− Organization (they should cooperate, intersect, interrelate, interreact)
− Responsibility of operations manager
o Finance
o Acquisition of resources and the conversion of those inputs into outputs using one
▪ Major activities
or more transformation processes. - It also includes product and/or service design
• Budgeting – monthly, annually
o Operations performs this activity in conjunction with marketing.
• Economic analysis of investment proposal – evaluating alternative o Also be a source of new ideas for improvements in the processes that provide the
investments goods or services.
• Provision of funds – responsible in providing of funds in the entire − Primary function of operations manager
operations o Guide the system by decision making
o Operations department
▪ All activities directly related to producing goods/ offering services Systems design vs. Systems Operations
o Marketing
System Design System Operations
▪ More promotions and selling
− Involves decision that relate to system − Involves management of personnel,
▪ Responsible in conducting researches
capacity, the geographic location of inventory planning and control,
▪ Lead time - it is the time necessary to deliver an order or perform a service
facilities, arrangement of departments scheduling, project management, and
• If it is not delivered on time, it is free and placement of equipment within quality assurance
Other functions of business organization physical structures, product and service
planning, and acquisition of equipment
− Accounting - FS
− Purchasing – to purchase, procurement of materials − Requires long-term commitment − Involves day-to-day operating decisions
− Personnel – human resources
− Public relations – building and maintain positive image of the organization Features of Operations Systems
− Industrial engineering – concerned with the employees; scheduling of employees; Degree of Standardization
evaluation of employees; quality control Standardized Output Customized Output
− Distribution department – logistics department; shipping of goods to customers; stores; − High degree of uniformity in goods or − Designed for a specific case or individual
wholesalers and retailers services
− Maintenance – maintain, repair of building, equipment, general repairs − Examples: − Example:
− MIS – connects all communications in the systems o Goods o Goods
▪ Radios, television, ▪ Eyeglasses, custom-
Value-added process
computers fitted clothing
− Input (land, labor capital, ideas) o Services o Services
▪ Automatic car washes, ▪ Tailoring, taxi rides,
− Transformation/ conversion process
televised newscasts surgery
Difference between Manufacturing versus Service Operations
Characteristics Manufacturing Services Lesson 2
Output Tangible Intangible
Customer Contact Low High Productivity
Uniformity of input High Low − A measure of the effective of resources usually expressed as the ratio of output to input
Labor Content Low High
− Productivity ratios are used for
Uniformity of Output High Low
o Planning workforce requirements
Measurement of Productivity Easy Difficult
o Scheduling equipment
Opportunity to correct quality High Low
o Financial analysis
problems before delivery to
customer 𝑜𝑢𝑡𝑝𝑢𝑡𝑠
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
𝑖𝑛𝑝𝑢𝑡𝑠
The Historical Evolution of Operations Management
− Three measures
o Partial measure
▪ 𝑂𝑢𝑡𝑝𝑢𝑡/ (𝑠𝑖𝑛𝑔𝑙𝑒 𝑖𝑛𝑝𝑢𝑡)
o Multi factor measures
▪ 𝑂𝑢𝑡𝑝𝑢𝑡𝑠/ (𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑒 𝑖𝑛𝑝𝑢𝑡𝑠)
o Total measure
▪ 𝑂𝑢𝑡𝑝𝑢𝑡/ (𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑝𝑢𝑡𝑠)

𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 − 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑒𝑟𝑖𝑜𝑑 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦

𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝑔𝑟𝑜𝑤𝑡ℎ = ∗ 100
𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑒𝑟𝑖𝑜𝑑 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦

Trends in Business
− E-business
o Use of the Internet to transact business
− Supply chain
o A sequence of activities and organizations involved in producing and delivering a
good or service.
 o Processes and procedures wherever possible can have a significant impact on both
productivity and quality
− Quality
o Distort productivity measurements
− Use of the internet
o Can lower costs of a wide range of transactions, thereby increasing productivity
o It is likely that this effect will continue to increase productivity in the foreseeable
future
− Computer viruses
o Can have an immense negative impact on productivity
− Searching for lost or misplaced items
o Wastes time, hence negatively affecting productivity
− Scrap rates
o Have an adverse effect on productivity, implying inefficient use of resources
− New workers
o Tend to have lower productivity than seasoned workers
o Growing companies may experience a productivity lag
− Safety
o Accidents can take a toll on productivity
− Shortage of IT workers
o Hampers the ability of companies to update computing resources, generate and
sustain growth, and take advantage of new opportunities
− Layoffs
o The effect can be positive and negative
o Initially, productivity may increase after a layoff, because the workload remains the
same but fewer workers do the work-although they have to work harder and longer
Factors affecting productivity to do it
− Capital o As time goes by, the remaining workers may experience an increased risk of
− Methods burnout, and they may fear additional job cuts. The most capable workers may
− Quality decide to leave
− Technology − Labor turnover
− Management o Has a negative effect on productivity; replacements need time to get up to speed
− Design of workspace
Other factors o It can impact productivity
− Standardization o For example, having tools and other work items within easy reach can positively
impact productivity.
 − Incentive plans that reward productivity
o Increases can boost productivity
o Has also the risk of only thinking about the incentive while sacrificing output

Bottleneck Operation

Improving productivity measures

− Develop productivity measures
− Determine critical (bottleneck) operations
− Develop methods for productivity improvements
− Establish reasonable goals
− Get management support
− Measure and publicize improvements
− Don’t confuse productivity with efficiency