1 - 1 2011 Pearson Education, Inc.

publishing as Prentice Hall

1
Operations and
Productivity
PowerPoint presentation to accompany
Heizer and Render
Operations Management, 10e
Principles of Operations Management, 8e

PowerPoint slides by Jeff Heyl
1 - 2 2011 Pearson Education, Inc. publishing as Prentice Hall
What is Operations
Management?
Production (operations) 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
1 - 3 2011 Pearson Education, Inc. publishing as Prentice Hall
Organizing to Produce
Goods and Services
Essential functions:
1. Marketing generates demand
2. Production/operations creates
the product
3. Finance/accounting tracks how
well the organization is doing,
pays bills, collects the money
1 - 4 2011 Pearson Education, Inc. publishing as Prentice Hall
Organizational Charts
Operations
Ground support
equipment
Maintenance
Ground Operations
Facility
maintenance
Catering
Flight Operations
Crew scheduling
Flying
Communications
Dispatching
Management science
Finance/
accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International
exchange
Airline
Figure 1.1(B)
Marketing
Traffic
administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising
1 - 5 2011 Pearson Education, Inc. publishing as Prentice Hall
Marketing
Sales
promotion
Advertising
Sales
Market
research
Organizational Charts
Operations
Facilities
Construction; maintenance
Production and inventory control
Scheduling; materials control
Quality assurance and control
Supply-chain management
Manufacturing
Tooling; fabrication; assembly
Design
Product development and design
Detailed product specifications
Industrial engineering
Efficient use of machines, space,
and personnel
Process analysis
Development and installation of
production tools and equipment
Finance/
accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Manufacturing
Figure 1.1(C)
1 - 7
Top 10 J obs
1 - 8
10 Hot Management Jobs in 2013

1.Chief operations and integration officer. "Hospitals
cannot continue to operate in 'business-as-usual mode.
They need to create new partnerships and alliances," notes
Sullivan. The COIO's main job: coming up with new
strategies for shifting business models.

2. Chief business officer
3. Vice president of market access
4. Compliance manager.
5. Chief risk officer.
6. Emerging payments officer.
http://management.fortune.cnn.com/2013/01/22/10-hot-management-jobs-2013/
1 - 9 2011 Pearson Education, Inc. publishing as Prentice Hall
What Operations
Managers Do
Planning
Organizing
Staffing
Leading
Controlling
Basic Management Functions
1 - 10 Source: NACE 2013 Outlook (http://www.naceweb.org/s10242012/skills-abilities-qualities-new-hires/)
Skill/Quality Weighted
average
rating*
verbally communicate with persons inside and outside the
organization
4.63
work in a team structure 4.60
make decisions and solve problems 4.51
plan, organize, and prioritize work 4.46
obtain and process information 4.43
analyze quantitative data 4.30
Technical knowledge related to the job 3.99
Proficiency with computer software programs 3.95
create and/or edit written reports 3.56
sell or influence others 3.55
Employers rate the importance of candidate skills/qualities
1 - 11 2011 Pearson Education, Inc. publishing as Prentice Hall
Significant Events in OM
Figure 1.3
1 - 12 2011 Pearson Education, Inc. publishing as Prentice Hall
Changing Challenges
Traditional
Approach
Reasons for
Change
Current
Challenge
Ethics and
regulations
not at the
forefront
Public concern over
pollution, corruption,
child labor, etc.
High ethical and
social
responsibility;
increased legal
and professional
standards
Local or
national
focus
Growth of reliable, low
cost communication
and transportation
Global focus,
international
collaboration
Lengthy
product
development
Shorter life cycles;
growth of global
communication; CAD,
Internet
Rapid product
development;
design
collaboration
Figure 1.5
1 - 13 2011 Pearson Education, Inc. publishing as Prentice Hall
Changing Challenges
Traditional
Approach
Reasons for
Change
Current
Challenge
Low cost
production,
with little
concern for
environment;
free
resources
(air, water)
ignored
Public sensitivity to
environment; ISO 14000
standard; increasing
disposal costs
Environmentally
sensitive
production; green
manufacturing;
sustainability
Low-cost
standardized
products
Rise of consumerism;
increased affluence;
individualism
Mass
customization
Figure 1.5
1 - 14 2011 Pearson Education, Inc. publishing as Prentice Hall
Changing Challenges
Traditional
Approach
Reasons for
Change
Current
Challenge
Emphasis on
specialized,
often manual
tasks
Recognition of the
employee's total
contribution; knowledge
society
Empowered
employees;
enriched jobs
In-house
production;
low-bid
purchasing
Rapid technological
change; increasing
competitive forces
Supply-chain
partnering; joint
ventures,
alliances
Large lot
production
Shorter product life
cycles; increasing need
to reduce inventory
Just-In-Time
performance; lean;
continuous
improvement
Figure 1.5
1 - 15 2011 Pearson Education, Inc. publishing as Prentice Hall
Characteristics of Goods
Tangible product
Consistent product
definition
Production usually
separate from
consumption
Can be inventoried
Low customer
interaction
1 - 16 2011 Pearson Education, Inc. publishing as Prentice Hall
Characteristics of Service
Intangible product
Produced and
consumed at same time
Often unique
High customer
interaction
Inconsistent product
definition
Often knowledge-based
Frequently dispersed
1 - 17 2011 Pearson Education, Inc. publishing as Prentice Hall
Industry and Services as
Percentage of GDP
Services Manufacturing
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90
80
70
60
50
40
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10
0
1 - 18 2011 Pearson Education, Inc. publishing as Prentice Hall
120
100
80
60
40
20
0
| | | | | | |
1950 1970 1990 2010 (est)
1960 1980 2000
E
m
p
l
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y
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Manufacturing and Service
Employment
Figure 1.4 (A)
Manufacturing
Service
1 - 19 2011 Pearson Education, Inc. publishing as Prentice Hall
Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Stop requiring signatures
on credit card purchases
under $25
Saved 8 seconds
per transaction
Change the size of the ice
scoop
Saved 14 seconds
per drink
New espresso machines Saved 12 seconds
per shot
1 - 20 2011 Pearson Education, Inc. publishing as Prentice Hall
Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Stop requiring signatures
on credit card purchases
under $25
Saved 8 seconds
per transaction
Change the size of the ice
scoop
Saved 14 seconds
per drink
New espresso machines Saved 12 seconds
per shot
Operations improvements have
helped Starbucks increase yearly
revenue per outlet by $200,000 to
$940,000 in six years.
Productivity has improved by 27%,
or about 4.5% per year.
1 - 21 2011 Pearson Education, Inc. publishing as Prentice Hall
Represents output relative to input
Productivity
Productivity =
Units produced
Input used
1 - 22 2011 Pearson Education, Inc. publishing as Prentice Hall
Productivity Calculations
Productivity =
Units produced
Labor-hours used
= = 4 units/labor-hour
1,000
250
Labor Productivity
One resource input single-factor productivity
1 - 23 2011 Pearson Education, Inc. publishing as Prentice Hall
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
=
Old labor
productivity
8 titles/day
32 labor-hrs
1 - 24 2011 Pearson Education, Inc. publishing as Prentice Hall
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
1 - 25 2011 Pearson Education, Inc. publishing as Prentice Hall
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
=
New labor
productivity
= .25 titles/labor-hr
14 titles/day
32 labor-hrs
1 - 26 2011 Pearson Education, Inc. publishing as Prentice Hall
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
= .4375 titles/labor-hr
1 - 27 2011 Pearson Education, Inc. publishing as Prentice Hall
Multi-Factor Productivity
Output
Labor + Material + Energy
+ Capital + Miscellaneous
Productivity =
More than single factor for input
Output and inputs are often expressed
in dollars
Multiple resource inputs multi-factor productivity
1 - 28 2011 Pearson Education, Inc. publishing as Prentice Hall
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:
=
Old multifactor
productivity
8 titles/day
$640 + 400
1 - 29 2011 Pearson Education, Inc. publishing as Prentice Hall
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
$640 + 400
=
Old multifactor
productivity
= .0077 titles/dollar
1 - 30 2011 Pearson Education, Inc. publishing as Prentice Hall
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
$640 + 400
=
Old multifactor
productivity
=
New multifactor
productivity
= .0077 titles/dollar
14 titles/day
$640 + 800
1 - 31 2011 Pearson Education, Inc. publishing as Prentice Hall
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
$640 + 400
14 titles/day
$640 + 800
=
Old multifactor
productivity
=
New multifactor
productivity
= .0077 titles/dollar
= .0097 titles/dollar
1 - 32 2011 Pearson Education, Inc. publishing as Prentice Hall
Measurement Problems
1. Quality may change while the
quantity of inputs and outputs
remains constant
2. External elements may cause an
increase or decrease in
productivity
Prices
Precise units of measure may be
lacking
1 - 33 2011 Pearson Education, Inc. publishing as Prentice Hall
Productivity Variables
1. Labor - contributes
about 10% of the
annual increase
2. Capital - contributes
about 38% of the
annual increase
3. Management -
contributes about 52%
of the annual increase
1 - 34 2011 Pearson Education, Inc. publishing as Prentice Hall
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