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OM CH 1 Introduction To Operations Management Operations and Prodcutivity
OM CH 1 Introduction To Operations Management Operations and Prodcutivity
OM CH 1 Introduction To Operations Management Operations and Prodcutivity
Operations Management
Hello!
Name: Aleema Shuja
Qualification: MS Management Sciences,
COMSATS University Islamabad (Silver Medallist)
Experience: 7.6 years
3
Teaching and Research Profile
Research Contributions:
4
Email: aleema.shuja@lbs.uol.edu.pk
Consultation Hours:
6
What do YOU expect?
Operations Management
Introduction
10
Success and Failure Stories
Successes!
Hard Rock Café
AMUL’s Forecast of Increased Sales during COVID Lockdown
Walt Disney Parks and Resorts
IKEA point of sale transaction data
Zara’s JIT production system – 2 weeks production time
Failures!
The Rise and Fall of Airbus A380
Nike’s Failure to Forecast Demand due to faulty Demand Planning Software
Downfall of TATA NANO
Walmart got out of stock in 2013
Cisco – Caught with piles of product on shelves in 2001
Heathrow’s Poor Demand Forecast
12 Failure Stories
Value added
1- Cost
2- Flexibility Inputs
Transformation/ Outputs
3- Innovation Land
4- Quality Conversion Goods
Labor
5- Agility/ process Services
Timeliness Capital
Feedback
Control
Feedback Feedback
Examples
Production Service
Auto factories (assembly ¨ Hospitals
plants)
¨ Airlines
Job shops (printing)
¨ Movie theaters
Fast food restaurants
¨ Grocery stores
Goods-service Continuum
Why Study OM?
OM is one of three major functions of any organization
(Marketing, Finance, and Operations).
Jobs!
Organizational Functions
¨ Operations.
¨ Creates product or service.
Marketing.
Generates demand.
¨ Finance/Accounting.
¨ Obtains funds &
tracks money.
Key Differences b/w Goods and Services
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory
Characteristics of Goods
¨ Tangible product.
¨ Consistent inputs and
outputs.
¨ Production separate from
consumption.
¨ Can be inventoried.
¨ Low customer interaction.
Characteristics of Service
¨ Intangible product.
¨ Variable inputs and outputs
(people!).
¨ Production and consumption at
same place and time.
¨ No inventories.
¨ High customer interaction.
10 Critical Decisions for OM
Product & service design (Lower limits of cost; upper limits of quality; time-to-market; customer
satisfaction; appearance; ease of production/assembly; ease of maintenance/service; competitive advantage; HR
required; sustainability)
Process capacity design (Process of production; technology, quality and HR; capital investments)
Location strategy (Judgments regarding nearness to customers, supplier and talent while considering
costs, infrastructure, logistics and govt.)
Layout of facilities (Integrating capacity needs, personnel levels, technology, inventory requirements for
efficient flow of material, people and information)
10 Critical Decisions for OM
Human resources & Job design (Recruitment, development, motivation and retention of people; Work
arrangement, ways decision-makers choose to organize work responsibilities, duties, activities, and tasks)
Supply-chain management (Decisions about what to purchase, from whom, under what conditions)
Inventory management (Inventory ordering and holding decisions; optimization for customer
satisfaction, supplier capability)
Scheduling (Determining inter-mediate and short-term schedules for efficiently and effectively utilizing
resources; allocating and prioritizing demand to available facilities)
Maintenance (Decisions about facility capacity; production demands and personnel to maintain reliable
process)
Significant Events in OM
Recent Developments for OM
Outputs
Productivity =
Inputs
Productivity Growth
Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
Measures of Productivity
MFP = Output
Labor + Materials + Overhead
MFP = 2.20
Factors Affecting Productivity
Capital Quality
Technology Management
Other Factors Affecting Productivity
Standardization
Quality
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers
Other Factors Affecting Productivity
Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity
Improving Productivity
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
Numerical Problem
COMPUTING SINGLE-FACTOR AND MULTIFACTOR GAINS IN PRODUCTIVITY
Collins Title Insurance Ltd. 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) and
overhead expenses of $400. Collins processes and closes on 8 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.
SOLUTION:
Labor productivity has increased from .25 to .4375. The change is (.4375 - .25)>.25 = 0.75, or a 75% increase in
labor productivity.
Multifactor productivity has increased from .0077 to .0097. This change is (.0097 - .0077)>.0077 = 0.26, or a 26%
increase in multifactor productivity.
Example
Compute the labor productivity for each of the weeks. On the basis of your
calculations, what can you conclude about crew size and productivity?
Numerical Problem
Compute the multifactor productivity measure for each of the
weeks shown for production of chocolate bars. What do the
productivity figures suggest? Assume 40-hour weeks and an hourly
wage of $12. Overhead is 1.5 times weekly labor cost. Material cost
is $6 per pound.