A Benchmark For Models of Growth and Inflation20130917122818

Module 1
BIS 963 Operations Management

Introduction to
Operations Management
Prof. Aziz Ezzat ElSayed, Ph.D.
Professor of Industrial Engineering

College of Engineering and Technology
Arab Academy for Science and Technology
Abu-Kir Campus, Alexandria, Egypt
Main Reference: Operations Management: Sustainability and Supply Chain Management, Jay Heizer,
Barry Render, Chuck Munson, Global Edition, 12/E, ©2017 • Pearson
• In a Turbulent World …
How to Run
a Successful Corporate ?
• A Successful Corporate Means ….

• Successful Operations !
© Copyright Prof. Dr. Aziz Ezzat ElSayed – BIS 963 Operations Management - Lecture Handouts 2
© Copyright Prof. Dr. Aziz Ezzat ElSayed – BIS 963 Operations Management - Handouts 1
500
Top 10 World Companies (2017)

Revenues
Rank Company
(Million)
1 Wal-Mart Stores $485,873
2 State Grid $315,199
3 Sinopec Group $267,518
4 China National Petroleum $262,573
5 Toyota Motor $254,694
6 Volkswagen $240,264
7 Royal Dutch Shell $240,033
8 Berkshire Hathaway $223,604
9 Apple $215,639
10 Exxon Mobil $205,004
Source :http://fortune.com/global500/ ( Accessed: June 2018)
Operations …
• The set of activities that transform

inputs into outputs to produce goods
or services which have added value.
Operations …
• Set of Activities
• Inputs / outputs
• Goods / Services
• Added Value
3 Basic Functions …
To create goods & services, all Organizations
perform ...
Organization
Marketing Operations Finance

•Generates demand •Produce Goods •Tracks Finance
•Consumer Needs •Provide service • Pays bills
•Promotions • Collects money
•Advertising
•Customer Relations
SUB FUNCTIONS
Case 1 Organization
Commercial Bank
• Teller Scheduling
SUB FUNCTIONS
• Check Clearing
• Collection
• Transaction
• Layout Design
• Vault Operations
• Maintenance
• Security
Case 2 Organization
Airline Industry
• Ground support
SUB FUNCTIONS
• Catering
• Flight Operations
• Crew Scheduling
• Maintenance
• Communications
• Dispatching
• Reservations
Case 3 Organization
Manufacturing
• Facilities Layout
SUB FUNCTIONS
• Production Control
• Materials Control
• Quality Assurance
• Fabrication
• Maintenance
• Job Scheduling
• Process Analysis
Example 1: 
Examining Options for increasing contribution
Marketing Finance Operations
Consider the current Option Option Option
situation of a firm Increase
Increase Reduce Reduce
sales
Sales 50%
50% Finance Production
Current Costs 50% Costs 20%
Sales $100,000 $150,000 $100,000 $100,000
Cost of Goods Sold – 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 $ 10,500 $ 18,000 $ 12,750 $ 22,500
Exercise: what is the impact of 15% decrease in costs in the OM option ?
Operations …?
Human
Financial
Resources Physical
Information
Transformation processes of inputs to output goods and /or services

Operations … ? Input Output System

Environment
Data • Competitors
• Suppliers • Technology Data
(information) (information)
• Customers • Economy • Regulation
Transformation
Inputs Outputs
System
• Capital
Conversion
• • Goods
• Materials
Transportation
• • Services
• Equipment
Storage
•
• Facilities
Inspection
•
• Labor Data
• Knowledge Data
Action (information)
(information)
• Time
Action Monitoring and
Action = Feed Back Control
Adding Values in
Operations … ? a Supply Chain
Up Down
Stream Stream
$0.20 $0.33 $0.48 $1.00 $1.15 $1.25
(Wheat)
Supply Chain
$0.10 $0.15 $0.25
• The chain of activities for
supplying bread to consumers.
• Each stage adds value for the
final customer.
Supply Chain
• A global network of organizations and
activities that supply a firm with goods
and services.
• Members of the supply chain collaborate
to achieve high levels of customer
satisfaction, efficiency and competitive
advantage.
Farmer Syrup Producer Bottling Plant Distributer Consumer

Supply Chain Management
The management of organizations, people,

technology, activities, information and resources
involved in moving a product or service from
supplier to customer.
Adapted with modification from: http://supplychaincanada.org/en/
A Generic Supply Chain Network
Source: “ A Fuzzy Approach for a Supply Chain Network Design Problem” , Proceedings of 26th Annual
Production and Operations Management Society Conference, Washington DC, USA, May 2015
Example: Supply Chain in Services
Up Stream Down Stream
Tier 1 Tier 2 Tier 3 Tier 4 Tier 1 Tier 2
Labor
Sand Quarry Contractor
Guests
Cement
Supplier
Gravel Quarry
Building
Contractor Guests
Hotel
Management
Company
Lumber Frames
Provider Contractor Furniture Supplier
Mill
Hotel Management Guests
Food Supplier
Economies of Scope Vs. Scale

Economy of Scope Economy of Scale
• A relatively new • Has been Known for long
approach. time (e.g. Ford’s mass
• Benefits gained from production lines).
producing a wide variety • Benefits gained from the
of products or services by production of large
efficiently utilizing the volume of a product or
same operations. service.
• Heavily based on the • Increasing profitability
adoption of high and contributing to firm’s
technology. financial performance.
Sustainability in production processes
Four R’s to address sustainability:
1. Resources
Special pressure on the use of non-renewable resources-
depletion of resources – water – energy.
2. Recycling
Wastes and scrap : burn it – bury it (undesirable) or
reuse it – recycling starts at design stage.
3. Regulations
Laws and regulations affect methods of transportation,
waste and noise.
4. Reputation
Bad Reputation can have negative consequences.
Topics - Decisions …
Forecasting Strategy Projects Quality
Capacity Inventory Scheduling Location
Waiting lines Process Layout Maintenance

Operations Management Decisions

• Forecasting: The art and science of
forecasting customer demand to
optimize supply decisions by corporate
supply chain and business management.
• Strategy: Provides an overall direction

that serves as the framework for
carrying out all the organization’s
functions.
• Project Management: The application
of processes, methods, knowledge, skills
and experience to achieve the project
objectives.
• Quality Management: build a total

quality management system that
identifies and satisfies customer needs

• Capacity Planning: The process of
determining the operations capacity
needed by an organization to meet
changing demands for its outputs.
• Inventory Management: The process

of ordering, storing and using a
company's inventory: raw materials,
components and finished products.
• Scheduling: The process of assigning,
and sequencing of jobs and workloads
in production of goods or services.
• Location: A strategic decision for any

production or service organization to find
a new site or region with sufficient
demand to match its capacity.

• Waiting Lines: the management of
waiting lines are based on averages for
customer arrivals and service times to
optimize queues.
• Process Analysis: understand and

improve the operations processes by
removing wastes and increasing
efficiency.
• Facility Layout: The arrangement of
different aspects of facilities in an
appropriate manner as to achieve
desired operations output results.
• Maintenance Management:
Maintaining the resources/assets of the
organization so that operations performs
effectively and efficiently.
Course Modules
# Topic Category
1 Introduction to OM & Essential
2 Productivity Enhancement Essential
3 Forecasting Demand Essential
4 Quality Management Tentative
5 Capacity Planning Essential
6 Process Strategy Essential
7 Location Planning Tentative
8 Scheduling Tentative
9 Inventory Management Essential
10 Supply Chain management Tentative
Course Materials
Operations Management: Sustainability and Supply
Chain Management, Global Edition, 12/E
• Jay Heizer,
• Barry Render,
• Chuck Munson,
• ISBN-10: 1292148632,
• ©2017 , Pearson
Lecture Handouts
Your Notes !
Excel Files
Assignments
Global Edition
Handouts:
https://sites.google.com/site/omaast/ Bis963AAST%
Grades ..
Your Grade in this course is the sum of the following:
No Subject % grade
1 Assignments and home works 25%
2 Mid-Term Assessment (Exam) 30%
3 Participation, attendance,… 15%
4 Final Assessment (Exam) 40%
Total 100%
Attendance is a must to capture insights of this course …..
Take care Please … Under any circumstances Exams

will not be rescheduled … You Missed it You Lose it !
Assignments ..
All Assignments , Class work and Projects
should be sent in WS, PDF or PPT Format to
this email Address
mba.om.bis963@gmail.com
In Your email message Subject line use the following Format:
Group # - Your Name – Student Id # - Assignment title - Assignment #
Example:
Group A-Ibrahim Abdou - 900123456- Forecast - Assignment # 2
Department of Industrial and Management Engineering
Module 2
BIS 963 Operations Management
Productivity Enhancement
Prof. Aziz Ezzat ElSayed, Ph.D.
Professor of Industrial Engineering

College of Engineering and Technology
Arab Academy for Science and Technology
Abu-Kir Campus, Alexandria, Egypt
Main Reference: Operations Management: Sustainability and Supply Chain Management, Jay Heizer,
Barry Render, Chuck Munson, Global Edition, 12/E, ©2017 • Pearson
Productivity ...
1
Productivity
OUTPUT
Productivity =
INPUT
Measures …
1. Partial measure : Output ÷ (single input)
2. Multi-factor measure: output ÷ (multiple inputs)
3. Total measure : output ÷ (total inputs)
Growth …
[ This Period Productivity – Last Period Productivity]
Productivity
=
Growth Rate (%)
Last Period Productivity
Measures of Productivity
Partial measures
Labor productivity = (Output Quantity  number of workers)
Labor productivity = (Value of Output  number of workers)
Machine productivity = (Output  number of Machines)
Energy productivity = (Output  Energy consumed)
Capital productivity = (Output  Capital Invested)
Multifactor measures
Output  (Labor + Machines)
Output  (Capital + Energy+ Labor)
Total measures
Goods or services produced  ( All inputs used to produce them)
Example : Units produced = 1,000 and labor-hours used is 250 , Then

Productivity = 1,000/250 = 4 units per labor-hour
2
Case :
Productivity Improvement
Starbucks and the Game of Seconds ..!
A team of 10 analysts
continually look for ways
to save time.
Some improvements:
Stop requiring signatures on Saved 8 seconds

credit card purchases under $25 per transaction
Saved 14 seconds
Change the size of the ice Scoop per drink
Saved 12 seconds
New Espresso Machine per coffee cup
Case :
Productivity Improvement
Starbucks and the Game of Seconds ..!
Operations improvements have increased Starbucks yearly

revenue per outlet by $200,000 to $940,000 in six years.
Productivity has improved by 27%, or about 4.5% per year
3
Problem 1
• A firm produces 10,000 units of a certain
product which is sold at $10 per unit. The
firm uses 500 labor hour at a labor rate of $9
per hour.
What is the labor productivity ?
Labor Productivity = 10000 ÷ 500 = 20 units/lab.hr 1
Labor Productivity =(10000 x$10)÷500 =$200/lab.hr 2
Labor Productivity =10000 ÷(500x$9) =2.20 units/$ 3
Labor Productivity =(10000 x$10)÷(500x$9) =$22.0/$ 4
Productivity
Continued ...
4
Problem 4
The following labor data are collected for four departments
in a firm, compare the labor productivity:
Output Units # of Workers Hours
1 720 4 8
2 680 5 6
3 350 6 4
4 570 8 3
Output (units)
Labor Productivity =
No. of Workers X(working hours)
Department Productivity
1 22.50
2 22.67
3 14.58
4 23.75
Problem 5
• ABCD Company operates 12 hours per day to
produce 240 pumps. The OM manager thinks
that by changing one of the suppliers she can
increase the rate to 360 pumps per day. Total
material cost for each pump is approximately
$3.50; she has to invest $20 in the necessary
supplies (disposables) per day; energy costs are
assumed to be only $4.00 per day; and the firm
has 20 workers each is making $10 per hour.
Viewing this from a total (multifactor)
productivity perspective, what is the productivity
now and with the new supplier?
5
Solution Working hours = 12 hours/day
Current Method New Supplier
Output 240 Pumps Output 360 Pumps
Input (Materials) $3.5 Per pump
Input (Materials) $20 Per day
Input (energy) $4.0 Per day Same Inputs
Input (workers) 20 Worker N.B. Materials Input will change
Input (worker/hr) $10 Per worker/hr
Total Inputs (1) = $3264 Total Inputs (2) = $3684
MFP (1) = 240 ÷ $3264 = 0.073 pump/$input 1
MFP (2) = 360 ÷ $3684 = 0.098 pump/$input 2

% Improvement  33 %
Case Study
Productivity A firm has its Productivity Progress as
Growth Rate shown in Figure Below
(%)
7
6
5
4
3
2
1 Time (Years)
08 09 10 11 12 13 14 15 16 17
What do you think the manager of this firm is doing ?
6
World Productivity
GDP per Capita (PPP) (2017)
Gabon
Botswana
Source: The International Monetary Fund
Improving Productivity
• Develop productivity measures
• Determine critical (bottleneck) operations
• Develop methods for productivity
improvements (Use IT)
• Establish reasonable goals
• Get management support
• Measure and publicize improvements
• Don’t confuse productivity with efficiency
7
Productivity Vs. Efficiency
Consider a simple production system with a single input (x) and single output (y)
Output
Production Frontier
Production is a measure of output

only and not a measure of efficiency
Efficiency is ..
Maximum O/P at same I/P (point B)
O/P at minimum I/P (point C)
Input
The Production Frontier defines the relationship between (X) and (Y),
the maximum output at each input. So any point on the production
frontier is efficient (points B and C). Point (A) is inefficient because the
output could be increased to reach level (B)

A Benchmark For Models of Growth and Inflation20130917122818

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Module 1

BIS 963 Operations Management

Professor of Industrial Engineering

• A Successful Corporate Means ….

Top 10 World Companies (2017)

• The set of activities that transform

Marketing Operations Finance

Marketing Operations Finance

Marketing Operations Finance

Marketing Operations Finance

Transformation processes of inputs to output goods and /or services

Operations … ? Input Output System

$0.20 $0.33 $0.48 $1.00 $1.15 $1.25

Farmer Syrup Producer Bottling Plant Distributer Consumer

The management of organizations, people,

A Generic Supply Chain Network

Hotel Management Guests

Economies of Scope Vs. Scale

Capacity Inventory Scheduling Location

Waiting lines Process Layout Maintenance

Operations Management Decisions

• Strategy: Provides an overall direction

• Quality Management: build a total

Operations Management Decisions

• Inventory Management: The process

• Location: A strategic decision for any

Operations Management Decisions

• Process Analysis: understand and

Attendance is a must to capture insights of this course …..

Take care Please … Under any circumstances Exams

In Your email message Subject line use the following Format:

Group # - Your Name – Student Id # - Assignment title - Assignment #

BIS 963 Operations Management

Professor of Industrial Engineering

Example : Units produced = 1,000 and labor-hours used is 250 , Then

Stop requiring signatures on Saved 8 seconds

Operations improvements have increased Starbucks yearly

Labor Productivity =(10000 x$10)÷500 =$200/lab.hr 2

Labor Productivity =10000 ÷(500x$9) =2.20 units/$ 3

Labor Productivity =(10000 x$10)÷(500x$9) =$22.0/$ 4

Total Inputs (1) = $3264 Total Inputs (2) = $3684

MFP (1) = 240 ÷ $3264 = 0.073 pump/$input 1

MFP (2) = 360 ÷ $3684 = 0.098 pump/$input 2

What do you think the manager of this firm is doing ?

Source: The International Monetary Fund

Production is a measure of output

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