Chapter 1 Operations and Productivity

Introduction

What An introduction to Operations Management Where In any business that wants to improve its productivity Why Productivity is one measure of success in business

Production

All companies produce something In the examples you gave of careers you would like to pursue, what would you be producing? The creation of goods and services

What is Operations Management?

Operations Management is the set of activities that creates goods and services by transforming inputs into outputs

What are the Inputs and Outputs?

A A A A

Sony TV Factory Bank Hospital University

Why Study Operations Management?

Study how people organize themselves for productive enterprise Study how goods and services are produced Understand what operations managers do Understand how operations management affects costs for an organization

Operations Management Breakdown

Design of Goods and Services Managing Quality Process Strategy Location Strategy Layout Strategy

Breakdown Continued

Human Resources Supply-chain Management Inventory Management Scheduling Maintenance

Framework of Business

All businesses perform three functions to create goods and services:

Finance and Accounting Marketing Operations and Production

Operations Management and Services

Goods vs Services

Goods

Services

Resold Inventoried Measurable Quality Sales distinct from Production

Reselling Unusual Difficult to Inventory Quality Difficult to Measure Selling Part of Service

Goods vs Services Continued

Goods

Services

Product Transportable Location for Cost Easy to Automate

Provider Transportable Location for Customer Contact Difficult to Automate

Trends in Services

Your job Your parents job

Growth of Services
U.S. Employment, % Share
80 %70 60 50 40 30 20 10

Services as a Percent of GDP

United States
Services Canada France Italy Industry Britain Japan 250 200 150 100

U.S. Exports of Services In Billions of Dollars

Farming

50
W Germany 1970 1991
40 50 60 70 Percent 1970 75 80 85 90 95 2000

0 1850 75 1900 25 50 75 2000

Year 2000 data is estimated

Mix of Goods and Services

Automobile Computer Installed Carpeting Fast-food Meal Restaurant Meal Auto Repair Hospital Care Advertising Agency Investment Management Consulting Service Counseling
100
Percent of Product that is a Good

75

50

25

Percent of Product that is a Service

25

50

75

100

Pure Service

Pure Service: No physical product provided along with a service

Applying OM to Services

Can be very difficult to apply operations management concepts to the service sector

Productivity

Productivity Definition

Productivity is the ratio of outputs of an enterprise divided by its inputs

Outputs Productivity =

Inputs

Productivity Definition

Outputs? Inputs?
Products and Services

Productivity =

Labour, Material, Energy, Capital

Productivity Definition

It is the function of Operations Management to improve the ratio of outputs to inputs to make the operation more efficient. How?

Productivity Improvement

Why measure national productivity? Only by increasing productivity does the standard of living improve Three variables:

Labour Capital Management