Professional Documents
Culture Documents
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Learning Objectives
Definition of Operations Management (OM)
Organizational Functions
Why Study OM?
The future of the discipline
Goods Versus Services
Measuring productivity
Career opportunities in operations management
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What Is Operations
Management?
Production 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
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Organizing to Produce
Goods and Services
Essential functions:
1.
2.
Organizational Charts
Commercial Bank
Operations
Teller Scheduling
Check Clearing
Collection
Transaction processing
Facilities design/layout
Vault operations
Maintenance
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Human Resources
Recruitment
Job evaluation
Performance evaluation
Wage and Salary Adm.
Personnel records
Trust Department
Security
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Organizational Charts
Manufacturing
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
Human Resources
Recruitment
Marketing
Sales
promotion
Advertising
Sales
Market research
Job evaluation
Performance evaluation
Wage and Salary Adm.
Personnel records
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What Operations
Managers Do
Basic Management Functions
Planning
Organizing
Staffing
Leading
Controlling
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2. Managing quality
How do we define quality?
Who is responsible for quality?
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4. Location strategy
Where should we put the facility?
On what criteria should we base the
location decision?
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10. Maintenance
How do we build reliability into our
processes?
Who is responsible for maintenance?
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Characteristics of Goods
Tangible product
Consistent product
definition
Production usually
separate from
consumption
Can be inventoried
Low customer
interaction
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Characteristics of Service
Intangible product
Produced and
consumed at same time
Often unique
High customer
interaction
Inconsistent product
definition
Often knowledge-based
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Services
80
Manufacturing
70
60
50
40
30
20
10
Turkey
US
UK
Spain
South Africa
Russian Fed
Mexico
Japan
Hong Kong
Germany
France
Czech Rep
China
Canada
Australia
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New Trends in OM
Ethics
Global focus
Environmentally sensitive production
Rapid product development
Mass customization
Empowered employees
Supply-chain partnering
Just-in-time performance
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Productivity Challenge
Productivity is the ratio of outputs (goods
and services) divided by the inputs
(resources such as labor and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output
only and not a measure of efficiency
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Efficiency Versus
Effectiveness
The difference between efficient and effective is that
efficiency refers to how well you do something,
whereas effectiveness refers to how useful it is.
Efficiency is doing things right; effectiveness
is doing the right things.
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Productivity
Units produced
Productivity =
Input used
Measure of process improvement
Represents output relative to input
Only through productivity increases
can our standard of living improve
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Productivity Calculations
Labor Productivity
Productivity =
Units produced
Labor-hours used
1,000
= 250 = 4 units/labor-hour
One resource input single-factor productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
1 - 22
Multi-Factor Productivity
Output
Productivity =
Labor + Material + Energy
+ Capital + Miscellaneous
Also known as total factor productivity
Output and inputs are often expressed
in dollars
Multiple resource inputs multi-factor productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
1 - 23
8 titles/day
Overhead = $400/day
8 titles/day
Old labor =
productivity 32 labor-hrs
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8 titles/day
Overhead = $400/day
8 titles/day
Old labor =
= .25 titles/labor-hr
32
labor-hrs
productivity
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8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor =
= .25 titles/labor-hr
32
labor-hrs
productivity
14 titles/day
New labor =
32 labor-hrs
productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
1 - 26
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor =
= .25 titles/labor-hr
32
labor-hrs
productivity
14 titles/day
New labor =
= .4375 titles/labor-hr
32
labor-hrs
productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
1 - 27
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor =
$640 + 400
productivity
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8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor =
= .0077 titles/dollar
$640
+
400
productivity
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8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor =
= .0077 titles/dollar
$640
+
400
productivity
14 titles/day
New multifactor =
$640 + 800
productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
1 - 30
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor =
= .0077 titles/dollar
$640
+
400
productivity
14 titles/day
New multifactor =
= .0097 titles/dollar
$640
+
800
productivity
2011 Pearson Education, Inc. publishing as Prentice Hall
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Measurement Problems
1. Quality may change while the quantity
of inputs and outputs remains constant
(HDTV, iphones)
2. External elements may cause an
increase or decrease in productivity
(using more reliable electric power
system)
3. Precise units of measure may be lacking
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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
2011 Pearson Education, Inc. publishing as Prentice Hall
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10
8
6
4
2
0
10
15
20
25
30
35
Percentage investment
2011 Pearson Education, Inc. publishing as Prentice Hall
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Service Productivity
1. Typically labor intensive (teaching,
counseling)
2. Frequently focused on unique individual
desires (customer representatives in banks)
3. Often an intellectual task performed by
professionals
4. Often difficult to mechanize
5. Often difficult to evaluate for quality
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Ethics and
Social Responsibility
Challenges facing
operations managers:
Developing and producing safe,
quality products
Maintaining a clean environment
Providing a safe workplace
Honoring stakeholder commitments
2011 Pearson Education, Inc. publishing as Prentice Hall
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Entry-Level Jobs in OM
Purchasing planner/buyer
Production (or operations) supervisor
Production (or operations)
scheduler/controller
Production (or operations) analyst
Inventory analyst
Quality specialist
Others
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