Operations and Productivity ch1

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

Organizing to Produce Goods and Services -Essential functions:

1-Marketing 2-Production/operations 3-Finance/accounting

generates demand creates the product tracks how well the organization is
doing, pays bills, collects the money
Organizational Charts

The 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

Why Study OM?

1.OM is one of three major functions of any organization; we want to study how people organize themselves for
productive enterprise
2. We want (and need) to know how goods and services are produced
3. We want to understand what operations managers do
4. OM is such a costly part of an organization

Options for Increasing Contribution

What Operations Managers Do-Basic Management Functions

Planning Organizing Staffing Leading Controlling

Ten Strategic Decisions

The Strategic Decisions

De1. Design of goods and services
▶ Defines what is required of operations
▶ Product design determines quality, sustainability and human resources

2. Managing quality
▶ Determine the customer’s quality expectations
▶ Establish policies and procedures to identify and achieve that quality

3. Process and capacity design

▶ How is a good or service produced?
▶ Commits management to specific technology, quality, resources, and investment

4. Location strategy
▶ Nearness to customers, suppliers, and talent
▶ Considering costs, infrastructure, logistics, and government

5. Layout strategy
▶ Integrate capacity needs, personnel levels, technology, and inventory
▶ Determine the efficient flow of materials, people, and information

6. Human resources and job design

▶ Recruit, motivate, and retain personnel with the required talent and skills
▶ Integral and expensive part of the total system design

7. Supply chain management

▶ Integrate supply chain into the firm’s strategy
▶ Determine what is to be purchased, from whom, and under what conditions

8. Inventory management
▶ Inventory ordering and holding decisions
▶ Optimize considering customer satisfaction, supplier capability, and production schedules

9. Scheduling
▶ Determine and implement intermediate- and short-term schedules
▶ Utilize personnel and facilities while meeting customer demands

10. Maintenance
▶ Consider facility capacity, production demands, and personnel
▶ Maintain a reliable and stable process

Where are the OM Jobs?

1. Technology/methods
2. Facilities/space utilization
3. Strategic issues
4. Response time
5. People/team development
6. Customer service
7. Quality
8. Cost reduction
9. Inventory reduction
10. Productivity improvement
Opportunities management positions

Plant Manager, Operations Analyst, Quality Manager, Supply-Chain Manager and Planner, Process Improvement
Consultants
Certifications

▶ APICS, the Association for Operations Management

▶ American Society for Quality (ASQ)
▶ Institute for Supply Management (ISM)
▶ Project Management Institute (PMI)
▶ Council of Supply Chain Management Professionals
▶ Charter Institute of Procurement and Supply (CIPS)
Significant Events in OM

Cost focus, Quality focus, customization focus, Globalization focus

The Heritage of OM

▶ Division of labor (Adam Smith 1776; Charles Babbage 1852)

▶ Standardized parts (Whitney 1800)
▶ Scientific Management (Taylor 1881)
▶ Coordinated assembly line (Ford/ Sorenson 1913)
▶ Gantt charts (Gantt 1916)
▶ Motion study (Frank and Lillian Gilbreth 1922)
▶ Quality control (Shewhart 1924; Deming 1950)
▶ Computer (Atanasoff 1938)
▶ CPM/PERT (DuPont 1957, Navy 1958)
▶ Material requirements planning (Orlicky 1960)
▶ Computer aided design (CAD 1970)
▶ Flexible manufacturing system (FMS 1975)
▶ Baldrige Quality Awards (1980)
▶ Computer integrated manufacturing (1990)
▶ Globalization (1992)
Internet (1995)
Eli Whitney

▶ Received government contract to make 10,000 muskets

▶ Showed that machine tools could make standardized parts to exact specifications
▶ Musket parts could be used in any musket
Frederick W. Taylor

▶ Known as ‘father of scientific management’

▶ As chief engineer for Midvale Steel, studied how tasks were done
▶ Began first motion and time studies
▶ Created efficiency principles
Taylor’s Principles
Management Should Take More Responsibility for:
1. Matching employees to right job
2. Providing the proper training
3. Providing proper work methods and tools
4. Establishing legitimate incentives for work to be accomplished
Frank and Lillian Gilbreth

▶ Husband and wife engineering team

▶ Further developed work measurement methods
▶ Applied efficiency methods to their home and 12 children!
▶ Book and Movie: “Cheaper by the Dozen,” “Bells on Their Toes”
Henry Ford

▶ Created Ford Motor Company.

▶ First used moving assembly line to make Model T
▶ Unfinished product moved by conveyor past work station
▶ Paid workers very well for 1911 ($5/day!)
W. Edwards Deming

▶ Engineer and physicist

▶ Credited with teaching Japan quality control methods in post-WW2
▶ Used statistics to analyze process
▶ His methods involve workers in decisions

Contributions From

Industrial engineering , Statistics , Management ,Economics ,Physical sciences ,Information technology

Operations for Goods and Services

Services – Economic activities that typically produce an intangible product (such as education, entertainment,
lodging, government, financial, and health services)
▶ Manufacturers produce tangible product, services often intangible
▶ Operations activities often very similar
▶ Distinction not always clear
▶ Few pure services

Differences Between Goods and Services ‫مهم‬

TABLE 1.3
CHARACTERISTICS OF SERVICES CHARACTERISTICS OF GOODS
Intangible: Ride in an airline seat Tangible: The seat itself
 Produced and consumed simultaneously: Beauty salon Product can usually be kept in inventory (beauty care
produces a haircut that is consumed as it is produced products)
Unique: Your investments and medical care are unique Similar products produced (iPods)
High customer interaction: Often what the customer is Limited customer involvement in production
paying for (consulting, education)
Inconsistent product definition: Auto Insurance changes Product standardized (iPhone)
with age and type of car
Often knowledge based: Legal, education, and medical Standard tangible product tends to make automation
services are hard to automate feasible
Services dispersed: Service may occur at retail store, Product typically produced at a fixed facility
local office, house call, or via internet.
Quality may be hard to evaluate: Consulting, education, Many aspects of quality for tangible products are
and medical services easy to evaluate (strength of a bolt)
Reselling is unusual: Musical concert or medical care Product often has some residual value

Organizations in Each Sector

▶ Service Sector -Education, Medical, Other .Trade (retail, wholesale)…

▶ Manufacturing Sector
▶ Construction Sector
▶ Agriculture
▶ Mining Sector
▶ Grand Total

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
The Economic System
 Improving Productivity at Starbucks ‫مثال‬

Productivity

▶ Measure of process improvement

▶ Represents output relative to input
▶ Only through productivity increases can our standard of living improve

Productivity Calculations

Multi-Factor Productivity

► Also known as total factor productivity

► Output and inputs are often expressed in dollars
 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
3.Precise units of measure may be lacking

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

Key Variables for Improved Labor Productivity

1. Basic education appropriate for the labor force

2. Diet of the labor force
3. Social overhead that makes labor available
▶ Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge

Productivity in the Service Sector

Productivity improvement in services is difficult because:

1. Typically labor intensive
2. Frequently focused on unique individual attributes or desires
3. Often an intellectual task performed by professionals
4. Often difficult to mechanize and automate
5. Often difficult to evaluate for quality

Ethics, Social Responsibility, and Sustainability

Challenges facing operations managers

▶ Develop and produce safe, high-quality green products
▶ Train, retrain, and motivate employees in a safe workplace
▶ Honor stakeholder commitments

Stakeholders
Those with a vested interest in an organization, including customers, distributors, suppliers, owners, lenders,
employees, and community members.

JORY Almohammdi.…Good luck