BA240: Operations Management
OverviewManufacturing & Services
Process MappingThe Role of Technology
POM Software DemoMeasuring Productivity
Exercises
What is Operations Management?
Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.
What is a Transformation Process?
A transformation process is defined as a user of resources to transform inputs into some desired outputs.
Transformations
• Physical -- manufacturing
• Locational -- transportation
• Exchange -- retailing
• Storage -- warehousing
• Physiological -- health care
• Informational -- telecommunications
Value-AddedValue-Added
The difference between the cost of inputs and the value or price of outputs.
Inputs Land Labor Capital
Transformation/Conversion
process
Outputs Goods Services
Control
Feedback
FeedbackFeedback
Value added
OM in the Organization Chart
OperationsOperations
Plant Manager
Plant Manager
OperationsManager
OperationsManager
DirectorDirector
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Finance Marketing
Business Operations OverlapBusiness Operations Overlap
Operations
FinanceMarketing
Responsibilities of Operations ManagementResponsibilities of Operations Management
Products & services
Planning– Capacity– Location–– Make or buy– Layout– Projects– Scheduling
Controlling/Improving– Inventory– Quality
Organizing– Degree of centralization– Process selection
Staffing– Hiring/laying off– Use of Overtime
Directing– Incentive plans– Issuance of work orders– Job assignments
– Costs– Productivity
OM Decisions
1. Product / Service Design2. Quality Management3. Process Strategy / Capacity Planning4. Location Strategies5. Layout Strategies6. Human Resources
7. Supply Chain Management8. Inventory Management9. Scheduling10. Maintenance
Core services are basic things that customers want from products they purchase.
Core Services
Core Services Performance Objectives
OperationsManagement
Flexibility
Quality
Speed
Price (or cost Reduction)
Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way
Value-Added Services
Value-Added Service Categories
OperationsManagement
Information
Problem Solving
Sales Support
Field Support
Manufacturing or Service?Manufacturing or Service?
Tangible Act
Manufacturing vs ServiceManufacturing vs Service
Characteristic Manufacturing ServiceOutput
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Opportunity to correct
Tangible
Low
High
Low
High
Easy
High
Intangible
High
Low
High
Low
Difficult
Lowquality problems
High
U.S. Manufacturing vs. Service Employment
0
20
40
60
80
100
45 50 55 60 65 70 75 80 85 90 95 00
Year
Perc
ent
Year Mfg. Service45 79 2150 72 2855 72 2860 68 3265 64 3670 64 3675 58 4280 44 4685 43 5790 35 6595 32 6800 30 70
Productivity• Productivity
– A measure of the effective use of resources, usually expressed as the ratio of output to input
• Productivity ratios are used for– Planning workforce requirements– Scheduling equipment– Financial analysis
Productivity
• Partial measures– output/(single input)
• Multi-factor measures– output/(multiple inputs)
• Total measure– output/(total inputs)
Productivity = Outputs
Inputs
Productivity GrowthProductivity Growth
Current Period Productivity – Previous Period ProductivityPrevious Period Productivity
Productivity Growth =
Measures of ProductivityMeasures of Productivity
Partial Output Output Output Output
measures Labor Machine Capital Energy
Multifactor Output Output
measures Labor + Machine Labor + Capital + Energy
Total Goods or Services Produced
measure All inputs used to produce them
Units of output per kilowatt-hourDollar value of output per kilowatt-hour
Energy Productivity
Units of output per dollar inputDollar value of output per dollar input
Capital Productivity
Units of output per machine hourmachine hour
Machine Productivity
Units of output per labor hourUnits of output per shiftValue-added per labor hour
Labor Productivity
Examples of Partial Productivity Examples of Partial Productivity MeasuresMeasures
Factors Affecting Productivity
Capital Quality
Technology Management
• 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
Other Factors Affecting Productivity
Bottleneck Operation
Machine #2Machine #2BottleneckOperation
BottleneckOperation
Machine #1Machine #1
Machine #3Machine #3
Machine #4Machine #4
10/hr
10/hr
10/hr
10/hr
30/hr
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
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