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OPM Heizer CH01 Operations and Productivity 06032023 125949pm

The document discusses the key decisions that operations managers must make including designing products and services, managing quality, designing processes and capacity, determining facility location and layout, human resources planning, supply chain management, inventory management, scheduling, and maintenance. It provides examples and brief explanations of each decision area.

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Muhammad Sarmad

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0% found this document useful (0 votes)

53 views61 pages

OPM Heizer CH01 Operations and Productivity 06032023 125949pm

Uploaded by

Muhammad Sarmad

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Download as PPT, PDF, TXT or read online on Scribd

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Operations

Management
Chapter 1 –
Operations and
Productivity
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 1–1
What Is Operations
Management?

Production is the creation of

goods and services
Operations management (OM) is
the set of activities that creates
value in the form of goods and
services by transforming inputs
into outputs

© 2008 Prentice Hall, Inc. 1–2

Organizing to Produce
Goods and Services
 Essential functions:
 Marketing – generates demand
 Production/operations – creates
the product
 Finance/accounting – tracks how
well the organization is doing, pays
bills, collects the money

© 2008 Prentice Hall, Inc. 1–3

Organizational Charts
Commercial Bank

Operations Finance Marketing

Teller Investments Loans
Scheduling Security Commercial
Check Clearing Real estate Industrial
Collection Financial
Transaction Accounting Personal
processing
Facilities Mortgage
design/layout
Auditing
Vault operations
Trust Department
Maintenance
Security
Figure 1.1(A)
© 2008 Prentice Hall, Inc. 1–4
Organizational Charts
Airline

Operations Finance/ Marketing

Ground support accounting Reservations
equipment Accounting Schedules
Maintenance Tariffs (pricing)
Payables
Ground Operations Receivables Sales
General Ledger Advertising
Facility
maintenance Finance
Catering Cash control
Flight Operations International
exchange
Crew scheduling
Flying
Communications
Dispatching
Management science Figure 1.1(B)
© 2008 Prentice Hall, Inc. 1–5
Organizational
Manufacturing
Charts

Operations Finance/ Marketing

Facilities accounting Sales
Construction; maintenance Disbursements/ promotion
Production and inventory control credits Advertising
Scheduling; materials control Receivables Sales
Quality assurance and control Payables
General ledger Market
Supply chain management research
Manufacturing Funds Management
Tooling; fabrication; assembly Money market
Design International
Product development and design exchange
Detailed product specifications Capital requirements
Industrial engineering Stock issue
Efficient use of machines, space, Bond issue
and personnel
and recall
Process analysis
Development and installation of
production tools and equipment Figure 1.1(C)
© 2008 Prentice Hall, Inc. 1–6
Why Study OM?
 OM is one of three major functions
(marketing, finance, and operations)
of any organization
 We want (and need) to know how
goods and services are produced
 We want to understand what
operations managers do
 OM is such a costly part of an
organization
© 2008 Prentice Hall, Inc. 1–7
What Operations
Managers Do
Basic Management Functions
 Planning
 Organizing
 Staffing
 Leading
 Controlling
© 2008 Prentice Hall, Inc. 1–8
Ten Critical Decisions
 Design of goods and services
 Managing quality
 Process and capacity design
 Location strategy
 Layout strategy
 Human resources and job design
 Supply chain management
 Inventory management
 Scheduling
 Maintenance

Table 1.2
© 2008 Prentice Hall, Inc. 1–9
1. Product and Service Design
 Design of goods and services
 What good or service should we
offer?
 How should we design these products
and services?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 10
© 2008 Prentice Hall, Inc. 1 – 11
2. Product and Process
Quality
 Managing quality
 How do we define quality?
 Who is responsible for quality?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 12
© 2008 Prentice Hall, Inc. 1 – 13
3. Process and Capacity
Design
 Process and capacity design
 What process and what capacity will
these products require?
 What equipment and technology is
necessary for these processes?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 14
© 2008 Prentice Hall, Inc. 1 – 15
4. Location
 Location strategy
 Where should we put the facility?
 On what criteria should we base the
location decision?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 16
© 2008 Prentice Hall, Inc. 1 – 17
5. Layout
 Layout strategy
 How should we arrange the facility?
 How large must the facility be to meet
our plan?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 18
© 2008 Prentice Hall, Inc. 1 – 19
© 2008 Prentice Hall, Inc. 1 – 20
6. HRM and Job Design
 Human resources and job design
 How do we provide a reasonable work
environment?
 How much can we expect our
employees to produce?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 21
© 2008 Prentice Hall, Inc. 1 – 22
7. Supply Chain Management
 Supply chain management
 Should we make or buy this component?
 Who are our suppliers and who can
integrate into our e-commerce program?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 23
© 2008 Prentice Hall, Inc. 1 – 24
8. Inventory Planning
 Inventory, material requirements
planning, and JIT
 How much inventory of each item
should we have?
 When do we re-order?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 25
© 2008 Prentice Hall, Inc. 1 – 26
9. Scheduling
 Intermediate and short–term
scheduling
 Are we better off keeping people on
the payroll during slowdowns?
 Which jobs do we perform next?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 27
© 2008 Prentice Hall, Inc. 1 – 28
10. Maintenance
 Maintenance
 Who is responsible for maintenance?
 When do we do maintenance?

Table 1.2 (cont.)

© 2008 Prentice Hall, Inc. 1 – 29
Where are the OM Jobs?
 Technology/methods
 Facilities/space utilization
 Strategic issues
 Response time
 People/team development
 Customer service
 Quality
 Cost reduction
 Inventory reduction
 Productivity improvement
© 2008 Prentice Hall, Inc. 1 – 30
Characteristics of Goods
 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction

© 2008 Prentice Hall, Inc. 1 – 31

Characteristics of Service
 Intangible product
 Produced and
consumed at same time
 Often unique
 High customer
interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed
© 2008 Prentice Hall, Inc. 1 – 32
Goods Versus Services
Attributes of Goods Attributes of Services
(Tangible Product) (Intangible Product)
Can be resold Reselling unusual
Can be inventoried Difficult to inventory
Some aspects of quality Quality difficult to measure
measurable
Selling is distinct from Selling is part of service
production
Product is transportable Provider, not product, is
often transportable
Site of facility important for cost Site of facility important for
customer contact
Often easy to automate Often difficult to automate
Revenue generated primarily Revenue generated primarily
from tangible product from the intangible service

© 2008 Prentice Hall, Inc.

Table 1.3 1 – 33
Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
100% 75 50 25 0 25 50 75 100%
| | | | | | | | |

Percent of Product that is a Good Percent of Product that is a Service

Figure 1.4
© 2008 Prentice Hall, Inc. 1 – 34
Manufacturing and Service
Employment
120 –

100 –
Employment (millions)

Service
80 –

60 –

40 –
Manufacturing
20 –

| | | | | | |
0 – 1950 1970 1990 2010 (est)
1960 1980 2000
Figure 1.5 (A)
© 2008 Prentice Hall, Inc. 1 – 35
New Challenges in OM
From To
 Local or national focus  Global focus
 Batch shipments  Just-in-time
 Low bid purchasing  Supply chain
partnering
 Lengthy product  Rapid product
development development,
alliances
 Standard products  Mass
customization
 Job specialization  Empowered
employees, teams
© 2008 Prentice Hall, Inc. 1 – 36
New Trends in OM
Past Causes Future
Local or Reliable worldwide Global focus,
national communication and moving
focus transportation networks production
offshore
Batch (large) Short product life cycles Just-in-time
shipments and cost of capital put performance
pressure on reducing
inventory
Low-bid Supply chain competition Supply chain
purchasing requires that suppliers be partners,
engaged in a focus on the collaboration,
end customer alliances,
outsourcing

Figure 1.6
© 2008 Prentice Hall, Inc. 1 – 37
New Trends in OM
Past Causes Future
Lengthy Shorter life cycles, Rapid product
product Internet, rapid international development,
development communication, computer- alliances,
aided design, and collaborative
international collaboration designs
Standardized Affluence and worldwide Mass
products markets; increasingly customization
flexible production with added
processes emphasis on
quality
Job Changing socioculture Empowered
specialization milieu; increasingly a employees,
knowledge and information teams, and lean
society production

Figure 1.6
© 2008 Prentice Hall, Inc. 1 – 38
New Trends in OM
Past Causes Future
Low-cost Environmental issues, ISO Environmentally
focus 14000, increasing disposal sensitive
costs production, green
manufacturing,
recycled
materials,
remanufacturing
Ethics not Businesses operate more High ethical
at forefront openly; public and global standards and
review of ethics; opposition social
to child labor, bribery, responsibility
pollution expected

Figure 1.6
© 2008 Prentice Hall, Inc. 1 – 39
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

© 2008 Prentice Hall, Inc. 1 – 40

Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Stop requiring signatures Saved 8 seconds
on credit card purchases per transaction
under $25
Change the size of the ice Saved 14 seconds
scoop per drink
New espresso machines Saved 12 seconds
per shot
© 2008 Prentice Hall, Inc. 1 – 41
Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Operations improvements have
helped Starbucks
Stop requiring signatures increase
Saved yearly
8 seconds
revenue per outlet
on credit card purchases perby $200,000 to
transaction
under $25 $940,000 in six years.
Change the sizeProductivity
of the ice hasSaved
improved by 27%,
14 seconds
scoop or about 4.5% per
peryear.
drink
New espresso machines Saved 12 seconds
per shot
© 2008 Prentice Hall, Inc. 1 – 42
Productivity

Units produced
Productivity =
Input used

 Measure of process improvement

 Represents output relative to input
 Only through productivity increase,
can our standard of living improve

© 2008 Prentice Hall, Inc. 1 – 43

Productivity Calculations

Labor Productivity
Units produced
Productivity =
Labor-hours used

1,000
= = 4 units/labor-hour
250

One resource input  single-factor productivity

© 2008 Prentice Hall, Inc. 1 – 44

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

© 2008 Prentice Hall, Inc. 1 – 45

Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day

Old labor 8 titles/day

productivity = 32 labor-hrs

© 2008 Prentice Hall, Inc. 1 – 46

Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day