heizer_om10_ch01.ppt
- 1. 1 - 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 1 Operations and Productivity PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl
- 2. 1 - 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall Outline What Is Operations Management? Organizing to Produce Goods and Services Why Study OM? What Operations Managers Do
- 3. 1 - 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall Outline - Continued The Heritage of Operations Management Operations in the Service Sector Differences between Goods and Services Growth of Services Service Pay Exciting New Trends in Operations Management
- 4. 1 - 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall Outline - Continued The Productivity Challenge Productivity Measurement Productivity Variables Productivity and the Service Sector Ethics and Social Responsibility
- 5. 1 - 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall Learning Objectives When you complete this chapter you should be able to: 1. Define operations management 2. Explain the distinction between goods and services 3. Explain the difference between production and productivity
- 6. 1 - 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall Learning Objectives When you complete this chapter you should be able to: 4. Compute single-factor productivity 5. Compute multifactor productivity 6. Identify the critical variables in enhancing productivity
- 7. 1 - 8 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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
- 8. 1 - 9 © 2011 Pearson Education, Inc. publishing as Prentice Hall Organizing to Produce Goods and Services Essential functions: 1. Marketing – generates demand 2. Production/operations – creates the product 3. Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
- 9. 1 - 10 © 2011 Pearson Education, Inc. publishing as Prentice Hall Organizational Charts Operations Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Finance Investments Security Real estate Accounting Auditing Marketing Loans Commercial Industrial Financial Personal Mortgage Trust Department Commercial Bank Figure 1.1(A)
- 10. 1 - 11 © 2011 Pearson Education, Inc. publishing as Prentice Hall Organizational Charts Operations Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science Finance/ accounting Accounting Payables Receivables General Ledger Finance Cash control International exchange Airline Figure 1.1(B) Marketing Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising
- 11. 1 - 12 © 2011 Pearson Education, Inc. publishing as Prentice Hall Marketing Sales promotion Advertising Sales Market research Organizational Charts 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 Manufacturing Figure 1.1(C)
- 12. 1 - 13 Retail Chains © 2011 Pearson Education, Inc. publishing as Prentice Hall
- 13. 1 - 14 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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. OM is such a costly part of an organization
- 14. 1 - 16 © 2011 Pearson Education, Inc. publishing as Prentice Hall What Operations Managers Do Planning Organizing Staffing Leading Controlling Basic Management Functions
- 15. 1 - 17 © 2011 Pearson Education, Inc. publishing as Prentice Hall Ten Critical Decisions Ten Decision Areas Chapter(s) 1. Design of goods and services 5 2. Managing quality 6, Supplement 6 3. Process and capacity 7, Supplement 7 design 4. Location strategy 8 5. Layout strategy 9 6. Human resources and 10 job design 7. Supply-chain 11, Supplement 11 management 8. Inventory, MRP, JIT 12, 14, 16 9. Scheduling 13, 15 10. Maintenance 17 Table 1.2
- 16. 1 - 18 © 2011 Pearson Education, Inc. publishing as Prentice Hall The Critical Decisions 1. Design of goods and services What good or service should we offer? How should we design these products and services? 2. Managing quality How do we define quality? Who is responsible for quality? Table 1.2 (cont.)
- 17. 1 - 19 © 2011 Pearson Education, Inc. publishing as Prentice Hall The Critical Decisions 3. Process and capacity design What process and what capacity will these products require? What equipment and technology is necessary for these processes? 4. Location strategy Where should we put the facility? On what criteria should we base the location decision? Table 1.2 (cont.)
- 18. 1 - 20 © 2011 Pearson Education, Inc. publishing as Prentice Hall The Critical Decisions 5. Layout strategy How should we arrange the facility? How large must the facility be to meet our plan? 6. 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.)
- 19. 1 - 21 © 2011 Pearson Education, Inc. publishing as Prentice Hall The Critical Decisions 7. Supply-chain management Should we make or buy this component? Who should be our suppliers and how can we integrate them into our strategy? 8. Inventory, material requirements planning, and JIT How much inventory of each item should we have? When do we re-order? Table 1.2 (cont.)
- 20. 1 - 22 © 2011 Pearson Education, Inc. publishing as Prentice Hall The Critical Decisions 9. Intermediate and short–term scheduling Are we better off keeping people on the payroll during slowdowns? Which jobs do we perform next? 10.Maintenance How do we build reliability into our processes? Who is responsible for maintenance? Table 1.2 (cont.)
- 21. 1 - 23 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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
- 22. 1 - 24 © 2011 Pearson Education, Inc. publishing as Prentice Hall Opportunities Figure 1.2
- 23. 1 - 25 © 2011 Pearson Education, Inc. publishing as Prentice Hall Certifications APICS, the American Production and Inventory Control Society American Society of Quality (ASQ) Institute for Supply Management (ISM) Project Management Institute (PMI) Council of Supply Chain Management Professionals Charter Institute of Purchasing and Supply (CIPS)
- 24. 1 - 26 © 2011 Pearson Education, Inc. publishing as Prentice Hall Significant Events in OM Figure 1.3
- 25. 1 - 35 © 2011 Pearson Education, Inc. publishing as Prentice Hall Contributions From Human factors Industrial engineering Management science Biological science Physical sciences Information technology
- 26. 1 - 36 © 2011 Pearson Education, Inc. publishing as Prentice Hall New Challenges in OM Global focus Just-in-time Supply-chain partnering Rapid product development, alliances Mass customization Empowered employees, teams To From Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization
- 27. 1 - 37 © 2011 Pearson Education, Inc. publishing as Prentice Hall Characteristics of Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction
- 28. 1 - 38 © 2011 Pearson Education, Inc. publishing as Prentice Hall Characteristics of Service Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed
- 29. 1 - 39 © 2011 Pearson Education, Inc. publishing as Prentice Hall Industry and Services as Percentage of GDP Services Manufacturing Australia Canada China Czech Rep France Germany Hong Kong Japan Mexico Russian Fed South Africa Spain UK US 90 − 80 − 70 − 60 − 50 − 40 − 30 − 20 − 10 − 0 −
- 30. 1 - 40 © 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/ investment management Consulting service/ teaching Counseling Percent of Product that is a Good Percent of Product that is a Service 100% 75 50 25 0 25 50 75 100% | | | | | | | | |
- 31. 1 - 41 © 2011 Pearson Education, Inc. publishing as Prentice Hall 120 – 100 – 80 – 60 – 40 – 20 – 0 – | | | | | | | 1950 1970 1990 2010 (est) 1960 1980 2000 Employment (millions) Manufacturing and Service Employment Figure 1.4 (A) Manufacturing Service
- 32. 1 - 43 © 2011 Pearson Education, Inc. publishing as Prentice Hall Development of the Service Economy Figure 1.4 (C) United States Canada France Italy Britain Japan W. Germany 1970 2010 (est) | | | | | 40 50 60 70 80 Percent
- 33. 1 - 44 © 2011 Pearson Education, Inc. publishing as Prentice Hall Organizations in Each Sector Service Sector Example % of all Jobs Education, Legal, Medical, other San Diego Zoo, Arnold Palmer Hospital 25.8 Trade (retail, wholesale) Walgreen’s, Wal-Mart, Nordstrom’s 14.9 Utilities, Transportation Pacific Gas & Electric, American Airlines 5.2 Professional and Business Services Snelling and Snelling, Waste Management, Inc. 10.7 Table 1.3
- 34. 1 - 45 © 2011 Pearson Education, Inc. publishing as Prentice Hall Organizations in Each Sector Service Sector Example % of all Jobs Finance, Information, Real Estate Citicorp, American Express, Prudential, Aetna 9.6 Food, Lodging, Entertainment Olive Garden, Motel 6, Walt Disney 8.5 Public Administration U.S., State of Alabama, Cook County 4.6 Total 78.8 Table 1.3
- 35. 1 - 46 © 2011 Pearson Education, Inc. publishing as Prentice Hall Organizations in Each Sector Other Sectors Example % of all Jobs Manufacturing Sector General Electric, Ford, U.S. Steel, Intel 11.2 Construction Sector Bechtel, McDermott 8.1 Agriculture Sector King Ranch 1.4 Mining Sector Homestake Mining 0.5 Total 21.2 Table 1.3
- 36. 1 - 47 © 2011 Pearson Education, Inc. publishing as Prentice Hall New Trends in OM Ethics Global focus Environmentally sensitive production Rapid product development Environmentally sensitive production Mass customization Empowered employees Supply-chain partnering Just-in-time performance
- 37. 1 - 51 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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
- 38. 1 - 52 © 2011 Pearson Education, Inc. publishing as Prentice Hall Feedback loop Outputs Goods and services Transformation The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is the result of a mix of capital (38% of 2.5%), labor (10% of 2.5%), and management (52% of 2.5%). The Economic System Inputs Labor, capital, management Figure 1.6
- 39. 1 - 53 © 2011 Pearson Education, Inc. publishing as Prentice Hall
- 40. 1 - 56 © 2011 Pearson Education, Inc. publishing as Prentice Hall Measure of process improvement Represents output relative to input Only through productivity increases can our standard of living improve Productivity Productivity = Units produced Input used
- 41. 1 - 57 © 2011 Pearson Education, Inc. publishing as Prentice Hall Productivity Calculations Productivity = Units produced Labor-hours used = = 4 units/labor-hour 1,000 250 Labor Productivity One resource input single-factor productivity
- 42. 1 - 58 © 2011 Pearson Education, Inc. publishing as Prentice Hall Multi-Factor Productivity Output Labor + Material + Energy + Capital + Miscellaneous Productivity = Also known as total factor productivity Output and inputs are often expressed in dollars Multiple resource inputs multi-factor productivity
- 43. 1 - 59 Example 2 page 16 © 2011 Pearson Education, Inc. publishing as Prentice Hall
- 44. 1 - 60 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: = Old labor productivity 8 titles/day 32 labor-hrs
- 45. 1 - 61 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: 8 titles/day 32 labor-hrs = Old labor productivity = .25 titles/labor-hr
- 46. 1 - 62 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: 14 titles/day Overhead = $800/day New System: 8 titles/day 32 labor-hrs = Old labor productivity = New labor productivity = .25 titles/labor-hr 14 titles/day 32 labor-hrs
- 47. 1 - 63 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: 14 titles/day Overhead = $800/day New System: 8 titles/day 32 labor-hrs = Old labor productivity = .25 titles/labor-hr 14 titles/day 32 labor-hrs = New labor productivity = .4375 titles/labor-hr
- 48. 1 - 64 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: 14 titles/day Overhead = $800/day New System: = Old multifactor productivity 8 titles/day $640 + 400
- 49. 1 - 65 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: 14 titles/day Overhead = $800/day New System: 8 titles/day $640 + 400 = Old multifactor productivity = .0077 titles/dollar
- 50. 1 - 66 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: 14 titles/day Overhead = $800/day New System: 8 titles/day $640 + 400 = Old multifactor productivity = New multifactor productivity = .0077 titles/dollar 14 titles/day $640 + 800
- 51. 1 - 67 © 2011 Pearson Education, Inc. publishing as Prentice Hall Collins Title Productivity Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day Old System: 14 titles/day Overhead = $800/day New System: 8 titles/day $640 + 400 14 titles/day $640 + 800 = Old multifactor productivity = New multifactor productivity = .0077 titles/dollar = .0097 titles/dollar
- 52. 1 - 68 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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 Precise units of measure may be lacking
- 53. 1 - 69 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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
- 54. 1 - 70 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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
- 55. 1 - 71 © 2011 Pearson Education, Inc. publishing as Prentice Hall Labor Skills About half of the 17-year-olds in the U.S. cannot correctly answer questions of this type Figure 1.7
- 56. 1 - 72 © 2011 Pearson Education, Inc. publishing as Prentice Hall Investment and Productivity 10 8 6 4 2 0 Percent increase in productivity Percentage investment 10 15 20 25 30 35
- 57. 1 - 73 © 2011 Pearson Education, Inc. publishing as Prentice Hall Service Productivity 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 5. Often difficult to evaluate for quality
- 58. 1 - 76 © 2011 Pearson Education, Inc. publishing as Prentice Hall 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
- 59. 1 - 77 © 2011 Pearson Education, Inc. publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.