FIN4060 Week 2 Project

Operations and Productivity

How do you de�ne OM?  One simple de�nition is taking a set of inputs and transforming these into an

output.  For example, you might have two slices of bread, peanut butter, and grape jelly (three inputs). 

From those inputs, you can assemble them (a process) into a peanut butter and jelly sandwich (an

output). 

What is considered an input? That depends on the situation. It could be raw materials, information, or

customers themselves. The output could be a product or a service. 

It is easy to understand a product; it's something you can feel and touch. However, if someone is a

consultant, it may not be clear what is being offered by the person. This is a key difference between

goods and services. A service is usually intangible, being produced and consumed simultaneously.

There are many key decisions that need to be made within an organization, and OM plays an important role.  It creates the goods or services that are sold by the organization.  However, it is also an expensive

activity, because most of the money within the organization is spent in OM. 

No matter what type of product is being produced, an organization is interested in utilizing its

resources well. Organizations must focus on making the best use of their resources (labor, equipment,

and activities).

To determine how well you are doing as an organization or a department, it’s necessary to measure

your performance or productivity.  This is calculated as the ratio of outputs to inputs. 

Productivity= Units Produced

= Outputs

Inputs used Inputs

For example, if it takes 100 hours of work to make 100 widgets, you have a productivity factor of 1.  If

you make an improvement to your process and now take only 50 hours to make 100 widgets, you’ve

doubled your productivity to a factor of 2.

The relationship between operations and productivity has many other �ne points that must be

considered.  Review the Supplemental Media entitled “Productivity In More Depth” to understand

some of these �ner points.

Additional Materials

Productivity In More Depth

(media/week1/SUO_MGT3059%20W1%20L1%20Productivity%20In%20More%20Depth.pdf?

_&d2lSessionVal=SWzqLkE3HvLXZkZ375Dqp03nU&ou=86458)

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