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heizer_om12_ch01_accessible.pptxOperations Management: Sustainability and Supply Chain Management
Twelfth Edition
Chapter 1
Operations and Productivity
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
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Outline (1 of 2)
Global Company Profile: Hard Rock Café
What Is Operations Management?
Organizing to Produce Goods and Services
The Supply Chain
Why Study O M?
What Operations Managers Do
Outline (2 of 2)
The Heritage of Operations Management
Operations for Goods and Services
The Productivity Challenge
Current Challenges in Operations Management
Ethics, Social Responsibility, and Sustainability
Operations Management at Hard Rock Cafe
First opened in 1971
Now – 150 restaurants in over 53 countries
Rock music memorabilia
Creates value in the form of good food and entertainment
3,500+ custom meals per day in Orlando
How does an item get on the menu?
Role of the Operations Manager
Learning Objectives (1 of 2)
1.1 Define operations management
1.2 Explain the distinction between goods and services
1.3 Explain the difference between production and productivity
Learning Objectives (2 of 2)
1.4 Compute single-factor productivity
1.5 Compute multifactor productivity
1.6 Identify the critical variables in enhancing productivity
What Is Operations Management?
Production is the creation of goods and services
Operations management (O M) 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:
Marketing – generates demand
Production/operations – creates the product
Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
Organizational Charts (1 of 3)
Figure 1.1 Organization Charts for Two Service Organizations and One Manufacturing Organization
Organizational Charts (2 of 3)
Figure 1.1 [continued]
Organizational Charts (3 of 3)
Figure 1.1 [continued]
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
Figure 1.2 Soft Drink Supply Chain
Why Study O M?
O M is one of three major functions of any organization; we want to study how people organize themselves for productive enterprise
We want (and need) to know how goods and services are produced
We want to understand what operations managers do
O M is such a costly part of an organization
Table 1.1 Options for Increasing Contribution
What Operations Managers Do
Basic Management Functions
Planning
Organizing
Staffing
Leading
Controlling
Ten Strategic Decisions
Table 1.2 Ten Strategic Operations Management Decisions
| Decision | Chapter(s) |
| 1. Design of goods and services | 5, Supplement 5 |
| 2. Managing quality | 6, Supplement 6 |
| 3. Process and capacity strategy | 7, Supplement 7 |
| 4. Location strategy | 8 |
| 5. Layout strategy | 9 |
| 6. Human resources and job design | 10 |
| 7. Supply-chain management | 11, Supplement 11 |
| 8. Inventory management | 12, 14, 16 |
| 9. Scheduling | 13, 15 |
| 10. Maintenance | 17 |
The Strategic Decisions (1 of 5)
Design of goods and services
Defines what is required of operations
Product design determines quality, sustainability and human resources
Managing quality
Determine the customer’s quality expectations
Establish policies and procedures to identify and achieve that quality
The Strategic Decisions (2 of 5)
Process and capacity design
How is a good or service produced?
Commits management to specific technology, quality, resources, and investment
Location strategy
Nearness to customers, suppliers, and talent
Considering costs, infrastructure, logistics, and government
The Strategic Decisions (3 of 5)
Layout strategy
Integrate capacity needs, personnel levels, technology, and inventory
Determine the efficient flow of materials, people, and information
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
Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.
The Strategic Decisions (4 of 5)
Supply chain management
Integrate supply chain into the firm’s strategy
Determine what is to be purchased, from whom, and under what conditions
Inventory management
Inventory ordering and holding decisions
Optimize considering customer satisfaction, supplier capability, and production schedules
The Strategic Decisions (5 of 5)
Scheduling
Determine and implement intermediate- and short-term schedules
Utilize personnel and facilities while meeting customer demands
Maintenance
Consider facility capacity, production demands, and personnel
Maintain a reliable and stable process
Where Are the O M Jobs?
Technology/methods
Facilities/space utilization
Strategic issues
Response time
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement
Opportunities
Figure 1.3 Many Opportunities Exist for Operations Managers
Certifications
A P I C S, the Association for Operations Management
American Society for Quality (A S Q)
Institute for Supply Management (I S M)
Project Management Institute (P M I)
Council of Supply Chain Management Professionals
Charter Institute of Procurement and Supply (C I P S)
Significant Events in O M
Figure 1.4 Significant Events in Operations Management
The Heritage of O M (1 of 2)
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)
The Heritage of O M (2 of 2)
Computer (Atanasoff 1938)
C P M/P E R T (DuPont 1957, Navy 1958)
Material requirements planning (Orlicky 1960)
Computer aided design (C A D 1970)
Flexible manufacturing system (F M S 1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
Globalization (1992)
Internet (1995)
Eli Whitney
Born 1765; died 1825
In 1798, 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
Born 1856; died 1915
Known as ‘father of scientific management’
In 1881, 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:
Matching employees to right job
Providing the proper training
Providing proper work methods and tools
Establishing legitimate incentives for work to be accomplished
Frank and Lillian Gilbreth
Frank (1868-1924); Lillian (1878-1972)
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
Born 1863; died 1947
In 1903, created Ford Motor Company
In 1913, 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
Born 1900; died 1993
Engineer and physicist
Credited with teaching Japan quality control methods in post-W W2
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 (1 of 2)
Services – Economic activities that typically produce an intangible product (such as education, entertainment, lodging, government, financial, and health services)
Operations for Goods and Services (2 of 2)
Manufacturers produce tangible product, services often intangible
Operations activities often very similar
Distinction not always clear
Few pure services
Table 1.3 Differences between Goods and Services
| Characteristics of Services | Characteristics of Goods |
| Intangible: Ride in an airline seat | Tangible: The seat itself |
| Produced and consumed simultaneously: Beauty salon produces a haircut that is consumed as it is produced | Product can usually be kept in inventory (beauty care products) |
| Unique: Your investments and medical care are unique | Similar products produced (iPods) |
| High customer interaction: Often what the customer is paying for (consulting, education) | Limited customer involvement in production |
| Inconsistent product definition: Auto Insurance changes with age and type of car | Product standardized (iPhone) |
| Often knowledge based: Legal, education, and medical services are hard to automate | Standard tangible product tends to make automation feasible |
| Services dispersed: Service may occur at retail store, local office, house call, or via internet. | Product typically produced at a fixed facility |
| Quality may be hard to evaluate: Consulting, education, and medical services | Many aspects of quality for tangible products are easy to evaluate (strength of a bolt) |
| Reselling is unusual: Musical concert or medical care | Product often has some residual value |
U.S. Agriculture, Manufacturing, and Service Employment
Figure 1.5 U.S. Agriculture, Manufacturing, and Service Employment
Table 1.4 Organizations in Each Sector
Service Pay
Perception that services are low-paying
42% of service workers receive above average wages
14 of 33 service industries pay below average
Retail trade pays only 61% of national average
Overall average wage is 96% of the average
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
Figure 1.6 The Economic System Adds Value by Transforming Inputs to Outputs
Improving Productivity at Starbucks (1 of 2)
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines
Saved 12 seconds per shot
Improving Productivity at Starbucks (2 of 2)
Operations improvements have helped Starbucks increase yearly revenue per outlet by $250,000 to $1,000,000.
Productivity has improved by 27%, or about 4.5% per year.
Productivity
Measure of process improvement
Represents output relative to input
Only through productivity increases can our standard of living improve
Productivity Calculations
Labor Productivity
One resource input single-factor productivity
Multi-Factor Productivity
Also known as total factor productivity
Output and inputs are often expressed in dollars
Multiple resource inputs multi-factor productivity
Collins Title Productivity (1 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
Collins Title Productivity (2 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Collins Title Productivity (3 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Collins Title Productivity (4 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Measurement Problems
Quality may change while the quantity of inputs and outputs remains constant
External elements may cause an increase or decrease in productivity
Precise units of measure may be lacking
Productivity Variables
Labor - contributes about 10% of the annual increase
Capital - contributes about 38% of the annual increase
Management - contributes about 52% of the annual increase
Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force
Social overhead that makes labor available
Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
Labor Skills
Figure 1.7 About half of the 17-year-olds in the U.S. cannot correctly answer questions of this type
Capital
Management
Ensures labor and capital are effectively used to increase productivity
Use of knowledge
Application of technologies
Knowledge societies
Labor has migrated from manual work to technical and information-processing tasks
More effective use of technology, knowledge, and capital
Productivity in the Service Sector
Productivity improvement in services is difficult because:
Typically labor intensive
Frequently focused on unique individual attributes or desires
Often an intellectual task performed by professionals
Often difficult to mechanize and automate
Often difficult to evaluate for quality
Productivity at Taco Bell (1 of 2)
Improvements:
Revised the menu
Designed meals for easy preparation
Shifted some preparation to suppliers
Efficient layout and automation
Training and employee empowerment
New water and energy saving grills
Productivity at Taco Bell (2 of 2)
Results:
Preparation time cut to 8 seconds
Management span of control increased from 5 to 30
In-store labor cut by 15 hours/day
Floor space reduced by more than 50%
Stores average 164 seconds/customer from drive-up to pull-out
Water- and energy-savings grills conserve 300 million gallons of water and 200 million KwH of electricity each year
Green-inspired cooking method saves 5,800 restaurants $17 million per year
Current Challenges in O M
Globalization
Supply-chain partnering
Sustainability
Rapid product development
Mass customization
Lean operations
Ethics, Social Responsibility, and Sustainability (1 of 2)
Challenges facing operations managers:
Develop and produce safe, high-quality green products
Train, retrain, and motivate employees in a safe workplace
Honor stakeholder commitments
Ethics, Social Responsibility, and Sustainability (2 of 2)
Stakeholders
Those with a vested interest in an organization, including customers, distributors, suppliers, owners, lenders, employees, and community members.
Copyright
Units produced
Productivity=
Input used
Units produced
Productivity=
Labor-hours used
1,000
==4 units/labor-hour
250
Output
Multifactor =
Labor + Material + Energy + Capital + Mi
scellaneous
8 titles/day
Oldlaborproductivity==.25 titles/labor-h
r
32labor-hrs
14 titles/day
Newlaborproductivity==.4375 titles/labor
-hr
32labor-hrs
8 titles/day
Old multifactor productivity==.0077 titl
es/dollar
$640 + 400
14 titles/day
New multifactor productivity==.0097 titl
es/dollar
$640 + 800
