WEB-BASED RESEARCH PAPER
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OM-Ch01-BB1.pptxChapter 1: Operations & Productivity
Chapter 1 Learning Objectives:
Define operations management
Explain the distinction between goods and services
Explain the difference between production and productivity
Compute single-factor productivity
Compute multifactor productivity
Identify the critical variables in enhancing productivity
Learning Objectives
listed for each chapter.
A good place to start
when reviewing for
an exam…
Chapter # / Slide #
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Operations and Supply Chain Management
1-1
What is Operations Management?
Production: the creation of goods and services
Production activities that go on in an organization are referred to as “Operations”
Operations Management (OM): the set of activities that create value in the form of goods and services by transforming ________ into outputs
Types of operations: goods producing, storage/transportation, exchange, entertainment, communication…
The principles of OM help one to view a business enterprise as a total system, in which all activities are __________, not only vertically throughout the organization, but also horizontally across multiple functions
“Blank space” for key terms, definitions or concepts. Fill in during lecture (or get from class-mates if you miss a class)
Underlined word(s): Definition
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Operations and Supply Chain Management
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Why Study Operations Management?
The three major functions of an organization must work _________ for the organization to function successfully
Must understand their role and the roles of the other functions
Significant interface between the functions
Exchange of _________
Cooperative decision-making
Impact of decisions of one function on others
Operations
Finance
Marketing
Marketing: generates demand
Operations: creates the product
Finance: tracks how well the organization is doing, pays the bills, collects the money
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1-3
The Supply Chain
Supply Chain: a global network of organizations and activities that supplies a firm with goods and services
Members of the supply chain _________ to achieve high levels of customer satisfaction, efficiency and competitive advantage
In general, starts with the provider of basic raw materials and continues all the way to the final _________ at the retail store
Example: Supply chain for a bottle of Coke
Requires beet or sugar cane farmer, a syrup producer, a distributor and a retailer, each adding values to satisfy a customer
Farmer Syrup Bottler Distributor Retailer
producer
Customer
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1-4
Four Basic Operations Management Functions
Planning: Provides the basis for future activities by developing strategies, goals and objectives and establishing guidelines, actions and _________ to meet them
Organizing: The process of bringing together the resources (people, material, equipment, technology, information and capital) necessary to perform planned activities
Directing (Staffing/Leading): The process of turning plans into realities by assigning specific tasks and responsibilities to employees, motivating them and coordinating their efforts
Controlling: Evaluating performance and applying _________ measures to ensure that plans are achieved
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Operations Management Decisions
Strategic decisions are _________ decisions and concern the determination of broad policies and plans for using the resources of a company to best support its long-term competitive strategy
Tactical decisions primarily address how to efficiently manage capacity, inventory and schedules within the constraints of previously made strategic decisions
Operations decisions are narrow and _________ by comparison and act under the operation constraints set out by the strategic and tactical management decisions
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Ten _________ OM Decisions
Decision: Chapter
_________ of goods and services 1, 5/5S
Managing quality 6, 6S
Process strategy 7/7S
Location strategy 8
Layout strategy 9
Human resources and job design 10
Supply-chain management 11/11S
Inventory, MRP, JIT 12, 14, 16
Scheduling 13, 15
Maintenance 17
We will cover the chapters in red (plus a few others!)
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Understanding Goods and Services
A _________ is a physical product that you can see, touch, or possibly consume
A durable good is a product that typically lasts at least three years
A non-durable good is perishable and generally lasts for less than three years
A _________ is any activity that does not directly produce a physical product
A service encounter is an interaction between the customer and the service provider
Service encounters consist of one or more “moments of truth” in which a customer comes into contact with any aspect of the delivery system, and thereby has an opportunity to form an impression
Distinctions between goods and services are not always clear
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Similarities Between Goods and Services
Goods and services provide _________ and satisfaction to customers who purchase and use them
They both can be standardized or customized to individual wants and needs
A _________ creates and delivers each good or service
Therefore, Operations Management is a critical skill!
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_________ Between Goods and Services
Goods are tangible while services are intangible
Customers participate in many service processes, activities, and transactions
The demand for services is more difficult to predict than the demand for goods
Services cannot be stored as physical inventory
Service management skills are paramount to a successful service encounter
Service facilities typically need to be in _________ proximity to the customer
Patents protect goods, they do not protect services
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_________ of 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 |
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_________ of Goods and Service Content
High Goods
Content
(Tangible)
(Pure Goods)
Low Goods
Content
(Intangible)
(Pure Service)
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Goods Quality
Quality: the degree to which the output of a process meets customer requirements
Goods quality: the physical _________ and characteristics of a good
Performance: a good’s primary operating characteristics
Features: the “bells and whistles” of a good
Reliability: the probability of a good’s surviving over a specified period of time under stated conditions of its use
Conformance: the degree to which physical and performance characteristics of a good match pre-established _________
Durability: the amount of use one gets from a good before it physically deteriorates or until replacement is preferred
Serviceability: the speed, courtesy and competence of repair work
Aesthetics: how a good looks, feels, sounds, tastes or smells
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13
Service Quality
Service quality: consistently meeting or exceeding customer expectations (_________ focus) and service delivery system performance (_________ focus) for all service encounters
Tangibles: physical facilities, uniforms, equipment, vehicles, and appearance of employees
Reliability: ability to perform the promised service dependably and accurately
Responsiveness: willingness to help customers and provide prompt recovery to service upsets
Assurance: knowledge and courtesy of the service-providers, and their ability to inspire trust and confidence in customers
Empathy: caring attitude and individualized attention provided to its customers
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14
Quality of Goods and Services
Three types of attributes to evaluate the quality of goods and services
Search attributes: are those attributes that a customer can determine _________ to purchasing the goods and/or services
Experience attributes: are those attributes that can be discerned only after purchase or during consumption or use
Credence attributes: are any aspects of a good or service that the customer must _________ in, but cannot personally evaluate even after purchase and consumption
Goods are easier to evaluate than services
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15
Evaluating the Quality of Services
Customers evaluate services in ways that are often different from goods, such as:
Customers seek and rely more on information from personal sources than from non-personal sources when evaluating services prior to purchase
Customers use a variety of perceptual features in evaluating services
Customers normally adopt innovations in services more _________ than they adopt innovation in goods
Customers perceive greater risks when buying services than when buying goods
These insights help to explain why it is more _________ to design services and service processes than goods and manufacturing operations
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Goods-Services _________
Easy to
evaluate
Difficult to
evaluate
High Goods Content
High Services Content
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1-17
17
_________ of Goods and Services Characteristics
| Characteristic | Goods | Service |
| Customer contact | Low | High |
| Uniformity of input | High | Low |
| Labor content | Low | High |
| Uniformity of output | High | Low |
| Output | Tangible | Intangible |
| Measurement of productivity | Easy | Difficult |
| Opportunity to correct problems | High | Low |
| Inventory | Much | Little |
| Evaluation | Easier | Difficult |
| Patentable | Usually | Not usual |
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Production
Production: the creation of goods and services
The production of goods and services requires transforming inputs into _________
Operations manager’s job is to _________ the transformation processes
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.
Inputs
Labor, capital, management
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1-19
Productivity
Productivity: A measure of the effective use of resources, expressed as the ratio of output of a process to the input
The objective is to _______ productivity by improving the ratio
Productivity = Units produced / Input used
Efficiency: doing the job well, with a minimum of resources and waste
Improving productivity improves efficiency
Productivity _________ are used for
Planning workforce requirements
Scheduling equipment
Financial analysis
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1-20
Productivity
Productivity is a _________ measure
Can be compared with similar operations within its industry
Can be compared over time
Productivity may be expressed as:
Partial measures: output to _________ input
Multifactor measures: output to a group of inputs
Total measures: output to all inputs
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Productivity Growth
Productivity growth (decline) is the increase (decrease) in productivity from one _________ to the next relative to the productivity of the _________ period
Example: What is the growth rate if productivity increased from 80 to 84?
Space provided
for calculations!
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Productivity Example
Consider a division of Miller Chemicals that produces water purification crystals for swimming pools. The major inputs used in the production process are labor, raw materials and energy.
For 2017 labor costs are $180,000; raw materials cost $30,000 and energy costs amount to $5,000
For 2018 labor costs are $350,000; raw materials cost $40,000 and energy costs amount to $6,000
Miller Chemicals produced 100,000 pounds of crystals in 2017 and 150,000 in 2018
Q: Has productivity increased or declined between 2017 and 2018?
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Productivity Solution
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Service Productivity
Productivity in the service sector is difficult to improve because
Typically _________ intensive
Frequently focused on unique individual attributes or desires
Often an intellectual task performed by professionals
Often difficult to mechanize
Often difficult to evaluate for _________
Example: Service Productivity at Taco Bell
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
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_________ Evolution of Operations Management
http://watchdocumentary.org/watch/modern-marvels-s06e33-assembly-lines-video_54ccebb9a.html
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Operations Management _________
Ford 1920’s Assembly Line
Oxen Cart circa 1800’s
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U.S. Agriculture, Manufacturing, and Service _________
100 –
80 –
60 –
40 –
20 –
0 –
Percent of
Workforce
1800
1825
1850
1875
1900
1925
1950
1975
2000
2025 (est.)
|
|
|
|
|
|
|
|
|
Agriculture Services Manufacturing
Agriculture
Service
Manufacturing
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New _________ in OM
| Challenges | OM Response |
| Global focus: decline in communication and transportation costs has made markets global | Operations managers are seeking creative designs, efficient production and high quality goods via international collaboration |
| Supply-chain partnering: shorter product life cycles, demanding customers and rapid changes in material, processes and technology | Operations managers are outsourcing an building long-term partnerships with critical players in the supply chain |
| Sustainability: concern for products and processes that are ecologically sustainable | Designing green products and packaging that minimize resource use and can be recycled or reused |
| Rapid product development: product life space is dramatically reduced | New management structures, enhanced collaboration and alliances that are more responsive and effective |
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New Challenges in OM
| Challenges | OM Response |
| Mass customization: consumers are increasingly aware of innovation and options and want customized products | Must respond with product designs and flexible processes that cater to the individual whims of consumers |
| Just-in-time performance: inventory requires financial resources and constrains response to shorter product life cycles | Operations managers must work with supply chains to cut _________ at every level |
| Empowered employees: knowledge explosion and more technical workplace require more employee competence | OM is responding by enriching jobs and moving more decision-making to the individual contributor |
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_________, Social Responsibility, and Sustainability
Challenges facing operations managers:
Develop and produce safe, high-quality green products
Train, retrain, and motivate employees in a _________ workplace
Honor stakeholder commitments
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Energy
Output
Capital
Output
Machine
Output
Labor
Output
:
Measures
Partial
Energy
Capital
Labor
Output
Machine
Labor
Output
:
Measures
r
Multifacto
+
+
+
them
produce
to
used
inputs
All
Produced
Services
or
Goods
:
Measures
Total
100%
x
ty
Productivi
Previous
ty
Productivi
Previous
-
ty
Productivi
Current
Growth
ty
Productivi
=
Miller Chemicals
Inputs20172018
Labor, $180,000350,000
Raw Materials, $30,00040,000
Energy, $5,0006,000
Output20172018
Crystals, pounds100,000150,000
Sheet1
| Miller Chemicals | |||
| Inputs | 2017 | 2018 | |
| Labor, $ | 180,000 | 350,000 | |
| Raw Materials, $ | 30,000 | 40,000 | |
| Energy, $ | 5,000 | 6,000 | |
| Output | 2017 | 2018 | |
| Crystals, pounds | 100,000 | 150,000 |
Sheet2
Sheet3
MBD0031B5DE.unknown
10 P A R T 1 | I N T R O D U C T I O N T O O P E R AT I O N S M A N AG E M E N T
By 1913, Henry Ford and Charles Sorensen combined what they knew about standardized parts with the quasi-assembly lines of the meatpacking and mail-order industries and added the revolutionary concept of the assembly line, where men stood still and material moved.
Quality control is another historically significant contribution to the field of OM. Walter Shewhart (1924) combined his knowledge of statistics with the need for quality control and provided the foundations for statistical sampling in quality control. W. Edwards Deming (1950) believed, as did Frederick Taylor, that management must do more to improve the work environ- ment and processes so that quality can be improved.
Operations management will continue to progress as contributions from other disciplines, including industrial engineering, statistics, management, analytics, and economics, improve deci- sion making.
Innovations from the physical sciences (biology, anatomy, chemistry, physics) have also contributed to advances in OM. These innovations include new adhesives, faster integrated circuits, gamma rays to sanitize food products, and specialized glass for iPhones and plasma TVs. Innovation in products and processes often depends on advances in the physical sciences.
Especially important contributions to OM have come from information technology, which we define as the systematic processing of data to yield information. Information technology—with wireless links, Internet, and e-commerce—is reducing costs and accelerating communication.
Decisions in operations management require individuals who are well versed in analyti- cal tools, in information technology, and often in one of the biological or physical sciences. In this textbook, we look at the diverse ways a student can prepare for a career in operations management.
Figure 1.4 Significant Events in Operations Management
Ev er
et t C
ol le
ct io
n/ Ne
w sc
om
Early Concepts 1776–1880 Labor Specialization (Smith, Babbage) Standardized Parts (Whitney)
Scientific Management Era 1880–1910 Gantt Charts (Gantt) Motion & Time Studies (Gilbreth) Process Analysis (Taylor) Queuing Theory (Erlang)
Mass Production Era 1910–1980 Moving Assembly Line (Ford/Sorensen) Statistical Sampling (Shewhart) Economic Order Quantity (Harris) Linear Programming
(Dantzig) Material Requirements Planning (MRP)
Mass Customization Era 1995–2005 Internet/E-Commerce Enterprise Resource Planning International Quality Standards (ISO) Finite Scheduling Supply Chain Management Mass Customization Build-to-Order Radio Frequency Identification (RFID)
Globalization Era 2005–2025 Global Supply Chains and Logistics Growth of Transnational Organizations Sustainability Ethics in the Global Workplace Internet of things (IoT) Digital Operations Industry 4.0
Lean Production Era 1980–1995 Just-in-Time (JIT) Computer-Aided Design (CAD) Electronic Data Interchange (EDI) Total Quality Management (TQM) Baldrige Award Empowerment Kanbans
Globalization FocusCustomization FocusQuality FocusCost Focus
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