FIN4060 Week 2 Project

Productivity In More Depth Getting all you can out of what you have In this course, you will focus on processes, usually including people (labor), capital equipment, and activities to create the good or the service. Throughout this course, you will consider the following questions:

• How do you change the inputs into outputs?

• What impact do these inputs have on an organization?

• How can you improve the performance of these processes?

As children, most people learn about the five Ws (who, what, where, when, and why) of writing a paper. The same basic questions are important in OM. As an operations manager, you need be aware of the following:

• Who will do the work (staffing decisions)?

• What is the product or the service?

• Where will the production happen (in what facility or on what production line)?

• When will the production happen (the planning of input and output)?

• Why is there a need for the product or the service (to meet customer demand)?

Due to the fact that the profit of many organizations (after all expenses have been taken into consideration) is often not much larger than 2%, the ability to save $2 in the operations of a company has the same net impact on the organization’s bottom line as does a sales increase of $100. Using this relationship, since it is often easier to save $200 than to increase sales by $10,000, it is vital to have an understanding of operations and how to effectively manage OM processes.

In the Operations and Productivity video, you were introduced to the calculation of productivity. That equation can be used for a single input resource to calculate what is considered a “partial” (or “single factor”) productivity measure. For example, if you used 25 hours of labor make 100 widgets, your partial productivity would be 4 (four widgets per hour of labor).

Besides labor hours, you would also use materials, capital, energy, and overhead when making the widgets. Including more of these variables in your productivity measure will give you a broader view of system productivity. This type of productivity measure is a multifactor productivity measure, in which you can use two or more inputs, typically represented in dollars. When all factors are included in such a multifactor measure, it is known as a total productivity measure.

2 Productivity In More Depth Getting all you can out of what you have

Generally, you need to be concerned about three key productivity variables: labor, capital, and management. A change in these variables will directly link to productivity, and the variables are often the focus of productivity improvement projects.

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Operations Management

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