operation management ch. 1

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CHAPTER 1

OPERATIONS AND PRODUCTIVITY

Overview of Operations Management

Features of Production Systems

Operations Strategy and CompetitivenessProductivity Issues

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Overview of Operations Management

What is Operations Management?

Product / Outputcan be goods or services

Productionis the creation of goods & services

Operations Mgtis the set of activities that createsvalue in the form of goods and services bytransforming inputs into outputs.

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Organizing to produce goods & servicesa) Marketingb) Production/Operationsc) Finance/Accounting

Why study OM?

a) study how people organize themselves forproductive enterprise.b) want to know how goods & services are

produced.c) understand what operations managers do.

(Planning, Organizing & Controlling)

d) it is such a costly part of an organization.

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10 Strategic OM Decision

a) Goods & Service Designb) Qualityc) Process & Capacity Design

d) Location Selectione) Layout Designf) Human Resource & Job Designg) Supply Chain Managementh) InventoryI) Schedulingk) Maintenance

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Difference between Goods & Services

Attributes of GOODS Attributes of SERVICES

Product can be resold Reselling a service is unusual

Product can be inventoried Many services cannot be inventoried

Some aspects of quality aremeasurable Many aspects of quality are difficultto measure

Selling is distinct from production Selling is often a part of the service

Product is transportable Provider, not product, is oftentransportable

Site of facility is important for cost Site of facility is important forcustomer contact

Often easy to automate Service is often difficult to automate

Revenue is generated primarily fromthe tangible product Revenue is generated primarily fromthe intangible service.

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Features of Production System

Inputs(4M; manpower, machine, material, money)

Transformation Process

(Factors; capacity, efficiency, effectiveness, flexibility)

Outputs (end-result of a production)

Feedback(actual vs expected)

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Operations Strategy & Competitiveness

Global Competitiveness:

a) Qualityb) Variety

c) Customization

d) Convenience

e) Timeliness

f) Cost

Reason for globalize:

a) Reduce cost

b) Increase supply chainc) Understand market

d) Provide better goods and services

e) Learn to increase operations

f) Attract and retain global talent

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Develop Mission & Strategy

Visionis what organization want to become.

Missionis the purpose or rational for an organization existence.

Strategyis how organization expects to achieve its mission orgoals. (action plan)

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Achieving Competitive Advantages

Competitive Advantageis the creation of a unique advantages

over competitors.

Competing on Differentiation

Differentiation is to distinguish the offerings of the organization in any

way that customer perceives as adding value.

Competing on Cost

A low-cost strategy means having the companys resources and facilityeffectively utilized.

Competing on Response

Response is a range of values related to timely product development anddeliver as well as reliable scheduling and flexible performances.

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Productivity Challenge

Productivityis the ratio of outputs divided by one or more inputsSingle Factor Productivity = Unit Produced

Input Used

Multifactor Productivity = Unit Produced

4M + etcTo Increase Productivity:

a) Reduce input, output constant

b) Increase output, input constant

Productivity Variable:

a) Labor

b) Capital

c) Management

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Exercise: Collins Title wants to evaluate its labor and multifactor

productivity with a new computerized title-search

system. The company has a staff of four, each working8hours per day (for a payroll cost of RM640/day) andoverhead expenses of RM400 per day. Collins processesand closes on 8 titles each day. The new computerizedtitle-search system will allow the processing of 14 titlesper day. Although the staff. Their work hours and payare the same, the overhead expenses are now RM800per day.

QUESTIONS:

Calculate both single-factor and multi-factor productivityusing old system and new system

If the overhead expenses goes to RM960 (rather thanRM800), what is the multifactor productivity?

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NEXT CLASS

Product selection & development

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