operation management operations and productivity
DESCRIPTION
OPERATION MANAGEMENT OPERATIONS AND PRODUCTIVITY. BARRY PUALENGCO – KAREN TRINIDAD. 1. Introduction to Operation Management. 2. Productivity. Examples. 3. Challenges. 4. Contents. WHAT IS INSIDE A BUSINESS?. WE CREATE VALUE. Production/Operation. Finance/Accounting. Marketing. - PowerPoint PPT PresentationTRANSCRIPT
OPERATIONS AND PRODUCTIVITY
OPERATION MANAGEMENT
OPERATIONS AND PRODUCTIVITY
BARRY PUALENGCO – KAREN TRINIDAD
OPERATIONS AND PRODUCTIVITY
Contents
Introduction to Operation Management1
Productivity2
Challenges 4
Examples 3
OPERATIONS AND PRODUCTIVITY
WHAT IS INSIDE A BUSINESS?
OPERATIONS AND PRODUCTIVITY
WE CREATE VALUE
Facilities ConstructionFacilities MaintenanceProduction and inventory controlScheduling, material controlsQuality Assurance and controlSupply-chain managementManufacturing tooling fabrication; Assembly; Design products, product developmentDetailed product specificationIndustrial engineering, efficient use of machine, space, personnel.
Production/Operation
Disbursement/credits, Accounts receivable, payable, General ledgerFund management, money market, International exchangeCapital requirements, Stock issue, Bond issue and recallFinance, cash controlInvestment
Finance/Accounting
Sale promotionAdvertisingMarket researchSales
Marketing
OPERATIONS AND PRODUCTIVITY
generates the demand, or at least takes the order for a product or service.
tracks how well the organization is doing, paying bills, and collecting money.
creation of goods and services
MarketingMarketing
Finance/Accounting
Finance/Accounting
What are these activities?
Production/Operation
Production/Operation
OPERATIONS AND PRODUCTIVITY
VALUE ADDED
TRANSFORMATION/CONVERSION
PROCESS
OUTPUTS
GoodsServices
CONTROL
VALUE ADDED
FEEDBACK
FEEDBACK
FEEDBACK
INPUTS
LandLabor
Capital
OPERATIONS AND PRODUCTIVITY
is the set of activities that creates value in the form of goods and services by transforming inputs into outputs
Operation ManagementOperation Management
Definition
OPERATIONS AND PRODUCTIVITY
EXAMPLES
3.OUTPUT
INPUT-PROCESS-OUTPUT
2.PROCESS
1.INPUT
OPERATIONS AND PRODUCTIVITY
FOOD PROCESSOR
OUTPUTSINPUTS Raw Vegetables Raw Vegetables Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
CleaningPROCESSING
Making cans
Cutting
Cooking
Packing
Labeling
Canned vegetables
OPERATIONS AND PRODUCTIVITY
HOSPITAL PROCESS
OUTPUTSINPUTS PROCESSING
Nurses
Hospital
Medical Supplies
Equipment
Laboratories
Raw Vegetables Raw VegetablesDoctors Examination
Surgery
Monitoring
Medication
Therapy
Healthy patients
OPERATIONS AND PRODUCTIVITY
Difference between Goods and Services
1. Can be resold2. Can be inventoried3. Some aspect of quality are
measurable 4. Selling is distinct from
production5. Product is transportable6. Site of facility is important
for cost7. Easy to automate8. Revenue generated from
tangible product
GOODSGOODS
GOODS AND SERVICES
SERVICESSERVICES
1. Reselling is unusual2. Cannot be inventoried3. Many aspect are difficult to
measure4. Selling is often part of the
services5. Provider is transportable6. Site of facility is important
for customer contact7. Difficult to automate8. Revenue generated from
intangible services
OPERATIONS AND PRODUCTIVITY
Manufacturing or Service?
Tangible Act
OPERATIONS AND PRODUCTIVITY
Goods-service Continuum
Steel productionAutomobile fabrication
Home remodelingRetail sales
Auto RepairAppliance repair
Maid ServiceManual car wash
TeachingLawn mowing
High percentage goodsLow percentage service
Low percentage goodsHigh percentage service
OPERATIONS AND PRODUCTIVITY
High Low
Easy Difficult
High Low
Low High
Opportunity to correct quality
problems
Measurement of productivity
Uniformity of output
Manufacturing vs Service
IntangibleTangible
HighLow
LowHigh
Labor content
Uniformity of input
Customer contact
Output
MANUFACTURINGMANUFACTURING SERVICESERVICECharacteristics
OPERATIONS AND PRODUCTIVITY
MANUFACTURING VS. SERVICE
US EMPLOYMENT
OPERATIONS AND PRODUCTIVITY
Lets Try This!
• Fisher Technologies is a small firm that double its dollar contribution to a fixed cost and profit in order to be profitable enough to purchase the next generation of production equipment. Management has determined that if the firm fails to increase contribution, its bank will not make the loan and the equipment cannot be purchased. It the firm cannot purchase the equipment, the limitations of the old equipment will force Fisher to go out of business and, in doing so, puts its employees out of work and discontinue producing goods and services for its customers.
OPERATIONS AND PRODUCTIVITY
Fisher Technologies
Sales $100,000.00
Cost of Goods -80,000.00
Gross Margin 20,000.00
Finance costs -6,000.00
Subtotal 14,000.00
Taxes at 25% -3,500.00
Contribution $10,500Option No. 1: (Marketing Option) Good marketing management may increase sales by 50%
Option No. 2: (Finance/Accounting Option) Good financial management cut in half the finance costs.
Option No. 3: (OM Option) Reduce production cost by 20%
OPERATIONS AND PRODUCTIVITY
Details
Current Option 1 Option 2 Option 3
Sales $100,000.00 $150,000.00 $100,000.00 $100,000.00Cost of Goods -80,000.00 -120,000.00 -80,000.00 -64,000.00
Gross Margin 20,000.00 30,000.00 20,000.00 36,000.00
Finance costs -6,000.00 -6,000.00 -3,000.00 -6,000.00
Subtotal 14,000.00 24,000.00 17,000.00 30,000.00
Taxes at 25% -3,500.00 -6,000.00 -4,250.00 -7,500.00
Contribution $10,500.00 $18,000.00 $12,750.00 $22,500.00
OPERATIONS AND PRODUCTIVITY
Productivity is the ratio of outputs (goods and services) Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)divided by the inputs (resources such as labor and capital)
ProductivityProductivity
Productivity Challenge:Productivity Challenge:
Productivity =Goods and Services
Labor and Capital
Output
Input=
Objective: to improve productivity!Objective: to improve productivity!
OPERATIONS AND PRODUCTIVITY
Doing job well- minimum resources/waste Effective doing the right thing.
EfficiencyEfficiency
Definition
OPERATIONS AND PRODUCTIVITY
4.High ROI, constant
productivity = higher prices
How do we increase Productivity?
3.Resulting to
High ROI, lower prices.
2.Increase outputs,
constant inputs
1.Reduce inputs,
constant outputs
OPERATIONS AND PRODUCTIVITY
indicates the ratio of one resource (input) to the goods and services produced (outputs)
Productivity Measurement
Single-factor productivity
indicates the ratio of many or all resources (inputs) to the goods and services produced (outputs)
Multifactor productivity
OPERATIONS AND PRODUCTIVITY
Example
Collins Title wants to evaluate its labor and multifactor productivity with a new computerized search system. The company has a staff of four, each working 8 hours per day (for a payroll cost of $640/day) and overhead expenses of $400 per day. Collins processes and closes on 8 titles each day. The new computerized title-search system will allow the processing of 14 titles per day. Although the staff, their work hours, and pay are the same, the overhead expenses are now $800 per day.
Use Single-factor productivity.
Use multifactor productivity.
OPERATIONS AND PRODUCTIVITY
Productivity Variables
LaborLabor
contributes about 10% of the annual increase
contributes about 38% of the annual increase
which contributes about 52% of the annual increase.CapitalCapital
ManagementManagement
OPERATIONS AND PRODUCTIVITY
CHALLENGES
OPERATIONS AND PRODUCTIVITY
6 yds
4 yds
What is the area of this rectangle?
a.4 square ydsb.6 square ydsc.10 square ydsd.20 square ydse.24 square yds
OPERATIONS AND PRODUCTIVITY
If 9Y + 3 = 6y + 15, then Y = a. 1 c. 4
b. 2 d. 6
OPERATIONS AND PRODUCTIVITY
Which of the following is true about 84% of 100?
a.It is greater than 100b.It is less than 100c.Its is equal to 100
OPERATIONS AND PRODUCTIVITY
Lets Try This.
• At Modern Lumber, Inc., Art Binley, president and producer of apple crates sold to growers, has been able, with his current equipment, to produce 240 crates per 100 logs. He currently purchases 100 logs per day, and each log requires 3 labor-hours to process. He believes that he can hire a professional buyer who can buy a better-quality log at the same cost. If this is the case, he can increase his production to 260 crates per 100 logs. His laobr-hours will increase by 8 hours per day.– What will be the impact on productivity (measured in crates per
labor-hour) if the buyer is hired?
OPERATIONS AND PRODUCTIVITY
Problem 2
• Art Binley has decided to look at his productivity from a multifactor (total factor productivity) perspective (refer to Solved Problem 1.1). To do so, he has determined his labor, capital, energy, and material usage and decided to use dollars as the common denominator. His total labor-hours are now 300 per day and will increase to 308 per day. His capital and energy costs will remain constant at $350 and $150 per day, respectively. Material costs for the 100 logs per day are $1,000 and will remain the same. Because he pays an average of $10 per hour (with fringes), Binley determines his productivity increase as follows:
OPERATIONS AND PRODUCTIVITY
Solution
Current System System with Professional Buyer
Labor: 300hrs. @ $10 = $3,000
308 hrs @ $10 = $3,080
Material: 100 logs/day 1,000
1,000
Capital: 350
350
Energy: 150
150
Total Cost: $4,500
$4,580
Multifactor productivity of current system: = 240 crates/4,500 = .0533 crates/dollar
Multifactor productivity of proposed system: = 260 crates/4580 = .0568 crates/dollar
OPERATIONS AND PRODUCTIVITY
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