lecture 1

© 2008 Prentice Hall, Inc. 1 – 1

Operations ManagementOperations ManagementChapter 1 – Chapter 1 – Operations and Operations and ProductivityProductivity

PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer/Render Heizer/Render Principles of Operations Management, 7ePrinciples of Operations Management, 7eOperations Management, 9e Operations Management, 9e


What Is Operations What Is Operations Management?Management?

ProductionProduction is the creation of is the creation of goods and servicesgoods and services

Operations management (OM)Operations management (OM) is the set of activities that is the set of activities that

creates value in the form of creates value in the form of goods and services by goods and services by

transforming inputs into transforming inputs into outputsoutputs


Ten Critical DecisionsTen Critical DecisionsTen Decision AreasTen Decision Areas Chapter(s)Chapter(s)

Design of goods and servicesDesign of goods and services 55 Managing qualityManaging quality 6, Supplement 66, Supplement 6 Process and capacity Process and capacity 7, Supplement 77, Supplement 7

design design Location strategyLocation strategy 88 Layout strategyLayout strategy 99 Human resources and Human resources and 10, Supplement 1010, Supplement 10

job design job design Supply chain Supply chain 11, Supplement 1111, Supplement 11

management management Inventory managementInventory management 12, 14, 1612, 14, 16 SchedulingScheduling 13, 1513, 15 MaintenanceMaintenance 1717

Table 1.2Table 1.2


Significant Events in OMSignificant Events in OM

Figure 1.3Figure 1.3


New Challenges in OMNew Challenges in OM

Global focusGlobal focus

Just-in-timeJust-in-time

Supply chain Supply chain partneringpartnering

Rapid product Rapid product development, development, alliancesalliances

Mass Mass customizationcustomization

Empowered Empowered employees, teamsemployees, teams

ToToFromFrom Local or national focusLocal or national focus

Batch shipmentsBatch shipments

Low bid purchasingLow bid purchasing

Lengthy product Lengthy product developmentdevelopment

Standard productsStandard products

Job specializationJob specialization


Measure of process improvementMeasure of process improvement

Represents output relative to inputRepresents output relative to input

Only through productivity increases Only through productivity increases can our standard of living improvecan our standard of living improve

ProductivityProductivity

Productivity =Productivity =Units producedUnits produced

Input usedInput used


Multi-Factor Productivity Multi-Factor Productivity

OutputOutput

Labor + Material + Energy Labor + Material + Energy + Capital + Miscellaneous+ Capital + Miscellaneous

Productivity =Productivity =

Also known as total factor productivityAlso known as total factor productivity

Output and inputs are often expressed Output and inputs are often expressed in dollarsin dollars

Multiple resource inputs Multiple resource inputs multi-factor productivity multi-factor productivity


Problem 1.5Problem 1.5

• Lori produces “Final Exam Care Packages” for Lori produces “Final Exam Care Packages” for resale by the sorority. She is currently working a resale by the sorority. She is currently working a total of 5 hours per day to produce 100 packages. total of 5 hours per day to produce 100 packages. – What is Lori’s productivity?What is Lori’s productivity?

– Lori thinks that by redesigning the package she can Lori thinks that by redesigning the package she can increase her total productivity to 133 care packages per increase her total productivity to 133 care packages per day. What will be her new productivity?day. What will be her new productivity?

– What will be the increase in productivity of Lori makes What will be the increase in productivity of Lori makes the change?the change?



• Eric Johnson makes billiard Eric Johnson makes billiard balls in his new England balls in his new England plant. With recent increase in plant. With recent increase in his costs, he has a new his costs, he has a new found interest in efficiency. found interest in efficiency. Eric is interested in Eric is interested in determining the productivity determining the productivity of his organization. He would of his organization. He would like to know if his like to know if his organization is maintaining organization is maintaining the manufacturing average the manufacturing average of 3% increase in of 3% increase in productivity. He has the productivity. He has the following data : following data :

Last Last YearYear

NowNow

Units Units (produced) (produced)

1,0001,000 1,0001,000

Labor Labor (hours)(hours)

300300 275275

Resin Resin (pounds)(pounds)

5050 4545

Capital ($)Capital ($) 10,00010,000 11,00011,000

Energy Energy (btu)(btu)

3,0003,000 2,8502,850



• Eric Johnson (using data from problem 1.6 ) Eric Johnson (using data from problem 1.6 ) determines his costs to be as follows: determines his costs to be as follows: – Labor $ 10 per hourLabor $ 10 per hour

– Resin $5 per poundResin $5 per pound

– Capital 1% per month of investmentsCapital 1% per month of investments

– Energy $0.50 per btuEnergy $0.50 per btu

• Show the productivity change for one month lat Show the productivity change for one month lat year versus one month this year, on a multifactor year versus one month this year, on a multifactor basis with dollars as the common denominator. basis with dollars as the common denominator.



• Kleen karpet cleaned 65 rugs in October, Kleen karpet cleaned 65 rugs in October, consuming the following resources: consuming the following resources: – Labor 520 hours at $ 13 per hourLabor 520 hours at $ 13 per hour

– Solvent 100 gallons at $ 5 per gallonSolvent 100 gallons at $ 5 per gallon

– Machine Rental 20 days at $50 per dayMachine Rental 20 days at $50 per day

• What is the labor productivity per dollar?What is the labor productivity per dollar?

• What is the multifactor productivity?What is the multifactor productivity?


Do it yourself now !Do it yourself now !

• David Upton is president of Upton Manufacturing , a David Upton is president of Upton Manufacturing , a producer of Go-Kart tires. Upton makes 1,000 tires producer of Go-Kart tires. Upton makes 1,000 tires per day with the following resources: per day with the following resources:

• Labor 400 hours per day @ 12.50 per hourLabor 400 hours per day @ 12.50 per hour

• Raw Material 20,000 pounds per day @ $1 per poundRaw Material 20,000 pounds per day @ $1 per pound

• Energy $5,000 per dayEnergy $5,000 per day

• Capital $10,000 per dayCapital $10,000 per day

– What is the labor productivity per labor hour for these tires?What is the labor productivity per labor hour for these tires?

– What is the multifactor productivity for these tires?What is the multifactor productivity for these tires?

– What is the percent change in multifactor productivity? What is the percent change in multifactor productivity?


Problem 1.13Problem 1.13• Charles lackey operates a bakery in Idaho. Because of its Charles lackey operates a bakery in Idaho. Because of its

excellent product and excellent location, demand has excellent product and excellent location, demand has increased by 25% in the last year. On far too many increased by 25% in the last year. On far too many occasions the customers have not been able to purchase occasions the customers have not been able to purchase the bread of their choice. the bread of their choice.

• Because of the size of the store no new ovens can be Because of the size of the store no new ovens can be added. At a staff meeting, one employee suggested ways to added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can load the ovens differently so that more loaves of bread can be baked at one time. be baked at one time.

• This new process will require that the ovens be loaded by This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only thing hand, requiring additional manpower. This is the only thing to be changed. If the bakery makes 1,500 loaves per month to be changed. If the bakery makes 1,500 loaves per month with a labor productivity of 2.344 loaves per labor hour, with a labor productivity of 2.344 loaves per labor hour, how many workers will lackey need to add? (Hint: Each how many workers will lackey need to add? (Hint: Each worker works for 160 hours per month). worker works for 160 hours per month).

lecture 1

Documents

labor productivity

prentice hall

new productivity

multifactor productivity

total productivity

productivity of lori

productivity change

productivity increases