Operations management heizer 6e ch01 ppt

Production is the creation of goods and services Operations management OM is the set of activities that creates value in the form of goods and services by transforming inputs into out

Operations

Management

Chapter 1 – Operations and Productivity

PowerPoint presentation to accompany Heizer/Render

Principles of Operations Management, 6e Operations Management, 8e

Cafe

Services

Outline - Continued

Management

Outline - Continued

Learning Objectives

When you complete this chapter, you should be able to:

Identify or Define:

The Hard Rock Cafe

 Now – 110 restaurants in over 40 countries

and entertainment

What Is Operations

Management?

Production is the creation of

goods and services

Operations management (OM)

is the set of activities that creates value in the form of

goods and services by transforming inputs into

outputs

Organizing to Produce Goods and Services

 Marketing – generates demand

 Production/operations – creates

the product

 Finance/accounting – tracks how

well the organization is doing, pays bills, collects the money

Trust Department

Commercial Bank

Figure 1.1(A)

Cash control International exchange

Airline

Figure 1.1(B)

Marketing

Traffic administration Reservations Schedules Tariffs (pricing) Sales

Advertising

Sales promotion Advertising Sales

Market research

Organizational Charts

Operations

Facilities

Construction; maintenance

Production and inventory control

Scheduling; materials control

Quality assurance and control

Supply-chain management

Manufacturing

Tooling; fabrication; assembly

Design

Product development and design

Detailed product specifications

Industrial engineering

Efficient use of machines, space,

and personnel

Process analysis

Development and installation of

production tools and equipment

Finance/

accounting

Disbursements/

credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue

Bond issue and recall

Manufacturing

Figure 1.1(C)

Why Study OM?

(marketing, finance, and operations)

of any organization

 We want (and need We want ( and need ) to know how

goods and services are produced

operations managers do

organization

Options for Increasing

Increase Reduce Reduce Sales Finance Production Current Revenue 50% Costs 50% Costs 20%

Ten Critical Decisions

 Service and product design 5

The Critical Decisions

 Service and product design

offer?

and services?

 Quality management

Table 1.2 (cont.)

The Critical Decisions

 Process and capacity design

these products require?

necessary for these processes?

 Location

location decision?

Table 1.2 (cont.)

The Critical Decisions

 Layout design

and material flow?

our plan?

 Human resources and job design

environment?

employees to produce?

Table 1.2 (cont.)

The Critical Decisions

 Supply-chain management

integrate into our e-commerce program?

 Inventory, material requirements

planning, and JIT

we have?

Table 1.2 (cont.)

The Critical Decisions

 Intermediate and short –term

scheduling

the payroll during slowdowns?

 Maintenance

Table 1.2 (cont.)

Where are the OM Jobs?

Figure 1.2

Where are the OM Jobs?

Significant Events in OM

Figure 1.3

The Heritage of OM

 Division of labor (Adam Smith 1776;

Charles Babbage 1852)

 Standardized parts (Whitney 1800)

 Scientific Management (Taylor 1881)

 Coordinated assembly line (Ford/

Sorenson/Avery 1913)

 Gantt charts (Gantt 1916)

 Motion study (Frank and Lillian Gilbreth 1922)

 Quality control (Shewhart 1924; Deming 1950)

 Computer aided design (CAD 1970)

 Flexible manufacturing system (FMS 1975)

 Baldrige Quality Awards (1980)

 Computer integrated manufacturing (1990)

 Globalization (1992)

 Internet (1995)

Eli Whitney

contract to make 10,000 muskets

make standardized parts to exact specifications

musket

Frederick W Taylor

management’

Midvale Steel, studied how tasks were done

Taylor’s Principles

Frank & Lillian Gilbreth

measurement methods

home and 12 children!

Dozen,” book: “Bells on Their Toes”

 Born 1863; died 1947

Company

line to make Model T

conveyor past work station

($5/day!)

Henry Ford

W Edwards Deming

quality control methods in WW2

decisions

interaction

Industry and Services as

Goods Versus Services

Site of facility important for cost

Often easy to automate

Revenue generated primarily

from tangible product

Attributes of Goods

(Tangible Product)

Attributes of Services (Intangible Product) Reselling unusual

Difficult to inventory Quality difficult to measure

Selling is part of service

Provider, not product, is often transportable

Site of facility important for customer contact

Often difficult to automate Revenue generated primarily from the intangible service

Goods and Services

Automobile Computer Installed carpeting

Fast-food meal Restaurant meal/auto repair

Hospital care Advertising agency/

investment management

Consulting service/

teaching Counseling

Percent of Product that is a Good Percent of Product that is a Service

100% 75 50 25 0 25 50 75 100%

Figure 1.4

Organizations in Each Sector

Service Sector Example % of all Jobs

7.1

Table 1.4

Organizations in Each Sector

Service Sector Example % of all Jobs

6.7

Food, Lodging,

Entertainment McDonald’s, Hard Rock Café, Motel 6, Hilton

Hotels, Walt Disney, Paramount Pictures

5.4

Public

Administration U.S., State of Alabama, Cook County 4.5

Table 1.4

Organizations in Each Sector

Manufacturing

Sector Example % of all Jobs

General General Electric, Ford,

U.S Steel, Intel 13.3Construction Bechtel, McDermott 7.1

Agriculture King Ranch 2.5

Mining Homestake Mining 0.4

Sector Percent of all jobs

Manufacturing 23.3%

Table 1.4

Figure 1.5 (A)

Agriculture

100 90 80 70 60 50 40 30 20 10 0

1800 1850 1900 1950 2000

Development of the Service Economy

Industrial production

Estimate

Development of the Service Economy

Figure 1.5 (C)

United States

Canada France Italy Britain Japan

Just-in-time shipments

Low-bid

purchasing Quality emphasis requires that suppliers be engaged

in product improvement

chain partners, Enterprise Resource Planning, e-commerce

Supply-Figure 1.6

Past Causes Future

international collaboration

Rapid product development, alliances,

collaborative designs

Standardized

products Affluence and worldwide markets; increasingly

flexible production processes

Mass customization with added emphasis on quality

Job

specialization Changing socioculture milieu; increasingly a

knowledge and information society

Empowered employees, teams, and lean

production

Figure 1.6

Past Causes Future

production, green

manufacturing, recycled

materials, remanufacturing

Figure 1.6

Past Causes Future

Productivity Challenge

Productivity is the ratio of outputs (goods

and services) divided by the inputs (resources such as labor and capital)

The objective is to improve this

measure of efficiency

Important Note!

Production is a measure of output only and not a measure of efficiency

Feedback loop

Outputs

Goods and services

The Economic System

Inputs

Labor, capital, management

Figure 1.7

 30% of the 900 trash trucks were in repair

 11% of police cars were in repair Actions:

 Created team assignments

 Assigned parking places for trucks

 Tires checked and trucks emptied each night

 Standard customer pickups established

 Computerized fleet management

 Mechanics moved to night shift

Increasing Productivity –

The LA Motor Pool

 Cost $120 million annually

 21,000 vehicles

 30% of the 900 garbage trucks were in repair

 11% of police cars were in repair

Before:

Actions:

 Creating team assignments

 Assigned parking places for trucks

 Tire checked and trucks emptied each night

 Standard customer pickups established

 Computerized fleet management

 Mechanics moved to night shift

Results:

 Total fleet reduced by 500 vehicles

 Parts inventory dropped 20% reducing cost by $5.4 million annually

 Standardized pickups reduced costs by

$12 million annually

 Out of service garbage trucks dropped

to 18%

 Measure of process improvement

can our standard of living improve

Productivity

Productivity = Units produced

Input used

Multi-Factor Productivity

Output Labor + Material + Energy + Capital + Miscellaneous Productivity =

in dollars

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

Old System:

=

Old labor productivity

8 titles/day

32 labor-hrs

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

Old System:

8 titles/day

32 labor-hrs

= Old labor productivity = .25 titles/labor-hr

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

=

New labor productivity

= 25 titles/labor-hr

14 titles/day

32 labor-hrs

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

14 titles/day

32 labor-hrs

= New labor productivity = .4375 titles/labor-hr

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

8 titles/day

$640 + 400

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

Measurement Problems

 Quality Quality may change while the

quantity of inputs and outputs remains constant

 External elements External elements may cause an

increase or decrease in productivity

 Precise units Precise units of measure may be

lacking

Productivity Variables

 Labor Labor - contributes about 10% of

the annual increase

 Capital Capital - contributes about 32%

of the annual increase

 Management Management - contributes about

Key Variables for Improved

Labor Productivity

labor force

available

midst of rapidly changing technology and knowledge

Labor Skills

About half of the 17-year-olds in the US cannot

correctly answer questions of this type

Figure 1.8

Investment and Productivity

in Selected Nations

Canada Italy

Belgium

France Netherlands

Japan

10 8 6 4 2 0

Service Productivity

individual attributes or desires

professionals

Productivity at Taco Bell

Improvements:

 Revised the menu

 Designed meals for easy preparation

 Shifted some preparation to suppliers

 Efficient layout and automation

 Training and employee empowerment

Productivity at Taco Bell

Improvements:

 Revised the menu

 Designed meals for easy preparation

 Shifted some preparation to suppliers

 Efficient layout and automation

 Training and employee empowerment

Results:

 Preparation time cut to 8 seconds

 Management span of control increased from 5 to 30

 In-store labor cut by 15 hours/day

 Stores handle twice the volume with half the labor

 Fast-food low-cost leader

Ethics and Social Responsibility

Challenges facing

operations managers: