OPERATION MANAGEMENT OPERATIONS AND PRODUCTIVITY

1. OPERATION MANAGEMENTOPERATIONS AND PRODUCTIVITY BARRY PUALENGCO – KAREN TRINIDAD

2. 1 Introduction to Operation Management 2 Productivity Examples 3 Challenges 4 Contents

3. WHAT IS INSIDE A BUSINESS?

4. WE CREATE VALUE Production/Operation Finance/Accounting Marketing • Facilities Construction • Facilities Maintenance • Production and inventory control • Scheduling, material controls • Quality Assurance and control • Supply-chain management • Manufacturing tooling fabrication; Assembly; • Design products, product development • Detailed product specification • Industrial engineering, efficient use of machine, space, personnel. • Disbursement/credits, Accounts receivable, payable, General ledger • Fund management, money market, International exchange • Capital requirements, Stock issue, Bond issue and recall • Finance, cash control • Investment • Sale promotion • Advertising • Market research • Sales

5. creation of goods and services Production/Operation tracks how well the organization is doing, paying bills, and collecting money. Finance/ Accounting generates the demand, or at least takes the order for a product or service. Marketing What are these activities?

6. TRANSFORMATION/ CONVERSION PROCESS INPUTS Land Labor Capital OUTPUTS Goods Services CONTROL VALUE ADDED VALUE ADDED FEEDBACK FEEDBACK FEEDBACK

7. Operation Management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs Definition

8. EXAMPLES INPUT-PROCESS-OUTPUT 1. INPUT 2. PROCESS 3. OUTPUT

9. Raw Vegetables Cleaning Canned vegetables Metal Sheets Making cans Water Cutting Energy Cooking Labor Packing Raw Vegetables Building Labeling Equipment FOOD PROCESSOR INPUTS PROCESSING OUTPUTS

10. Doctors Examination Healthy patients Surgery Nurses Monitoring Hospital Medication Medical Supplies Therapy Equipment Raw Vegetables Laboratories HOSPITAL PROCESS INPUTS PROCESSING OUTPUTS

11. GOODS AND SERVICES • Reselling is unusual • Cannot be inventoried • Many aspect are difficult to measure • Selling is often part of the services • Provider is transportable • Site of facility is important for customer contact • Difficult to automate • Revenue generated from intangible services • Can be resold • Can be inventoried • Some aspect of quality are measurable • Selling is distinct from production • Product is transportable • Site of facility is important for cost • Easy to automate • Revenue generated from tangible product GOODS SERVICES Difference between Goods and Services

12. Tangible Act Manufacturing or Service?

13. High percentage goods Low percentage service Low percentage goods High percentage service Goods-service Continuum Steel productionAutomobile fabrication Home remodelingRetail sales Auto Repair Appliance repair Maid Service Manual car wash Teaching Lawn mowing

14. MANUFACTURING SERVICE Tangible Intangible Low High Output Uniformity of input High Low Customer contact Low High Measurement of productivity Uniformity of output High Low Labor content Easy Difficult Opportunity to correct quality problems High Low Manufacturing vs Service Characteristics

15. US EMPLOYMENT MANUFACTURING VS. SERVICE

16. 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.

17. Fisher Technologies Option 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%

18. Details

19. Output Goods and Services Productivity = = Input Labor and Capital Productivity Challenge: Productivity Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital) Objective: to improve productivity!

20. Definition Efficiency Doing job well- minimum resources/waste Effective doing the right thing.

21. 4. High ROI, constant productivity = higher prices 1. Reduce inputs, constant outputs 2. Increase outputs, constant inputs 3. Resulting to High ROI, lower prices. How do we increase Productivity?

22. indicates the ratio of one resource (input) to the goods and services produced (outputs) Single-factor productivity indicates the ratio of many or all resources (inputs) to the goods and services produced (outputs) Multifactor productivity Productivity Measurement

23. 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.

24. Productivity Variables Management which contributes about 52% of the annual increase. Capital contributes about 38% of the annual increase Labor contributes about 10% of the annual increase

25. CHALLENGES

26. 6 yds 4 yds What is the area of this rectangle? • 4 square yds • 6 square yds • 10 square yds • 20 square yds • 24 square yds

27. If 9Y + 3 = 6y + 15, then Y = • 1 c. 4 • 2 d. 6

28. Which of the following is true about 84% of 100? • It is greater than 100 • It is less than 100 • Its is equal to 100

29. 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?

30. 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:

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