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OPERATIONS MANAGEMENT OPERATIONS AND PRODUCTIVITY. Changing Challenges for the Operations Manager. Changing Challenges for the Operations Manager. Past. Causes. Future. Standardized. Affluence and worldwide. Mass. products. markets; increasingly flexible. customization.
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Changing Challenges for the Operations Manager Past Causes Future Standardized Affluence and worldwide Mass products markets; increasingly flexible customization production processes Job Changing socio-cultural scene. Empow ered specialization Increasingly a knowledge and employees, teams, information society. Low cost Environmental issues, ISO Environmentally focus increasing disposal costs sensitive production, Green manufacturing,
Characteristics of Goods • Tangible product • Production usually separate from consumption • Consistent product definition • Low customer interaction • Can be inventoried
Characteristics of Service • Intangible product • Produced & consumed at same time • Inconsistent product definition • High customer interaction • Often unique • Often knowledge-based • Frequently dispersed
Goods Versus Services GOODS SERVICES • Can be resold • Can be inventoried • Some aspects of quality measurable • Selling is distinct from production • Reselling unusual • Difficult to inventory • Quality difficult to measure • Selling is part of service
Goods Versus Services - Continued GOODS SERVICES • Product is transportable • Site of facility important for cost • Often easy to automate • Revenue generated primarily from tangible product • Provider is transportable • Site of facility important for customer contact • Often difficult to automate • Revenue generated primarily from intangible service.
75 25 50 100 75 0 100 50 25 Goods Contain Services / Services Contain Goods Automobile Computer Installed Carpeting Fast-food Meal Restaurant Meal Auto Repair Hospital Care Advertising Agency Investment Management Consulting Service Counseling Percent of Product that is a Good Percent of Product that is a Service
Inputs Process Outputs Land, Labor, Capital, Management Goods and Services The Production System Feedback loop The Production System Transforms Inputs to Outputs
Unitsproduced Productivity = Input used Productivity • Measure of process improvement • Represents ratio of output to input • Only through productivity increases can our standard of living improve
Multi-Factor Productivity Productivity =Output Labor + material + capital + energy + Misc
Measurement Problems • Quality may change while the quantity of inputs and outputs remains constant • External elements may cause an increase or decrease in productivity • Precise unitsof measure may be lacking
Productivity Variables • Labor - contributes about 10% of the annual increase • Capital- contributes about 32% of the annual increase • Management - contributes about 52% of the annual increase
Service Productivity Reasons for low productivity in services • Typically labor intensive • Frequently individually processed • Often an intellectual task performed by professionals • Often difficult to mechanize • Often difficult to evaluate for quality