Operations & Productivity
Chapter 1
Operations Management
• is the set of activities that
creates value in the form of
goods
and
services
by
transforming
inputs
into
outputs
• Satisfaction
Increase in Satisfaction
Increase in Production
Increase Sales
Increase in Profit
KEY POINTS
Production:
– Output
• Goods
• Services
– Units
– Quantitative
Operations
– System
• Network of functions
– Methods
– Steps
– Qualitative
KEY POINTS
Management
– Ingredients
1.
2.
3.
4.
5.
6.
Manpower
Machines
Methods
Money
Markets
Materials
– Factors of Production
1. Tangible vs. Intangible
2. Degree of Customer
Satisfaction
3. Degree of Customer
Participation
Instructions:
1.
Brainstorm within your group a product proposal
(tangible) that you can sell the market.
2.
Identify the design, raw materials, method of
production, length of production, target market, and
lastly estimated budget.
3.
What are the issues that you have encountered during
brainstorming in addressing the aforementioned.
4.
What improvement would you suggest to better the
proposed product?
Learning Exercise
Mechanics
1. Read the Operations & Productivity (Chapter 1).
2. You may use your own GC to discuss and complete the
task.
3. Assign someone to present (preferably in ppt) your
output.
4. 5 minutes shall be given to each group.
•
Note: Only the Leader of the group shall upload the output here. Make sure to include the names of the
member.
Synthesis
1. The experience in answering the task is synonymous to
the same scenario a businessman faced in developing a
product.
2. Prior to identifying a product, market study is imperative.
3. Market testing is needed to validate effectiveness.
Adjustment must be considered.
4. Availability of the product based on market acceptance.
1. Finance
– Budgeting
– Economic Analysis of Investment Proposal
– Provision of Funds
2. Marketing
3. Human Resource
4. Production
u
Market Study
The process of gathering, analyzing and
interpreting information about a market,
about a product or service to be offered
for sale in that market, and about the
past, present and potential customers for
the product or service; research into the
characteristics, spending habits, location
and needs of your business' target
market, the industry as a whole, and the
particular competitors you face.
Source: https://www.entrepreneur.com/encyclopedia/market-research
1. It helps in spotting emerging
trends.
2. It minimizes investment risk.
3. It identifies threats and
opportunities
4. It identifies your competitive
advantage
5. It helps to strengthen business
position.
Source:
https://www.google.com/search?q=benefits+of+market+study&rlz=1C1GCEU_enPH911PH9
11&oq=benefits+of+market+study&aqs=chrome..69i57j0l2.4721j0j7&sourceid=chrome&ie=U
TF-8
The Transformation Process
Value-Added
Inputs
•Land
•Labor
•Capital
•Information
Transformation/
Conversion
Process
Outputs
•Goods
•Services
Measurement
and Feedback
Measurement
and Feedback
Control
Measurement
and Feedback
Feedback - measurements taken at various points in the transformation process
Control - the comparison of feedback against previously established standards to determine if
corrective action is needed.
Productivity
– a measure of the effective use of
resources, usually expressed as the
ration of output to input.
– It is an index that measures output
(g/s) relative to the input (labor,
materials, energy and other
resources) used to produce them.
FACTORS:
1.
2.
3.
4.
5.
Specialization of Labor
Scientific Management
Scheduling
Quality Control
Technology
Productivity
Productivi ty =
Output
Input
Partial Measures
Output
;
Single Input
Multifactor Measures
Total Measure
Ouput
;
Labor
Output
Capital
Output
;
Multiple Inputs
Goods or services produced
All inputs used to produce them
Ouput
;
Labor + Machine
Output
Labor + Capital + Energy
Example:
1. Given:
Units produced:
Standard price:
Labor input:
Cost of labor:
Cost of materials:
Cost of overhead:
5,000
$30/unit
500 hours
$25/hour
$5,000
2x labor cost
Multifactor Productivity

=
=
Output
Labor +Material +Overhead
5,000 units  $30/unit
(500 hours  $25/hour) + $5,000 + (2(500 hours  $25/hour))
=
$150,000
$42,500
= 3.5294
Example:
1. A company that makes shopping carts for supermarkets
and other stores recently purchased some new
equipment that reduces the labor content of the jobs
needed to produce the shopping carts. Prior to buying
the new equipment, the company used five workers,
who produced an average of 80 cart per hour. Workers
receive $10 per hour, and machine cost was $40 per
hour. With the new equipment, it was possible to
transfer one of the workers to another department, and
equipment cost increased by $10 per hour while output
increased by four carts per hour.
a. compute labor productivity under before and
after buying new equipment (Use carts per worker per hour
as a measure of labor productivity).
b. compute the multifactor productivity before
and after buying new equipment. Use carts per dollar cost
(labor plus equipment) as a measure of productivity)
a. Prior to Buying New Equipment:
Labor Productivity = Carts per Worker per Hour = 80
/5
= 16 Carts per Worker per hour
b. After Buying New Equipment:
Labor Productivity = Carts per Worker per Hour =
(80 + 4) / (5 – 1) = 84 /4
= 21 Carts per Worker per Hour
Example:
b. Prior to Buying New Equipment:
After Buying New Equipment:
Multifactor Productivity = Carts per Dollar (Labor +
Equipment)
Multifactor Productivity = Carts per Dollar (Labor +
Equipment)
Labor = 5 workers x $10/hour = $50/hour
Equipment = Machine Cost = $40/hour
Labor = 4 workers x $10/hour = $40/hour
Equipment = Machine Cost = $40/hour + $10/hour =
$50/hour
Multifactor Productivity = 80 carts / ($50 + $40)
Multifactor Productivity = 84 carts / ($40 + $50)
= 0.89 Carts per Dollar (rounded to two decimals)
= 0.93 Carts per Dollar (rounded to two decimals)
Productivity Growth
Productivity Growth
=
Current productivity - Previous productivity
100%
Previous productivity
Productivity Growth

23 - 25
=
100%  8%
25