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Operations and
Productivity
PowerPoint presentation to accompany
Heizer and Render
Operations Management, 10e
Principles of Operations Management, 8e
PowerPoint slides by Jeff Heyl
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Outline
 What Is Operations Management?
 Organizational Design
 Decisions in OM
 Significant Events in OM
 Operations in the Service Sector
 New Challenges in OM
 The Productivity Challenge

Productivity Example
 Ethics and Social Responsibility
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What Is Operations
Management?
Production is the creation of goods
and services
Operations management (OM) is the
set of activities that create value in
the form of goods and services by
transforming inputs into outputs
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Organizational Charts
Commercial Bank
Operations
Finance
Marketing
Teller
Scheduling
Check Clearing
Collection
Transaction
processing
Facilities
design/layout
Vault operations
Maintenance
Security
Investments
Security
Real estate
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Accounting
Auditing
Trust Department
Figure 1.1(A)
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Organizational Charts
Airline
Operations
Ground support
equipment
Maintenance
Ground Operations
Facility
maintenance
Catering
Flight Operations
Crew scheduling
Flying
Communications
Dispatching
Management science
Finance/
accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International
exchange
Marketing
Traffic
administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising
Figure 1.1(B)
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Organizational Charts
Manufacturing
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
Finance/
accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Marketing
Sales
promotion
Advertising
Sales
Market
research
Process analysis
Development and installation of
production tools and equipment
Figure 1.1(C)
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The Critical Decisions(1 of 2)
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
Table 1.2 (cont.)
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The Critical Decisions(2 of 2)
6. Human resources and job design
7. Supply-chain management
8. Inventory, MRP, and JIT
9. Intermediate & short–term scheduling
10. Maintenance
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Significant Events in OM
Figure 1.3
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How Important is
Manufacturing?
In 1978 the United States produced 22%
of the worlds manufactured goods.
What percent does the United States
produce today?
21%
The US is still the largest manufacturer in the world.
Although China is growing quickly.
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How Important is
Manufacturing
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How Important is
Manufacturing
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How Important is
Manufacturing
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Goods versus Services
goods
McDonald’s
(facilitating goods)
Pencil Manufacturer
• tangible
• storable*
• easy quality assessment
• centralized production
• long lead times
• capital intensive
• low customer contact
• production separate
from consumption
services
Psychologist
• intangible
• perishable*
• difficult quality assessment
• dispersed production
• short lead times
• labor intensity
• high customer contact
• production concurrent
with consumption
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Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
100%
75
50
25
0
25
50
75
100%
|
|
|
|
|
|
|
|
|
Percent of Product that is a Good Percent of Product that is a Service
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New Challenges in OM
From
To
 Local or national focus
 Global focus
 Batch shipments
 Just-in-time
 Low bid purchasing
 Supply-chain
partnering
 Lengthy product
development
 Rapid product
development,
alliances
 Standard products
 Mass
customization
 Job specialization
 Empowered
employees, teams
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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 productivity!
Important Note!
Production is a measure of output
only and not a measure of efficiency
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The Economic System
Inputs
Transformation
Outputs
Labor,
capital,
management
The U.S. economic system
transforms inputs to outputs
at about an annual 2.5%
increase in productivity per
year.
Goods
and
services
Feedback loop
Figure 1.6
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Productivity
Units produced
Productivity =
Input used
 Measure of process improvement
 Represents output relative to input
 Only through productivity increases
can our standard of living improve
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Productivity Calculations
Labor Productivity
Productivity =
=
Units produced
Labor-hours used
1,000
250
= 4 units/labor-hour
One resource input  single-factor productivity
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Multi-Factor Productivity
Output
Productivity =
Labor + Material + Energy
+ Capital + Miscellaneous
 Also known as total factor productivity
 Output and inputs are often expressed
in dollars
Multiple resource inputs  multi-factor productivity
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
8 titles/day
Old labor
=
productivity 32 labor-hrs
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
8 titles/day
Old labor
=
productivity 32 labor-hrs = .25 titles/labor-hr
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor
=
productivity 32 labor-hrs = .25 titles/labor-hr
14 titles/day
New labor
=
productivity
32 labor-hrs
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old labor
=
productivity 32 labor-hrs = .25 titles/labor-hr
14 titles/day
New labor
=
= .4375 titles/labor-hr
productivity
32 labor-hrs
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
productivity
$640 + 400
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
14 titles/day
New multifactor
=
productivity
$640 + 800
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Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
New System:
14 titles/day
8 titles/day
Overhead = $400/day
Overhead = $800/day
8 titles/day
Old multifactor
=
= .0077 titles/dollar
productivity
$640 + 400
14 titles/day
New multifactor
=
= .0097 titles/dollar
productivity
$640 + 800
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Ethics and
Social Responsibility
Challenges facing
operations managers:
 Developing and producing safe,
quality products
 Maintaining a clean environment
 Providing a safe workplace
 Honoring stakeholder commitments
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In-Class Problems from the
Lecture Guide Practice Problems
Problem 3: Joanna French is currently working a total
of 12 hours per day to produce 240 dolls. She thinks
that by changing the paint used for the facial features
and fingernails that she can increase her rate to 360
dolls per day. Total material cost for each doll is
approximately $3.50; she has to invest $20 in the
necessary supplies (expendables) per day; energy
costs are assumed to be only $4.00 per day; and she
thinks she should be making $10 per hour for her time.
Viewing this from a total (multifactor) productivity
perspective, what is her productivity at present and with
the new paint?
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In-Class Problems from the
Lecture Guide Practice Problems
Problem 4: How would total (multifactor) productivity
change if using the new paint raised Ms. French’s
material costs by $0.50 per doll?
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