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Unformatted text preview: Chapter 1: Operations Management and Productivity
BUS 140 Fundamentals of Operations Management
Professor Ming Zhou Introduction Get to know each other Syllabus The course Requirement Course Outline Groups Key Decisions of Operations Managers: Regal Boat What What resources/what amounts When Needed/scheduled/ordered Where Work to be done How Designed Who To do the work Ten Critical Decisions
Ten Decision Areas Service and product design Quality management Process and capacity design Location Layout design Human resources, job design Supply-chain management Inventory management Scheduling Maintenance Chapter(s) 5 6 6 Supplement 7 7 Supplement 8 9 10 10 Supplement 11 11 Supplement 12, 14, 16 13, 15 17 Table 1.2 Operations Management World War II: Britain Operations Research: study all factors involved in battle, human and technical, to understand and learn from what happened. Depth Charges: Experience: 100 150 feet Statistical Analysis: Chance to hit a diving U-Boat is already low If a U-boat is not deep, 100-150 is too deep Objects are partly visible "Battle of the Atlantic" Operations Management
Frederick W. Taylor: efficiency `father of scientific management' Stop watch timing Designed a shovel that allows a worker to work the whole day that reduced the labor requirement from 500 to 140 Operations Management George Danzig: Linear Programming and Simplex Method Thomas Saaty: Analytical Hierarchy process Nash: Nash Equilibrium Operations Management More recent: During 1940 1950, Toyota was on the edge of bankruptcy Taiichi Ohno invented lean production system or the JIT system Drive out all unnecessary or static processes or items in a system to keep cost low: Defects, including rework Overproduction of goods not needed/wanted by customers Inventories of goods awaiting further processing Unnecessary processing Unnecessary movement of people Unnecessary transportation of goods Waiting by employees for upstream activity Today's Operations Management ValueAdded
Figure 1.2 The difference between the cost of inputs and the value or price of outputs.
Inputs Land Labor Capital Transformation/ Conversion process
Feedback Outputs Goods Services Control
Feedback Feedback Food Processor
Table 1.2 Inputs
Raw Vegetables Metal Sheets Water Energy Labor Building Equipment Processing
Cleaning Making cans Cutting Cooking Packing Labeling Outputs
Canned vegetables Hospital Process
Table 1.2 Inputs
Doctors, nurses Hospital Medical Supplies Equipment Laboratories Processing
Examination Surgery Monitoring Medication Therapy Outputs
Healthy patients Manufacturing versus Service Industries Characteristics of Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction Characteristics of Service Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed Productivity Productivity A measure of the effective use of resources, usually expressed as the ratio of output to input Planning workforce requirements Scheduling equipment Financial analysis U.S. Productivity Productivity Partial measures output/(single input) Multi-factor measures Outputs Productivity = Inputs output/(multiple inputs) output/(total inputs) Total measure Measures of Productivity
Table 2.4 Partial measures Multifactor measures Total measure Output Labor Output Output Machine Capital Output Energy Output Labor + Machine Output Labor + Capital + Energy Goods or Services Produced All inputs used to produce them 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 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 = .4375 titles/labor-hr 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 = .0077 titles/dollar 14 titles/day New multifactor productivity = $640 + 800 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 = .0077 titles/dollar 14 titles/day New multifactor productivity = $640 + 800 = .0097 titles/dollar Productivity Growth Productivity Growth =
Current Period Productivity Previous Period Productivity Previous Period Productivity 0.4375 0.25 0.25 = 0.75 Example 3 7040 Units Produced Sold for $1.10/unit Cost of labor of $1,000 Cost of materials: $520 Cost of overhead: $2000 What is the total factor productivity? Example 3 Solution
TFP = Output Labor + Materials + Overhead (7040 units)*($1.10) $1000 + $520 + $2000 2.20 TFP = TFP = 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 units of measure may be lacking Service Productivity Typically labor intensive Frequently focused on unique individual attributes or desires Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality Productivity at Taco Bell
Improvements: Revised the menu Results: Designed meals for easy preparation Shifted some preparation to suppliers Preparation time cut to 8 seconds Efficient layout and automation Management span of control increased from 5 to empowerment Training and employee 30 In-store labor cut by 15 hours/day Stores handle twice the volume with half the labor Fast-food low-cost leader ...
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This note was uploaded on 09/08/2010 for the course BUS 140 at San Jose State University .