Other Sectors Other Sectors Example Example % of all % of all Jobs Jobs Manufacturing Sector General Electric, Ford, U.S. Steel, Intel 11.2 Construction Sector Bechtel, McDermott 8.1 Agriculture Sector King Ranch 1.4 Mining Sector Homestake Mining 0.5 Total 21.2 Table 1.3
Changing Challenges Traditional Approach Reasons for Change Current Challenge Ethics and regulations not at the forefront Public concern over pollution, corruption, child labor, etc. High ethical and social responsibility; increased legal and professional standards Local or national focus Growth of reliable, low cost communication and transportation Global focus, international collaboration Lengthy product development Shorter life cycles; growth of global communication; CAD, Internet Rapid product development; design collaboration Figure 1.5
Changing Challenges Traditional Approach Reasons for Change Current Challenge Low cost production, with little concern for environment; free resources (air, water) ignored Public sensitivity to environment; ISO 14000 standard; increasing disposal costs Environmentally sensitive production; green manufacturing; sustainability Low-cost standardized products Rise of consumerism; increased affluence; individualism Mass customization Figure 1.5
Changing Challenges Traditional Approach Reasons for Change Current Challenge Emphasis on specialized, often manual tasks Recognition of the employee's total contribution; knowledge society Empowered employees; enriched jobs “In-house” production; low-bid purchasing Rapid technological change; increasing competitive forces Supply-chain partnering; joint ventures, alliances Large lot production Shorter product life cycles; increasing need to reduce inventory Just-In-Time performance; lean; continuous improvement Figure 1.5
New Trends in OM Ethics Global focus Environmentally sensitive production Rapid product development Environmentally sensitive production Mass customization Empowered employees Supply-chain partnering Just-in-time performance
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! The objective is to improve productivity! Important Note! Production is a measure of output only and not a measure of efficiency
Feedback loop Outputs Goods and services Transformation The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is the result of a mix of capital (38% of 2.5%), labor (10% of 2.5%), and management (52% of 2.5%). The Economic System Inputs Labor, capital, management Figure 1.6
2-53 Productivity Partial measures output/(single input) Multi-factor measures output/(multiple inputs) Total measure output/(total inputs) Productivity = Outputs Inputs
2-54 Productivity Growth Productivity Growth Current Period Productivity – Previous Period Productivity Previous Period Productivity Productivity Growth =
2-55 Measures of Productivity Measures of Productivity Partial Output Output Output Output measures
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