lntroduction to Operations

Management 53

V SOLVED PBOBLETfr I,2 .lrt Binley has decided to look af his productivity from amultifactor (totai factor productivity) perspective (iefer to Solved problem 1.1). To do sO, he has determined his labor, capital, energy, and material usage and decided to use dollars as the common denominator. His total labor-hours are now 300 per day and will increase

to 308 per day. His capital and energy costs

will remain con$tant at $350 and $150 per 4ay, respectively. Material costs for the 100
logs per day are $i,000 and will remain th€ same. Because [e pays an average of $10 per hour (with fringes), Biniey detennines his productivity increase as follows:

Current System
Labor: System with Pro&ssional Buyer
308 hrs. @10 =

Capital: Energy: Total Cost:

300 hrs. @10 = 3.000 100logs/day 1,000

$3,080 r,000



$4,580 Multifactor productivity of proposed system: 260cratesl4,580 -0568 cratesldollar

Multifactor productivity of current system:




.0533 crates/dollar





1.066, ata6,6Voincrease.

. l.l John Lucy makes wooden boxes in which to ship motorcycles. John and his three employees invest a total of 40 hours per day making the 120 boxes. a) What is their productivity? b) John and his employees have discussed redesigning the process to improve efficiency. If they can increase the rate to 125 per day, what will be their new productivity? c) What will be their unit increase in productivity per hour? d) What will be their percentage change in productivity?*{ , 1,2
Riverside Metal Works produces cast bronze valves on

b) Lori thinks c)

that by redesigning the package, she can increase her total productivity to 133 care packages per day. What will be her new productivity? What will be the percentage increase in ploductivity if Lori makes the change? F"o

a lO-person assembly line. On a recent day, 160 valves were produced during an S-hour shift. a) Calculate the labor productivity

1.6 Eric Johnson makes billiard balls in his New England plant. With recent increases in his costs, he has a newfound interest in efficiency. Edc is interested in deterrnining the productivity ofhis organization. He would like to know if his organization is maintaining the manufacturing average of 37a increase in prodr-rctivity. He has the fbilowing data representing a month from last year and an equivalent month rhib year:
Last Units produced Labor (hours) Resin (pounds) Capital invested ($) Energy (BTU)

ofthe line.

b) The manager at Riverside changed the layout and was able to increase production to 180 units per 8-hour shift. What is the


1,000 275


new labor productivity per labor-hour? What is the percentage of productivity increase?


1,000 300 50 10,000 3.000

This year, Benson, Inc., will produce 57,600 hot water heaters at its plant in Yuiee, Florida, in order to meet expected global demand. To accomplish this, each laborer at the yulee plant will work 160 hours per monrh. If the labor productivity at the plant is 0.15 hot water heaters per labor-hour, how many laborers are
employed at the plant? As a library or Intemet assignment, find the U.S. productivity rate (increase) last year for the (a) national economy, (b) manulacturing sector. and 1c.; seruice sector.



45 1,000 2,850



Show the productivity percentage change for each category and then determine the improvement for iabor-hours, the typical stanOa-rO

IOI COmpanSOn.


Eb. -. r$

Lori produces "Final Exam Care Packages" for resale by her sorority. She is currently working a total of 5 hours per day to produce I 00 care packages. a) What is Lori's productivity?
*Nole.' Q€, means the problem may be solved with POM lbr Windows
and/or Excel OM.



1.7 Eric Johnson (using data from Problem 1.6) determines his costs to be as follows: . Labor: $10 per hour . Resin: $5 per pound . Capital expense: 1% per month of investment . Energy:
$.50 per BTU.

Show the percent change in productivity for one month last year versus one month this year, on a multifactor basis with dollars as the cornmon denominator. P I

Average labor cost iast year was $20 per hour.18-1. a local bakery.875) as the change in labor-hours. c) 325 18.*l 2. Resource inputs were: labor.{. with an increase in labor cost (from 640 to 800 hours). Show the percent productivity change for labor and investment. Cunningham? F. The manager. and cost of ingredients at $0.13 and 1. This new process will require that the ovens be loaded by hand. demand has increased by 25Vo in the last year. modifies 375 autos per year. Together. kits cost $1. requiring additional manpower. The plant is now able to produce 650 boxes per day. 1.1 1 vans per hour. The job shop employs eight workers..16 In December.9 a) Calculate the company's productivity before the change in work ru1es and after the change.000 1.750 1. He has asked you to provide him with a multifactor measure of last year's performance as a benchmark for future comparison.000 3. but Charles does not purchase the blender suggested in Problem 1 . the owner. If Charles Lackey's utility costs remain constant at $500 per month.'r. The new blender will mean an increase in his investment. If the bakery makes 1. is worried about increased costs-pafticularly energy. in dollars per labor-hour. You have the following data to work with: Last Year Production (dozen) Labor (hours) Capital investment ($) Energy (BTU) 1. Because of its excellent product and excellent location. The modifications were supposed to make the ovens at least 75Vo more efficient. Idaho. Due to increased demand. they produced a batch of 1 32 garments. but she did invest an additional $3. P..344 loaves per labor-hour.000 ) Refer to li''-.ffiY $ lntroduction to Operations Management 1. b) Labor: Raw material: 400 hours per day @ $12. each worker worked 45 hours. one employee suggested ways to load the ovens differentiy so that more loaves ofbread can be baked at one time.000 pounds per day @ $1 per pound $5. consuming 520 hours at $13 per hour 100 gallons at $5 per gallon 20 days at $50 per day the following resources: Labor: Solvent: Machine rentai: a) What kilowatt-hours. Upton makes 1. Last year's records can provide a fairly good estimate of the parameters for this year. What do you tell Mr.1O Sawyer's..l7 l. F. Because of the size of the store. 52 were "seconds" (meaning that they were flawed).54 . The remaining 80 garments were sold to retail outlets at a price of $198 per garment.) a) What is the labor productivity per labor-hour for Upton Manufacturing? b) What is the multifactor productivity for c) these tires at Upton Manufacturing? What is the percent change in multifactor productivity if Upton can reduce the energy bill by $ 1.000 for modifications to the bakery's ovens to make them more energy efficient.14.600 cus- tomized vans at its plant in Detroit. On far too many occasions. how many hours would the average laborer work that month? Natalie Attired runs a sma11 job shop where garments are made.:r.l 3 Charles Lackey operates a bakery in Idaho Falls.500 350 15.'f.000 . 100. This is the only thing to be changed.000 tires per day with the following resources: {. l. for these additional homework problems: 1. and energy. in loaves per dollar. Of these gaments. a) How many hours did the average laborer work that month? b) If productivity can be increased to 0. 300 laborers were employed at the plant that month. Inc. working in two 1 0-hour shifts.14 Refer to Problem 1. The labor productivity at this plant is known to have been 0.000 per day without cutting production or changing any other inputs? Su . at this job shop during the first week of March? l. and energy costs were $3 per kilowatt-hour. but he will achieve the same output (an increase to 1.000 per day $10. plant managers have decided to operate three S-hour shifts instead. Judy Sawyer.000 per day these tires at c) If production What is the percentage increase in productivity'l is increased to 700 boxes per day.500 loaves per month with a labor productivity of 2. This added investment has a cost of $100 per month. Sawyer has asked you to check the energy savings of the new ovens and also to look over other measures of the bakery's productivity to see if the modifications were beneficial. Peter Cunningham. is interested in obtaining a measure of overall performance. what will the productivity of the bakery be? What will be the percent increase or decrease? 1.S..35 per loaf. how many workers wili Lackey need to add? (Hint: Each worker works 160 hours per month.19 .500 b) Show the new productivity.12 Lake Charles Seafood makes 500 wooden packing b) is the labor productivity per dollar? What is the multifactor productivityl Fl* boxes for fresh seafood per day. The seconds were sold for $90 each at a factory outlet store.000 hours. what is the new productivity? E€ Energy: Capital costs: I .15 Referto Problems 1.50 per hour 20.10 vans per labor-hour during that month. in loaves per dollar. David Upton is president of Upton Manutacturing. 500 suspension and engine modification kits. General Motors produced 6.000 each.. Which is the better decision? a) Show the productivity change. a producer of Go-Kart tires. 10. 1 4.13. The pay will be $8 per hour for employees. with only an increase in investment ($ 100 per month more). does not believe things have changed much. Each worker is paid $10 per hour. During the first week of March. customers have not been able to purchase the bread of their choice. You have assembled the foilowing data. no new ovens can be added' At a staffmeeting. What was the labor productivity. r'.8 Kleen Karpet cleaned 65 rugs in October.1l Cunningham Perfbrmance Auto. labor at $8 per hour. Now 1. Charies Lackey can also improve the yield by purchasing a new blender.

mqterial requirements planning. sustainatrility MasS customizatiot . continuous improvement . 8.include: High ethical 4''d gogi. 4' organiz. Rapid product dwelopment. Almost all services and almost all goods are a mixture of. which creates the product Finanie/{rccaLtnting. motion' and time l{udies (Gilbreth).rtorrsibility.'. total quality managemeai.-L ij ji Review Material r Productisn-The creation of goods./sorensen).ations perform three functions to. Interneve:commerce. sustainabiliw: l. ieading. process analycis (Taylor). and health services). medical' and other piofesgionar oqcup4tions. : OPERATIONS IN TTIE SEfiVICE SECTOR {pp.and services are produced To understand what operations managers do Bqcause OM is a costly part of an organization. empowefment. 2. stand. : l.ards.. Operations maragers possess. economic resources to he devoted . gOods FEARSoN .iob titles'such as plant manager. education. €ntefiainmentl lodglng.to-order. 3. !e11ice lodging.to seryices.3fi*S?) WHY STUDY OM? 1pp. customization. 36) OM at Hard Rock OM at Frito-Lay ORGANIZING TO PRODUCE GOODS AND SERVICES All ipp. linear programming -' (Dantzig). 9. 1egal.. Many service jobs pay very well. r Operations management (OM)*Activities that relats to the creation ol ald services througb the transfotmation of inputs to outputs. 4. THE HERITAGE OF OPERATIONS MANAGEMENT i*p.:-.2 p.. staffing. Babbege).finite scheduling.. 5. computir. 3. job design. The huge productivity increases in agriculture and manufacruring have allowed *or" oi ou. lean. services now constitute the largest economic seitor in postiodustrial societies.:statisiieal samplilg (Shewha4). 1. MANAGEMENT? i f . aa-as} : r ' Some of the current challenges for opegalions managers. VIDEOS l.and. whtch tracks how welr the oiganization is doing.planning Leaii production f 1980-1995)----Jusr-in-timq. enterprise rgsource planning. Empowered employees. and wqik msasurement ' Supply-chain management Inventory. . electronis data interchange. Mass production (19r0-1980)---Assembly rine (Ford. quality manager. and JIT fust_in_time) Intermediare and short-term scheduling 10.a service ano a tangibie prodgqt. suppiy-chain management. 6.how goods. 4G-4P! Significant. . WHAT OPERATIONS MANAGERS DO {pp. financiai. Maintenance Abqut 407o of all jobs are in OM. 3. EXCITIIIG NEW TRENDS II'I I}PERATIONS MANAGEMENT {pp. increased legar and professional standards Global focus. which generates demand Production/operetions. design collaLroration Environmenially sensitive production. build. enriched jobs Supply:chain p4rtnqringi joint venturcs: alliances Jqst-in'time performanqe.create goodq 4nd services: Marketing. kanbans Mass customization (1995-pres€nr):Globalizatiori. 3. economic order quantity (I{anis}. mass. quguing theor)z {Erlaag] . r seetor-Jhe segment of the economy thar inaludes ffade.aidgd deiign. and operations analyst. 7. . Baldrige Award.. and controlling to achieve objeetives..services. international collatroiation r.3$*3S) 7. govqmment. s$*a$} r Management process-The application of planning.l and . material requirementr. PERT/CPM {DuPont). events in modern OM can be classified into five eras: Early concepts (1776-1 880)-Labor specialization (Smith. green manufacturing. Ten major OM decisions are required ofop€rations managers: Design of goods and serr ices Managing quaiity Process and capacity design Location.Chapter 1 Main Heading WHAT IS OPERATIONS RapidReview _._*-_::-. 2. 7. standardized pans ( Whirney) Scientifi c management ( 1 380-'1 g 1 0)-Gantt charts (Gantt). pays the bitls. and collects the monev We srudy OM for four reasons: To learn how people organize themselves fqrproducfive en{erprige To learn. 42*44} r serviees--€conomic acrivities that typically prodqce as an intangible produci lsuch education. financial. organizing.strategy Layout $lrategy Hum_an resources.l.internatiotal qualit5. process improvement consultant.

y be lacki-ng {2) externaLelem.kn0w1edge. capital. Productivity: a) can use many factors as the numerator. c) outputs decrease while inputs remain the same' d) inputs and outputs increase proportionately. e) inputs increase at the same rate as outputs. c. ETHIGS AND $OCIAL Iii"gfU. . 51 } ethical ehailengei facing operalions:manager$ are (1) gfficiently producing safe'quallty ploduqtsi (2) ma.'-t-- . productivity has averngedz. : seldom uses labor as a factor b) cj is never constant.5 7o per year. Onilr througH iaileases in productivity can the ilandard qf living of a country . capital. il) tbe quality may qtrangel (3) . management b) engineering. b) is never constant production. capital. LO4. LO3. management.lety in which'much of thq 1abo1 force has migrated frommanua1worktowork. Productivity increases each year in the United States are a result of three factors: a) labor.. piodnctiYlry}-lndi-eates'the ratio ol i.-The thlge factotg criticaLto productivityrimprovement are.i"*y comfiutments. quality control d) engineering.' q-J 1. d.r.preCiqe units of nreasure ma. LO5' c. LO3. c) usually uses labor as a factor. {31 providing a safe workp{ace: and r(4) honorir'}g stakehoide{ Self Test r the chapter and the kev terms listed at the end of the chapter' Belore taking the sell-test.goods and services produced {gutputs)' Multifactor Prqductivity. Productivity increases when: a) inputs inqrease while outputs remain the same' b) inputs decrease while outputs remain the same.scciety:4 so.s. Single-factor ProductivitY: a) remains constant. Units produced Productivitv Input used . caPital c) engineering. e) always uses management as a factor. b) is the same thing as Production. LO6.. refer t0 the learning objectives listed at the beginning 0f LO1. a. labor.-:-*LT il"_T:?'. a) are tangible c) are knowledge based d) are low in customer rnteractlon' e) have consistent product definition.labqr (10%). ents rnay interfere. labor. 4$-$t } continued Review Material lProductivity:-Theratloofoutputs(gqod$andservices)dividedbyoneQrmore inputs (cuch as labqr. Answers: LO1. data processing LO4. capilal' or'rmanagerrenr)' High produe tion means producing many unitg. -.lra$edon. Multi-factor ProductivitY a) remains constant.include. fiE$PONSIBILITY {p. *urry o. U.SVa pey yea! for over a eentuiy. and r Pioductivity variables. c. data processing e) engineering. i4rprove. and capital' e) is the same thing as effectiveness.Chapter 1 RaPid Rellqv. Services often: b) are standardized.1. al1 resoureqs (inputs) to the:. d) is dependent upon 1abor.'. bl LO2. LO2.intaining aclean : " developing and enlronmenr. capital (38%)i and manags4ent (527o)' r Knowledgg. LO5. Output Labor i Material + Energy + Capltal f Miscellanequs $-2) Mea*utement problems with prqductiyitli:. .one resouree (input) to the goods and services prcidueed (outputs). LO6. fuuttifactor producuvity (total faetor. while high productivily nieals producing units efficiently.t Main Heading THE PRODUCTIVITY CHALLENGE {pp. d) seldom uses labor as a factor. d) e) uses management as a factor.2 A Virtual Office Hours for Solved Problems: (i:r) r single-faqtor produciivity-Indiqaiqsihe ratio:of -. usually uses substitutes as common variables for the factors of c) increases at about 0.

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