Unit 1


Introduction to Operations Management (Ch. 1)

Any organization producing a tangible good or a service can be thought of in terms of two main functions – production and marketing. While all organizations have production function, formal marketing function may not exist. For example, in Canadian context, most of the hospitals do not have a marketing function. All other functions, such as accounting, finance, and human resource support the above two functions.

Operations Management (OM)
Authors define OM as the set of activities that creates value in the form of goods and services by transforming inputs into outputs. They detail ten critical decision areas -- see Table 1.2, p. 7 -- that underlie an operations manager’s job. The textbook is organized according to this schema. A very broad definition of OM in an organization considers it as the management of a transformation process that converts inputs into outputs. The textbook gives several examples of this process. Another convenient schema for understanding the major decisions in OM is the Life Cycle approach. Table 1.1: Stages of Production System and Key Issues under Life Cycle Approach             Key Issues What are the Mission and goals of the organization? What products will be offered? What is the OSM strategy and its fit? What is the form of the manufactured product? How will it be produced? What capacity will we have? How to design quality in the product? How to determine the demand? Where would the production facilities be located? What is the best physical layout of work centers in the production facility? How will the jobs be designed, measured, and compensated? How do we train the workers and know

Stage of the Production System Birth of the system

Product Design and Process Selection

Design of the system

5. production planning. or closure of the system? Rejuvenation/Death of the system  The Figure2. and inventories? How to manage suppliers. including outsourcing.Operation and Control of the system    that the training has taken place? How to manage day to day activities of quality assurance. scheduling. and logistics? How to maintain and enhancement of the production facilities? How to make major changes in the system including business re-engineering. . 42. p. helps in explaining the ideas of life cycle approach.

Four areas that are important to improving labor productivity are: (1) basic education (basic reading and math skills). consult it. productivity is harder to measure.S. location. therefore. A knowledge society implies that work is more intellectual and therefore harder to measure. You should read the differences between physical goods and services. we’ll concentrate on a few stages. For example. and you should enhance your understanding of these by solving Related Problems.). and indeed much of the world. human resources. Name four areas that are significant to improving labour productivity. and other countries. Two broad measures. tells us about the new challenges in operations management. for job creation. Single-factor productivity measure and the Multifactor productivity measures are provided on p.. Review and Discussion Questions with answers 7.S. 13. layout. inventory. has been described as a “knowledge society”. an industrial or agriculture society is very different. (3) social overhead that makes labor available (water. 9. it is important to measure their performance through productivity measures. Operations management traces its origin from factory management. (2) diet of the labor force. pl. and be very conversant with it. The table on p. and maintenance. and (4) maintaining and expanding the skills necessary for changing technology and knowledge. you’ll find an emphasis on application of various principles in services.S. Throughout the course. p. transportation. but now its applications are more in services. supply-chain management.Because. 10. Managers are entrusted with the management of economic resources and therefore. (and many other countries) are increasingly “knowledge” societies. The 10 decisions of operations management are product design. we cannot consider all the decisions during each life cycle stage. Name the 10 decision areas of operations management. the greatest impact is being felt in operations. The Course Schedule tells you of our intended focus. How does this affect productivity measurement and the comparison of productivity between the U. services assume greater importance. etc. As China becomes the factory of the nations. process. Using labor hours as a measure of productivity for a postindustrial society vs. as well as for teamwork and motivation. Productivity is harder to measure when the task becomes more intellectual. 18. Because the U. decades spent developing a marvelous new drug or winning a very difficult legal . 8. As more and more globalization occurs. The U. sanitation. quality. scheduling (aggregate and short term). of the paucity of time.

(b) New labor productivity = 180 valves / 80 hours = 2. automation to save preparation time. Both rely on agility within the organization. with actual cooking and food preparation done elsewhere. (3) it may be an intellectual task performed by professionals. Mass customization is the flexibility to produce in order to meet specific customer demands.3 0. 11. Describe some of the action taken by Taco Bell to increase the productivity that have resulted in Taco Bell’s ability to serve “twice the volume with half the labour. (4) it is often difficult to mechanize and automate. Mass customization and rapid product development were identified as current trends in modern manufacturing operations. manager training to increase span of control.case on intellectual property rights may be significant for post.15 = 57. 10. 12.2 (a) Labor productivity is 160 valves/80 hours = 2 valves per hour.15) laborers employed . reduced floor space. 13.” Taco Bell designed meals that were easy to prepare.25 valves / 2 valves = 12. quality may not be consistent. What is the relationship. and in computers. without sacrificing the low cost of a product oriented process. between these two trends? Can you cite any examples? In services. and (5) often difficult to evaluate for quality.600 = 200 (160)(12)(0. Problems 1. are a good example of the above.industrial societies. Rapid product development is a source of competitive advantage. Smart phones service. where L  number of laborers employed at the plant So L = 57. What are the measurement problems that occur when one attempts to measure productivity? Productivity is difficult to measure because precise units of measure may be lacking. if any. 600 (160)(12)( L ) .5% 1.25 valves per hour (c) Percentage change in productivity = . Dell model. and exogenous variables may change. What are the five reasons productivity is difficult to improve in the service sector? Labor productivity in the service sector is hard to improve because (1) many services are labor intensive and (2) they are individually (personally) processed (the customer is paying for that service—the hair cut). but not show much in the way of productivity improvement measured in labor hours.

31 3.64 Resin 1.1 1.56 percent increase.22 2. 000 45 Change 0.000 + 500.01 –0.8 Productivity = Output Input 65 65 = (520 × 13) $6. After.1 0.1. the ratio is 1.000 = 0.02 = –10.0096 rugs per labor $ (a) Labor productivity = 65 (b) Multifactor productivity (520 × $13) + (100 × $5) + (20 × $50) = 65 = .000 tires/400 hours = 2.00787 rugs per $ $8.760 = .9 (a) Labor productivity = 1.1% Capital 1.000) = 1.02564.3% = 3.22 20 = 11.3% in productivity New labour productivity = 700/24 = 29.025 to 0.000) + ($1.000/39.000 = .000 tires/(400 × $12. 000 10. 000 50 = 20 = 22.000/40.000) = 375/1.33 = 6. 650/24 = 27.000 tires/$40.02 0. 000 275 1. 000 11.0256. 000 = 0.11 Multifactor productivity is: 375 autos/[($20 × 10.083 or an increase of 8.31 Percent Change 0.6 Resource Labor Last Year 1.33 = 9.33 This Year 1.000.1% 1. (c) Multifactor productivity changes from 1. 000 300 = 3.08 boxes per hour =27.000375 autos per dollar of inputs (a) (b) (c) Before: 500/20 = 25 boxes per hour.12 .025 tires/dollar. 000 2.000 to 1. 000 = 0.000 × 500) + ($3 × 100.000)] = 375/(200. 1. (b) Multifactor productivity is 1.0% Energy 1.000 + $10.167 boxes per hour 1. 000 3.000.35 0.33 = 0.000 + 300. so the change is a 2.50 + 20. or from 0. 000 1.01 0.000 × $1 + $5.08/25 = 1.09 –0.5 tires/hour.260 1.22 2. 850 = 0.

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