Lecture - 1

What does the Finance people do in a firm?

What does the HR people do?

Accountants?

Marketing team?

Who deals with the production?

 Operations Management:
 The activity of managing the resources which produce and
deliver products and services.
 The management of systems or processes that create
goods and/or provide services

 Operations Function:
 The part of the organization that is responsible for this
activity.

 Operations Managers:
 The people responsible for managing some or all of the
resources which compose the operations function.
Automobile assembly factory

Physician

Management consultancy

Disaster relief

Advertising agency
 Tangibility

Can be inventoried?

Customer contact

Response time

Input intensity
 Goods Service
 Tangible product  Intangible product
 Product can be  Product cannot be
inventoried inventoried
 Low customer contact  High customer contact
 Longer response time  Short response time
 Capital intensive  Labor intensive
 Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
 Similarities
 Both use technology

 Both have quality, productivity, & response issues

 Both must forecast demand

 Both will have capacity, layout, and location issues

 Both have customers, suppliers, scheduling and staffing issues

 Manufacturing often provides services

 Services often provides tangible goods

 Core services are basic things that customers want

from products they purchase

 Value-added services differentiate the organization

from competitors and build relationships that

bind customers to the firm in a positive way
 Professional services (e.g., financial, health care, legal)

 Mass services (e.g., utilities, Internet, communications)

 Service shops (e.g., tailoring, appliance repair, car wash,

auto repair/maintenance)

 Personal care (e.g., beauty salon, spa, barbershop)

 Government (e.g., Medicare, mail, social services, police,

fire)
 Education (e.g., schools, universities)

 Food service (e.g., restaurants, fast foods, catering,

bakeries)

 Services within organizations (e.g., payroll, accounting,

maintenance, IT, HR, janitorial)

 Retailing and wholesaling

 Shipping and delivery (e.g., truck, railroad, boat, air)

 Residential services (e.g., lawn care, painting, general

repair, remodeling, interior design)

 Transportation (e.g., mass transit, taxi, airlines,

ambulance)

 Travel and hospitality (e.g., travel bureaus, hotels, resorts)

 Miscellaneous services (e.g., copy service, temporary help)

 Service jobs are often less structured than manufacturing
jobs
 Customer contact is higher

 Worker skill levels are lower

 Employee turnover is higher

 Input variability is higher

 Service performance can be affected by worker’s personal

factors
Characteristics of an Ops Process

Volume Variety

The 4v
Model

Variation Visibility
 Road side budget hotel

 General staffs handle overall

needs of all customers

 No special/customized service

 Cheap cost

 No restaurant

 Highly automated
 Very well furnished living

arrangements
 Two dedicated staffs per

customer
 Tourist flow varies from season

to season
 All sorts of needs of the customers are catered for

 Discussions arranged and facilitated by staffs

Mwagusi Safari Lodge vs. Formule 1:

Volume
Variety
Variation
Visibility
 Currently produces 5000 units sold @ Tk. 1000 per
unit
 To boost revenue, management is considering
three options:

Option 1
 Spending Tk. 10,00,000 on purchasing market info

and sales campaign.

 Estimated sales rise by 30 percent.

 Currently produces 5000 units sold @ Tk. 1000 per
unit
 To boost revenue, management is considering
three options:

Option 2
 Forming improvement teams to eliminate waste in

operations.

 Operating expenses will go down by 20 percent.

 Currently produces 5000 units sold @ Tk. 1000 per
unit
 To boost revenue, management is considering
three options:

Option 3
 Investing Tk. 7,00,000 in more flexible machinery

to allow faster response to customer orders.

 Will charge 15 percent extra for this ‘speedy

service’.
 Quality
Speed
Dependability
Flexibility
Cost
 is defined differently for Goods and Services
 Can
 Productivity
Single-factor Productivity
Multi-factor Productivity
Total Productivity
Productivity Growth
 A company that processes fruits and vegetables is able

to produce 400 cases of canned peaches in

one-half hour with four workers. What is labor
productivity?
 A wrapping-paper company produced 2,000 rolls of

paper one day. Labor cost was $160, material

cost was $50, and overhead was $320. Determine the
multifactor productivity.
 Three employees process 600 insurance policies in a

week. Each of them works 8 hrs. per day, 5-days per

week. Find labour productivity.

 A team of workers make 400 units of a product,
which is sold in the market for $10 each. The
accounting department reports that for this job
the actual costs are:
$ 400 for labour,
$ 1000 for materials and
$ 300 for overhead.
Calculate multi-factor productivity.
 Suzan’s Ceramics spent 3000 taka on a new kiln last year, in the belief
that it would cut energy usage 25% over the old kiln. This kiln is an
oven that turns “green ware” into finished pottery. Suzan is
concerned that the new kiln requires extra labour hours for its
operation. Suzan wants to check the energy savings of the new oven
and also to look other measures of their productivity to see if the
change really was beneficial. Suzan has the following data to work
with:
Total % change in productivity = -6.65% -18.52% +33.83% = 8.66%

The change was beneficial.

a) Productivity = 120 boxes/ 40 hrs = 3 boxes /hours

b) New Productivity = 125 boxes/40 hrs = 3.125 boxes/hours

c) Change in Productivity = (3.125-3.0) =0.125 boxes/hours

d) Percentages in Productivity = (0.125/3)*100%=4.1667%

a) Productivity = 160 valves/ 80 Hours = 2 valves /hours ( 10 Person, 8 hours shift)

b) New Productivity = 180 valves/80 Hours = 2.25 Valves/hours

c) Change in Productivity = (2.25-2.0) =0.25 Valves/hours

d) Percentages in Productivity = (0.25/2)*100%=12.5%

 Methods
Capital
Quality
Technology
Management