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Operations Management Eleventh Edition H
Operations Management Eleventh Edition H
Productivity 1
PowerPoint presentation to accompany
Heizer and Render
Operations Management, Eleventh Edition
Principles of Operations Management, Ninth Edition
© 2014
© 2014
Pearson
Pearson
Education,
Education,
Inc.Inc. 1-1
Outline
▶ Global Company Profile: Hard Rock Cafe
FINANCE
MARKETING /ACCOUNTING
OPTION OPTION OM OPTION
INCREASE REDUCE REDUCE
SALES FINANCE PRODUCTION
CURRENT REVENUE 50% COSTS 50% COSTS 20%
Sales $100,000 $150,000 $100,000 $100,000
Cost of goods –80,000 –120,000 –80,000 –64,000
Gross margin 20,000 30,000 20,000 36,000
Finance costs –6,000 –6,000 –3,000 –6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% –3,500 –6,000 –4,200 –7,500
Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500
Figure 1.4
© 2014 Pearson Education, Inc. 1 - 26
The Heritage of OM
▶ Division of labor (Adam Smith 1776; Charles
Babbage 1852)
▶ Standardized parts (Whitney 1800)
▶ Scientific Management (Taylor 1881)
▶ Coordinated assembly line (Ford/ Sorenson 1913)
▶ Gantt charts (Gantt 1916)
▶ Motion study (Frank and Lillian Gilbreth 1922)
▶ Quality control (Shewhart 1924; Deming 1950)
Unique: Your investments and medical care are Similar products produced (iPods)
unique
High customer interaction: Often what the customer is Limited customer involvement in production
paying for (consulting, education)
Inconsistent product definition: Auto Insurance Product standardized (iPhone)
changes with age and type of car
Often knowledge based: Legal, education, and medical Standard tangible product tends to make automation
services are hard to automate feasible
Services dispersed: Service may occur at retail store, Product typically produced at a fixed facility
local office, house call, or via internet.
Quality may be hard to evaluate: Consulting, Many aspects of quality for tangible products are easy
education, and medical services to evaluate (strength of a bolt)
Reselling is unusual: Musical concert or medical care Product often has some residual value
© 2014 Pearson Education, Inc. 1 - 37
U.S. Agriculture, Manufacturing,
and Service Employment
Figure 1.5
100 –
80 –
Percent of Workforce
60 –
40 –
20 –
0–
| | | | | | | | |
PERCENT OF
SECTOR EXAMPLE ALL JOBS
Service Sector
Education, Legal, Medical, Other San Diego Zoo, Arnold Palmer Hospital 13.2
Trade (retail, wholesale) Walgreen's, Walmart, Nordstrom 13.8
Utilities, Transportation Pacific Gas & Electric, American Airlines 3.3
Professional and Business Services Snelling and Snelling, Waste Management, Inc. 10.1
85.9
Finance, Information, Real Estate Citicorp, American Express, Prudential, Aetna 21.0
Food, Lodging, Entertainment Olive Garden, Motel 6, Walt Disney 9.0
Public Administration U.S., State of Alabama, Cook County 15.5
Important Note!
Production is a measure of output only
and not a measure of efficiency
Feedback loop
Figure 1.6
1,000
= 250 = 4 units/labor-hour
8 titles/day
Old labor =
productivity 32 labor-hrs
8 titles/day
Old labor = = .25 titles/labor-hr
productivity 32 labor-hrs
8 titles/day
Old labor = = .25 titles/labor-hr
productivity 32 labor-hrs
14 titles/day
New labor =
productivity 32 labor-hrs
8 titles/day
Old labor = = .25 titles/labor-hr
productivity 32 labor-hrs
14 titles/day
New labor = = .4375 titles/labor-hr
productivity 32 labor-hrs
8 titles/day
Old multifactor =
productivity $640 + 400
8 titles/day
Old multifactor = = .0077 titles/dollar
productivity $640 + 400
8 titles/day
Old multifactor = = .0077 titles/dollar
productivity $640 + 400
14 titles/day
New multifactor =
productivity $640 + 800
8 titles/day
Old multifactor = = .0077 titles/dollar
productivity $640 + 400
14 titles/day
New multifactor = = .0097 titles/dollar
productivity $640 + 800
Figure 1.7
© 2014 Pearson Education, Inc. 1 - 59
Capital
10
Percent increase in productivity
10 15 20 25 30 35
Percentage investment