HISTORY OF

OPERATIONS
MANAGEMENT and
PRODUCTIVITY
MEASUREMENT
 Operations Operations Corporate
management management operations
is the is concerned management
WHAT IS administratio with professionals
OPERATIONS n of business converting try to balance
MANAGEMENT? practices to materials and costs with
create the labor into revenue to
highest level goods and maximize net
of efficiency services as operating
possible efficiently as profit.
within an possible.
organization.
 RAW MATERIALS
PRODUCT

OPERATIONS MANAGEMENT

LABOR
 PRODUCT DIFFERENTIATION

TANGIBLE INTANGIBLE
HISTORY OF OPERATIONS MANAGEMENT
HISTORICAL MILESTONES IN
OPERATIONS MANAGEMENT

★ The Industrial Revolution

★ Post-Civil War Period
★ Scientific Management
★ Operations Research
★ The Service Revolution
★ The Computer Revolution
 The Industrial Revolution
The Industrial Revolution The industrial revolution
developed in England in the 1700s. The steam engine,
invented by James Watt in 1764, largely replaced
human and water power for factories. Adam Smith’s
The Wealth of Nations in 1776 touted the economic
benefits of the specialization of labor. Thus the late-
1700s factories had not only machine power but also
ways of planning and controlling the tasks of workers
Post-Civil War Period

During the post-Civil War period great expansion of

production capacity occurred. By post-Civil War the
following developments set the stage for the great
production explosion of the 20th century: increased
capital and production capacity the expanded urban
workforce new Western US markets an effective
national transportation system
Scientific Management
Scientific Management Frederick Taylor is known as the father of
scientific management. His system employed these steps: Each
worker’s skill, strength, and learning ability were determined.
Stopwatch studies were conducted to precisely set standard output
per worker on each task. Material specifications, work methods, and
routing sequences were used to organize the shop. Supervisors were
carefully selected and trained. Incentive pay systems were initiated.
 Operations Research

During World War II, enormous quantities of resources (personnel,

supplies, equipment, …) had to be deployed. Military operations research
(OR) teams were formed to deal with the complexity of the deployment.
After the war, operations researchers found their way back to universities,
industry, government, and consulting firms. OR helps operations
managers make decisions when problems are complex and wrong
decisions are costly.
The Service Revolution

The creation of services organizations accelerated sharply after

World War II. Today, more than two-thirds of the US workforce is
employed in services. About two-thirds of the US GDP is from
services. There is a huge trade surplus in services. Investment per
office worker now exceeds the investment per factory worker. Thus
there is a growing need for service operations management.
The Computer Revolution

Explosive growth of computer and communication technologies

Easy access to information and the availability of more information
Advances in software applications such as Enterprise Resource
Planning (ERP) software Widespread use of email More and more
firms becoming involved in EBusiness using the Internet Result:
faster, better decisions over greater distances
 Career Opportunities in Operations Management

● Operations Management is a core aspect to a business, it’s responsible

for:
○ Managing logistical processes and overall supply chain
○ Overseeing production and assuring product quality
○ Initiating and building relationships with vendors
○ Ordering, warehousing and, managing the flow of materials

● These are the following career paths for Operations Management:

○ Purchasing Management
○ Materials Management
○ Business Operations Management
○ Operations Research
Future of Operations Management

● Advances in information technology and global competition have had major influence in
Operations Management today.

● Product and Service Technology- Refers to the discovery and development of new
products and services.

● Process Technology- Refers to methods, procedures and equipment used to produce

goods and provide services.

● Information Technology- Refers to the science and use of computers and other
electronic equipment to store, process and send information.
 What is Productivity?

● It is a measure of efficiency of a person, machine, factory, system and, etc.

● Productivity is computed by dividing average output per period by the total

costs incurred or resources (Capital, energy, material, personnel) consumed in
that period.

Productivity = Output (goods and services)

Input (labor, materials, energy and other
resources)

● Productivity is a critical determinant of cost efficiency.

MEASUREMENT THEORY
 Measurement theory is the study of how numbers are assigned
to objects and phenomena, and its concerns include the kinds
of things that can be measured, how different measures relate
to each other, and the problem of error in the measurement
process.

 Measurement theory shows that strong assumptions are

required for certain statistics to provide meaningful
information about reality. Measurement theory encourages
people to think about the meaning of their data. It encourages
critical assessment of the assumptions behind the analysis. It
encourages responsible real-world data analysis. 
MEASURING PRODUCTIVITY

Examples on how to measure productivity:

● Simple Productivity Output:

○ Choose the output you will measure. (Usually this is complete units made, or jobs
completed.)
○ Find your input figure, which is the hours of labor put into production.
○ Divide the output by the input.
○ Assign a dollar/peso value to the results, to measure your cost-benefit ratio.
○ Measure non-manufacturing productivity in dollars/peso instead of units
● Time Tracking and Project Management Software
○ Softwares like WorkflowMax exists to help track productivity. By submitting timesheets
electronically, employees track data more accurately and you get a by-the-job look at
exactly how your team is performing. With WorkflowMax you can even use the data to
run performance-based reports to see which employees or contractors are completing
the most jobs or logging in the most hours.
 Measuring Productivity

● Labor productivity is the ratio

output per person. Labor
productivity measures the
efficiency of the labor in the
transformation of something
into a product of higher value.
In software development terms,
labor productivity is a measure
of the efficient use of the effort
needed to write and implement
the code.
MEASURING PRODUCTIVITY

● Capital productivity is the ratio of output (goods or services) to the

input of physical capital. Improving physical capital (known as
capital deepening) typically yields an increase in output. In software
development, physical capital includes the equipment, buildings or
other items like computers needed to develop and implement the
code.

● CAPITAL PRODUCTIVITY = TOTAL OUTPUT

CAPITAL INPUT
MEASURING PRODUCTIVITY

● Material productivity is the ratio of output to the input of

materials (also known as natural resources). In software
development, there are very little material or natural
resources that are used. Material productivity plays a
larger role when considering the manufacture of
hardware/software packages, such as an ATM.
 MEASURING PRODUCTIVITY

● Total Factor productivity (TFP) is not a

simple ratio of output to input, but
rather it is a measure that captures
everything that is not captured as labor,
capital or material productivity. Factors
included in total factor productivity
include attributes like changes in
general knowledge, the use of
particular organizational structures,
management techniques, or returns on
the scale. The components in TFP are
often the sources of productivity
changes in software development
 An organization that is more
productive will tend to outperform
other organizations, helping to
ensure organizational longevity.