Operations & Productivity

Chapter 1
 Operations Management
• is the set of activities that Increase in Satisfaction
creates value in the form of Increase in Production
goods and services by Increase Sales
transforming inputs into
Increase in Profit
outputs

• Satisfaction
 KEY POINTS
Production: Operations
– Output – System
• Goods • Network of functions
• Services – Methods
– Units – Steps
– Quantitative – Qualitative
 KEY POINTS
Management
– Ingredients 1. Tangible vs. Intangible
1. Manpower
2. Machines
2. Degree of Customer
3. Methods Satisfaction
4. Money 3. Degree of Customer
5. Markets Participation
6. Materials
– Factors of Production
 Instructions:

1. Brainstorm within your group a product proposal (tangible)

that you can sell the market.
Learning Exercise
2. Identify the design, raw materials, method of
production, length of production, target market, and lastly
estimated budget.

3. What are the issues that you have encountered during

brainstorming in addressing the aforementioned.

4. What improvement would you suggest to better the

proposed product?
 Mechanics
1. Read the Operations & Productivity (Chapter 1).
2. You may use your own GC to discuss and complete the
task.
3. Assign someone to present (preferably in ppt) your
output.
4. 15 minutes shall be given to each group.

• Note: Only the Leader of the group shall upload the output here. Make sure to include the names of the member.
 Synthesis
1. The experience in answering the task is synonymous to
the same scenario a businessman faced in developing a
product.
2. Prior to identifying a product, market study is imperative.
3. Market testing is needed to validate effectiveness.
Adjustment must be considered.
4. Availability of the product based on market acceptance.
1. Finance
– Budgeting
– Economic Analysis of Investment Proposal
– Provision of Funds
2. Marketing
3. Human Resource
4. Production
u
 Market Study
The process of gathering, analyzing and 1. It helps in spotting emerging
interpreting information about a market, trends.
about a product or service to be offered 2. It minimizes investment risk.
for sale in that market, and about the past,
3. It identifies threats and
present and potential customers for the
opportunities
product or service; research into the
characteristics, spending habits, location 4. It identifies your competitive
and needs of your business' target market, advantage
the industry as a whole, and the particular 5. It helps to strengthen business
competitors you face. position.
Source: https://www.google.com/search?q=benefits+of+market+study&rlz
Source: https://www.entrepreneur.com/encyclopedia/market-research =1C1GCEU_enPH911PH911&oq=benefits+of+market+study&aqs
=chrome..69i57j0l2.4721j0j7&sourceid=chrome&ie=UTF-8
 The Transformation Process
Value-Added

Inputs Transformation/ Outputs

•Land Conversion •Goods
•Labor •Services
•Capital Process
•Information

Measurement
and Feedback
Measurement Measurement
and Feedback and Feedback
Control

Feedback - measurements taken at various points in the transformation process

Control - the comparison of feedback against previously established standards to determine if
corrective action is needed.
 Productivity
– a measure of the effective use of FACTORS:
resources, usually expressed as the
ration of output to input. 1. Specialization of Labor
2. Scientific Management
3. Scheduling
4. Quality Control
– It is an index that measures output 5. Technology
(g/s) relative to the input (labor,
materials, energy and other
resources) used to produce them.
 Productivity
Output
Productivi ty =
Input

Output Ouput Output

Partial Measures ; ;
Single Input Labor Capital

Output Ouput Output

Multifactor Measures ; ;
Multiple Inputs Labor + Machine Labor + Capital + Energy

Goods or services produced

Total Measure
All inputs used to produce them
 Example:
• Solution:
1. Given: Output
Multifactor Productivity =
Units produced: 5,000 Labor + Material + Overhead
Standard price: $30/unit
Labor input: 500 hours  5,000 units  $30/unit
Cost of labor: $25/hour =
(500 hours  $25/hour) + $5,000 + (2(500 hours  $25/hour))
Cost of materials: $5,000
Cost of overhead: 2x labor cost $150,000
=
$42,500
•What is the multifactor productivity?
= 3.5294
 Example:
• Solution:
1. A company that makes shopping carts for supermarkets and
other stores recently purchased some new equipment that
reduces the labor content of the jobs needed to produce the
a. Prior to Buying New Equipment:
shopping carts. Prior to buying the new equipment, the Labor Productivity = Carts per Worker per Hour =
company used five workers, who produced an average of 80 80 / 5
cart per hour. Workers receive $10 per hour, and machine cost
was $40 per hour. With the new equipment, it was possible to = 16 Carts per Worker per hour
transfer one of the workers to another department, and
equipment cost increased by $10 per hour while output
increased by four carts per hour.
b. After Buying New Equipment:
Labor Productivity = Carts per Worker per Hour
a. compute labor productivity under before and after buying
new equipment (Use carts per worker per hour as a measure of
= (80 + 4) / (5 – 1) = 84 /4
labor productivity).
b. compute the multifactor productivity before and after
= 21 Carts per Worker per Hour
buying new equipment. Use carts per dollar cost (labor plus
equipment) as a measure of productivity)
 Example:
b. Prior to Buying New Equipment:
Multifactor Productivity = Carts per Dollar (Labor +
Equipment)
Labor = 5 workers x $10/hour = $50/hour
Equipment = Machine Cost = $40/hour
Multifactor Productivity = 80 carts / ($50 + $40)
= 0.89 Carts per Dollar (rounded to two decimals)
After Buying New Equipment:
Multifactor Productivity = Carts per Dollar (Labor +
Equipment)
Labor = 4 workers x $10/hour = $40/hour
Equipment = Machine Cost = $40/hour + $10/hour =
$50/hour
Multifactor Productivity = 84 carts / ($40 + $50)
= 0.93 Carts per Dollar (rounded to two decimals)
 Productivity Growth
Current productivity - Previous productivity
Productivity Growth = 100% 1. Labor productivity on the ABC assembly line was
Previous productivity
25 units per hour in 2014. In 2015, labor
productivity was 23 units per hour. What was the
productivity growth from 2014 to 2015?

23 - 25
Productivity Growth = 100%  8%
25

