OPERATIONS MANAGEMENT OPERATIONS AND PRODUCTIVITY

1. OPERATIONS MANAGEMENTOPERATIONS AND PRODUCTIVITY

2. Changing Challenges for the Operations Manager

3. Changing Challenges for the Operations Manager Past Causes Future Standardized Affluence and worldwide Mass products markets; increasingly flexible customization production processes Job Changing socio-cultural scene. Empow ered specialization Increasingly a knowledge and employees, teams, information society. Low cost Environmental issues, ISO Environmentally focus increasing disposal costs sensitive production, Green manufacturing,

4. Characteristics of Goods • Tangible product • Production usually separate from consumption • Consistent product definition • Low customer interaction • Can be inventoried

5. Characteristics of Service • Intangible product • Produced & consumed at same time • Inconsistent product definition • High customer interaction • Often unique • Often knowledge-based • Frequently dispersed

6. Goods Versus Services GOODS SERVICES • Can be resold • Can be inventoried • Some aspects of quality measurable • Selling is distinct from production • Reselling unusual • Difficult to inventory • Quality difficult to measure • Selling is part of service

7. Goods Versus Services - Continued GOODS SERVICES • Product is transportable • Site of facility important for cost • Often easy to automate • Revenue generated primarily from tangible product • Provider is transportable • Site of facility important for customer contact • Often difficult to automate • Revenue generated primarily from intangible service.

8. 75 25 50 100 75 0 100 50 25 Goods Contain Services / Services Contain Goods Automobile Computer Installed Carpeting Fast-food Meal Restaurant Meal Auto Repair Hospital Care Advertising Agency Investment Management Consulting Service Counseling Percent of Product that is a Good Percent of Product that is a Service

9. Inputs Process Outputs Land, Labor, Capital, Management Goods and Services The Production System Feedback loop The Production System Transforms Inputs to Outputs

10. Unitsproduced Productivity = Input used Productivity • Measure of process improvement • Represents ratio of output to input • Only through productivity increases can our standard of living improve

11. Multi-Factor Productivity Productivity =Output Labor + material + capital + energy + Misc

12. Measurement Problems • Quality may change while the quantity of inputs and outputs remains constant • External elements may cause an increase or decrease in productivity • Precise unitsof measure may be lacking

13. Productivity Variables • Labor - contributes about 10% of the annual increase • Capital- contributes about 32% of the annual increase • Management - contributes about 52% of the annual increase

14. Service Productivity Reasons for low productivity in services • Typically labor intensive • Frequently individually processed • Often an intellectual task performed by professionals • Often difficult to mechanize • Often difficult to evaluate for quality