CHAPTER 1

OPERATIONS AND PRODUCTIVITY

Overview of Operations Management Features of Production Systems Operations Strategy and Competitiveness Productivity Issues

Overview of Operations Management

What is Operations Management?

Product / Output can be goods or services Production is the creation of goods & services Operations Mgt is the set of activities that creates
value in the form of goods and services by transforming inputs into outputs.

Organizing to produce goods & services a) Marketing b) Production/Operations c) Finance/Accounting Why study OM? a) study how people organize themselves for productive enterprise. b) want to know how goods & services are produced. c) understand what operations managers do.
(Planning, Organizing & Controlling)

d) it is such a costly part of an organization.

10 Strategic OM Decision a) b) c) d) e) f) g) h) I) k) Goods & Service Design Quality Process & Capacity Design Location Selection Layout Design Human Resource & Job Design Supply Chain Management Inventory Scheduling Maintenance

Difference between Goods & Services

Attributes of GOODS Attributes of SERVICES Reselling a service is unusual Many services cannot be inventoried

Product can be resold Product can be inventoried

Some aspects of quality are measurable

Selling is distinct from production Product is transportable Site of facility is important for cost Often easy to automate

Many aspects of quality are difficult to measure

Selling is often a part of the service Provider, not product, is often transportable Site of facility is important for customer contact Service is often difficult to automate

Revenue is generated primarily from Revenue is generated primarily from the tangible product the intangible service.

Features of Production System

Inputs
(4M; manpower, machine, material, money)

Transformation Process
(Factors; capacity, efficiency, effectiveness, flexibility)

Outputs (end-result of a production) Feedback (actual vs expected)

Operations Strategy & Competitiveness

Global Competitiveness: a) Quality b) Variety c) Customization d) Convenience e) Timeliness f) Cost Reason for globalize: a) Reduce cost b) Increase supply chain c) Understand market d) Provide better goods and services e) Learn to increase operations f) Attract and retain global talent

Develop Mission & Strategy

Vision is what organization want to become.

Mission is the purpose or rational for an organization existence. Strategy is how organization expects to achieve its mission or
goals. (action plan)

Achieving Competitive Advantages

Competitive Advantage is the creation of a unique advantages
over competitors.

Competing on Differentiation Differentiation is to distinguish the offerings of the organization in any way that customer perceives as adding value. Competing on Cost A low-cost strategy means having the companys resources and facility effectively utilized. Competing on Response Response is a range of values related to timely product development and deliver as well as reliable scheduling and flexible performances.

Productivity Challenge
Productivity is the ratio of outputs divided by one or more inputs Single Factor Productivity = Unit Produced Input Used Multifactor Productivity = Unit Produced 4M + etc To Increase Productivity: a) Reduce input, output constant b) Increase output, input constant

Productivity Variable: a) Labor b) Capital c) Management

Collins Title wants to evaluate its labor and multifactor productivity with a new computerized title-search system. The company has a staff of four, each working 8hours per day (for a payroll cost of RM640/day) and overhead expenses of RM400 per day. Collins processes and closes on 8 titles each day. The new computerized title-search system will allow the processing of 14 titles per day. Although the staff. Their work hours and pay are the same, the overhead expenses are now RM800 per day.

Exercise:

QUESTIONS:

Calculate both single-factor and multi-factor productivity using old system and new system If the overhead expenses goes to RM960 (rather than RM800), what is the multifactor productivity?

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