In this chapter, the following content will be discussed: Definition of production operations management (OM), organizational functions, why study POM? a brief history of operations management, the future of the discipline, goods versus services, measuring productivity, career opportunities in operations management.
LECTUR E2 LSM 733Production Operations Management OSMAN BIN SAIF Summary of Last Session • Self Introduction • Course outline, Procedures and Structure Agenda of this Session • Definition of Production Operations Management (OM) • Organizational Functions • Why Study POM? • A brief history of operations management • The future of the discipline • Goods Versus Services • Measuring productivity What Is Production Operations Management? • • Production is the creation of goods and services Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs Organizing to Produce Goods and Services • Essential functions: Marketing – generates demand Production/operations – creates the product Finance/accounting – tracks how well the organization is doing, pays bills, collects the money Organizational Charts Organizational Charts Why Study POM? POM is one of four major functions of any organization, we want to study how people organize themselves for productive enterprise We want (and need) to know how goods and services are produced We want to understand what operations managers POM is IMPORTANT part of an organization Options for Increasing Contribution Finance/ Marketing Option Current Sales Cost of Goods Gross Margin Finance Costs Subtotal Taxes at 25% Contribution $100,000 – 80,000 20,000 – 6,000 14,000 – 3,500 $ 10,500 Accounting Option Increase Reduce Sales Finance Revenue 50% Costs 50% $150,000 – 120,000 30,000 – 6,000 24,000 – 6,000 $ 18,000 $100,000 – 80,000 20,000 – 3,000 17,000 – 4,250 $ 12,750 OM Option Reduce Production Costs 20% $100,000 – 64,000 36,000 – 6,000 30,000 – 7,500 $ 22,500 What Operations Managers Do ? • Basic Management Functions u Planning u Organizing u Staffing u Leading u Controlling 10 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day titles/day Overhead = $400/day New System: 14 titles/day Overhead = $800/day Old labor productivity New labor productivity = = titles/day 32 labor-hrs = 25 titles/labor-hr 14 titles/day 32 labor-hrs 39 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day titles/day Overhead = $400/day New System: 14 titles/day Overhead = $800/day Old labor productivity New labor productivity = = titles/day 32 labor-hrs 14 titles/day 32 labor-hrs = 25 titles/labor-hr = 4375 titles/labor-hr 40 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day titles/day Overhead = $400/day New System: 14 titles/day Old multifactor productivity Overhead = $800/day = titles/day $640 + 400 41 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day titles/day Overhead = $400/day New System: 14 titles/day Old multifactor productivity Overhead = $800/day = titles/day $640 + 400 = 0077 titles/dollar 42 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day titles/day Overhead = $400/day New System: 14 titles/day Old multifactor productivity New multifactor productivity Overhead = $800/day = titles/day $640 + 400 = 14 titles/day $640 + 800 = 0077 titles/dollar 43 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day titles/day Overhead = $400/day New System: 14 titles/day Old multifactor productivity New multifactor productivity Overhead = $800/day = titles/day $640 + 400 = 0077 titles/dollar = 14 titles/day $640 + 800 = 0097 titles/dollar 44 Measurement Problems Quality may change while the quantity of inputs and outputs remains constant (HDTV, iphones) External elements may cause an increase or decrease in productivity (using more reliable electric power system) Precise units of measure may be lacking 45 Productivity Variables Labor - contributes about 10% of the annual increase Capital - contributes about 38% of the annual increase Management contributes about 52% of the annual increase 46 Key Variables for Improved Labor Productivity u Basic education appropriate for the labor force Diet of the labor force Social overhead that makes labor available such as transportation and sanitation Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge 47 Investment and Productivity Percent increase in productivity 10 10 15 20 25 30 Percentage investment 48 35 Service Productivity Typically labor intensive (teaching, counseling) Frequently focused on unique individual desires (customer representatives in banks) Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality 49 Ethics and Social Responsibility Challenges facing operations managers: u u u u Developing and producing safe, quality products Maintaining a clean environment Providing a safe workplace Honoring stakeholder commitments 50 Entry-Level Jobs in POM – Purchasing planner/buyer – Production (or operations) supervisor – Production (or operations) scheduler/controller – Production (or operations) analyst – Inventory analyst – Quality specialist – Others … 51 Summary of this Session • Definition of Production Operations Management (OM) • Organizational Functions • Why Study POM? • A brief history of operations management • The future of the discipline • Goods Versus Services • Measuring productivity 52 THANK YOU 53 ... $ 18,000 $100,000 – 80,000 20 ,000 – 3,000 17,000 – 4 ,25 0 $ 12, 750 OM Option Reduce Production Costs 20 % $100,000 – 64,000 36,000 – 6,000 30,000 – 7,500 $ 22 ,500 What Operations Managers Do ? •... labor productivity New labor productivity = = titles/day 32 labor-hrs 14 titles/day 32 labor-hrs = 25 titles/labor-hr = 4375 titles/labor-hr 40 Collins Title Productivity Old System: Staff of works... $800/day Old labor productivity New labor productivity = = titles/day 32 labor-hrs = 25 titles/labor-hr 14 titles/day 32 labor-hrs 39 Collins Title Productivity Old System: Staff of works hrs/day