Operations Management Chapter – Operations and Productivity PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 6e Operations Management, 8e © 2006 Prentice Hall, Inc Hall, Inc © 2006 Prentice 1–1 Outline Global Company Profile: Hard Rock Cafe What Is Operations Management? Organizing To Produce Goods And Services Why Study OM? What Operations Managers Do How This Book Is Organized © 2006 Prentice Hall, Inc 1–2 Outline - Continued The Heritage Of Operations Management Operations In The Service Sector Differences Between Goods And Services Growth Of Services Service Pay Exciting New Trends In Operations Management © 2006 Prentice Hall, Inc 1–3 Outline - Continued The Productivity Challenge Productivity Measurement Productivity Variables Productivity And The Service Sector Ethics And Social Responsibility © 2006 Prentice Hall, Inc 1–4 Learning Objectives When you complete this chapter, you should be able to: Identify or Define: Production and productivity Operations management (OM) What operations managers Services © 2006 Prentice Hall, Inc 1–5 Learning Objectives When you complete this chapter, you should be able to: Describe or Explain : A brief history of operations management Career opportunities in operations management The future of the discipline Measuring productivity © 2006 Prentice Hall, Inc 1–6 The Hard Rock Cafe First opened in 1971 Now – 110 restaurants in over 40 countries Rock music memorabilia Creates value in the form of good food and entertainment 3,500+ custom meals per day in Orlando How does an item get on the menu? Role of the Operations Manager © 2006 Prentice Hall, Inc 1–7 What Is Operations Management? Production is the creation of goods and services Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs © 2006 Prentice Hall, Inc 1–8 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 © 2006 Prentice Hall, Inc 1–9 Organizational Charts Commercial Bank Operations Finance Marketing Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Investments Security Real estate Loans Commercial Industrial Financial Personal Mortgage Accounting Auditing Trust Department Figure 1.1(A) © 2006 Prentice Hall, Inc – 10 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day New System: 14 titles/day titles/day Overhead = $400/day Overhead = $800/day titles/day Old labor productivity = 32 labor-hrs = 25 titles/labor-hr 14 titles/day New labor productivity = 32 labor-hrs © 2006 Prentice Hall, Inc – 58 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day New System: 14 titles/day titles/day Overhead = $400/day Overhead = $800/day titles/day Old labor productivity = 32 labor-hrs = 25 titles/labor-hr 14 titles/day New labor productivity = 32 labor-hrs = 4375 titles/labor-hr © 2006 Prentice Hall, Inc – 59 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day New System: 14 titles/day titles/day Overhead = $400/day Overhead = $800/day titles/day Old multifactor productivity = $640 + 400 © 2006 Prentice Hall, Inc – 60 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day New System: 14 titles/day titles/day Overhead = $400/day Overhead = $800/day titles/day Old multifactor productivity = $640 + 400 = 0077 titles/dollar © 2006 Prentice Hall, Inc – 61 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day New System: 14 titles/day titles/day Overhead = $400/day Overhead = $800/day titles/day Old multifactor productivity = $640 + 400 = 0077 titles/dollar 14 titles/day New multifactor productivity = $640 + 800 © 2006 Prentice Hall, Inc – 62 Collins Title Productivity Old System: Staff of works hrs/day Payroll cost = $640/day New System: 14 titles/day titles/day Overhead = $400/day Overhead = $800/day titles/day Old multifactor productivity = $640 + 400 = 0077 titles/dollar 14 titles/day New multifactor productivity = $640 + 800 = 0097 titles/dollar © 2006 Prentice Hall, Inc – 63 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 units of measure may be lacking © 2006 Prentice Hall, Inc – 64 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 © 2006 Prentice Hall, Inc – 65 Key Variables for Improved Labor Productivity Basic education appropriate for the labor force Diet of the labor force Social overhead that makes labor available Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge © 2006 Prentice Hall, Inc – 66 Labor Skills About half of the 17-year-olds in the US cannot correctly answer questions of this type Figure 1.8 © 2006 Prentice Hall, Inc – 67 Percent increase in mfg productivity Investment and Productivity in Selected Nations 10 Japan Belgium Italy Netherlands France Canada US 10 UK 15 20 25 30 35 Percentage investment © 2006 Prentice Hall, Inc – 68 Service Productivity Typically labor intensive Frequently focused on unique individual attributes or desires Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality © 2006 Prentice Hall, Inc – 69 Productivity at Taco Bell Improvements: Revised the menu Designed meals for easy preparation Shifted some preparation to suppliers Efficient layout and automation Training and employee empowerment © 2006 Prentice Hall, Inc – 70 Productivity at Taco Bell Improvements: Results: Revised the menu Designed meals for easy preparation Preparation time cut to seconds Shifted some preparation to suppliers Management span of control Efficient layout and automation increased from to 30 Training and employee empowerment In-store labor cut by 15 hours/day Stores handle twice the volume with half the labor Fast-food low-cost leader © 2006 Prentice Hall, Inc – 71 Ethics and Social Responsibility Challenges facing operations managers: Developing safe quality products Maintaining a clean environment Providing a safe workplace Honoring community commitments © 2006 Prentice Hall, Inc – 72 ... Heritage Of Operations Management Operations In The Service Sector Differences Between Goods And Services Growth Of Services Service Pay Exciting New Trends In Operations Management. .. on the menu? Role of the Operations Manager © 2006 Prentice Hall, Inc 1–7 What Is Operations Management? Production is the creation of goods and services Operations management (OM) is the set... you should be able to: Describe or Explain : A brief history of operations management Career opportunities in operations management The future of the discipline Measuring productivity