operation management chapter 1 (Heizer and Render)
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1 - 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 1 Operations and Productivity PowerPoint presentation to PowerPoint presentation to accompany accompany Heizer and Render Heizer and Render Operations Management, 10e Operations Management, 10e Principles of Operations Principles of Operations Management, 8e Management, 8e PowerPoint slides by Jeff Heyl
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PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8ePowerPoint slides by Jeff Heyl
Transcript of operation management chapter 1 (Heizer and Render)
Operations and Productivity1
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Outline
What Is Operations Management?
Why Study OM?
*
Outline - Continued
Growth of Services
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Outline - Continued
Ethics and Social Responsibility
*
Learning Objectives
When you complete this chapter you should be able to:
Define operations management
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Learning Objectives
When you complete this chapter you should be able to:
Compute single-factor productivity
Compute multifactor productivity
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
The Hard Rock Cafe
First opened in 1971
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
What Is 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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Organizing to Produce Goods and Services
Essential functions:
Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Organizational Charts
Commercial Bank
Figure 1.1(A)
*
Organizational Charts
*
Organizational Charts
and personnel
Process analysis
*
Why Study OM?
OM is one of three 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 do
OM is such a costly part of an organization
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Options for Increasing Contribution
Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance Costs – 6,000 – 6,000 – 3,000 – 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500
Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500
Finance/
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
What Operations
Managers Do
*
Ten Critical Decisions
Managing quality 6, Supplement 6
Process and capacity 7, Supplement 7
design
Scheduling 13, 15
*
The Critical Decisions
What good or service should we offer?
How should we design these products and services?
Managing quality
Table 1.2 (cont.)
*
The Critical Decisions
Location strategy
On what criteria should we base the location decision?
Table 1.2 (cont.)
*
The Critical Decisions
How large must the facility be to meet our plan?
Human resources and job design
How do we provide a reasonable work environment?
How much can we expect our employees to produce?
Table 1.2 (cont.)
*
Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.
1 - *
The Critical Decisions
Should we make or buy this component?
Who should be our suppliers and how can we integrate them into our strategy?
Inventory, material requirements planning, and JIT
How much inventory of each item should we have?
When do we re-order?
*
The Critical Decisions
Intermediate and short–term scheduling
Are we better off keeping people on the payroll during slowdowns?
Which jobs do we perform next?
Maintenance
Who is responsible for maintenance?
Table 1.2 (cont.)
*
Where are the OM Jobs?
Technology/methods
*
Opportunities
*
Certifications
American Society of Quality (ASQ)
Institute for Supply Management (ISM)
Project Management Institute (PMI)
Charter Institute of Purchasing and Supply (CIPS)
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Significant Events in OM
*
The Heritage of OM
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Gantt charts (Gantt 1916)
Quality control (Shewhart 1924; Deming 1950)
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
The Heritage of OM
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
*
Eli Whitney
In 1798, received government contract to make 10,000 muskets
Showed that machine tools could make standardized parts to exact specifications
Musket parts could be used in any musket
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Frederick W. Taylor
Known as ‘father of scientific management’
In 1881, as chief engineer for Midvale Steel, studied how tasks were done
Began first motion and time studies
Created efficiency principles
*
Taylor’s Principles
Providing the proper training
Establishing legitimate incentives for work to be accomplished
Management Should Take More Responsibility for:
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Frank & Lillian Gilbreth
Applied efficiency methods to their home and 12 children!
Book & Movie: “Cheaper by the Dozen,” “Bells on Their Toes”
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Born 1863; died 1947
In 1903, created Ford Motor Company
In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor past work station
Paid workers very well for 1911 ($5/day!)
Henry Ford
*
W. Edwards Deming
Used statistics to analyze process
His methods involve workers in decisions
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Contributions From
Human factors
Industrial engineering
Management science
Biological science
Physical sciences
Information technology
*
New Challenges in OM
*
Characteristics of Goods
Can be inventoried
Low customer interaction
*
Characteristics of Service
Often unique
*
Industry and Services as Percentage of GDP
Services
Manufacturing
Australia
Canada
China
*
Goods and Services
| | | | | | | | |
Percent of Product that is a Good Percent of Product that is a Service
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Manufacturing and Service Employment
1960 1980 2000
*
Manufacturing Employment and Production
1960 1980 2000
*
Development of the
Percent
*
Organizations in Each Sector
25.8
14.9
5.2
10.7
*
Organizations in Each Sector
9.6
8.5
4.6
Total
78.8
*
Organizations in Each Sector
11.2
*
Changing Challenges
Figure 1.5
Traditional Approach
Public concern over pollution, corruption, child labor, etc.
High ethical and social responsibility; increased legal and professional standards
Local or national focus
Global focus, international collaboration
Rapid product development; design collaboration
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Changing Challenges
Figure 1.5
Traditional Approach
Current Challenge
Low cost production, with little concern for environment; free resources (air, water) ignored
Public sensitivity to environment; ISO 14000 standard; increasing disposal costs
Environmentally sensitive production; green manufacturing; sustainability
Low-cost standardized products
Mass customization
*
Changing Challenges
Figure 1.5
Traditional Approach
Recognition of the employee's total contribution; knowledge society
Empowered employees; enriched jobs
“In-house” production; low-bid purchasing
Supply-chain partnering; joint ventures, alliances
Large lot production
Just-In-Time performance; lean; continuous improvement
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
New Trends in OM
*
Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output only and not a measure of efficiency
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
The Economic System
services
Transformation
The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is the result of a mix of capital (38% of 2.5%), labor (10% of 2.5%), and management (52% of 2.5%).
Inputs
Labor,
capital,
management
*
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines
Operations improvements have helped Starbucks increase yearly revenue per outlet by $200,000 to $940,000 in six years.
Productivity has improved by 27%, or about 4.5% per year.
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Measure of process improvement
Only through productivity increases can our standard of living improve
Productivity
*
Productivity Calculations
Labor Productivity
Units produced
Labor-hours used
*
Multi-Factor Productivity
Output and inputs are often expressed in dollars
Multiple resource inputs multi-factor productivity
Output
Productivity =
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
8 titles/day
32 labor-hrs
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Productivity Variables
*
Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force
Social overhead that makes labor available
Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Labor Skills
About half of the 17-year-olds in the U.S. cannot correctly answer questions of this type
Figure 1.7
*
Investment and Productivity
10
8
6
4
2
0
*
Service Productivity
Often an intellectual task performed by professionals
Often difficult to mechanize
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Productivity at Taco Bell
Efficient layout and automation
Training and employee empowerment
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Productivity at Taco Bell
Efficient layout and automation
Training and employee empowerment
Results:
Management span of control increased from 5 to 30
In-store labor cut by 15 hours/day
Stores handle twice the volume with half the labor
Conserve 300 million gallons of water and 200 million KwH of electricity each year saving $17 million annually
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Ethics and
Social Responsibility
Maintaining a clean environment
Providing a safe workplace
*
© 2011 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.
Printed in the United States of America.
© 2011 Pearson Education, Inc. publishing as Prentice Hall
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Outline
What Is Operations Management?
Why Study OM?
*
Outline - Continued
Growth of Services
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Outline - Continued
Ethics and Social Responsibility
*
Learning Objectives
When you complete this chapter you should be able to:
Define operations management
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Learning Objectives
When you complete this chapter you should be able to:
Compute single-factor productivity
Compute multifactor productivity
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
The Hard Rock Cafe
First opened in 1971
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
What Is 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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Organizing to Produce Goods and Services
Essential functions:
Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Organizational Charts
Commercial Bank
Figure 1.1(A)
*
Organizational Charts
*
Organizational Charts
and personnel
Process analysis
*
Why Study OM?
OM is one of three 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 do
OM is such a costly part of an organization
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Options for Increasing Contribution
Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance Costs – 6,000 – 6,000 – 3,000 – 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500
Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500
Finance/
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
What Operations
Managers Do
*
Ten Critical Decisions
Managing quality 6, Supplement 6
Process and capacity 7, Supplement 7
design
Scheduling 13, 15
*
The Critical Decisions
What good or service should we offer?
How should we design these products and services?
Managing quality
Table 1.2 (cont.)
*
The Critical Decisions
Location strategy
On what criteria should we base the location decision?
Table 1.2 (cont.)
*
The Critical Decisions
How large must the facility be to meet our plan?
Human resources and job design
How do we provide a reasonable work environment?
How much can we expect our employees to produce?
Table 1.2 (cont.)
*
Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.
1 - *
The Critical Decisions
Should we make or buy this component?
Who should be our suppliers and how can we integrate them into our strategy?
Inventory, material requirements planning, and JIT
How much inventory of each item should we have?
When do we re-order?
*
The Critical Decisions
Intermediate and short–term scheduling
Are we better off keeping people on the payroll during slowdowns?
Which jobs do we perform next?
Maintenance
Who is responsible for maintenance?
Table 1.2 (cont.)
*
Where are the OM Jobs?
Technology/methods
*
Opportunities
*
Certifications
American Society of Quality (ASQ)
Institute for Supply Management (ISM)
Project Management Institute (PMI)
Charter Institute of Purchasing and Supply (CIPS)
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Significant Events in OM
*
The Heritage of OM
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Gantt charts (Gantt 1916)
Quality control (Shewhart 1924; Deming 1950)
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
The Heritage of OM
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
*
Eli Whitney
In 1798, received government contract to make 10,000 muskets
Showed that machine tools could make standardized parts to exact specifications
Musket parts could be used in any musket
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Frederick W. Taylor
Known as ‘father of scientific management’
In 1881, as chief engineer for Midvale Steel, studied how tasks were done
Began first motion and time studies
Created efficiency principles
*
Taylor’s Principles
Providing the proper training
Establishing legitimate incentives for work to be accomplished
Management Should Take More Responsibility for:
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Frank & Lillian Gilbreth
Applied efficiency methods to their home and 12 children!
Book & Movie: “Cheaper by the Dozen,” “Bells on Their Toes”
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Born 1863; died 1947
In 1903, created Ford Motor Company
In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor past work station
Paid workers very well for 1911 ($5/day!)
Henry Ford
*
W. Edwards Deming
Used statistics to analyze process
His methods involve workers in decisions
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Contributions From
Human factors
Industrial engineering
Management science
Biological science
Physical sciences
Information technology
*
New Challenges in OM
*
Characteristics of Goods
Can be inventoried
Low customer interaction
*
Characteristics of Service
Often unique
*
Industry and Services as Percentage of GDP
Services
Manufacturing
Australia
Canada
China
*
Goods and Services
| | | | | | | | |
Percent of Product that is a Good Percent of Product that is a Service
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Manufacturing and Service Employment
1960 1980 2000
*
Manufacturing Employment and Production
1960 1980 2000
*
Development of the
Percent
*
Organizations in Each Sector
25.8
14.9
5.2
10.7
*
Organizations in Each Sector
9.6
8.5
4.6
Total
78.8
*
Organizations in Each Sector
11.2
*
Changing Challenges
Figure 1.5
Traditional Approach
Public concern over pollution, corruption, child labor, etc.
High ethical and social responsibility; increased legal and professional standards
Local or national focus
Global focus, international collaboration
Rapid product development; design collaboration
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Changing Challenges
Figure 1.5
Traditional Approach
Current Challenge
Low cost production, with little concern for environment; free resources (air, water) ignored
Public sensitivity to environment; ISO 14000 standard; increasing disposal costs
Environmentally sensitive production; green manufacturing; sustainability
Low-cost standardized products
Mass customization
*
Changing Challenges
Figure 1.5
Traditional Approach
Recognition of the employee's total contribution; knowledge society
Empowered employees; enriched jobs
“In-house” production; low-bid purchasing
Supply-chain partnering; joint ventures, alliances
Large lot production
Just-In-Time performance; lean; continuous improvement
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
New Trends in OM
*
Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output only and not a measure of efficiency
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
The Economic System
services
Transformation
The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is the result of a mix of capital (38% of 2.5%), labor (10% of 2.5%), and management (52% of 2.5%).
Inputs
Labor,
capital,
management
*
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines
Operations improvements have helped Starbucks increase yearly revenue per outlet by $200,000 to $940,000 in six years.
Productivity has improved by 27%, or about 4.5% per year.
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Measure of process improvement
Only through productivity increases can our standard of living improve
Productivity
*
Productivity Calculations
Labor Productivity
Units produced
Labor-hours used
*
Multi-Factor Productivity
Output and inputs are often expressed in dollars
Multiple resource inputs multi-factor productivity
Output
Productivity =
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
8 titles/day
32 labor-hrs
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
Collins Title Productivity
Payroll cost = $640/day Overhead = $400/day
Old System:
*
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Productivity Variables
*
Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force
Social overhead that makes labor available
Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Labor Skills
About half of the 17-year-olds in the U.S. cannot correctly answer questions of this type
Figure 1.7
*
Investment and Productivity
10
8
6
4
2
0
*
Service Productivity
Often an intellectual task performed by professionals
Often difficult to mechanize
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Productivity at Taco Bell
Efficient layout and automation
Training and employee empowerment
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Productivity at Taco Bell
Efficient layout and automation
Training and employee empowerment
Results:
Management span of control increased from 5 to 30
In-store labor cut by 15 hours/day
Stores handle twice the volume with half the labor
Conserve 300 million gallons of water and 200 million KwH of electricity each year saving $17 million annually
© 2011 Pearson Education, Inc. publishing as Prentice Hall
*
Ethics and
Social Responsibility
Maintaining a clean environment
Providing a safe workplace
*
© 2011 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.
Printed in the United States of America.
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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