L2 - 1

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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.

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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
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The Production System Transforms Inputs to Outputs
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Productivity

• Measure of process improvement
• Represents ratio of output to input
• Only through productivity increases can our
  standard of living improve

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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 units of 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
Key Variables for Improved Labor Productivity

• Providing basic education appropriate for an
  effective labor force
• Providing proper diet to the labor force
• Providing social overhead that makes labor
  available e.g. transportation, sanitation, etc
• Maintaining and enhancing skills in the midst of
  rapidly changing technology and knowledge
• Better utilizing labor with a stronger commitment

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15
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