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Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,2008 Prentice Hall,Inc.,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,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,Outline-Continued,The Productivity Challenge,Productivity Measurement,Productivity Variables,Productivity and the Service Sector,Ethics and Social Responsibility,Learning Objectives,When you complete this chapter you should be able to:,Define operations management,Explain the distinction between goods and services,Explain the difference between production and productivity,Learning Objectives,When you complete this chapter you should be able to:,Compute single-factor productivity,Compute multifactor productivity,Identify the critical variables in enhancing productivity,The Hard Rock Cafe,First opened in 1971,Now 121 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,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,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,Operations,Teller Scheduling,Check Clearing,Collection,Transaction processing,Facilities design/layout,Vault operations,Maintenance,Security,Finance,Investments,Security,Real estate,Accounting,Auditing,Marketing,Loans,Commercial,Industrial,Financial,Personal,Mortgage,Trust Department,Commercial Bank,Figure 1.1(A),Organizational Charts,Operations,Ground support equipment,Maintenance,Ground Operations,Facility maintenance Catering,Flight Operations,Crew scheduling Flying Communications Dispatching,Management science,Finance/accounting,Accounting,Payables Receivables General Ledger,Finance,Cash control International exchange,Airline,Figure 1.1(B),Marketing,Traffic administration,Reservations Schedules Tariffs(pricing),Sales,Advertising,Marketing,Sales promotion,Advertising,Sales,Market research,Organizational Charts,Operations,Facilities,Construction;maintenance,Production and inventory control,Scheduling;materials control,Quality assurance and control,Supply chain management,Manufacturing,Tooling;fabrication;assembly,Design,Product development and design Detailed product specifications,Industrial engineering,Efficient use of machines,space,and personnel,Process analysis,Development and installation of production tools and equipment,Finance/accounting,Disbursements/credits,Receivables Payables General ledger,Funds Management,Money market International exchange,Capital requirements,Stock issue Bond issue and recall,Manufacturing,Figure 1.1(C),Why Study OM?,OM is one of three major functions(marketing,finance,and operations)of any organization,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,Options for Increasing Contribution,Sales$100,000$150,000$100,000$100,000,Cost of Goods,80,000,120,000,80,000,64,000,Gross Margin20,00030,00020,00036,000,Finance Costs,6,000,6,000,3,000,6,000,Subtotal14,00024,00017,00030,000,Taxes at 25%,3,500,6,000,4,250,7,500,Contribution$10,500$18,000$12,750$22,500,Finance/,MarketingAccountingOM,OptionOptionOption,IncreaseReduceReduce,SalesFinanceProduction,CurrentRevenue 50%Costs 50%Costs 20%,What Operations Managers Do,Planning,Organizing,Staffing,Leading,Controlling,Basic Management Functions,Ten Critical Decisions,Ten Decision AreasChapter(s),Design of goods and services5,Managing quality6,Supplement 6,Process and capacity 7,Supplement 7 design,Location strategy8,Layout strategy9,Human resources and 10,Supplement 10 job design,Supply chain 11,Supplement 11 management,Inventory management12,14,16,Scheduling13,15,Maintenance17,Table 1.2,The Critical Decisions,Design of goods and services,What good or service should we offer?,How should we design these products and services?,Managing quality,How do we define quality?,Who is responsible for quality?,Table 1.2(cont.),The Critical Decisions,Process and capacity design,What process and what capacity will these products require?,What equipment and technology is necessary for these processes?,Location strategy,Where should we put the facility?,On what criteria should we base the location decision?,Table 1.2(cont.),The Critical Decisions,Layout strategy,How should we arrange the facility?,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.),The Critical Decisions,Supply chain management,Should we make or buy this component?,Who are our suppliers and who can integrate into our e-commerce program?,Inventory,material requirements planning,and JIT,How much inventory of each item should we have?,When do we re-order?,Table 1.2(cont.),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?,When do we do maintenance?,Table 1.2(cont.),Where are the OM Jobs?,Figure 1.2,Where are the OM Jobs?,Technology/methods,Facilities/space utilization,Strategic issues,Response time,People/team development,Customer service,Quality,Cost reduction,Inventory reduction,Productivity improvement,Significant Events in OM,Figure 1.3,The Heritage of OM,Division of labor(Adam Smith 1776;Charles Babbage 1852),Standardized parts(Whitney 1800),Scientific Management(Taylor 1881),Coordinated assembly line(Ford/Sorenson 1913),Gantt charts(Gantt 1916),Motion study(Frank and Lillian Gilbreth 1922),Quality control(Shewhart 1924;Deming 1950),The Heritage of OM,Computer(Atanasoff 1938),CPM/PERT(DuPont 1957),Material requirements planning(Orlicky 1960),Computer aided design(CAD 1970),Flexible manufacturing system(FMS 1975),Baldrige Quality Awards(1980),Computer integrated manufacturing(1990),Globalization(1992),Internet(1995),Eli Whitney,Born 1765;died 1825,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,Frederick W.Taylor,Born 1856;died 1915,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,Taylors Principles,Matching employees to right job,Providing the proper training,Providing proper work methods and tools,Establishing legitimate incentives for work to be accomplished,Management Should Take More Responsibility for:,Frank&Lillian Gilbreth,Frank(1868-1924);Lillian(1878-1972),Husband-and-wife engineering team,Further developed work measurement methods,Applied efficiency methods to their home and 12 children!,Book&Movie:“Cheaper by the Dozen,”book:“Bells on Their Toes”,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,Born 1900;died 1993,Engineer and physicist,Credited with teaching Japan quality control methods in post-WW2,Used statistics to analyze process,His methods involve workers in decisions,Contributions From,Human factors,Industrial engineering,Management science,Biological science,Physical sciences,Information technology,New Challenges in OM,Global focus,Just-in-time,Supply chain partnering,Rapid product development,alliances,Mass customization,Empowered employees,teams,To,From,Local or national focus,Batch shipments,Low bid purchasing,Lengthy product development,Standard products,Job specialization,Characteristics of Goods,Tangible product,Consistent product definition,Production usually separate from consumption,Can be inventoried,Low customer interaction,Characteristics of Service,Intangible product,Produced and consumed at same time,Often unique,High customer interaction,Inconsistent product definition,Often knowledge-based,Frequently dispersed,Industry and Services as Percentage of GDP,Services,Manufacturing,Australia,Canada,China,Czech Rep,France,Germany,Hong Kong,Japan,Mexico,Russian Fed,South Africa,Spain,UK,US,90,80,70,60,50,40,30,20,10,0,Goods Versus Services,Table 1.3,Can be resold,Can be inventoried,Some aspects of quality measurable,Selling is distinct from production,Product is transportable,Site of facility important for cost,Often easy to automate,Revenue generated primarily from tangible product,Attributes of Goods(Tangible Product),Attributes of Services(Intangible Product),Reselling unusual,Difficult to inventory,Quality difficult to measure,Selling is part of service,Provider,not product,isoften transportable,Site of facility important forcustomer contact,Often difficult to automate,Revenue generated primarily from the intangible service,Goods and Services,Automobile,Computer,Installed carpeting,Fast-food meal,Restaurant meal/auto repair,Hospital care,Advertising agency/,investment management,Consulting service/,teaching,Counseling,Percent of Product that is a GoodPercent of Product that is a Service,100%7550250255075100%,|,Figure 1.4,120,100,80,60,40,20,0,|,1950197019902010(est),196019802000,Employment(millions),Manufacturing and Service Employment,Figure 1.5(A),Manufacturing,Service,Manufacturing Employment and Production,Figure 1.5(B),40,30,20,10,0,|,1950197019902010(est),196019802000,150,125,100,75,50,25,0,Employment(millions),Index:1997=100,Manufacturingemployment,(left scale),Industrial production,(right scale),Development of the Service Economy,Figure 1.5(C),United States,Canada,France,Italy,Britain,Japan,W.Germany,19702008(est),|,4050607080,Percent,Organizations in Each Sector,Service Sector,Example,%of all Jobs,Education,Legal,Medical,and other,Notre Dame University,San Diego Zoo,Arnold Palmer Hospital,25.5,Trade(retail,wholesale),Walgreens,Wal-Mart,Nordstroms,15.1,Utilities,Transportation,Pacific Gas&Electric,American Airlines,Santa Fe R.R.,Roadway Express,5.2,Table 1.4,Organizations in Each Sector,Service Sector,Example,%of all Jobs,Professional and Business Services,Snelling and Snelling,Waste Management,Pitney-Bowes,10.1,Finance,Information,Real Estate,Citicorp,American Express,Prudential,Aetna,Trammel Crow,EDS,IBM,9.6,Food,Lodging,Entertainment,Olive Garden,Hard Rock Cafe,Motel 6,Hilton Hotels,Walt Disney,Paramount Pictures,8.5,Public Administration,U.S.,State of Alabama,Cook County,4.6,Table 1.4,Organizations in Each Sector,Manufacturing Sector,Example,%of all Jobs,Manufacturing,General Electric,Ford,U.S.Steel,Intel,11.5,Construction,Bechtel,McDermott,7.9,Agriculture,King Ranch,1.6,Mining,Homestake Mining,0.4,Sector,Percent of all jobs,Service,78.6%,Manufacturing,21.4%,Table 1.4,New Trends in OM,Local or national focus,Reliable worldwide communication and transportation networks,Global focus,moving production offshore,Batch(large)shipments,Short product life cycles and cost of capital put pressure on reducing inventory,Just-in-time performance,Low-bid purchasing,Supply chain competition requires that suppliers be engaged in a focus on the end customer,Supply chain partners,collaboration,alliances,outsourcing,Figure 1.6,PastCausesFuture,New Trends in OM,Lengthy product development,Shorter life cycles,Internet,rapid international communication,computer-aided design,and international collaboration,Rapid product development,alliances,collaborative designs,Standardized products,Affluence and worldwide markets;increasingly flexible production processes,Mass customization with added emphasis on quality,Job specialization,Changing socioculture milieu;increasingly a knowledge and information society,Empowered employees,teams,and lean production,Figure 1.6,PastCausesFuture,New Trends in OM,Low-cost focus,Environmental issues,ISO 14000,increasing disposal costs,Environmentally sensitive production,green manufacturing,recycled materials,remanufacturing,Ethics not at forefront,Businesses operate more openly;public and global review of ethics;opposition to child labor,bribery,pollution,High ethical standards and social responsibility expected,Figure 1.6,PastCausesFuture,New Trends in OM,Global focus,Just-in-time performance,Supply chain partnering,Rapid product development,Mass customization,Empowered employees,Environmentally sensitive production,Ethics,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,Feedback,loop,Outputs,Goods andservices,Processes,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%),.,The Economic System,Inputs,Labor,capital,management,Figure 1.7,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,Saved 12 seconds per shot,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,Saved 12 seconds per shot,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.,Measure of process improvement,Represents output relative to input,Only through productivity increases can our standard of living improve,Productivity,Productivity=,Units produced,Input used,Productivity Calculations,Productivity=,Units produced,Labor-hours used,=,4,units/labor-hour,1,000,250,Labor Productivity,One resource input,single-factor productivity,Multi-Factor Productivity,Output,Labor+Material+Energy+Capital+Miscellaneous,Productivity=,Also known as total factor productivi
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