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Chapter 1 – Operations and Productivity
Introduction What – An introduction to
Operations Management Where – In any business that wants
to improve its productivity Why – Productivity is one measure
of success in business
Production All companies produce something In the examples you gave of
careers you would like to pursue, what would you be producing?
The creation of goods and services
What is Operations Management? “Operations Management is the
set of activities that creates goods and services by transforming inputs into outputs”
What are the Inputs and Outputs? A Sony TV Factory A Bank A Hospital A University
Why Study Operations Management? Study how people organize themselves
for productive enterprise Study how goods and services are
produced Understand what operations managers
do Understand how operations
management affects costs for an organization
Operations Management Breakdown Design of Goods and Services Managing Quality Process Strategy Location Strategy Layout Strategy
Breakdown Continued Human Resources Supply-chain Management Inventory Management Scheduling Maintenance
Framework of Business All businesses perform three
functions to create goods and services: Finance and Accounting Marketing Operations and Production
Operations Management and Services
Goods vs Services Goods
Resold Inventoried Measurable
Quality Sales distinct
from Production
Services Reselling
Unusual Difficult to
Inventory Quality Difficult
to Measure Selling Part of
Service
Goods vs Services Continued
Goods Product
Transportable
Location for Cost
Easy to Automate
Services Provider
Transportable
Location for Customer Contact
Difficult to Automate
Trends in Services Your job Your parents’ job
Growth of Services
1850 75 1900 25 50 75 2000 40 50 60 70 1970 75 80 85 90 95 2000Percent
United States
Canada
France
Italy
Britain
Japan
W Germany
19701991
Services
Industry
Farming
250
200
150
100
50
0
80
%70
60
50
40
30
20
10
0
U.S. Employment, % Share Services as a Percent of GDP U.S. Exports of ServicesIn Billions of Dollars
Year 2000 data is estimated
Mix of Goods and Services
0 25 50 75 100255075100
AutomobileComputerInstalled Carpeting
Fast-food MealRestaurant Meal
Auto RepairHospital Care
Advertising AgencyInvestment Management
Consulting ServiceCounseling
Percent of Product that is a Good Percent of Product that is a Service
Pure Service Pure Service: No physical product
provided along with a service
Applying OM to Services Can be very difficult to apply
operations management concepts to the service sector
Productivity
Productivity Definition Productivity is the ratio of outputs of an
enterprise divided by its inputs
Productivity =Outputs
Inputs
Productivity Definition Outputs? Inputs?
Productivity =Products and Services
Labour, Material, Energy, Capital
Productivity Definition It is the function of Operations
Management to improve the ratio of outputs to inputs – to make the operation more efficient.
How?
Productivity Improvement Why measure national productivity? Only by increasing productivity does
the standard of living improve Three variables:
Labour Capital Management
