OM_Topic 3 (Ch 3) Handout

8/12/2019 OM_Topic 3 (Ch 3) Handout

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OM

MEASURING PERFORMANCE

DAVID A. COLLIER AND

JAMES R. EVANS

1OM, Ch. 3 Measuring Performance in Operations2009 South-Western, a part of Cengage Learning


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Chapter 3 Measuring Performance in Operations

Introduction

anagers ma e many mportant ec s ons t ataffect how an organization provides value to its

.

To know if decisions are effective and to guide theorgan zat on on a a y as s, t ey nee a means ounderstanding performance at all levels of the

, .



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Customer partic ipationValue added

Outputs

Inputs

Performance Information

Goods Managers Equipment Facilities

processes

1 3

Services Materials Services Land

5

2 4

ControlFeedbackFeedback

Feedback


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The Scope of Performance Measurement

e st e ow eta s var ous categor es operformance measurements.

Financial Customer and market

Time

Flexibility Safety Quality

Innovation and learning



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Productivity = OutputIn ut

(NOTE) Outputs: goods, services

npu s: a or, ma er a s, e c

Labor productivity =

Employee hours


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Improving Productivity atStarbucksO erations im rovements haveO erations im rovements have

A team of 10 analystscontinually look for ways tohelped Starbucks increase yearlyhelped Starbucks increase yearlyrevenue per outlet by $200,000 torevenue per outlet by $200,000 to

$940,000 in six years.$940,000 in six years. .

improvements:Productivity has improved by %,Productivity has improved by %,

or about % per year.or about % per year.

Stop requiring signaturesStop requiring signatureson credit card purchaseson credit card purchasesunder 25under 25

Saved 8 secondsSaved 8 secondsper transactionper transaction

Change the size of the iceChange the size of the icescoopscoop

Saved 14 secondsSaved 14 secondsper drinkper drink

New espresso machinesNew espresso machines Saved 12 secondsSaved 12 secondsper shotper shot


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Measures of Productivit

measures Labor Machine Capital Energy

Multifactor Output Outputmeasures Labor + Machine Labor + Capital + Energy

Total Goods or Services Producedmeasure All inputs used to produce them


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Labor Productivit

xamp e:xamp e:Assume two workers paint twentyAssume two workers paint twenty--four tables infour tables ineight hours:eight hours:

In uts: 16 hours of labor 2 workers x 8 hoursIn uts: 16 hours of labor 2 workers x 8 hoursOutputs: 24 painted tablesOutputs: 24 painted tables

tablesOutputs

hours Inputs


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Can be used to compare a processCan be used to compare a processroductivit at a iven time Productivit at a iven time P to the sameto the same

process productivity at an earlier time (P process productivity at an earlier time (P 11))

12 PP PP

1P 1P, or


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Last week a company produced 150 units using 200 hours ofLast week a company produced 150 units using 200 hours oflabor labor This week, the same company produced 180 units using 250This week, the same company produced 180 units using 250

hours of labor hours of labor P1 =

PP 12 =

=

=

2

rategrowthor %P1


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Models of Organizational Performance

1. Malcolm Baldrige National Quality AwardFramework

2. Balanced Scorecard3. Value Chain Model

4. Service-Profit Chain Model



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Malcolm Baldrige National Quality Award Framework

categories of manufacturing, small business,

Primary purpose of the program is to provide aself-assessment to understand an organizations

priorities for improvement.


. .


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Malcolm Baldrige National Quality Award Model ofOrganizational PerformanceExhibit 3.3


Source: 2006 Malcolm Baldridge National Quality Award Criteria, U.S. Dept. of Commerce


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Malcolm Baldrige National QualityMalcolm Baldrige National Qualitywar - nnerswar - nners


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Malcolm Baldrige National Quality

-

Malcolm Baldrige National Quality

-Remark: Education and health sectors have been added since 1999.

e a r ge war rec p en s are:Motorola Commercial, Government & Industrial Solutions Sector (Manufacturing)Branch-Smith Printing Division (Small Business)

The 2003 Baldri e Award reci ients are:

SSM Health Care (Health Care)

Medrad, Inc., Indianola, Pa. (manufacturing);Boeing Aerospace Support, St. Louis, Mo. (service) (Boeing Airlift and TankerPrograms, Long Beach, Calif., received the Baldrige Award in 1998 in the

manufacturing category);Caterpillar Financial Services Corp., Nashville, Tenn. (service);Stoner Inc., Quarryville, Pa. (small business);Community Conso i ate Sc oo District 15, Pa atine, I . (e ucation);Baptist Hospital, Inc., Pensacola, Fla. (health care); andSaint Lukes Hospital of Kansas City, Kansas City, Mo. (health care).


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The balanced scorecard is a strategicThe balanced scorecard is a strategiclannin and mana ement s stemlannin and mana ement s stem used toused to

align business activities to the vision andalign business activities to the vision andstrate of the or anization im rovestrate of the or anization im roveinternal and external communications, andinternal and external communications, andmonitor or anizational erformance a ainstmonitor or anizational erformance a ainststrategic goals.strategic goals.


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The Balanced Scorecard Model

Consists of four performance perspectives:1 Financial

2) Customer

3) Innovation and Learning

4) Internal



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Source: Kaplan R. S., and Norton, D. P., The Balanced ScorecardMeasures That Drive Performance, Harvard Business Review, JanuaryFebruary 1992, p. 72.


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A BSC Example:

Re ional Airline Balanced Scorecard

A BSC Example:

Re ional Airline Balanced Scorecard

Source: Balanced Scorecard Institute, a Strategy Management Group company


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Documents

OM_Topic 3 (Ch 3) Handout