1 Operations and Productivity

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“I have always said that the day you think you’ve got all the answers, the game has passed you by – and you didn’t even know it.”

Bill CowherEx-Steelers Coach

Outline

• Profile: Hard Rock Café• What Is Operations Management?• Goods & Services • What Operations Managers Do?• Changing Challenges in OM• The Productivity Challenge• Ethics and Social Responsibility

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Hard Rock Cafe

• First opened in 1971– Now – 129 restaurants in over 40 countries

• Rock music memorabilia• Creates value in the form of good food and

entertainment• More than 3,500 custom meals per day in

Orlando • Role of the Operations Manager

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• Production is the creation of goods and services.

• Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.

What Is Operations Management?

External EnvironmentCustomer or client

participation

Inputs• Workers• Managers• Equipment• Facilities• Materials• Services• Land• Energy

Information on performance

Outputs• Goods• Services

Operations and transformations

1 35

2 4

The Transformation Process

Special Input

Special Input

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What Operations Managers Do

Basic Management Functions• Plan • Organize • Staff• Lead• Control

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Characteristics of Goods

Tangible productConsistent product definitionProduction usually separate from consumptionCan be inventoriedLow customer interaction

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Characteristics of Service

Intangible productProduced and consumed at same timeOften uniqueHigh customer interactionInconsistent product definitionOften knowledge-basedFrequently dispersed

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AutomobileComputer

Installed carpetingFast-food meal

Restaurant meal/auto repairHospital care

Advertising agency/investment management

Consulting service/teachingCounseling

Percent of Product that is a Good Percent of Product that is a Service

100% 75 50 25 0 25 50 75 100%| | | | | | | | |

Goods and Services

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Changing Challenges

Traditional Approach

Reasons for Change

Current Challenge

Ethics and regulations not at the forefront

Public concern over pollution, corruption, child labor, etc.

High ethical and social responsibility; increased legal and professional standards

Local or national focus

Growth of reliable, low cost communication and transportation

Global focus, international collaboration

Lengthy product development

Shorter life cycles; growth of global communication; CAD, Internet

Rapid product development; design collaboration

Figure 1.5

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Changing Challenges

Traditional Approach

Reasons for Change

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

Rise of consumerism; increased affluence; individualism

Mass customization

Figure 1.5

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Changing Challenges

Traditional Approach

Reasons for Change

Current Challenge

Emphasis on specialized, often manual tasks

Recognition of the employee's total contribution; knowledge society

Empowered employees; enriched jobs

“In-house” production; low-bid purchasing

Rapid technological change; increasing competitive forces

Supply-chain partnering; joint ventures, alliances

Large lot production

Shorter product life cycles; increasing need to reduce inventory

Just-In-Time performance; lean; continuous improvement

Figure 1.5

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Productivity

• Measure of process improvement• Represents output relative to input

• Only through productivity increases can our standard of living improve

Productivity Units ProducedInput Used=

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Productivity Calculations

Productivity =Units produced

Labor-hours used

= = 4 units/labor-hour1,000250

Labor Productivity

One resource input single-factor productivity

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Multi-Factor Productivity

OutputLabor + Material + Energy + Capital + Miscellaneous

Productivity =

Also known as total factor productivityOutput and inputs are often expressed

in dollars

Multiple resource inputs multi-factor productivity

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Productivity at Kleen Karpets

• Kleen Karpets cleaned 65 carpets in October• Labor = 520 hours @ $13 per hour• Solvent = 100 gallons @ $5 per gallon• Machine rental = 20 days @ $50 per day• Labor productivity = 65/(520*13)

= 0.0096 rugs/labor-dollar• Multifactor productivity

= 65/(520*13+100*5+20*50) = 0.00787 rugs/dollar

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• Challenges facing operations managers:– Developing and producing safe, quality products– Maintaining a clean environment– Providing a safe workplace– Honoring stakeholder commitments

Ethics & Social Responsibility

Thank You

Questions? ?