This chapter will cover following topics: Trends and Challenges of Operations Management Productivity Continuous Improvement Global Competitiveness Technological Change Environmental, Ethical, and Diversity Issues Nested Process Trends and Challenges of Operations Management Chapter: THREEChapter: THREE

Trends and Challenges of Operations Management Several business trends are currently having a great impact on operation management:3 Productivity Continuous Improvement Global competitiveness Technological change Environmental, ethical and diversity issues.

Productivity Productivity is an index that measures output (goods and services) relative to the input (labor, materials, energy, and other resources) used to produce them. It is usually expressed as the ratio of output to input. A productivity ratio can be computed for a single operation, a department, an organization, or an entire country. In business organizations, productivity ratios are used for planning workforce requirements, scheduling equipment, financial analysis, and other important tasks.

Productivity……Contd.. Productivity has important implications for business organizations and for entire nations. For non-profit organization, higher productivity means lower costs; for profit- based organizations, productivity is an important factor in determining how competitive a company is. For a nation, the rate of productivity growth is of great importance. Productivity growth is the increase in productivity from one period to the next relative to the productivity in the preceding period. Thus, For example, if productivity increased from 80 to 84, the growth rate would be….

Productivity……Contd.. Productivity comparisons can be made in two ways : First : a company can compare itself with similar operations within its industry. Second : to measure productivity over time within the same operation. Here productivity is compared in one time period with that of the next time period. The way processes are managed plays a key role in productivity improvement. Managers must examine productivity. The challenge is to increase the value of output relative to the costs of input. If processes can generate more output or output of better quality using the same amount of input, their productivity increases. If they can maintain the same level of output while reducing the use of resources, their productivity also increases.

Productivity……Contd.. Computing Productivity Productivity measures can be based on a single input (partial productivity) on more than one input (multifactor productivity), or on all inputs (total productivity).

Productivity……Contd.. Computing Productivity The choice of productivity measure depends primarily on the purpose of the measurement. If the purpose in labor productivity, then labor becomes the obvious measure. Partial measures are often of greatest use in operations management. Examples of partial measures are: labor productivity (units of output per labor hour, units of output per shift), machine productivity (units of output per machine hour), capital productivity (units of output per dollar input) and energy productivity (units of output per kilowatt-hour).

Productivity……Contd.. Computing Productivity The following are examples of labor productivity: Similar examples can be listed for machine productivity (e.g., the number of pieces per hour turned out by a machine)

Productivity……Contd.. Computing Productivity Example-1 : Determine the productivity for these cases: a.Four workers installed 720 square yards of carpeting in eight hours. b.A machine produced 68 usable pieces in two hours. Solution: (a) We know.. (b)

Productivity……Contd.. Computing Productivity Example-2 : Determine the multifactor productivity for the combined input of labor and machine time using the following data: Output 7, eachLabor: $1,000 Materials: $520Overhead: $2,000 Solution: We know.. = 2.20 units per dollar input (Answer)

Productivity……Contd.. Computing Productivity Example-3: Calculate the productivity for the following operations: a.Three employees process 600 insurance products in a week. They work 8 hours per day, 5 days per week. b.A team of workers make 400 units of a product, which is valued by its standard cost taka 10 each. The accounting department reports that for this job the actual costs are taka 400 for labor, taka 1000 for materials, and taka 100 for overhead. Solution: (a) We know.. = 5 polices/hour

Productivity……Contd.. Computing Productivity = 2.67 (b)

Productivity……Contd.. Computing Productivity Example-4: Student tuition at North South University is $100 per semester credit hour. The government supplements school revenue by matching student tuition dollar for dollar. Average class size for a typical three- credit course is 50 students. Labor costs are $ 4,000 per class, material costs are $20 per student per class, and overhead costs are $25,000 per class. (i) What is the multifactor productivity ratio for this course process? (ii) If instructors work an average of 14 hours per week for 16 weeks for each three-credit class of 50 students, what is the labor productivity?

Productivity……Contd.. Computing Productivity Solution: (i) Multifactor productivity is the ratio of the value of output to the value of input = $ 30,000/class Value of input = Labor + Material + Overhead = $ 30,000/class

Productivity……Contd.. Computing Productivity Solution: (ii) Labor productivity is the ratio if the value of output to labor hours. The values of output is the same as in part (i), or $30,000/class, so = $ /hour

Factors that Affect Productivity a. Standardizing b. Use of the Internet c.Computer viruses e. Searching for lost or misplaced items f. Scrap rates g. New workers h.A short of information technology workers and other technical workers j. Labor turnover k. Design of the workspace l.Incentive plans that reward productivity increases

Factors that Affect Productivity a. Standardizing processes and procedures wherever possible to reduce variability can have a significant benefit for both productivity and quality. b. Use of the Internet can lower costs of a wide range of transactions, thereby increasing productivity. It is likely that this effect will continue to increase productivity in the foreseeable future. c. Computer viruses can have an immense negative impact on productivity. d. Searching for lost or misplaced items wastes time, hence negatively affecting productivity. e. Scrap rates have an adverse effect on productivity, signaling inefficient use of resources. f. New workers tend to have lower productivity than seasoned workers. Thus, growing companies may experience a productivity lag.

Factors that Affect Productivity g. A short of information technology workers and other technical workers hampers the ability of companies o update computing resources, generate and sustain growth, and take advantage of new opportunities. h. Labor turnover has a negative effect on productivity; replacement need time to get up to speed. i. Design of the workspace can impact productivity. For example, having tools and other work items within easy reach can positively impact productivity. j. Incentive plans that reward productivity increases can boost productivity.

Improving Productivity A company or a department can take a number of key steps toward improving productivity: a.Develop productivity measures for all operations; measurement is the first step in managing and controlling an operation. b.Look at the system as a whole in deciding which operations are most critical; it is overall productivity that is important. c.Develop method for achieving productivity improvements, such as soliciting ideas from workers, studying how other firms have increased productivity, and reexamining the way is done. d.Establish reasonable goals for improvement. e.Make it clear that management supports and encourages productivity improvement. Consider incentives to reward workers for contributions. f.Measure improvements and publicize them.

Continuous Improvement Operations can no longer be designed to meet fixed standards without emphasis on future improvements, as customer needs change and better ideas are developed. In some cases, process reengineering ‑ the radical redesign of processes ‑ is needed when continuous incremental improvement is not sufficient. Even then, continuous improvement will be needed after processes are reengineered. Equipment should be continually upgraded as required by changing conditions. Improvement for improvement's sake is not needed, but innovation to fit the changing environment of operations is essential. Workers should not be initially trained and then forgotten. Training should be continual to meet new needs.

Global Competitiveness Businesses accept the fact that, to prosper, they must view customers, suppliers, facility locations, and competitors in global terms. Most products today are global composites of materials and services from throughout the world. Regardless of which area of the world you live in, if you face international competition, the challenge is to produce services or products that can compete on a global market, and design the processes to back them up.

Technological Change Technological change affects the design of new services and products and a firm’s processes. Many new opportunities are coming from advances in computer technology. E-commerce is dramatically changing many sales and purchasing processes. The internet-has emerged a vital tool linking firms internally and linking firms externally with customers, strategic partners, and critical suppliers. The right choices and effective management of technology can give a firm a competitive advantage.

Environmental, Ethical, and Diversity Issues Companies are locating new operation, and have more supplies and customers, in other countries. Potential ethical dilemmas arise when business can be conducted by different rules. Some countries are more sensitive than others about lavish entertainment, conflicts of internet, bribery, discrimination against minorities and women, poverty, minimum-wage levels, unsafe workplaces, and workers’ rights. Managers must decide in such case whether or not to design and operate processes that do more than just meet local standards that are lower than those back home.

Environmental, Ethical, and Diversity Issues Environmental issues, such as toxic wastes, poisoned drinking water, poverty, air quality, and global warming are getting more emphasis. In the past, many people viewed environmental problems as quality-of-life issues; in the 2000s, many people see them as survival issues. Interest in a clean, healthy environment is increasing. Consideration of ethics, workforce diversity, and the environment are becoming part of every manager’s job. When designing and operating processes, they should consider integrity, respect for the individual, and respecting the customer along with more conventional performance measure such as productivity, quality, and profits.

Nested Process Nested process is a concept of a process within a process. Nested process may be helpful to separate one part of a process from another for several reasons. One person or one department may be unable to do all parts of the process, or different parts of the process may require different skills. That was the case in the advertisement design and planning process. The skills needed for creative ad design are quite different from the skills needed for effective media planning. Some parts of the process may be designed for routine work while other parts of the process may be geared for customized work.