1. OPERATION S MANAGEME NT OPERATIONS AND PRODUCTIVITY L2 - 1

2. C HANGING C HALLENGES FOR THE O PERATIONS M ANAGER 2

3. Past Causes Future Standardized products Affluence and worldwide markets; increasingly flexible production processes Mass customization Job specialization Changing socio-cultural scene. Increasingly a knowledge and information society. Empowered employees, teams, Low cost focus Environmental issues, ISO increasing disposal costs Environmentally sensitive production, Green manufacturing, 3

4. C HARACTERISTICS OF G OODS Tangible product Production usually separate from consumption Consistent product definition Low customer interaction Can be inventoried 4

5. C HARACTERISTICS OF S ERVICE Intangible product Produced & consumed at same time Inconsistent product definition High customer interaction Often unique Often knowledge-based Frequently dispersed 5

6. G OODS V ERSUS S ERVICES Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service 6 GOODS SERVICES

7. G OODS V ERSUS S ERVICES - C ONTINUED Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product Provider is transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from intangible service. 7 GOODS SERVICES

8. G OODS C ONTAIN S ERVICES / S ERVICES C ONTAIN G OODS 0 2550 75 100 2550 75 100 Automobile Computer Installed Carpeting Fast-food Meal Restaurant Meal Auto Repair Hospital Care Advertising Agency Investment Management Consulting Service Counseling Percent of Product that is a Good Percent of Product that is a Service 8

9. T HE P RODUCTION S YSTEM T RANSFORMS I NPUTS TO O UTPUTS The Production System Land, Labor, Capital, Management Goods and Services Feedback loop InputsProcessOutputs 9

10. P RODUCTIVITY  Measure of process improvement  Represents ratio of output to input  Only through productivity increases can our standard of living improve ProductivityProductivity Units produced Input used == 10

11. M ULTI -F ACTOR P RODUCTIVITY Productivity = Output Labor + material + capital + energy + Misc 11

12. M EASUREMENT P ROBLEMS Quality may change while the quantity of inputs and outputs remains constant External elements may cause an increase or decrease in productivity Precise units of measure may be lacking 12

13. P RODUCTIVITY V ARIABLES Labor - contributes about 10% of the annual increasecontributes about 10% of the annual increase Capital - contributes about 32% of the annual increase Management - contributes about 52% of the annual increase 13

14. K EY V ARIABLES FOR I MPROVED L ABOR P RODUCTIVITY Providing basic education appropriate for an effective labor force Providing proper diet to the labor force Providing social overhead that makes labor available e.g. transportation, sanitation, etc Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge Better utilizing labor with a stronger commitment Back 14

15. S ERVICE P RODUCTIVITY Reasons for low productivity in services Typically labor intensive Frequently individually processed Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality 15