© 2011 Pearson Education, Inc. publishing as Prentice Hall

11Operations and

ProductivityOperations and

Productivity

PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e

PowerPoint slides by Jeff Heyl

Learning Objectives• Definition of Operations Management (OM)• Organizational Functions• Why Study OM?• A brief history of operations management• The future of the discipline• Goods Versus Services• Measuring productivity• Career opportunities in operations management

© 2011 Pearson Education, Inc. publishing as Prentice Hall

© 2011 Pearson Education, Inc. publishing as Prentice Hall

What Is Operations Management?

Production is the creation of goods and services

Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Organizing to Produce Goods and Services

• Essential functions:1. Marketing – generates demand2. Production/operations – creates the

product3. Finance/accounting – tracks how well

the organization is doing, pays bills, collects the money

4. Human Resources – provides labor, wage and salary administration and job evaluation

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Organizational Charts

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Organizational Charts

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Why Study OM?1. OM is one of four major functions of any

organization, we want to study how people organize themselves for productive enterprise

2. We want (and need) to know how goods and services are produced

3. We want to understand what operations managers do

4. OM is such a costly part of an organization

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Options for Increasing Contribution

Table 1.1

Sales $100,000 $150,000 $100,000 $100,000Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000Gross Margin 20,000 30,000 20,000 36,000Finance Costs – 6,000 – 6,000 – 3,000 – 6,000Subtotal 14,000 24,000 17,000 30,000Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500

Finance/Marketing Accounting OM

Option Option Option

Increase Reduce ReduceSales Finance Production

Current Revenue 50% Costs 50% Costs 20%

© 2011 Pearson Education, Inc. publishing as Prentice Hall

What Operations Managers Do

Planning Organizing Staffing Leading Controlling

Basic Management Functions

© 2011 Pearson Education, Inc. publishing as Prentice Hall

The Critical Decisions

1. Design of goods and services– What good or service should we offer?– How should we design these products and

services?

2. Managing quality– How do we define quality?– Who is responsible for quality?

Table 1.2 (cont.)

© 2011 Pearson Education, Inc. publishing as Prentice Hall

The Critical Decisions3. Process and capacity design

– What process and what capacity will these products require?

– What equipment and technology is necessary for these processes?

4. Location strategy– Where should we put the facility?– On what criteria should we base the

location decision?

Table 1.2 (cont.)

© 2011 Pearson Education, Inc. publishing as Prentice Hall

The Critical Decisions5. Layout strategy

– How should we arrange the facility?– How large must the facility be to meet our

plan?6. Human resources and job design

– How do we provide a reasonable work environment?

– How much can we expect our employees to produce?

Table 1.2 (cont.)

© 2011 Pearson Education, Inc. publishing as Prentice Hall

The Critical Decisions7. Supply-chain management

– Should we make or buy this component?– Who should be our suppliers and how can we

integrate them into our strategy?8. Inventory, material requirements planning,

and JIT– How much inventory of each item should we

have?– When do we re-order?

Table 1.2 (cont.)

© 2011 Pearson Education, Inc. publishing as Prentice Hall

The Critical Decisions9. Intermediate and short–term scheduling

– Are we better off keeping people on the payroll during slowdowns?

– Which jobs do we perform next?10. Maintenance

– How do we build reliability into our processes?

– Who is responsible for maintenance?

Table 1.2 (cont.)

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Opportunities

Figure 1.2

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Significant Events in OM

Figure 1.3

Self-Check

• What are the 4 essential function of organizing products and services?

• What basic functions do managers do?• What 10 critical decisions do managers make?

Answer Key 1. Marketing, Production/operations,

Finance/accounting, Human Resources2. Planning, Organizing, Staffing, Leading, Controlling3. 10 critical decisions

1. Design of goods and services2. Managing quality3. Process and capacity design4. Location strategy5. Layout strategy6. Human resources and job design7. Supply-chain management8. Inventory, material requirements planning, and JIT9. Intermediate and short–term scheduling10. Maintenance

Fast Food Feast Case• Visit at least two different fast-food restaurants that make hamburgers.

For example, McDonald's, Jollibee, Whoopee are good choices. Observe the basic operational differences between these stores. Note the differences in the following processes:

• QUESTIONS• How are in-store orders taken?• Are the hamburgers prepared to order, or are they prepared ahead of

time and delivered from a storage bin?• How are special orders handled?• How are the hamburgers cooked?• How are the hamburgers assembled?• Is a microwave oven used in the process?• How are other common items, such as french fries and drinks, handled?