chap01-operation as competitive weapon

Chapter 1 -

Operations As a Competitive WeaponTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Processes and Operations

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Processes and OperationsInputs Workers Managers Equipment Facilities Materials Services Land Energy

Figure 1.1To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Processes and OperationsInputs Workers Managers Equipment Facilities Materials Services Land Energy

Processes and operations1 3 5 2 4


Processes and OperationsInternal and external customers

Inputs Workers Managers Equipment Facilities Materials Services Land Energy






Outputs Services Goods





Outputs Services Goods

Figure 1.1

Information on performanceTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Nested Processes at Chase Manhattan Bank


Nested Processes at Chase Manhattan BankBANKOperationsCash Management Loan operations Trading operations Others

RetailDistribution Compliance Finance Human resources

ProductsAuto Finance Cards Mortgages Others

WholesaleTrading Loan administration Leasing Others

ATM support Customer transactions Service quality Others

Teller line transactions Track branch sales ATM hotline Others

Credit applications Manage retail products Originate lease portfolio Others

Fund management Market making spot Dealer support Others

Maintain cards Research problems Site analysis Others

Process deposits Cash checks Safe deposit boxes Others

Loan documentation Review credit standing Obtain manager approval Others

Prepare reports Attend meetings Input funds deals Others

Figure 1.2


Types of OM Decisions

Strategic choices Process Quality Capacity, Location, Layout Operating DecisionsTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Operations Management as a Function


Operations Management as a Function


Operations Management As a Function

Skill Areas

Figure 1.3

Quantitative methods Organizational behavior General management Information systems Economics International business Business ethics and lawTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Continuum of Characteristics


Continuum of CharacteristicsMore like a manufacturing organization More like a service organization



Physical, durable product Output that can be inventoried Low customer contact Long response time Regional, national, or international markets Large facilities Capital intensive Quality easily measuredFigure 1.4To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.


Physical, durable product Output that can be inventoried Low customer contact Long response time Regional, national, or international markets Large facilities Capital intensive Quality easily measuredFigure 1.4

Intangible, perishable product Output that cannot be inventoried High customer contact Short response time Local markets Small facilities Labor intensive Quality not easily measured


Service Sector Jobs


Service Sector Jobs40

Percentage of workforce

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30 20 Government 10

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30 Wholesale and retail sales 20 Government 10

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Service Sector Jobs40 Other services



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Service Sector Jobs40 Manufacturing, mining, and construction Other services



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Productivity


Productivity

Productivity =

Output Input


Productivity

Policies processed Labor productivity = Employee hours

Example 1.1aTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity

600 policies Labor productivity = (3 employees)(40 hours/employee)


Productivity

Labor productivity = 5 policies/hour


Productivity

Labor productivity = 5 policies/hour Multifactor productivity =

Quantity at standard cost Labor cost + Materials cost + Overhead cost

Example 1.1bTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity

Labor productivity = 5 policies/hour Multifactor productivity =

(400 units)($10/unit) $400 + $1000 + $300

$4000 = = 2.35 $1700

Example 1.1bTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity Measures


Productivity MeasuresOM ExplorerTutor 1.1Productivity MeasuresThe state ferry service charges $18 per ticket plus a $3 surcharge to fund planned equipment upgrades. It expects to sell 4,700 tickets during the eight-week summer season. During that period, the ferry service will experience $110,000 in labor costs. Materials required for each passage sold (tickets, a tourist-information sheet, and the like) cost $1.30. Overhead during the period comes to $79,000. a. What is the multifactor productivity ratio? b. If ferry-support staff work an average of 310 person-hours per week for the 8 weeks of the summer season, what is the labor productivity ratio? Calculate labor productivity on an hourly basis.

Click here to continue.

Figure 1.6aTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity MeasuresTutor 1.1Productivity MeasuresEnter data in yellow areas. Use Tab to advance from one input cell to the next. a. Multifactor productivity is the ratio of the value of output to the value of input. Step 1. Enter the number of tickets sold during a season, the price per ticket, and the surcharge per ticket. To compute value of output, multiply tickets sold by the sum of price and surcharge. Tickets sold: Price: Surcharge: 4,700 $18 $3 Value of output:

Step 2. Enter labor costs, materials costs per passenger, and overhead cost. For value of input, add together labor costs, materials costs times number of passengers, and overhead costs. Labor costs: $110,000 Materials costs: $1.30 Overhead: $79,000

Value of input: Step 3. To calculate multifactor productivity, divide value of output by value of input. Multifactor productivity:

Figure 1.6bTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity MeasuresTutor 1.1Productivity MeasuresEnter data in yellow areas. Use Tab to advance from one input cell to the next. b. Labor productivity is the ratio of the value of output to labor hours The value of output is computed in part a, step 1.

Step 1. Enter person-hours per week and the number of weeks in the season; multiply the two together to calculate labor hours of input.Hours per week: 310 Weeks: 8 Labor hours of input: Step 2. To calculate labor productivity, divide value of output by labor hours of input. Labor productivity:

Click here to view the Results sheet. Figure 1.6bTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity MeasuresTutor 1.1Productivity MeasuresPlace cell pointer on green shaded areas to examine formulas. a. Multifactor productivity is the ratio of the value of output to the value of input. Step 1. Enter the number of tickets sold during a season, the price per ticket, and the surcharge per ticket. To compute value of output, multiply tickets sold by the sum of price and surcharge. Tickets sold: Price: Surcharge: 4,700 $18 $3 Value of output: $98,700

Step 2. Enter labor costs, materials costs per passenger, and overhead cost. For value of input, add together labor costs, materials costs times number of passengers, and overhead costs. Labor costs: $110,000 Materials costs: $1.30 Overhead: $79,000 $195,110

Value of input:

Step 3. To calculate multifactor productivity, divide value of output by value of input. Multifactor productivity: 0.51

Figure 1.6cTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity MeasuresTutor 1.1Productivity MeasuresPlace cell pointer on green shaded areas to examine formulas. b. Labor productivity is the ratio of the value of output to labor hours The value of output is computed in part a, step 1.

Step 1. Enter person-hours per week and the number of weeks in the season; multiply the two together to calculate labor hours of input.Hours per week: 310 Weeks: 8 Labor hours of input: 2,480

Step 2. To calculate labor productivity, divide value of output by labor hours of input. Labor productivity: $39.80

Figure 1.6cTo Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity Growth


Productivity Growth3

2

Percent

1

0Figure 1.7(a)

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Productivity Growth3 2.8

2.8

Average annual growth in productivity

2

Percent

1

0Figure 1.7(a)

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2.8 2.0


2

Percent

1.41

0Figure 1.7(a)

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2.8 2.0


2

1.91.4

Percent

1

0Figure 1.7(a)

1950s

1960s

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Productivity Growth

Figure 1.7(b)To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Sixth Edition 2002 Prentice Hall, Inc. All rights reserved.

Productivity Growth100 80

Percent

60 40 20

0Germany France Britain United States Japan

Figure 1.7(b)



Value added per hour worked

Whole economy

Percent

60 40 20


Figure 1.7(b)



Value added per hour worked

Whole economy Manufacturing

Percent

60 40 20


Figure 1.7(b)


chap01-operation as competitive weapon

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