operation management operations and productivity

OPERATIONS AND PRODUCTIVITY

OPERATION MANAGEMENT


BARRY PUALENGCO – KAREN TRINIDAD


Contents

Introduction to Operation Management1

Productivity2

Challenges 4

Examples 3


WHAT IS INSIDE A BUSINESS?


WE CREATE VALUE

Facilities ConstructionFacilities MaintenanceProduction and inventory controlScheduling, material controlsQuality Assurance and controlSupply-chain managementManufacturing tooling fabrication; Assembly; Design products, product developmentDetailed product specificationIndustrial engineering, efficient use of machine, space, personnel.

Production/Operation

Disbursement/credits, Accounts receivable, payable, General ledgerFund management, money market, International exchangeCapital requirements, Stock issue, Bond issue and recallFinance, cash controlInvestment

Finance/Accounting

Sale promotionAdvertisingMarket researchSales

Marketing


generates the demand, or at least takes the order for a product or service.

tracks how well the organization is doing, paying bills, and collecting money.

creation of goods and services

MarketingMarketing

Finance/Accounting

Finance/Accounting

What are these activities?




VALUE ADDED

TRANSFORMATION/CONVERSION

PROCESS

OUTPUTS

GoodsServices

CONTROL

VALUE ADDED

FEEDBACK

FEEDBACK

FEEDBACK

INPUTS

LandLabor

Capital


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

Operation ManagementOperation Management

Definition


EXAMPLES

3.OUTPUT

INPUT-PROCESS-OUTPUT

2.PROCESS

1.INPUT


FOOD PROCESSOR

OUTPUTSINPUTS Raw Vegetables Raw Vegetables Raw Vegetables

Metal Sheets

Water

Energy

Labor

Building

Equipment

CleaningPROCESSING

Making cans

Cutting

Cooking

Packing

Labeling

Canned vegetables


HOSPITAL PROCESS

OUTPUTSINPUTS PROCESSING

Nurses

Hospital

Medical Supplies

Equipment

Laboratories

Raw Vegetables Raw VegetablesDoctors Examination

Surgery

Monitoring

Medication

Therapy

Healthy patients


Difference between Goods and Services

1. Can be resold2. Can be inventoried3. Some aspect of quality are

measurable 4. Selling is distinct from

production5. Product is transportable6. Site of facility is important

for cost7. Easy to automate8. Revenue generated from

tangible product

GOODSGOODS

GOODS AND SERVICES

SERVICESSERVICES

1. Reselling is unusual2. Cannot be inventoried3. Many aspect are difficult to

measure4. Selling is often part of the

services5. Provider is transportable6. Site of facility is important

for customer contact7. Difficult to automate8. Revenue generated from

intangible services


Manufacturing or Service?

Tangible Act


Goods-service Continuum

Steel productionAutomobile fabrication

Home remodelingRetail sales

Auto RepairAppliance repair

Maid ServiceManual car wash

TeachingLawn mowing

High percentage goodsLow percentage service

Low percentage goodsHigh percentage service


High Low

Easy Difficult

High Low

Low High

Opportunity to correct quality

problems

Measurement of productivity

Uniformity of output

Manufacturing vs Service

IntangibleTangible

HighLow

LowHigh

Labor content

Uniformity of input

Customer contact

Output

MANUFACTURINGMANUFACTURING SERVICESERVICECharacteristics


MANUFACTURING VS. SERVICE

US EMPLOYMENT


Lets Try This!

• Fisher Technologies is a small firm that double its dollar contribution to a fixed cost and profit in order to be profitable enough to purchase the next generation of production equipment. Management has determined that if the firm fails to increase contribution, its bank will not make the loan and the equipment cannot be purchased. It the firm cannot purchase the equipment, the limitations of the old equipment will force Fisher to go out of business and, in doing so, puts its employees out of work and discontinue producing goods and services for its customers.


Fisher Technologies

Sales $100,000.00

Cost of Goods -80,000.00

Gross Margin 20,000.00

Finance costs -6,000.00

Subtotal 14,000.00

Taxes at 25% -3,500.00

Contribution $10,500Option No. 1: (Marketing Option) Good marketing management may increase sales by 50%

Option No. 2: (Finance/Accounting Option) Good financial management cut in half the finance costs.

Option No. 3: (OM Option) Reduce production cost by 20%


Details

Current Option 1 Option 2 Option 3

Sales $100,000.00 $150,000.00 $100,000.00 $100,000.00Cost of Goods -80,000.00 -120,000.00 -80,000.00 -64,000.00

Gross Margin 20,000.00 30,000.00 20,000.00 36,000.00

Finance costs -6,000.00 -6,000.00 -3,000.00 -6,000.00

Subtotal 14,000.00 24,000.00 17,000.00 30,000.00

Taxes at 25% -3,500.00 -6,000.00 -4,250.00 -7,500.00

Contribution $10,500.00 $18,000.00 $12,750.00 $22,500.00


Productivity is the ratio of outputs (goods and services) Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)divided by the inputs (resources such as labor and capital)

ProductivityProductivity

Productivity Challenge:Productivity Challenge:

Productivity =Goods and Services

Labor and Capital

Output

Input=

Objective: to improve productivity!Objective: to improve productivity!


Doing job well- minimum resources/waste Effective doing the right thing.

EfficiencyEfficiency

Definition


4.High ROI, constant

productivity = higher prices

How do we increase Productivity?

3.Resulting to

High ROI, lower prices.

2.Increase outputs,

constant inputs

1.Reduce inputs,

constant outputs


indicates the ratio of one resource (input) to the goods and services produced (outputs)

Productivity Measurement

Single-factor productivity

indicates the ratio of many or all resources (inputs) to the goods and services produced (outputs)

Multifactor productivity


Example

Collins Title wants to evaluate its labor and multifactor productivity with a new computerized search system. The company has a staff of four, each working 8 hours per day (for a payroll cost of $640/day) and overhead expenses of $400 per day. Collins processes and closes on 8 titles each day. The new computerized title-search system will allow the processing of 14 titles per day. Although the staff, their work hours, and pay are the same, the overhead expenses are now $800 per day.

Use Single-factor productivity.

Use multifactor productivity.


Productivity Variables

LaborLabor

contributes about 10% of the annual increase

contributes about 38% of the annual increase

which contributes about 52% of the annual increase.CapitalCapital

ManagementManagement


CHALLENGES


6 yds

4 yds

What is the area of this rectangle?

a.4 square ydsb.6 square ydsc.10 square ydsd.20 square ydse.24 square yds


If 9Y + 3 = 6y + 15, then Y = a. 1 c. 4

b. 2 d. 6


Which of the following is true about 84% of 100?

a.It is greater than 100b.It is less than 100c.Its is equal to 100


Lets Try This.

• At Modern Lumber, Inc., Art Binley, president and producer of apple crates sold to growers, has been able, with his current equipment, to produce 240 crates per 100 logs. He currently purchases 100 logs per day, and each log requires 3 labor-hours to process. He believes that he can hire a professional buyer who can buy a better-quality log at the same cost. If this is the case, he can increase his production to 260 crates per 100 logs. His laobr-hours will increase by 8 hours per day.– What will be the impact on productivity (measured in crates per

labor-hour) if the buyer is hired?


Problem 2

• Art Binley has decided to look at his productivity from a multifactor (total factor productivity) perspective (refer to Solved Problem 1.1). To do so, he has determined his labor, capital, energy, and material usage and decided to use dollars as the common denominator. His total labor-hours are now 300 per day and will increase to 308 per day. His capital and energy costs will remain constant at $350 and $150 per day, respectively. Material costs for the 100 logs per day are $1,000 and will remain the same. Because he pays an average of $10 per hour (with fringes), Binley determines his productivity increase as follows:


Solution

Current System System with Professional Buyer

Labor: 300hrs. @ $10 = $3,000

308 hrs @ $10 = $3,080

Material: 100 logs/day 1,000

1,000

Capital: 350

350

Energy: 150

150

Total Cost: $4,500

$4,580

Multifactor productivity of current system: = 240 crates/4,500 = .0533 crates/dollar

Multifactor productivity of proposed system: = 260 crates/4580 = .0568 crates/dollar


www.themegallery.com

Thank You!

operation management operations and productivity

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