Chapter 1 Operations

and Productivity
Introduction
What An introduction to
Operations Management
Where In any business that wants
to improve its productivity
Why Productivity is one measure
of success in business
Production
All companies produce something
In the examples you gave of
careers you would like to pursue,
what would you be producing?
The creation of goods and services
What is Operations
Management?
Operations Management is the
set of activities that creates goods
and services by transforming
inputs into outputs
What are the Inputs and
Outputs?
A Sony TV Factory
A Bank
A Hospital
A University
Why Study Operations
Management?
Study how people organize themselves
for productive enterprise
Study how goods and services are
produced
Understand what operations managers
do
Understand how operations management
affects costs for an organization
Operations Management
Breakdown
Design of Goods and Services
Managing Quality
Process Strategy
Location Strategy
Layout Strategy
Breakdown Continued
Human Resources
Supply-chain Management
Inventory Management
Scheduling
Maintenance
Framework of Business
All businesses perform three
functions to create goods and
services:
Finance and Accounting
Marketing
Operations and Production
Operations Management
and Services
Goods vs Services
Goods Services
Resold Reselling
Inventoried Unusual
Measurable
Difficult to
Quality Inventory
Sales distinct
Quality Difficult
from to Measure
Production Selling Part of
Service
Goods vs Services
Continued
Goods Services
Product Provider
Transportabl Transportable
e Location for
Location for Customer
Cost Contact
Easy to
Difficult to
Automate Automate
Trends in Services
Your job
Your parents job
Growth of Services
U.S. Employment, % Share Services as a Percent of GDP U.S. Exports of Services
80
United States In Billions of Dollars
%70
Canada 250
60 Services
50 France 200
40
Italy 150
30
Industry
Britain 100
20

10
Japan 50
0 Farming
W Germany 0

1970
1850 75 1900 25 50 75 2000 40 50 60 70 1970 75 80 85 90 95 2000
1991
Percent

Year 2000 data is estimated

Mix of Goods and Services
Automobile
Computer
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Counseling

100 75 50 25 0 25 50 75 100
Percent of Product that is a Good Percent of Product that is a Service
Pure Service
Pure Service: No physical product
provided along with a service
Applying OM to Services
Can be very difficult to apply
operations management concepts
to the service sector
Productivity
Productivity Definition
Productivity is the ratio of outputs of an
enterprise divided by its inputs

Outputs
Productivity =
Inputs
Productivity Definition
Outputs?
Inputs?

Products and Services

Productivity =
Labour, Material, Energy, Capital
Productivity Definition
It is the function of Operations
Management to improve the ratio
of outputs to inputs to make the
operation more efficient.
How?
Productivity Improvement
Why measure national productivity?
Only by increasing productivity does
the standard of living improve
Three variables:
Labour
Capital
Management