Operations Management Part 1 Operations and Productivity Production
- Slides: 21
Operations Management Part 1 - Operations and Productivity
Production is the creation of goods and services
Operations Management Set of activities that create value in the form of goods and services by creating or improving goods or services. Transforms what is put into a product or service and creates something new or improved. Example: Harley Davidson turns metal and other materials into motorcycles
Organized to produce goods and services 3 required functions all organizations perform to create goods and services: 1. Marketing - generates demand or produces sales for the product 2. Production/Operations - product is created 3. Finance/Accounting - Tracks success of company, pays bills, and collects money
Examples: Commercial Bank
Examples: Airline
Examples: Manufacturing
Goods vs Services Goods - tangible item, you can hold or touch it. Service - intangible Example: Boeing makes the airplane (Good); Southwest Airlines flies the planes (Service) Both are valuable and can be purchased (Consumed)
Key Differences between Goods and services 1. Services are usually intangible 2. Services are often produced (made) and consumed (used) simultaneously (at the same time). 3. Services are often unique. Example: your haircut is unique to your style. 4. Services have high customer interaction. You interact with customers in services jobs. 5. Services have inconsistent product definition 6. Services are often knowledge-based and hard to automate. Education, legal, medical, etc.
Review What are the differences between Marketing, Production/Operations, and Finance/Accounting? Give examples of Operations activity at a Commercial Bank. Airline. Manufacturer. What are some key differences between a good and a service?
Quiz tomorrow On Socrative. Bring your devices!! Room: Evers. MHS
Productivity Production - is the creation of a good or service. Productivity is a measurement (ratio) of outputs (the goods or service) divided by the inputs (resources, labor, and capital/$$)
Calculating Productivity Measurement Single Factor Productivity = Units Produced/ Input Used Multi-factor Productivity = Output / (Labor+Material+Energy+Capital+Misc)
Example: Single Factor Rosa works as a carhop at Sonic. She works an 8 hour shift on Saturday. She delivers 400 orders during her shift. Calculate her productivity. Productivity = Units Produced/ Input Used Units produced is number of orders delivered Input Used is hours worked. Productivity = 400 orders/8 hours Productivity = 50 orders/hour
Multi-Factor Productivity Example Mulit-Factor is more complex and requires more calculations. To simplify the process, it is best to convert each input into dollars. Jacob works at Sonic with Rosa, but he is a cook. On Saturday, Jacob works 8 hrs and he is paid $10 per hour. Jacob makes 800 hamburgers. The total cost of ingredients (buns, meat, cheese, lettuce, etc) are $800. The cost of utilities for Jacob’s shift is $20. Calculate productivity based on burger per dollar. Output = # of burgers made. Inputs = (Jacob’s Pay + Ingredients + Utilities) Productivity = 800/ ($80+$800 + $20) = 800/$900 = 0. 89 burgers/$1. 00 spent *You can flip the calculation to get cost per burger. $900/800 = $1. 125 per burger
Review
Quiz Tomorrow Socrative Room: Evers. MHS
Productivity Variables Productivity Increases depend on these 3 productivity variables 1. Labor 2. Capital 3. Management
Labor Contributes 10% to annual increases 3 Keys for labor: 1. Education 2. Diet and nutrition 3. Social Overhead (Transportation, sanitation, amount of workers available) In developed countries maintaining and enhancing skills are important as well
Capital Money or resources used in productivity Capital investment provides tools for humans to work Money invested to buy the tools. Can be complex like a factory or machine, or simple like scissors for a hair stylist
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