Aadee

Presentation
Operations and
Productivity
Group Members
Adeel Azher
Shahid mehmmed
Mobeen Abbasi
Malik adeel ahmed
Yang yi
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1
1–1
What Is Operations
Management?
Production is the creation of goods

and services
Operations management (OM) is
the set of activities that creates
value in the form of goods and
services by transforming inputs
into outputs
1–2
The Hard Rock Cafe
 First opened in 1971

 Now – 121 restaurants in over 40 countries
 Creates value in the form of good food
and entertainment
 3,500+ custom meals per day in Orlando
 How does an item get on the menu?
 Role of the Operations Manager

3
1–3
Organizing to Produce Goods
and Services
 Essential functions:
 Marketing – generates demand
 Production/operations – creates the
product
 Finance/accounting – tracks how well
the organization is doing, pays bills,
collects the money

4
1–4
Organizational Charts
Commercial Bank
Operations Finance Marketing

Teller Investments Loans
Scheduling Security Commercial
Check Clearing Real estate Industrial
Collection Financial
Transaction Accounting Personal
processing
Facilities Mortgage
design/layout
Auditing
Vault operations
Trust Department
Maintenance
Security
5
1–5
Airline
Operations Finance/ Marketing

Ground support accounting Traffic
equipment Accounting administration
Maintenance Payables Reservations
Ground Operations Receivables Schedules
General Ledger Tariffs (pricing)
Facility
maintenance Finance Sales
Catering Cash control Advertising
Flight Operations International
exchange
Crew scheduling
Flying
Communications
Dispatching
Management science If you want to download or edit then call me or sms @03458014643
6
1–6
Manufacturing
Operations Finance/ Marketing

Facilities accounting Sales
Construction; maintenance Disbursements/ promotion
Production and inventory control credits Advertising
Scheduling; materials control Receivables Sales
Quality assurance and control Payables
General ledger Market
Supply chain management research
Manufacturing Funds Management
Tooling; fabrication; assembly Money market
Design International
Product development and design exchange
Detailed product specifications Capital requirements
Industrial engineering Stock issue
Efficient use of machines, space, Bond issue
and personnel and recall
Process analysis
Development and installation of
production tools and equipment
7
1–7
IMPORTANCE OF OM?
 OM is one of three major functions
(marketing, finance, and
operations) of any organization
 We want (and need) to know how
goods and services are produced
 We want to understand what
operations managers do
 OM is such a costly part of an
organization
8
1–8
Options for Increasing
Contribution
Finance/
Marketing Accounting OM
Option Option Option
Increase Reduce Reduce

Sales Finance Production
Current Revenue 50% Costs 50% Costs 20%
Sales $100,000 $150,000 $100,000 $100,000

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

9
1–9
What Operations
Managers Do
Basic Management Functions
 Planning
 Organizing
 Staffing
 Leading
 Controlling
1 – 10
Significant Events in OM
Figure 1.3
11
1 – 11
Contributions From
 Human factors
 Industrial engineering
 Management science
 Biological science
 Physical sciences
 Information technology

12
1 – 12
New Challenges in OM
From To
 Local or national focus  Global focus
 Batch shipments  Just-in-time
 Supply chain
 Low bid purchasing
partnering
 Rapid product
 Lengthy product development,
development alliances
 Mass customization
 Standard products  Empowered
employees, teams
 Job specialization
13
1 – 13
Characteristics of Goods
 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction

14
1 – 14
Characteristics of Service
 Intangible product
 Produced and consumed
at same time
 Often unique
 High customer
interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed
15
1 – 15
Manufacturing and Service
Employment
120 –
100 –
Employment (millions)
80 –
Service
60 –
40 –
20 –
Manufacturing
0–
| | | | | | |
1950 1970 1990 2010 (est)
1960 1980 2000
16
1 – 16
Manufacturing Employment and
Production
– 150
Industrial
production – 125
Employment (millions)
(right scale)
– 100
Index: 1997 = 100

– 75
– 50
40 – Manufacturing
employment – 25
30 – (left scale)
20 – – 0
10 –
0 – | | | | | | |
1950 1970 1990 2010 (est)
1960 1980 2000
17
1 – 17
Organizations in Each Sector
Service Sector Example % of all
Jobs
Education, Legal, Notre Dame University, 25.5
Medical, and San Diego Zoo, Arnold
other Palmer Hospital
Trade (retail, Walgreen’s, Wal-Mart, 15.1
wholesale) Nordstrom’s
Utilities, Pacific Gas & Electric, 5.2
Transportation American Airlines, Santa
Fe R.R., Roadway Express

18
1 – 18
Service Sector Example % of all
Jobs
Professional and Snelling and Snelling, Waste 10.1
Business Management, Pitney-Bowes
Services
Finance, Citicorp, American Express, 9.6
Information, Prudential, Aetna, Trammel
Real Estate Crow, EDS, IBM
Food, Lodging, Olive Garden, Hard Rock Cafe, 8.5
Entertainment Motel 6, Hilton Hotels, Walt
Disney, Paramount Pictures
Public U.S., State of Alabama, Cook 4.6
Administration County

19
1 – 19
Manufacturing Example % of all
Sector Jobs
Manufacturing General Electric, Ford, U.S. 11.5
Steel, Intel
Construction Bechtel, McDermott 7.9
Agriculture King Ranch 1.6
Mining Homestake Mining 0.4

Sector Percent of all jobs
Service 78.6%
Manufacturing 21.4%
20
1 – 20
New Trends in OM
Past Causes Future
Local or Reliable worldwide Global focus,
national focus communication and moving
transportation networks production
offshore
Batch (large) Short product life cycles and Just-in-time
shipments cost of capital put pressure performance
on reducing inventory
Low-bid Supply chain competition Supply chain

purchasing requires that suppliers be partners,
engaged in a focus on the collaboration,
end customer alliances,
outsourcing

21
1 – 21
New Trends in OM
Past Causes Future
Lengthy Shorter life cycles, Internet, Rapid product
product rapid international development,
development communication, computer- alliances,
aided design, and collaborative
international collaboration designs
Standardized Affluence and worldwide Mass

products markets; increasingly customization
flexible production processes with added
emphasis on
quality
Job Changing socioculture Empowered
specialization milieu; increasingly a employees,
knowledge and information teams, and lean
society production

22
1 – 22
New Trends in OM
Past Causes Future
Low-cost Environmental issues, ISO Environmentally
focus 14000, increasing disposal sensitive
costs production, green
manufacturing,
recycled materials,
remanufacturing
Ethics not at Businesses operate more High ethical

forefront openly; public and global standards and
review of ethics; opposition social responsibility
to child labor, bribery, expected
pollution

23
1 – 23
New Trends in OM
 Global focus
 Just-in-time performance
 Supply chain partnering
 Rapid product development
 Mass customization
 Empowered employees
 Environmentally sensitive production
 Ethics

24
1 – 24
Productivity Challenge
Productivity is the ratio of outputs (goods

and services) divided by the inputs
(resources such as labor and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output
only and not a measure of efficiency

25
1 – 25
The Economic System
Inputs Processes Outputs
Labor, The U.S. economic system Goods

capital, transforms inputs to outputs and
management at about an annual 2.5% services
increase in productivity per
year. The productivity
increase is the result of a
mix of capital (38% of 2.5%),
labor (10% of 2.5%), and
management (52% of 2.5%).
Feedback loop

26
1 – 26
Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Stop requiring signatures Saved 8 seconds
on credit card purchases per transaction
under $25
Change the size of the ice Saved 14 seconds
scoop per drink
New espresso machines Saved 12 seconds
perthenshot
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27
1 – 27
Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Operations improvements have
Stop requiring signatures
helped StarbucksSaved 8 seconds
increase yearly
on credit card purchases per by
revenue per outlet transaction
$200,000 to
under $25 $940,000 in six years.
Productivity
Change the size of the ice has improved
Saved by 27%,
14 seconds
scoop or about 4.5% per
peryear.
drink
New espresso machines Saved 12 seconds
perthenshot
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28
1 – 28
Productivity
Units produced
Productivity =
Input used
 Measure of process improvement

 Represents output relative to input
 Only through productivity increases
can our standard of living improve

29
1 – 29
Measurement Problems
 Quality may change while the

quantity of inputs and outputs
remains constant
 External elements may cause an
increase or decrease in
productivity
 Precise units of measure may be
lacking
30
1 – 30
Productivity Variables
 Labor - contributes
about 10% of the
annual increase
 Capital - contributes
about 38% of the
annual increase
 Management -
contributes about 52%
of the annual increase
31
1 – 31
Key Variables for Improved
Labor Productivity
 Basic education appropriate for the
labor force
 Diet of the labor force
 Social overhead that makes labor
available
 Maintaining and enhancing skills in the
midst of rapidly changing technology
and knowledge
32
1 – 32
Labor Skills
About half of the 17-year-olds in the US cannot
correctly answer questions of this type

33
1 – 33
Investment and Productivity
10
Percent increase in productivity
10 15 20 25 30 35
Percentage investment
34
1 – 34
Service Productivity
 Typically labor intensive

 Frequently focused on unique
individual attributes or desires
 Often an intellectual task performed by
professionals
 Often difficult to mechanize
 Often difficult to evaluate for quality

35
1 – 35
Productivity at Taco Bell
Improvements:
 Revised the menu
 Designed meals for easy preparation
 Shifted some preparation to suppliers
 Efficient layout and automation
 Training and employee empowerment

36
1 – 36
Productivity at Taco Bell
Improvements:
Revised the menu
Results:
 Designed meals for easy preparation
 Preparation time cut to 8 seconds
 Shifted some preparation to suppliers
 Management span of control
 Efficient layout and automation
increased from 5 to 30
 Training and employee empowerment
 In-store labor cut by 15 hours/day
 Stores handle twice the volume with
half the labor
 Fast-food low-cost leader

37
1 – 37
Ethics and Social Responsibility
Challenges facing
operations managers:
 Developing and producing safe,
quality products
 Maintaining a clean environment
 Providing a safe workplace
 Honoring community commitments
1 – 38
Productivity Calculations
Labor Productivity
Units produced
Productivity =
Labor-hours used
1,000
= = 4 units/labor-hour
250
One resource input  single-factor productivity

39
1 – 39
Multi-Factor Productivity
Output
Productivity =
Labor + Material + Energy
+ Capital + Miscellaneous
 Also known as total factor productivity
 Output and inputs are often expressed
in dollars
Multiple resource inputs  multi-factor productivity

40
1 – 40
Collins Title Productivity
Old System:
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old labor 8 titles/day

productivity = 32 labor-hrs

41
1 – 41
Old System:

productivity = 32 labor-hrs = .25 titles/labor-hr

42
1 – 42
Old System:
New System:
14 titles/day Overhead = $800/day

New labor 14 titles/day

productivity = 32 labor-hrs
43
1 – 43
Old System:
New System:

New labor 14 titles/day

44
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Old System:
New System:
Old multifactor 8 titles/day

productivity = $640 + 400

45
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Old System:
New System:

productivity = $640 + 400 = .0077 titles/dollar

46
1 – 46
Old System:
New System:

New multifactor 14 titles/day

productivity = $640 + 800
47
1 – 47
Old System:
New System:

New multifactor 14 titles/day

48
1 – 48

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Presentation

If you want to download or edit then call me or sms @03458014643

Production is the creation of goods

 First opened in 1971

If you want to download or edit then call me or sms @03458014643

If you want to download or edit then call me or sms @03458014643

Operations Finance Marketing

Operations Finance/ Marketing

Operations Finance/ Marketing

Increase Reduce Reduce

Sales $100,000 $150,000 $100,000 $100,000

If you want to download or edit then call me or sms @03458014643

If you want to download or edit then call me or sms @03458014643

If you want to download or edit then call me or sms @03458014643

Index: 1997 = 100

If you want to download or edit then call me or sms @03458014643

If you want to download or edit then call me or sms @03458014643

Mining Homestake Mining 0.4

Low-bid Supply chain competition Supply chain

If you want to download or edit then call me or sms @03458014643

Standardized Affluence and worldwide Mass

If you want to download or edit then call me or sms @03458014643

Ethics not at Businesses operate more High ethical

If you want to download or edit then call me or sms @03458014643

If you want to download or edit then call me or sms @03458014643

Productivity is the ratio of outputs (goods

The objective is to improve productivity!

If you want to download or edit then call me or sms @03458014643

Inputs Processes Outputs

Labor, The U.S. economic system Goods

If you want to download or edit then call me or sms @03458014643

 Measure of process improvement

If you want to download or edit then call me or sms @03458014643

 Quality may change while the

If you want to download or edit then call me or sms @03458014643

 Typically labor intensive

If you want to download or edit then call me or sms @03458014643

If you want to download or edit then call me or sms @03458014643

If you want to download or edit then call me or sms @03458014643

One resource input  single-factor productivity

Multiple resource inputs  multi-factor productivity

If you want to download or edit then call me or sms @03458014643

Old labor 8 titles/day

If you want to download or edit then call me or sms @03458014643

Old labor 8 titles/day

If you want to download or edit then call me or sms @03458014643

Old labor 8 titles/day

New labor 14 titles/day

Old labor 8 titles/day

New labor 14 titles/day

Old multifactor 8 titles/day

If you want to download or edit then call me or sms @03458014643

Old multifactor 8 titles/day

If you want to download or edit then call me or sms @03458014643

Old multifactor 8 titles/day

New multifactor 14 titles/day

Old multifactor 8 titles/day

New multifactor 14 titles/day

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