Lecture 1

Operations
Management
Chapter 1 –
Operations and
Productivity
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 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
Ten Critical Decisions
Ten Decision Areas Chapter(s)
 Design of goods and services 5
 Managing quality 6, Supplement 6
 Process and capacity 7, Supplement 7
design
 Location strategy 8
 Layout strategy 9
 Human resources and 10, Supplement 10
job design
 Supply chain 11, Supplement 11
management
 Inventory management 12, 14, 16
 Scheduling 13, 15
 Maintenance 17
Table 1.2
Significant Events in OM
Figure 1.3

New Challenges in OM
From To
 Local or national focus  Global focus
 Batch shipments  Just-in-time
 Low bid purchasing  Supply chain
partnering
 Lengthy product  Rapid product
development development,
alliances
 Standard products  Mass
customization
 Job specialization  Empowered
employees, teams
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

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

Problem 1.5
• Lori produces “Final Exam Care Packages” for
resale by the sorority. She is currently working a
total of 5 hours per day to produce 100 packages.
– What is Lori’s productivity?
– Lori thinks that by redesigning the package she can
increase her total productivity to 133 care packages per
day. What will be her new productivity?
– What will be the increase in productivity of Lori makes
the change?

Problem 1.6
• Eric Johnson makes billiard Last Now
balls in his new England Year
plant. With recent increase in
his costs, he has a new Units 1,000 1,000
found interest in efficiency. (produced)
Eric is interested in
determining the productivity Labor 300 275
of his organization. He would (hours)
like to know if his Resin 50 45
organization is maintaining
the manufacturing average (pounds)
of 3% increase in Capital ($) 10,000 11,000
productivity. He has the
following data :
Energy 3,000 2,850
(btu)
Problem 1.7
• Eric Johnson (using data from problem 1.6 )
determines his costs to be as follows:
– Labor $ 10 per hour
– Resin $5 per pound
– Capital 1% per month of investments
– Energy $0.50 per btu
• Show the productivity change for one month lat
year versus one month this year, on a multifactor
basis with dollars as the common denominator.
© 2008 Prentice Hall, Inc. 1 – 10

Problem 1.8
• Kleen karpet cleaned 65 rugs in October,
consuming the following resources:
– Labor 520 hours at $ 13 per hour
– Solvent 100 gallons at $ 5 per gallon
– Machine Rental 20 days at $50 per day
• What is the labor productivity per dollar?

• What is the multifactor productivity?

Do it yourself now !
• David Upton is president of Upton Manufacturing , a
producer of Go-Kart tires. Upton makes 1,000 tires
per day with the following resources:
• Labor 400 hours per day @ 12.50 per hour
• Raw Material 20,000 pounds per day @ $1 per pound
• Energy $5,000 per day
• Capital $10,000 per day
– What is the labor productivity per labor hour for these tires?
– What is the multifactor productivity for these tires?
– What is the percent change in multifactor productivity?

Problem 1.13
• Charles lackey operates a bakery in Idaho. Because of its
excellent product and excellent location, demand has
increased by 25% in the last year. On far too many
occasions the customers have not been able to purchase
the bread of their choice.
• Because of the size of the store no new ovens can be
added. At a staff meeting, one employee suggested ways to
load the ovens differently so that more loaves of bread can
be baked at one time.
• This new process will require that the ovens be loaded by
hand, requiring additional manpower. This is the only thing
to be changed. If the bakery makes 1,500 loaves per month
with a labor productivity of 2.344 loaves per labor hour,
how many workers will lackey need to add? (Hint: Each
worker works for 160 hours per month).

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Operations

Production is the creation of

© 2008 Prentice Hall, Inc. 1–4

 Measure of process improvement

© 2008 Prentice Hall, Inc. 1–6

Multiple resource inputs  multi-factor productivity

© 2008 Prentice Hall, Inc. 1–7

© 2008 Prentice Hall, Inc. 1–8

© 2008 Prentice Hall, Inc. 1 – 10

• What is the labor productivity per dollar?

© 2008 Prentice Hall, Inc. 1 – 11

© 2008 Prentice Hall, Inc. 1 – 12

© 2008 Prentice Hall, Inc. 1 – 13

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