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LESSON 1: OPERATIONS AND PRODUCTIVITY
WHAT’S OM AND WHY TO STUDY IT?
The production of goods and services requires operations management. Production: the creation of goods and services. OM: set of activities that creates value in the form of good and services by transforming inputs into outputs. In all the organizations: manufacturing and service companies. To produce goods and services, a lmost all the organizations perform three functions: ‣ Marketing ‣ Production or operations ‣ Finance and accounting What can we Cind in the production area? ‣ Scheduling ‣ Check clearing ‣ Facilities design ‣ Maintenance ‣ Security ‣ Quality ‣ Supply chain management Why studying OM? ‣ It’s one of the major function of every organization and it’s related with the other functions. ‣ We want to know how goods and services are produced. ‣ We want to understand what operation managers do. ‣ It’s such a costly part of an organization. A large % of revenue is spent in the OM function.
System and Sub-system
Business as an open system. In order to achieve Business Objectives we need to coordinate all the subsystems that we could Cind in the system. Only a good product is not enough: ‣ (^) We need to communicate that product. ‣ (^) We need to invest capital in R&D ‣ (^) We need to use the adequate technology to produce that product. ‣ (^) We need to ask for money (Cinance) and we need to study all the different alternatives in order to choose the most proCitable one. ‣ (^) We need to look for qualiCied labor.
Production subsystem includes: ‣ Entrance : production factors (machinery, raw material, energy, labor, information, Cinancial resources…) ‣ Transformation process through speciCic technology. ‣ Exit: goods and services considered as outputs. This system is also producing other “outputs” that are not so “good” such as pollution. The Cinal purpose of production is producing goods and services by transforman all the inputs into outputs. The difference between production and operations is that production is the goods and operation is the services.
WHAT OPERATION MANAGERS DO?
Operation managers must apply the management process which is the application of: planning, organizing, leading and controling.
ACHIEVING COMPETITIVO ADVANTAGE
THROUGH OUT OM?
DeCinning and being efCicient in the 10 operation decisions. The manager must address carefully the 10 major decisions of OM. All of them belongs to planning, organizing, leading and controlling. They have to create a system that has a unique advantage over competitors and create customer value in an efCicient and sustainable way. This can be achieve via differentiation strategy, cost strategy or response strategy.
Competing on differentiation
‣ Innovative design. Distinguishing the offerings of an organization in a way that the customer perceives as adding value. ‣ Providing uniqueness. Efg.Through after-sales service. ‣ Experience of the product through all the Cive senses. Eg. Hard Rock Café (classic rok music, big- screens, memorabilia, staff who can tell stores...). ‣ High quality and so high prices.Not based on costs.
Competing on cost
‣ Achieving customers value through cutting costs and providing cost advantage. ‣ Using resources effective and efCiciently. ‣ All the 10 decisions are focused on driving down costs. Eg. Effective capacity use or inventory management. ‣ It doesn’t imply low value or low quality. ‣ Eg.RyanairAirlines.
Differences between goods and services
BASIC DECISIONS AT OM
- Design of goods and services
- Managing quality
- Process and capacity design
- Location strategy
- Layout strategy
- HR and job design
- Supply chain management
- Inventory, material requirements planing and jit
- Intermediate and short-term scheduling
- Maintenance Achieving competitive advantage though 10 basic decisions:
The productivity challenge
Effective: doing the right thing EfKiciency: doing the job well, with minimum of resources and waste Productivity
- Measure of the process improvement
- Represents output relative to input
- Only thought productivity increases can our standard of living improve Example 1: if we produced 1.000 units with labor-hour used (250 h), the productivity is: 1.000/250 = 4 units per hour.
Ethics and social responsibility
Challenges facing operations managers: ‣ Developing and producing safe, quality products ‣ Maintaining a clean and sustainable environment ‣ Providing a safe workplace ‣ Honouring stakeholder commities Labor productivity = Output or Units poduced Labor (hours) Multifactor Productivity = Output or Units poduced Labor + Material + Energy + Capital + Miscellaneous
