QSO 300_Class 1 Lecture_Chp 1_Operations and Productivity_25 _SV, Slides of Production and Operations Management

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QSO 300:

Operations and

Productivity

Dr. Thomas

Operations Management (OM)

➔ Operations management (OM) is the set of activities that relate to the creation of

goods and services through the transformation of inputs to outputs.

➔Production is the creation of goods and services.

➔To create goods and services, all organizations perform three functions:

◆

1. Marketing, which generates the demand, or at least takes the order for a product or

service (nothing happens until there is a sale).

◆ 2. Production/operations, which creates, produces, and delivers the product.

◆ 3. Finance/accounting, which tracks how well the organization is doing, pays the bills,

and collects the money.

➔Supply chain is a global network of organizations and activities that supply a firm with

goods and services.

Operations for Goods & Services

➔Services are economic activities that typically produce an intangible (no physical

presence) product (such as education, entertainment, lodging, government,

financial, and health services).

Service sector is the segment of the economy that includes trade, financial,

lodging, education, legal, medical, and other professional occupations.

Productivity is the ratio of outputs (goods and services) divided by the inputs

(resources, such as labor and capital).

➔The operations manager’s job is to enhance (improve) this ratio of outputs to

inputs. Improving productivity means improving efficiency.

Operations for Goods & Services

➔Measurement of productivity is an excellent way to evaluate a country’s ability to

provide an improving standard of living for its people. Only through increases in

productivity can the standard of living improve. Moreover, only through increases in

productivity can labor, capital, and management receive additional payments. If

returns to labor, capital, or management are increased without increased

productivity, prices rise (Starbucks page 45/46 pdf in textbook).

Operations for Goods & Services

➔Productivity variables are the three factors critical to productivity improvement—

labor, capital, and the art and science of management.

◆Management is a factor of production and an economic resource. Management is

responsible for ensuring that labor and capital are effectively used to increase

productivity. Management accounts for over half of the annual increase in

productivity.

● Knowledge society is a society in which much of the labor force has migrated from

manual work to work based on knowledge (technology).

● Why did you decide to attend college?

● How are employees in the service sector measured for productivity?

Challenges in Operations Management

Globalization: The rapid decline in the cost of communication and transportation

has made markets global. Similarly, resources in the form of capital, materials,

talent, and labor are also now global. As a result, countries throughout the world

are contributing to globalization as they vie for economic growth. Operations

managers are rapidly seeking creative designs, efficient production, and high-

quality goods via international collaboration.

➔Supply-chain partnering: Shorter product life cycles, demanding customers, and

fast changes in technology, materials, and processes require supply-chain partners

to be in tune with the needs of end users. And because suppliers may be able to

contribute unique expertise, operations managers are outsourcing and building

long-term partnerships with critical players in the supply chain.

➔Sustainability: Operations managers’ continuing battle to improve productivity is

concerned with designing products and processes that are ecologically

sustainable. This means designing green products and packaging that minimize

resource use, can be recycled or reused, and are generally environmentally

friendly.

Challenges in Operations Management

➔Lean operations: Lean is the management model sweeping the world and

providing the standard against which operations managers must compete.

Lean can be thought of as the driving force in a well-run operation, where

the customer is satisfied, employees a respected, and waste does not

exist. The theme of this text is to build organizations that are more

efficient, where management creates enriched jobs that help employees

engage in continuous improvement, and where goods and services are

produced and delivered when and where the customer desires them.

These ideas are also captured in the phrase Lean.

Ethics, Social Responsibility and Sustainability

➔Stakeholders are those with a vested interest in an organization, including

customers, distributors, suppliers, owners, lenders, employees, and community

members.

Managers are also challenged to:

◆Develop and produce safe, high-quality green products

◆Train, retain, and motivate employees in a safe workplace

◆Honor stakeholder commitments