Operation Management

1

Operations and Productivity

Learning Objectives

When you complete this chapter you should be able to:

1. Define operations management 2. Explain the distinction between goods and services 3. Explain the difference between production and productivity 4. Compute single-factor productivity 5. Compute multifactor productivity 6. Identify the critical variables in enhancing productivity

1-1

1-2

What Is Operations Management?

1. Production is the creation of goods and services. 2. Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs. 3. The creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labor, and information are used to create goods or services using one or more transformation process (e.g. storing, transporting, cutting). To ensure that the desired outputs are obtained, an organization takes measurements at various points in the transformation process (feedback) and then compares them with previously established standards to determine whether corrective action is needed (control).

1-3

What Is Operations Management?

Value-added Inputs •Land •Labor •Capital •Information Transformation/ conversion process Outputs •Goods •Services

Feedback Feedback Control Feedback

1-4

What Is Operations Management?

4. Value-added is the term used to describe the difference between the cost of inputs and the value or price of outputs. 5. In nonprofit organizations, the value of outputs (e.g., highway construction, police and fire protection) is their value to society; the greater the value-added, the greater the effectiveness of these operations. 6. In for-profit organizations, the value of outputs is measured by the prices that customers are willing to pay for those goods or services. Firm use the money generated by valueadded for research and development, investment in new facilities and...