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September 21, 2016

Production and Operations


Management

Calculating Percentage
Change in Productivity

Exercise
Determine the productivity for the
following data
Four workers installed 720 sq yards of carpet in
eight hours.
Requirement
Find out the yards per hour carpet installation.

Solution
Formula

Productivity = yards of carpet installed labor hours


worked
Productivity = 720 sq yards / (4 workers x 8 hrs)

Productivity = = 22.5 yards per hour

Exercise
Keeping in view the previous
example, a new worker joins the
group. The next job (900 yards) is
done in 9.5 hour. What is the new
productivity, and what is the
productivity change?

Solution

Productivity = yards of carpet installed


worked
900 yards / (5 workers x 9.5 hrs)

= 18.9 yards per hour

labor hours

Calculating Percentage
Change in Productivity
Formula
New Old
Old
Converting to percentage and Multiply the result with 100

Solution

Productivity = yards of carpet installed labor hours


worked
900 yards / (5 workers x 9.5 hrs)
= 18.9 yards per hour
Measuring Change
New productivity previous productivity previous
productivity
18.9 - 22.5 = -3.6 yards/hr
-3.6/22.5 = - 0.16 yards/hr
Converting to percentage = 100 x (- 0.16)
16 percent lesser than the previous hour.

Example - Productivity Change

You have just determined that your service employees have


used a total of 2400 hours of labor this week to process 560
insurance forms. Last week the same crew used only 2000
hours of labor to process 480 forms.
Which productivity measure should be used?
Answer: Could be classified as a Partial Measure.
Is productivity increasing or decreasing?
Answer: Last weeks productivity = 480/2000 = 0.24
This weeks productivity is = 560/2400 = 0.23.
So, productivity has decreased slightly.
Change in productivity = (0.23 0.24)/0.24 x 100 = ?

Exercise
A machine produced 68 usable
pieces in two hours.
Calculate pieces produced per hour
by a machine.

Solution
Formula

Productivity = units produced hours consumed for


production

Productivity = 68 pieces / 02 hours


Productivity = 34 pieces per hour.

Productivity Measure
Example
Determine the multifactor productivity for the
combined input using the following data:
Output;
1760 units
Input;
Labor $1000,
Material $520,
Overhead $2000.
Requirement;
Find out output per dollar

Productivity Measure
Example - Solution
Output: 1760 units
Input: Labor $1000, Material $520, Overhead $2000.

Multifactor Productivity
Output
Labor + Material + Overhead

1760 units
$1000 + $520 +
$2000

= 0.50 units/dollar

Lecture 5

OperationsOriented
Barriers to Entry
Economies of Scale
Capital Investment
Access to Supply and
Distribution Channels
Learning Curve

1-15

Evolution of Operations
Management
Craft production
process of handcrafting products or
services for individual customers

Division of labor
dividing a job into a series of small
tasks each performed by a different
worker

Interchangeable parts
standardization of parts initially as
replacement parts; enabled mass
production
1-16

Evolution of Operations
Management (cont.)
Scientific management
systematic analysis of work methods

Mass production
high-volume production of a
standardized product for a mass market

Lean production
adaptation of mass production that
prizes quality and flexibility
1-17

Historical Events in
Operations Management
Era
Industrial
Revolution

Events/Concepts

Dates

Steam engine
Division of labor
Interchangeable parts
Principles of scientific

1769
1776
1790

management
Time and motion studies

Scientific
Management Activity scheduling chart
Moving assembly line

1-18

Originator
James Watt

Adam Smith
Eli Whitney

1911

Frederick W. Taylor

1911
1912

Frank and Lillian


Gilbreth
Henry Gantt

1913

Henry Ford

Historical Events in Operations


Management (cont.)
Era

Events/Concepts

Human
Relations

Motivation theories

Operations
Research

Hawthorne studies

Linear programming
Digital computer
Simulation, waiting
line theory, decision
theory, PERT/CPM
MRP, EDI, EFT, CIM

Dates

Originator

1950s

Operations research
groups

1930
1940s
1950s
1960s
1947
1951

1960s,
1970s
1-19

Elton Mayo
Abraham Maslow
Frederick Herzberg
Douglas McGregor
George Dantzig
Remington Rand

Joseph Orlicky, IBM


and others

Historical Events in Operations


Management (cont.)
Era
Quality
Revolution

Events/Concepts Dates Originator


JIT (just-in-time)
TQM (total quality
management)
Strategy and
operations
Business process
reengineering

1970s
1980s
1990s
1990s

1-20

Taiichi Ohno (Toyota)


W. Edwards Deming,
Joseph Juran
Wickham Skinner,
Robert Hayes
Michael Hammer,
James Champy

Historical Events in Operations


Management (cont.)
Era

Globalization
Internet
Revolution

Events/Concepts

WTO, European Union,


and other trade
agreements
Internet, WWW, ERP,
supply chain
management

Dates Originator
1990s

Numerous countries

2000s

and companies

1990s

ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE,

E-commerce

2000s

PeopleSoft
Amazon, Yahoo,
eBay, and others

1-21

Historical Development of
OM

Craft production
1700s
Industrial revolution Late 1700s
Scientific management (Model T)
Early 1900s
Human relations movement
1930sManagement science 1940sComputer age 1960sEnvironmental Issues 1970sJIT & TQM*
1980s-

*JIT= Just in Time, TQM= Total Quality Management

Historical Development
cont

Reengineering 1990Global competition 1980Flexibility Lean production


1990Time-Based Competition
1990Supply Chain Management 1990Electronic Commerce 2000Outsourcing & flattening of world 2000-

For long-run success, companies must place much importance on


their operations

History of Operations Management

Industrial revolution: The rapid development of industry in


Britain that was brought about by the introduction of
machinery.
Scientific Management: A theory of management that
suggested that work flows with the objective of improving
labor productivity (improving work efficiency).
Human relations movement; workers motivation and
technical aspects of work effect productivity.
Management science: scientific analysis of work methods.
Computer age: making the machines computerized for less
error and wastage.
Environmental issues: it addressed the problems faced by
the environment like pollution etc.

History of operations management


Just in Time: An inventorystrategy companies employ to
increase efficiency and decrease waste byreceivinggoods
only as they are needed in the production process, thereby
reducing inventory costs.
Total Quality management: continuously improving the quality
of products and services for maximum customer satisfaction.
Reengineering: Systematicstartingover and reinventing the
way afirm, or abusiness process, getsitsworkdone.
Global competition: business competition among countries
around the globe
Flexibility: responsive to change
Time based competition: A corporate strategy that has
identified a focus on time as providing a competitive edge due
to its value by the customer.

History of operations
management

Supply chain management: Supply chain management


(SCM) is the management of a network of interconnected
businesses involved in the ultimate provision of product.
Electronic commerce: business conducted electronically via
use of internet.
Outsourcing: obtaining goods and services from an outside
suppliers.

Operations Management
and E - Business

Assignment/Presentation No.1
How companies manage their
business in the e- business
environment?
It must cover
Forms of e-business
Forms of e-business used in Pakistan
Impact of e-business on operations
management of businesses operating
across globe.

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