Week 1 Operations Management PDF

WEEK 1: Fundamental of Quality, Operations and Total Quality Management OBJECTIVES  Define quality its history importance.  Distinguish the Deming, Juran and Crosby Philosophies on Quality Management.  Extract the different operation management concepts.  Summarize c...

WEEK 1: Fundamental of Quality, Operations and Total Quality Management OBJECTIVES  Define quality its history importance.  Distinguish the Deming, Juran and Crosby Philosophies on Quality Management.  Extract the different operation management concepts.  Summarize competitiveness, strategy, and productivity.  The top manager of an operations department is usually called the Director of Operations. Most operations departments will report to a Chief Operating Officer (COO), who reports to the Chief Executive Officer (CEO). The COO is often considered the most important figure in a firm, next to the CEO. One of the most significant contributions to operations management came in the early 20th century when Henry Ford pioneered the assembly line manufacturing process.  Operations Management Operations management is the management of the processes that transform inputs into the goods and services that add value for the customer The study of operations deals with how the goods and services that you buy and consume every day are produced. Operations Management A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients. Where the inputs are raw materials, it is relatively easy to identify the transformation involved, such as when milk is transformed into cheese or butter. Where the inputs are information or people, the nature of the transformation may be less obvious. For example, a hospital transforms ill patients (the input) into healthy patients (the output). Often all three types of input – materials, information and customers – must be transformed by a single organization Operations Management Micro and Macro operations The overall transformation can be described as the macro operation, and the more detailed transformations within this macro operation as micro operations. Micro and Macro operations For example, the macro operation in a brewery is making beer. The micro operations include: milling the malted barley into grist mixing the grist with hot water to form wort cooling the wort and transferring it to the fermentation vessel adding yeast to the wort and fermenting the liquid into beer filtering the beer to remove the spent yeast decanting the beer into casks or bottles. The Operations Function  The term operations embraces all the activities required to create and deliver an organization’s goods or services to its customers or clients.  Operations management is concerned with the design, management, and improvement of the systems that create the organization’s goods or services. Effectiveness refers to making the right actions and plans in order to improve the business and add value for the customer. It is helping to get the business doing the right things for the customer. Efficiency is different. To be efficient means doing things well at the lowest cost possible. To be efficient, we look for ways to reduce unnecessary or redundant activities that add unnecessary cost and could be avoided. Development of Operations Management Competitiveness, strategy, and productivity COMPETITIVENESS Companies must be competitive to sell their goods and services in the marketplace. Competitiveness is an important factor in determining whether a company prospers, barely gets by, or fails. Marketing influences competitiveness in terms of : 1.Identifying consumer wants and/or needs is a basic input in an organization’s decision- making process, and central to competitiveness. The ideal is to achieve a perfect match between those wants and needs and the organization’s goods and/or services. 2.Price and quality are key factors in consumer buying decisions. It is important to under- stand the trade-off decision consumers make between price and quality. 3.Advertising and promotion are ways organizations can inform potential customers about features of their products or services and attract buyers. Key Purchasing Criteria include:  Core competencies Core competencies are the resources and capabilities that comprise the strategic advantages of a business. A company’s people, physical assets, patents, brand equity, and capital all can make a contribution to a company’s core competencies. Examples: McDonald’s has standardization. It serves nine million pounds of French fries every day, and every one of them has precisely the same taste and texture. Apple has style. The beauty of its devices and their interfaces gives them an edge over its many competitors. Strategy Strategic management is the highest of these levels in the sense that it is the broadest and applies to all parts of the firm while also incorporating the longest time horizon. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Tactics the methods and actions used to accomplish strategies Strategy Operational Strategy- focus and deals with day-to-day operational activities such as scheduling criteria Common Operations Strategies Quality-based strategies Strategy that focuses on quality in all phases of an organization. Time-based strategies Strategy that focuses on reduction of time needed to accomplish tasks. which is the amount of time elapsed from the receipt of the customer’s order until the products are shipped. Productivity Productivity A measure of the effective use of resources, usually expressed as the ratio of output to input. “The higher the productivity, the lower the cost of the output” It is usually expressed as the ratio of output to input: Output Productivity= Input Productivity Output is always a reflection of how much the firm was able to produce. For inputs, peso spent are typically used as the measure. Productivity Productivity Growth = Current Productivity- Previous x 100 Productivity Previous Productivity For example, if productivity increased from 80 to 84, the growth rate would be 84-80/80 x 100 =5% Partial Productivity Examples: Output Output Output Output Labor Machine Materials Energy Multi Factor Productivity Examples: Output Output Labor + Materials Energy + Labor + Materials Note: The unit of measure must be the same for all factors in the denominato Productivity Measures Labor productivity Units of output per labor hour Units of output per shift Value-added per labor hour Peso value of output per labor hour Machine productivity Units of output per machine hour Peso value of output per machine hour Capital productivity Units of output per peso input Peso value of output per peso input Energy productivity Units of output per kilowatt-hour Peso value of output per kilowatt-hour  Partial Productivity Examples: Output Output Output Output Labor* Machine Materials Energy *The units of output used in productivity measures depend on the type of job performed. Four workers installed 720 square yards of carpeting in eight hours. ProductivityYards = of carpet installed Labor hours worked 720 square yards 4 workers x 8 hours/worker 720 yards = 22.5 yards/hour 32 hours  Partial Productivity Examples: Output Output Output Output Labor* Machine Materials Energy *The units of output used in productivity measures depend on the type of job performed. A machine produced 70 pieces in two hours. However, two pieces w unusable. Productivit Usable Pieces y= Production Time 70-2=68 usable pieces 2 hours 68 pieces = 34 pieces/hour 2 hours  Partial Productivity Examples: Output Output Output Output Labor* *The units of outputMachine Materials used in productivity measures Energy depend on the type of job performed. A company makes seasonal jams and jellies. Yesterday they produced 420 jars of jam with five workers who each worked an 8-hour day. What was the labor productivity? Productivit Jar of Jams y= Labor 420 (5 workers x 8 hours) 420 pieces = 10.5 jars per worker/hour 40 hours Billco Windows and Doors is preparing their monthly productivity report. Their monthly costs are shown below. Calculate the Average labor rate is Php 18.00. Units produced: 1800 Labor hours: 1975 Machine hours: 425 Materials cost: Php 81,000 Energy cost: Php 2,160 a) labor productivity b) machine productivity c) the multifactor productivity (labor cost, material cost, and energy cost) A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in one-half hour with four workers. What is labor productivity? Labor Quantity 400 cases productivity= produced 4 workers x 1/2 Labor hours hour/worker = 200 cases per labor/hour  A wrapping-paper company produced 2,000 rolls of paper one day. Labor cost was P 160, material cost was P 50, and overhead was P 320. Determine the multifactor productivity. Multifactor Quantity produced productivity= Labor hours+ Material Cost + 2,000 rolls Overhead 160 + 50 + 320 = 3.77 rolls per peso output A variation of the multifactor productivity calculation incorporates the standard price in the numerator by multiplying the units by the standard price. Activity ½ crosswise. Analyze each problem carefully, provide the recommended action based on the findings. Labor Productivity Problem 1. A factory produces 500 units of a product in an 8- hour shift with 5 workers. Recently, production has dropped to 450 units, and management wants to understand the labor productivity issue. Initial Labor Productivity Current Labor Productivity Machine Productivity Problem 2. A company has two machines producing widgets. Machine A produces 300 widgets in 10 hours, and Machine B produces 250 widgets in 12 hours. Management notices underperformance on Machine B. Material Productivity Problem 3. A bakery uses 100 kg of flour to produce 1,200 loaves of bread daily. Recently, only 1,050 loaves are produced using the same 100 kg of flour. - Initial Material Productivity - Current Material Productivity Energy Productivity Problem 4. A manufacturing unit consumes 5,000 kWh of energy monthly to produce 2,500 units. With a rise in energy costs, management aims to improve energy efficiency. - Additional: What is the new productivity If optimized machines save 500 kWh. Multi-Factor Productivity Problem 5. A company uses Php 15,000 in labor, Php 10,000 in materials, and Php 5,000 in overhead to produce 1,000 units monthly. They observe increasing costs without proportional output gains. - Initial Multi-Factor Productivity (MFP) - If costs rise by Php 5,000 without increasing output: