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Du Om CH-1

This document discusses key concepts in operations management. It defines OM as transforming inputs into finished goods and services through efficient management of resources, processes, and value-adding activities. OM is important for economic growth and involves strategic, tactical, and operational planning decisions. Productivity measures the ratio of outputs to inputs and is a key metric for OM. The document outlines factors that impact productivity and steps to improve it.

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Ebsa Abdi
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22 views16 pages

Du Om CH-1

This document discusses key concepts in operations management. It defines OM as transforming inputs into finished goods and services through efficient management of resources, processes, and value-adding activities. OM is important for economic growth and involves strategic, tactical, and operational planning decisions. Productivity measures the ratio of outputs to inputs and is a key metric for OM. The document outlines factors that impact productivity and steps to improve it.

Uploaded by

Ebsa Abdi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Dilla university

College of Business and Economics


Department of Management
Operations Management
By: Robel H.
2013 E.c
CHAPTER ONE
NATURE OF OPERATIONS
MANAGEMENT
1.1. Introduction
• OM is an important factor in a country’s economic growth.
• Traditional view of manufacturing management is the concept of
production management (focus on manufacturing efficiency).
• OM was identified, as service sector became more prominent.
• It leads improvement on productivity and goals achievement with
minimum effort.
• It deals with the production of goods and services that people buy and
use every day.
CONT’D
• OM refers to the interaction and control of the process that transform
input into finished goods and services.
• It is the process whereby resources, flowing within a defined system,
are combined and transformed by a controlled manner to add value
• Keywords on definition of OM:
o Resources
o Systems
o Transformation and Value addition Activities
1.2. Why study OM?
• We study OM for four reasons:
o OM is one of the three major functions of any organization
o we want to know how goods and services are produced.
o To understand what operations managers do.
o It is such a costly part of an organization.
1.3. Manufacturing operations and service operations

• Manufacturing is the transformation of raw materials into finished goods


(production of a tangible output ).
• Service is a time-perishable, intangible experience performed for a customer
acting in the role of a co-producer.
• Service can facilitate the production and distribution of goods.

• Distinguishing Manufacturing Operations with Service Operations:


o The nature and customer contact

o Uniformity of input

o Labor content of jobs

o Uniformity of output

o Measurement of productivity

o
1.4. Operations Decision making
• Even minor decisions determine the company’s success or failure.
• The major areas in which operations managers make decisions are:

A. Strategic (long term) decision


• It involves high amount, more effort and it is periodical.
• Decision includes Product design, Process design, and selection and Location
decision.
B. Tactical (intermediate term) decisions
• Tactical decision primarily address how to efficiently schedule material and labor
• A base for operations planning and control decisions are made.

C. Operational planning & control (short term) decision


• Issues at this level include: What jobs do we work on today, whom do we assign to
what tasks? what jobs have priority?
1.5. Framework for Decision-Making
• Decision implies the following systematic steps
 Defining the problem.
 Establish the decision criteria.
 Formulation of a model.
 Generating alternatives.
 Evaluation of the alternatives.
 Implementation and monitoring.
1.6. Productivity measurement
• Productivity is defined in terms of utilization of resources, like
material and labor.
• It is the ratio of output to input.
• can be improved by
 Controlling inputs
 Improving process so that the same input yields higher output
 Improvement of technology.
CONT’D
• Productivity can be measured in three ways (total factor
productivity, multifactor productivity or partial productivity).
 Productivity = Output
Input
• Partial productivity (A single input)
 Productivity = Output or Output or Output or Output & so on.
Labor Capital Materials Energy
• Multifactor productivity (Based on more than one input)
 Productivity= Output or Output
Labor +Capital Labor + Capital +Material
CONT’D
• Total productivity (Based on total measure or on all inputs)
 Productivity= Goods or services produced
All inputs used to produce them
• Productivity comparisons can be made in two ways:
 A company can compare itself with similar operations within its
industry
 A Company can compare its productivity in one time period with
that of the next.
Example
• Determine productivity level of the following cases:
A. Four worker installed 720 square yards of carpeting in eight
hours.
PL = 720 s.ys = 22.5 yards/hour
4*8
B. A machine produced 70 pieces in 2 hours. However, 2 pieces
are unusable.
PM = 70 Pieces – 2 pieces = 34 pieces/hour
2 hours
C. Given; Output = 7,040 unit
Labor = 1,000 USD
Material = 520 USD
Over head = 2,000 USD
CONT’D
I. Productivity of labor and material
PL,M = 7,040 unit = 4.6 unit/dollar
$1000 + $ 520
II. Total factor productivity
TFP = 7,040 unit =2
unit/dollar
$1000 + $ 520 + $2000
CONT’D
• Productivity Analysis can be analysis
 Trend analysis (productivity changes for the firm over a period of
time)
 Horizontal analysis (productivity in comparison with other firms
of same size and engaged in similar business)
 Vertical analysis (comparison with other industries and other firms
of different sizes in the same industry.
 Budgetary analysis (Setting productivity plan)
Factors Affecting Productivity
 Capital/labor ratio
 Scarcity of some resources
 Work-force changes
 Innovations and technology
 Managerial factors
 Quality of work life (organizational culture)
CONT’D
• key steps that a company can take toward improving productivity:
 Develop productivity measures for all operations
 Look at the system as a whole
 Develop methods for achieving productivity improvements
 Establish reasonable goals for improvement
 Make it clear that management supports
 Measure improvements and publicize them
! ! !
O U
K Y
A N
T H

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