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Int Lec 01

There is a complex relationship between inflation and productivity. Some key points: - Productivity decline can contribute to inflation by reducing the supply of goods and services. With the same demand but lower supply, prices tend to rise. - However, inflation itself can also negatively impact productivity. High inflation makes planning difficult for businesses and can reduce investment in productivity-enhancing capital and technology. It also erodes the real value of wages over time, which can reduce worker effort and productivity. - Other factors like rising input costs (e.g. commodity prices, wages) that are not matched by productivity gains can fuel both inflation and lower productivity. This shows inflation and productivity declines can reinforce each other. - Central banks fight

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14 views

Int Lec 01

There is a complex relationship between inflation and productivity. Some key points: - Productivity decline can contribute to inflation by reducing the supply of goods and services. With the same demand but lower supply, prices tend to rise. - However, inflation itself can also negatively impact productivity. High inflation makes planning difficult for businesses and can reduce investment in productivity-enhancing capital and technology. It also erodes the real value of wages over time, which can reduce worker effort and productivity. - Other factors like rising input costs (e.g. commodity prices, wages) that are not matched by productivity gains can fuel both inflation and lower productivity. This shows inflation and productivity declines can reinforce each other. - Central banks fight

Uploaded by

waqaryounas28936
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We take content rights seriously. If you suspect this is your content, claim it here.
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INTRODUCTION TO OPERATIONS

MANAGEMENT
Books

 Operations Management by J. Hazier (10th edition)


 Quantitative methods for business by Anderson, Sweeny
 Instructor notes
Policies

 NO Mobiles
 You are supposed to bring stationary and calculators
along.
 No retakes of quizzes and assignments
 I am available in my office Monday to friday, but you
need to seek appointment through my official email
[email protected] at least a day in advance other
than in emergency cases.
 75% attendance
Grading Policy
Final Exam 35%
Midterm 20%
Final Project 15%
Quizzes 15%
Assignments/Case studies 15%
Dates to remember
Week in
Item Due
Semester
Week 3 Quiz 01
Week 4 Assignment 01
Finalizing groups and project title
Week 5
submission
Week 6 Quiz 02
Week 7 Assignment 2
Week 08 In class discussion of projects
Week 11 Quiz 03
Week 12 Assignment 03
Week 15 Project report submission
Week 16 Project presentations
Operations Management = OM
 Management of ANY activities/process that create goods and provide
services
 Exemplary Activities: Forecasting, Scheduling, Quality
management
 Why to study OM
 At a typical manufacturing company

Profit 5%
OM Cost 21%

Marketing
Cost 26%

Manufacturing
Cost 48%
Operations Management = OM
The management of systems or processes that create goods
and/or provide services

Organization

Finance Operations Marketing

The distinct –active- role of operations:


Inputs become Outputs after some
Transformation
Operations example in Manufacturing:
Food Processing
INPUTS PROCESS OUTPUTS

Raw vegetables Cleaning Clean


vegetables

Metal sheets Cutting/Rolling/ Cans


Welding
Energy, Cutting Cut
Vegetables vegetables
Energy, Water, Cooking Boiled
Vegetables vegetables
Energy, Cans, Placing Can food
Boiled
vegetables
Operations example in service:
Health care
Inputs Processing Outputs

Doctors, nurses Examination Healthy


Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Types of Operations
Operation Examples

Goods producing Farming, mining, construction

Storage/transportation Warehousing, trucking, mail, taxis,


buses, hotels, location
Exchange Trade, retailing, wholesaling, renting,
leasing, loans
Entertainment Radio, movies, TV, concerts, recording

Communication Newspapers, journals, magazines, radio,


TV, telephones, satellite
Why OM?

 Core of all business organizations


 Many areas interrelated with OM activities
 Management of operations is critical to create and
maintain competitive advantages
Organization of Businesses

 Three basic functions


 Operations/Production
 Goods oriented (manufacturing and assembly)
 Service oriented (health care, transportation and retailing)
 Value-added (the essence of the operations functions)

 Finance-Accounting
 Budgets (plan financial requirements)
 Economic analysis of investment proposals
 Provision of funds (the necessary funding of the operations)
Organization of Businesses (Cont.)

 Marketing
 Selling
 Promoting
 Assessing customer wants and needs
 Communicating those needs to operations
 The need for working closely

Operations

Marketing Finance
Systems (Holistic) Approach

 Emphasizes interrelations among subsystems.


 A systems approach is essential whenever
something is being designed, redesigned,
implemented, or improved. It is important to
take into account the impact on all parts of the
system.

 Example: A new feature is added to a product.


 Designer must take into account how customers
will view the change, instruction for using new
feature, the cost, training of workers, production
schedule, quality standard, advertising must be
informed about the new feature.
Systems Approach
“The whole is greater than
the sum of the parts.”
Value Added
Value added: The difference between cost of inputs and price (??) of outputs.

Is this definition right? Should value added include profit?

Value added: The difference between the cost of inputs


and the (market or fair) value or price of outputs.
Value-Added

Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
Introduction

 Objective of any organization


• To convert Input into output via a transformation process.

• The transformation process should add value such that the output has financial
value greater than the sum of the inputs.

INPUT $ $$$
OUTPUT
TRANSFORMATION
PROCESS
Introduction

 Definition of Productivity

 Productivity is the quantitative relation between what


 we produce and

 we use as a resource to produce them,

i.e., Productivity is the ratio of outputs (goods and services)


divided by the inputs (resources such as labour and capital)

output
productivi ty 
input
Introduction

 Productivity a tool of gauging a Nation’s competiveness


 Comparative tool for managers, industrial engineers, economists, &
politicians.
 Productivity is a great comparative tool which can be used to judge
 People

 Companies

 Nations

 “Standard of living is determined by the productivity of a nation's


economy, which is measured by the value of goods and services
(products) produced per unit of the nation's human, capital and
natural resources". (Porter & Christensen, Harvard Business School)
Productivity Portfolios

 Investments in facilities and equipment


 Investments in programs and systems
 Investments in people.

Note: these alternatives are not mutually exclusive; however, most


organizations tend to choose one as their dominant orientation.
Productivity & Quality

 Leverage of Productivity & Quality


Increased Quality leads to decrease productivity
Debunking common myths about productivity?

 Myth 1 – Profitability is a measure of productivity


 Productivity and profits are two different things!
 An organization can be profitable without being productive.
 High market value of product.
 Curtailing expenditure on HRD and R&D.
 Marketing campaigns
 Strong hand tactics (monopoly, corrupt practices, etc )

 Myth 2 – Productivity can be judged by output


 Comparison with the previous fiscal years .
 Must take into account impact of environment (Inflation, natural disasters,
etc)
 Myth 3 – Production and productivity are the same thing.
 More is good! So more the number/units of products the better is productivity
 Productivity is not just number, rather it is integral to all stages of
“Transformation Process”.
Debunking common myths about productivity? (2)

 Myth 4 – Productivity is only relevant to manufacturing.

 Productivity or lack of it is ever present

 Governance of a nations
 Wars
 Satisfaction of a client

 Myth 5 – Cost cutting improves productivity

 Indiscriminate cost cutting might fulfill short term goals.


 Reducing R&D and on job training is detrimental to long term objectives.

 Myth 6– improving productivity leads to decline in quality.


 Quality and productivity go hand in hand.
 Compromise on quality will ultimately result in lowering of profits in
the long term.
Productivity appraisal through productivity ratio

 Total productivity (TPM)

 It is based on all the inputs. The model can be applied to any manufacturing
organization or service company.

 If productivity ≥ 1 the company should be making a profit


 If productivity ≤ 1 the company should be making a loss.
Discussion

Spending on R & D is directed towards product improvement rather than productivity improvement.
Discussion

Is Inflation the cause of Productivity decline or is Inflation the result of Productivity decline?

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