Chapter 1: Operations and productivity

• Essential functions of any business


  • Marketing (generates demand)
  • Production/operations (creates the product/service)
  • Finance/Accounting (tracks how well the organization is doing, collects the money, pays the bills)
• Basic OM Management Functions


  • Planning
  • Organizing
  • Staffing
  • Leading
  • Controlling
• Manufacturers


  Produce tangible products
• Service products

  Often intangible
• Almost all services have a tangible component
• Very few pure services (ex: counseling)
• Inputs


  • Labor
  • Capital
  • Management
• Transformation


  The US economic system transforms inputs to outputs at about an annual 2.5% increase in productivity/year
• Productivity increase is the result of

  • Capital (38%)
  • Labor (10%)
  • Management (52%)
• Outputs


  • Goods
  • Services
• Key variables for improved labor productivity


  • Basic education
  • Diet
  • Social overhead that makes labor available (ex: transportation/sanitation)
  • Key challenge: enhancing skills in the midst of rapidly changing technology and knowledge
• Capital


  Capital investment provides for production tools
• Management

  • Ensures labor and capital are effectively being used to increase productivity
  • Use of knowledge, application of technologies, knowledge management
• OM's objective is to improve productivity
• Productivity improvement: the result of managing and intervening in transformation or work processes
• Single-factor productivity


  One resource input
• Multi-factor productivity (total factor productivity)


  Multiple resource inputs
• Inputs


  • Labor
  • Material
  • Energy
  • Capital
  • Miscellaneous
• Outputs/inputs often expressed in dollars
• Operations activities are oven very similar, so their distinction is not always clear.
• Productivity measurement problems

  • quality may change while the quantity of inputs and outputs remains constant
  • external elements may cause an increase or decrease in productivity
  • Precise units of measure may be lacking
• Products & services are produced by transforming resources (inputs) into goods & services (output)