Session 5: Operations

Management and Logistics

Definition

• Operations management – set of activities

that creates value in the form of goods and

services by transforming inputs into outputs.

In manufacturing firms, these are the

production (factory) activities.

OM and Services

• In organizations that do not create physical

goods, the production function may be less

obvious. Ex.: liver transplants, transfer of

funds from savings to checking account, the

education of a student

Organizing for Operations

These functions are the necessary ingredients:

• Marketing – generates the demand, or at least

takes the order for the product or service

• Production/operations – creates the product

• Finance/accounting – tracks how well the

organization is doing, pays the bills, collects

the money

So where does HR Management fit in? ☺

+Products vs. Services

Services

• Intangible

• Produced and consumed simultaneously

• No stored inventory

• Inconsistent product definition

Products

• Tangible

• Produced first

• With inventory

• Rigorous product definition

Trends in OM

• Global focus

• Just-in-time performance

• Supply-chain partnering

• Rapid product development

• Mass customization

• Empowered employees

• Environmentally sensitive production

Lexar Video

• Why do you think Lexar still has wafer

production in the US?

• What possible advantages does Lexar see in

having final assembly done in Asia?

Productivity

• Productivity – ratio of outputs (goods and

services divided by the inputs (resources, such

as labor and capital). The operations

manager’s job is to enhance or improve this

ratio of outputs to inputs

Measuring Productivity

Productivity = Units produced/Input used

Productivity = Output

-------------------------------------------------

Labor + Materials + Energy + Capital

+ Miscellaneous

Improving Productivity

• Reduction in inputs while output remains

constant

• Increase in output while inputs remain

constant

Note: High production DOES NOT imply high

productivity

Improving Productivity

Dependent upon three productivity variables:

• Labor – may be the result of a healthier,

better educated, and better-nourished work

force

• Capital – provides tools for labor to use

• Management – responsible for ensuring that

labor and capital are effectively used to

increase productivity

How can HR help here?

Globalizing Operations

• Reduce costs – ex. Maquiladoras in

Matamoros, Mexico ; BPOs in India and PH

• Improve the supply chain – ex. Athletic shoe

production in Guangzhou, China (production

competence); perfume production in Grasse,

France (supply of flowers)

• Provide better goods and services – reduction

of response time; production of more

culturally-fit products

Globalizing Operations

• Attract new markets –

expanding the life cycle

• Learn to improve

operations – ex. Joint

ventures with foreign

companies (GM-Daewoo,

Sony-Samsung, Nokia-

Siemens, LG-Philips)

• Attract and retain global

talent – offering more

employment, transfer and

promotion opportunities

Strategic OM Decisions: PEOPLE

• Management

• Labor

The issue here is about quality of work life

provided, talent and skills required. Costs of

these must be determined

Strategic OM Decisions:

RESOURCES

CapitalRewards/

Motivation

Strategic OM Decisions:

STRUCTURE

– Layout design - material flows, capacity needs, personnel

levels, technology decisions and inventory requirements

influence layout

– Location selection

– Ergonomics

Rochester Mfg. Co.

Rochester Manufacturing Co. Is considering moving some of its

production from traditional numerically controlled machines to a

flexible machining system (FMS).

Its numerical control machines have been operating in a high-variety,

low-volume, intermittent manner. Machine utilization, as near as it

can determine, is hovering around 10%.

The machine tool salespeople and a consulting firm want to put the

machines together in an FMS.

They believe that a $3,000,000 expenditure on machine and the

transfer machines will handle about 30% of RMC work. There will,

of course, be transition and start-up costs in addition to this.

The firm has not yet entered all its parts into a comprehensive group technology system, but believes that the 30% is a good estimate of products suitable for the FMS.

This 30% should fit very nicely into a “family”. A reduction, because of higher utilization, should take place in the number of pieces of machinery. The firm should be able to go from 15 to about 4 machines and personnel should go from 15 to perhaps as low as 3.

Similarly, floor space reduction will go from 20,000 square feet to about 6,000. Throughput of orders should also improve with this family of part being processed in 1 to 2 days rather than 7 to 10, and annual labor savings should be in the neighborhood of $300,000.

Rochester Mfg. Co.

Rochester Mfg. Co.

Although the projections all look very positive,

an analysis of the project’s return on

investment showed it to be between 10% to

15% per year. The company has traditionally

had an expectation that projects should yield

well over 15% and have payback periods of

substantially less than 5 years.

Questions: As a production manager for RMC,

what do you recommend? Why?

Motivation by Job Design:

The JCM

• Job Characteristics Model (JCM)

– Hackman and Oldham’s concept that any job can be described through

five core job dimensions:

• Skill variety – Requirements for different tasks in the job.

• Task identity – Completion of a whole piece of work.

• Task significance – The job’s impact on others.

• Autonomy – Level of discretion in decision making.

• Feedback – Amount of direct and clear information on

performance.

– The way elements in a job are organized (job design) impacts

motivation, satisfaction and performance.

The Job Characteristics

Model

Core job dimensions affect

→ CriMcal Psychological States,

which affect

→ Personal and Work

Outcomes

Employee growth-need strength

moderates the relationships.

Core Job

Characteristics

Core Job

Characteristics

Psychological

States

Psychological

States

Personal & Work

Outcomes

Personal & Work

Outcomes

Job Enrichment/Enlargement

Alternative Work

Arrangements

Flextime – “flexible work time” allows

employees some discretion over when they

arrive at work and when they leave, as long as

they work a specific number of hours a week.

• Benefits of flextime include reduced

absenteeism and improved work productivity

• However, it’s not applicable to every job.

It’s better with clerical type positions but

not for jobs with significant service

demands.

Alternative Work

Arrangements

Job sharing – this allows two or more individuals to

split a traditional work week between the

sharers.

• Company gets to draw on the talents of more

than one person in a given job.

• Opens up the possibility of acquiring skilled

workers who might otherwise have not been

available on a full-time basis.

• Drawback is it’s very difficult to find

compatible pairs of employees who can

coordinate the intricacies of one job.

Another Alternative:

Telecommuting

• Telecommuting

– Employees do their work at home at least two

days a week on a computer that is linked to their

office.

• The Virtual Office

– Employees work out of their home on a relatively

permanent basis.

• Typical Telecommuting Jobs

– Professional and other knowledge-related tasks

– Routine information-handling tasks

– Mobile activities

Ergonomics and Work Methods

• Worker performance depends on

– Motivation

– Ability

– Work environment

• Foundation laid by Frederick Taylor

– Match employees to task

– Develop work methods

– Establish work standards

Ergonomics

• Study of work

• Also called ‘human factors’

• Involves human-machine interface

• Examples

– Mouse

– Keyboard

Methods Analysis

• Focuses on how task is performed

• Used to analyze

– Movement of body, people, or material

– Activities of people & machines

• Tools

– Process chart

– Flow diagram

– Activity chart

– Operations chart (right-hand, left-hand)

Methods Used to Study

• Movement of individuals or materials (Flow

diagrams or process charts)

• Activity of human and machine and crew

activity (Activity charts)

• Body movement (primarily arms and legs)

(Micro-motion charts)

Cause Maps and Social Network

Analysis ModelCause Maps – mathematical representations of

perceived causal relationships among

variables.

Basic Cause Map Structure

Example of Cause Map:

Sprained Ankle

Sprained

Ankle

Tripped on

Wire

Didn’t See

Wire

Tried to

Step Over

Wire

Carrying

Cartons

Going to

Dept. A

Wire in

Path

AND

Process Control Chart

• Diagrammatic view of the various steps in

sequential order that form an overall process

in an organization

• Flow charts are used in organizations for

depicting the processes in an easily

understandable form.

Start TaskMake a Decision

Yes No

Conduct a

MeetingReport Out

End of Process

KidsParentsBed Time

Initiate Bed Time

Procedures

Are Kids

Ready For

Bed?

Begin Bed

Time Routine

Brush Teeth

Pee

Put On PJs

NO

Meet Need So

Kids Are Ready

For Bed

Read Story

Say Prayers

Tuck In Kids

Get Into Bed

Questions to ask after

Process Flow Chart is made:

Macro level:

– Are all the steps necessary?

– Is any step missing?

– Which are the points of delay?

– Can the process be simplified?

Points to be checked for every input:

– Are there specified, clear, and agreed standards?

– Is there adequate feedback?

Questions to ask after

Process Flow Chart is made:

Points to be checked for every process step

– Is the step necessary?

– Are facilities/equipment adequate?

– Do the operators have necessary skills?

– Is it possible to measure performance?

– What impact will a defect in the process have?

Questions to ask after

Process Flow Chart is made:

Points to be checked for

every output:

– Are there specified,

clear and agreed

standards?

– Is there adequate

feedback?

Flow Diagram

Buyer

You

75 ft.

Flow Diagram of Axle-Stand Production Line

Activity Chart for Two-Person

Oil Change Crew

Operations Chart

Operations Chart (Left Hand/Right Hand)

� = operation; ⇒ = transport; � = inspect; D = delay; ∇ = storage

Left Hand Right Hand

Present Method Symbol Symbol Present Method

1 Reach for bolt Idle

2 Grasp bolt Idle

3 Hold bolt Reach for washer

4 Hold bolt Assemble

� ⇒ � D ∇

� ⇒ � D ∇

� ⇒ � D ∇

� ⇒ � D ∇

� ⇒ � D ∇

� ⇒ � D ∇

� ⇒ � D ∇

� ⇒ � D ∇

Analyzing Processes

• Is this process designed to create a

competitive advantage in terms of

differentiation, response or low cost?

• Does the process eliminate steps that do not

add value?

• Does the process maximize customer value as

perceived by the customer?

• Will the process win orders?

Group Practice

• Use the same groups as before. Identify at

least one process in your company that can be

improved.

• Use either the cause map and the process

flow chart to analyze it.

• Make recommendations.

What is Work Measurement?

• Determining the amount of worker time

required to generate one unit

of output

• Provides labor standards

– Target amount of time required to perform

a job under normal working conditions

Uses of Labor Standards

• Costing labor content of products

• Planning staffing needs

• Cost & time estimates for bids

• Planning production

• Wage-incentive plans

• Employee efficiency

Sources of Labor Standards

• Historical experience

• Time studies

• Predetermined time

standards (MTM)

• Work sampling

Labor Standards - Historical

Experience

• Labor standards are based on how many

labor-hours were needed in past

• Least preferred method

• Advantages

– Easy and inexpensive to obtain standard

• Disadvantages

– Unknown accuracy due to unusual occurrences,

unknown pace etc.

Strong Memorial Hospital:

Caselet

Amy Katherine is a thirty-year-old registered nurse. She has been employed by Strong Memorial Hospital in Rochester, NY for eight years. For the first six years, Amy Katherine worked as a nurse on the neurological surgery floor. She enjoyed this job but after a few years of sporadic schedules and long shifts she decided to switch gears and began working as a nurse in the operating room.

In the beginning, Amy Katherine was excited for the change of pace, as well as the more structured scheduled that was offered while working in the operating room. One year into her job in the operating room however, Amy Katherine began to find her work monotonous and less interesting. She dreaded going to work, and looked forward to her days off. Amy Katherine began to miss her years of work on the neurological surgery floor and longed for a way to integrate the knowledge, skills and abilities she enjoyed by being a nurse to the job that suited her best.

https://wikispaces.psu.edu/display/PSYCH484/Job+Design+Case+Study

Strong Memorial Hospital:

Questions

• Describe what you as HR manager would do in

this case.

• How would you approach this problem with

the operations head (in this case, the director

of nursing)?

Plenary Discussion

• What are the OM principles that can be used

in strategic HR?

• How can HR people help improve operations

and productivity?

Group Report

(For PhD and MA Students)

• Download the latest stockholders’ report of Globe Telecom or PLDT/Smart. (Optional: interview corporate and/or marketing people at these companies)

• Analyze the products, target markets, and the corporate personas.

• What were the opportunities and threats within the industry?

• What were the strategies employed? What were the marketing programs that were done?

• Evaluate the effectiveness of the corporate strategies and the marketing programs.