Topic1-IntroductiontoOM

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INDUSTRIAL MANAGEMENT (MEM 575)

Topic 1: Basic Concepts In Production Management

Lecturer: Pn. Wan Mazlina Wan Mohamed Office: T1-A11-11A

Outline

þ  What Is Industrial Management?

þ  Organizing to Produce Goods and Services

þ  Why Study IM?

þ  What Industrial/Operations Managers Do?

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What Is Industrial/Operations Management?

Production is the creation of goods and services

Industrial/Operations management is the set of activities that creates value in the form of goods and services by transforming inputs

into outputs

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Organizing to Produce Goods and Services

þ  Essential functions:

þ  Marketing – generates demand

þ  Production/operations – creates the product

þ  Finance/accounting – tracks how well the organization is doing, pays bills, collects the money

Organizational Charts

Operations Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security

Finance Investments Security Real estate

Accounting

Auditing

Marketing Loans Commercial Industrial Financial Personal Mortgage

Trust Department

Commercial Bank

Figure 1.1(A) 5


Operations Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science

Finance/ accounting Accounting Payables Receivables General Ledger Finance Cash control International exchange

Airline

Figure 1.1(B)

Marketing Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising

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Marketing Sales promotion Advertising Sales Market research


Operations Facilities Construction; maintenance Production and inventory control Scheduling; materials control Quality assurance and control Supply chain management Manufacturing Tooling; fabrication; assembly Design Product development and design Detailed product specifications Industrial engineering Efficient use of machines, space, and personnel Process analysis Development and installation of production tools and equipment

Finance/ accounting Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall

Manufacturing

Figure 1.1(C)

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Why Study OM?

þ  OM is one of three major functions (marketing, finance, and operations) of any organization

þ  We want (and need) to know how goods and services are produced

þ  We want to understand what operations managers do

þ  OM is such a costly part of an organization

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What Operations Managers Do

þ  Planning

þ  Organizing

þ  Staffing

þ  Leading

þ  Controlling

Basic Management Functions

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Ten Critical Decisions Ten Decision Areas Chapter(s)

þ  Design of goods and services 5 þ  Managing quality 6, Supplement 6 þ  Process and capacity 7, Supplement 7

design þ  Location strategy 8 þ  Layout strategy 9 þ  Human resources and 10, Supplement 10

job design þ  Supply chain 11, Supplement 11

management þ  Inventory management 12, 14, 16 þ  Scheduling 13, 15 þ  Maintenance 17

Table 1.2

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The Critical Decisions þ  Design of goods and services

þ  What good or service should we offer?

þ  How should we design these products and services?

þ  Managing quality

þ  How do we define quality?

þ  Who is responsible for quality?

Table 1.2 (cont.)

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The Critical Decisions

þ  Process and capacity design þ  What process and what capacity will these

products require? þ  What equipment and technology is necessary

for these processes?

þ  Location strategy þ  Where should we put the facility? þ  On what criteria should we base the location

decision?

Table 1.2 (cont.)

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The Critical Decisions þ Layout strategy

þ  How should we arrange the facility? þ  How large must the facility be to meet

our plan? þ Human resources and job design

þ  How do we provide a reasonable work environment?

þ  How much can we expect our employees to produce?

Table 1.2 (cont.)

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The Critical Decisions þ Supply chain management

þ  Should we make or buy this component? þ  Who are our suppliers and who can

integrate into our e-commerce program? þ Inventory, material requirements planning,

and JIT þ  How much inventory of each item should we

have? þ  When do we re-order?

Table 1.2 (cont.)

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The Critical Decisions þ Intermediate and short–term

scheduling þ  Are we better off keeping people on the

payroll during slowdowns? þ  Which jobs do we perform next?

þ Maintenance þ  Who is responsible for maintenance? þ  When do we do maintenance?

Table 1.2 (cont.)

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Where are the OM Jobs?

Figure 1.2

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Feedback loop

Outputs

Goods and

services

Processes

The U.S. economic system transforms inputs to outputs

at about an annual 2.5% increase in productivity per

year. The productivity increase is the result of a

mix of capital (38% of 2.5%), labor (10% of 2.5%), and

management (52% of 2.5%).

The Economic System

Inputs

Labor, capital,

management

Figure 1.7

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Measuring Productivity

•  Productivity is a measure of how efficiently inputs are converted to outputs

Productivity = output/input •  Total Productivity Measure Total Productivity = $sales/inputs $

•  Partial Productivity Measure Partial Productivity = cars/employee

•  Multifactor Productivity Measure

Multi-factor Productivity = sales/total $costs

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þ Measure of process improvement þ Represents output relative to input þ Only through productivity increases

can our standard of living improve

Productivity

Productivity = Units produced

Input used

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Productivity Calculations

Productivity = Units produced

Labor-hours used

= = 4 units/labor-hour 1,000 250

Labor Productivity

One resource input ð single-factor productivity

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Multi-Factor Productivity

Output Labor + Material + Energy + Capital + Miscellaneous

Productivity =

þ  Also known as total factor productivity þ Output and inputs are often expressed

in dollars

Multiple resource inputs ð multi-factor productivity

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Collins Title Productivity

Staff of 4 works 8 hrs/day 8 titles/day Payroll cost = $640/day Overhead = $400/day

Old System:

= Old labor productivity

8 titles/day 32 labor-hrs

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Old System:


= Old labor productivity = .25 titles/labor-hr

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Old System:

14 titles/day Overhead = $800/day New System:


= Old labor productivity

= New labor productivity

= .25 titles/labor-hr


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Old System:



= Old labor productivity = .25 titles/labor-hr


= New labor productivity = .4375 titles/labor-hr

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Old System:


= Old multifactor productivity

8 titles/day $640 + 400

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Old System:

14 titles/day Overhead = $800/day

New System:

8 titles/day $640 + 400

= Old multifactor productivity = .0077 titles/dollar

14 titles/day

$640 + 800 = .0097 titles/dollar = New multifactor

productivity

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Measurement Problems

þ  Quality may change while the quantity of inputs and outputs remains constant

þ  External elements may cause an increase or decrease in productivity

þ  Precise units of measure may be lacking

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Productivity Variables

þ  Labor - contributes about 10% of the annual increase

þ  Capital - contributes about 38% of the annual increase

þ  Management - contributes about 52% of the annual increase

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Key Variables for Improved Labor Productivity

þ  Basic education appropriate for the labor force

þ  Diet of the labor force

þ  Social overhead that makes labor available

þ  Maintaining and enhancing skills in the midst of rapidly changing technology and knowledge

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