OM slides

1.  Lean Thinking…
 Process Thinking…
 Process Innovation…
 Value Chain, Value Creation and Value Sharing..
 Human Error Reduction …Design
 Universal and portable Products
 Perfection…
How to Manage World Class Operations?

2. Productivity
 Partial measures
◦ output/(single input)
 Multi-factor measures
◦ output/(multiple inputs)
 Total measure
◦ output/(total inputs)
Productivity =
Outputs
Inputs

3. Productivity Growth
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
Productivity Growth =

4. Measures of Productivity
Partial Output Output Output Output
measures Labor Machine Capital Energy
Multifactor Output Output
measures Labor + Machine Labor + Capital + Energy
Total Goods or Services Produced
measure All inputs used to produce them

5. Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Energy
Productivity
Units of output per dollar input
Dollar value of output per dollar input
Capital
Productivity
Units of output per machine hour
machine hour
Machine
Productivity
Units of output per labor hour
Units of output per shift
Value-added per labor hour
Labor
Productivity
Examples of Partial Productivity Measures

6. Example
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the
labor productivity?

7. Example--Labor Productivity
10,000 units/500hrs = 20 units/hour
or we can arrive at a unitless figure
(10,000 unit* $10/unit)/(500hrs* $9/hr) =
22.22
Can you think of any advantages or
disadvantages of each approach?

8. Example--Multifactor Productivity
MFP = Output
Labor + Materials
MFP = (10,000 units)*($10)
(500)*($9) + ($5000) + ($25000)
MFP = 2.90

9. Annual Productivity Growth
-2
0
2
4
6
77 79 81 83 85 87 89 91 93 95 97 99
Year
Annual%
Change

10. Factors Affecting Productivity
Capital Quality
Technology Management

11. Factors Affecting Productivity
 Standardization
 Use of Internet
 Computer viruses
 Searching for lost or misplaced items
 Scrap rates
 New workers
 Cuts in health benefits

12. Factors Affecting Productivity
 Safety
 Shortage of IT workers
 Layoffs
 Labor turnover
 Design of the workspace
 Incentive plans that reward productivity

13. Improving Productivity
 Develop productivity measures
 Determine critical (bottleneck) operations
 Develop methods for productivity
improvements
 Establish reasonable goals
 Get management support
 Measure and publicize improvements
 Don’t confuse productivity with efficiency

14. Bottleneck Operation
Operation
Bottleneck
Operation
Operation
Operation
Operation