1 - © 2014 Pearson Education, Inc.Operations and .docx

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© 2014 Pearson Education, Inc.
Operations and Productivity
PowerPoint presentation to accompany
Heizer and Render
Operations Management, Eleventh Edition
Principles of Operations Management, Ninth Edition
PowerPoint slides by Jeff Heyl
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OutlineGlobal Company Profile: Hard Rock CafeWhat Is
Operations Management?Organizing to Produce Goods and
Services The Supply ChainWhy Study OM?What Operations
Managers Do
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Outline - ContinuedThe Heritage of Operations
ManagementOperations for Goods and ServicesGrowth of
ServicesService PayThe Productivity ChallengeProductivity
MeasurementProductivity VariablesProductivity and the Service
Sector
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Outline - ContinuedNew Challenges in Operations
ManagementEthics, Social Responsibility, and Sustainability
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Learning Objectives
When you complete this chapter you should be able to:Define
operations managementExplain the distinction between goods
and servicesExplain the difference between production and
productivity
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Learning Objectives
When you complete this chapter you should be able to:Compute
single-factor productivityCompute multifactor
productivityIdentify the critical variables in enhancing
productivity
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Operations Management at Hard Rock CafeFirst opened in
1971Now – 150 restaurants in over 53 countriesRock music
memorabiliaCreates value in the form of good food and
entertainment3,500+ custom meals per day in OrlandoHow does
an item get on the menu?Role of the Operations Manager
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What Is Operations Management?
Production is the creation of goods and services
Operations management (OM) is the set of activities that create
value in the form of goods and services by transforming inputs
into outputs
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Organizing to Produce Goods and ServicesEssential functions:
Marketing – generates demand
Production/operations – creates the product
Finance/accounting – tracks how well the organization is doing,
pays bills, collects the money
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Organizational Charts
Figure 1.1
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Figure 1.1
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Figure 1.1
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The Supply ChainA global network of organizations and
activities that supply a firm with goods and servicesMembers of
the supply chain collaborate to achieve high levels of customer
satisfaction, efficiency and competitive advantage.
Figure 1.2
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Why Study OM?
OM is one of three major functions of any organization, we
want to study how people organize themselves for productive
enterpriseWe want (and need) to know how goods and services
are producedWe want to understand what operations managers
doOM is such a costly part of an organization
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Options for Increasing ContributionTABLE 1.1MARKETING
OPTIONFINANCE /ACCOUNTING OPTIONOM
OPTIONCURRENTINCREASE SALES REVENUE
50%REDUCE FINANCE COSTS 50%REDUCE PRODUCTION
COSTS 20%Sales$100,000$150,000$100,000$100,000Cost of
goods–80,000–120,000–80,000–64,000Gross
margin20,00030,00020,00036,000Finance costs–6,000–6,000–
3,000–6,000Subtotal14,00024,00017,00030,000Taxes at 25%–
3,500–6,000–4,200–7,500Contribution$ 10,500$ 18,000$
12,750$ 22,500
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What Operations
Managers Do
Basic Management
FunctionsPlanningOrganizingStaffingLeadingControlling
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Ten Strategic DecisionsTABLE 1.2DECISIONCHAPTER(S)1.
Design of goods and services5, Supplement 52. Managing
quality6, Supplement 63. Process and capacity design7,
Supplement 74. Location strategy85. Layout strategy96.
Human resources and job design 107. Supply-chain

management11, Supplement 118. Inventory management12, 14,
169. Scheduling13, 1510. Maintenance17
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The Strategic Decisions
Design of goods and servicesDefines what is required of
operationsProduct design determines quality, sustainability and
human resources
Managing qualityDetermine the customer’s quality
expectationsEstablish policies and procedures to identify and
achieve that quality
Table 1.2 (cont.)
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Process and capacity designHow is a good or service
produced?Commits management to specific technology, quality,
resources, and investment.
Location strategyNearness to customers, suppliers, and
talent.Considering costs, infrastructure, logistics, and
government.
Table 1.2 (cont.)
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Layout strategyIntegrate capacity needs, personnel levels,
technology, and inventoryDetermine the efficient flow of
materials, people, and information.
Human resources and job designRecruit, motivate, and retain
personnel with the required talent and skills.Integral and
expensive part of the total system design.
Table 1.2 (cont.)
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Using this and subsequent slides, you might go through in more
detail the decisions of Operations Management. While greater
detail is provided by these slides than the earlier one, you may
still decide to have the students contribute examples from their
own experience.
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Supply-chain managementIntegrate supply chain into the firm’s
strategy.Determine what is to be purchased, from whom, and
under what conditions.
Inventory managementInventory ordering and holding
decisions.Optimize considering customer satisfaction, supplier
capability, and production schedules.
Table 1.2 (cont.)
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SchedulingDetermine and implement intermediate- and short-
term schedules.Utilize personnel and facilities while meeting
customer demands.
MaintenanceConsider facility capacity, production demands,
and personnel.Maintain a reliable and stable process.
Table 1.2 (cont.)
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Where are the OM Jobs?Technology/methodsFacilities/space
utilizationStrategic issuesResponse timePeople/team
developmentCustomer serviceQualityCost reductionInventory
reductionProductivity improvement
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Opportunities
Figure 1.3

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CertificationsAPICS, the Association for Operations
ManagementAmerican Society for Quality (ASQ)Institute for
Supply Management (ISM)Project Management Institute
(PMI)Council of Supply Chain Management
ProfessionalsCharter Institute of Purchasing and Supply (CIPS)
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Significant Events in OM
Figure 1.4
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The Heritage of OMDivision of labor (Adam Smith 1776;
Charles Babbage 1852)Standardized parts (Whitney
1800)Scientific Management (Taylor 1881)Coordinated
assembly line (Ford/ Sorenson 1913)Gantt charts (Gantt
1916)Motion study (Frank and Lillian Gilbreth 1922)Quality
control (Shewhart 1924; Deming 1950)

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The Heritage of OMComputer (Atanasoff 1938)CPM/PERT
(DuPont 1957, Navy 1958)Material requirements planning
(Orlicky 1960)Computer aided design (CAD 1970)Flexible
manufacturing system (FMS 1975)Baldrige Quality Awards
(1980)Computer integrated manufacturing (1990)Globalization
(1992)Internet (1995)
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Eli WhitneyBorn 1765; died 1825In 1798, received government
contract to make 10,000 musketsShowed that machine tools
could make standardized parts to exact specificationsMusket
parts could be used in any musket
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Frederick W. TaylorBorn 1856; died 1915Known as ‘father of
scientific management’In 1881, as chief engineer for Midvale

Steel, studied how tasks were doneBegan first motion and time
studiesCreated efficiency principles
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Taylor’s Principles
Management Should Take More Responsibility for:Matching
employees to right jobProviding the proper trainingProviding
proper work methods and toolsEstablishing legitimate
incentives for work to be accomplished
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Frank & Lillian GilbrethFrank (1868-1924); Lillian (1878-
1972)Husband-and-wife engineering teamFurther developed
work measurement methodsApplied efficiency methods to their
home and 12 children! Book & Movie: “Cheaper by the Dozen,”
“Bells on Their Toes”
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Born 1863; died 1947In 1903, created Ford Motor CompanyIn

1913, first used moving assembly line to make Model
TUnfinished product moved by conveyor past work stationPaid
workers very well for 1911 ($5/day!)
Henry Ford
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W. Edwards DemingBorn 1900; died 1993Engineer and
physicistCredited with teaching Japan quality control methods
in post-WW2Used statistics to analyze processHis methods
involve workers in decisions
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Contributions FromHuman factorsIndustrial
engineeringManagement scienceBiological sciencePhysical
sciencesInformation technology
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Operations for

Goods and ServicesManufacturers produce tangible product,
services often intangibleOperations activities often very
similarDistinction not always clearFew pure services
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Differences Between Goods and ServicesTABLE
1.3CHARACTERISTICS OF SERVICESCHARACTERISTICS
OF GOODSIntangible: Ride in an airline seat Tangible: The
seat itself Produced and consumed simultaneously: Beauty salon
produces a haircut that is consumed as it is produced Product
can usually be kept in inventory (beauty care products) Unique:
Your investments and medical care are unique Similar products
produced (iPods) High customer interaction: Often what the
customer is paying for (consulting, education) Limited customer
involvement in production Inconsistent product definition: Auto
Insurance changes with age and type of car Product
standardized (iPhone) Often knowledge based: Legal, education,
and medical services are hard to automate Standard tangible
product tends to make automation feasible Services dispersed:
Service may occur at retail store, local office, house call, or via
internet. Product typically produced at a fixed facility Quality
may be hard to evaluate: Consulting, education, and medical
services Many aspects of quality for tangible products are easy
to evaluate (strength of a bolt) Reselling is unusual: Musical
concert or medical careProduct often has some residual value
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U.S. Agriculture, Manufacturing, and Service Employment
Figure 1.5

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Organizations in Each Sector
TABLE 1.4SECTOREXAMPLEPERCENT OF
ALL JOBSService SectorEducation, Legal, Medical, Other
Trade (retail, wholesale)
Utilities, Transportation
Professional and Business Services
Finance, Information, Real Estate
Food, Lodging, Entertainment
Public AdministrationSan Diego Zoo, Arnold Palmer Hospital
Walgreen's, Walmart, Nordstrom
Pacific Gas & Electric, American Airlines
Snelling and Snelling, Waste Management, Inc.
Citicorp, American Express, Prudential, Aetna
Olive Garden, Motel 6, Walt Disney
U.S., State of Alabama, Cook County 13.2
13.8
3.3
10.1
21.0
9.0
15.5
85.9Manufacturing SectorGeneral Electric, Ford, U.S. Steel,
Intel 8.2Construction SectorBechtel, McDermott
4.1AgricultureKing Ranch 1.4Mining SectorHomestake Mining
.4Grand Total100.0

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Service PayPerception that services are low-paying42% of
service workers receive above average wages14 of 33 service
industries pay below averageRetail trade pays only 61% of
national averageOverall average wage is 96% of the average
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Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided
by the inputs (resources such as labor and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output only and not a measure of
efficiency
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The Economic System
Figure 1.6
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Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time.
Some improvements:Stop requiring signatures on credit card
purchases under $25Saved 8 seconds per transactionChange the
size of the ice scoopSaved 14 seconds per drinkNew espresso
machinesSaved 12 seconds per shot
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Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time.
Some improvements:Stop requiring signatures on credit card
purchases under $25Saved 8 seconds per transactionChange the
size of the ice scoopSaved 14 seconds per drinkNew espresso
machinesSaved 12 seconds per shot
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Measure of process improvementRepresents output relative to
inputOnly through productivity increases can our standard of
living improve
Productivity
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Productivity Calculations
Labor Productivity
-factor productivity
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Multi-Factor Productivity Also known as total factor
productivityOutput and inputs are often expressed in dollars
-factor productivity
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Collins Title Productivity
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= .25 titles/labor-hr
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= .0077 titles/dollar
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Measurement ProblemsQuality may change while the quantity of
inputs and outputs remains constantExternal elements may
cause an increase or decrease in productivityPrecise units of
measure may be lacking

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Productivity VariablesLabor - contributes about 10% of the
annual increaseCapital - contributes about 38% of the annual
increaseManagement - contributes about 52% of the annual
increase
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Key Variables for Improved Labor ProductivityBasic education
appropriate for the labor forceDiet of the labor forceSocial
overhead that makes labor availableChallenge is in maintaining
and enhancing skills in the midst of rapidly changing
technology and knowledge
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Labor Skills
About half of the 17-year-olds in the U.S. cannot correctly
answer questions of this type
Figure 1.7

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Capital
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ManagementEnsures labor and capital are effectively used to
increase productivityUse of knowledgeApplication of
technologiesKnowledge societiesDifficult challenge
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Productivity and the Service SectorTypically labor
intensiveFrequently focused on unique individual attributes or
desiresOften an intellectual task performed by
professionalsOften difficult to mechanize and automateOften
difficult to evaluate for quality
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Productivity at Taco Bell
Improvements:Revised the menu Designed meals for easy
preparationShifted some preparation to
suppliersEfficient layout and automationTraining and employee
empowermentNew water and energy saving grills
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Productivity at Taco Bell
Improvements:
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New Challenges in OMGlobal focusSupply-chain
partneringSustainabilityRapid product developmentMass
customizationJust-in-time performanceEmpowered employees
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Ethics, Social Responsibility, and Sustainability
Challenges facing operations managers:Develop and produce
safe, high-quality green productsTrain, retrain, and motivate
employees in a safe workplaceHonor stakeholder commitments
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All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher.
Printed in the United States of America.
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Using this and subsequent slides, you might go through in more
detail the decisions of Operations Management. While greater
detail is provided by these slides than the earlier one, you may
still decide to have the students contribute examples from their
own experience.
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10 PART 1 | INTRODUCTION TO OPERATIONS
MANAGEMENT
By 1913, Henry Ford and Charles Sorensen combined what they
knew about standardized
parts with the quasi-assembly lines of the meatpacking and
mail-order industries and added
the revolutionary concept of the assembly line, where men stood
still and material moved.
Quality control is another historically signi!cant contribution to
the !eld of OM. Walter
Shewhart (1924) combined his knowledge of statistics with the
need for quality control and
provided the foundations for statistical sampling in quality
control. W. Edwards Deming (1950)
believed, as did Frederick Taylor, that management must do
more to improve the work environ-
ment and processes so that quality can be improved.
Operations management will continue to progress with
contributions from other disci-
plines, including industrial engineering, statistics, management,
and economics, contribute to
improved models and decision making.
Innovations from the physical sciences (biology, anatomy,
chemistry, physics) have also
contributed to advances in OM. These innovations include new
adhesives, faster integrated
circuits, gamma rays to sanitize food products, and higher-
quality glass for plane and plasma

TVs. Innovation in products and processes often depends on
advances in the physical
sciences.
Especially important contributions to OM have come from
information technology, which we
de!ne as the systematic processing of data to yield information.
Information technology—with
wireless links, Internet, and e-commerce—is reducing costs and
accelerating communication.
Decisions in operations management require individuals who
are well versed in analytical
tools, in information technology, and often in one of the
biological or physical sciences. In
this textbook, we look at the diverse ways a student can prepare
for a career in operations
management.
Early Concepts
1776–1880
Labor Specialization
(Smith, Babbage)
Standardized Parts (Whitney)
Scientific Management Era
1880–1910
Gantt Charts (Gantt)
Motion & Time Studies
(Gilbreth)
Process Analysis (Taylor)
Queuing Theory (Erlang)
Mass Production Era
1910–1980
Moving Assembly Line

(Ford/Sorensen)
Statistical Sampling
(Shewhart)
Economic Order
Quantity (Harris)
Linear Programming
PERT/CPM (DuPont)
Material Requirements
Planning (MRP)
Mass Customization Era
1995–2005
Internet/E-Commerce
Enterprise Resource Planning
International Quality Standards
(ISO)
Finite Scheduling
Supply Chain Management
Mass Customization
Build-to-Order
Globalization Era
2005–2020
Global Supply Chains
Growth of Transnational
Organizations
Instant Communications
Sustainability
Ethics in a Global Workforce
Logistics
Lean Production Era
1980–1995
Just-in-Time (JIT)
Computer-Aided Design
(CAD)

Electronic Data Interchange
(EDI)
Total Quality Management
(TQM)
Baldrige Award
Empowerment
Kanbans
Globalization Focus
Figure 1.4
Significant Events in Operations Management
2123_Heizer_Ch01_pp001-026.indd 10 25/09/12 8:05 PM
Running head: IMPERFECT PRODUCE 1
IMPERFECT PRODUCE 7
Imperfect Produce
510 – Operations Management
William Taylor
Bruna Martins
Southern States University
Introduction

The main reason why I decided to choose the Imperfect Produce
Business, especially on the fruits and vegetables is to help
reduce the waste of produce from the farm.
Imperfect produce business majorly deals with the fruits and the
vegetables that are seen to be ugly from their physical outlook
and the producers are isolating them from the best ones and in
most cases, they go at waste, but they are nutrients just like the
other ones which are taken to the store. Therefore, it is better
not to waste food but instead ensure that there are people who
could still realize that these kinds of fruits and vegetables are
just of the same value compared to the perfect product, but the
difference is only that they look ugly and these may not attract
customers when they are packed in the store. Imperfect Produce
is a business that focuses its main aim to fight the food waste
which is common by identifying a home for the ugly produce
and also some of the imperfect grocery items (Devin &
Richards, 2018).
The imperfect produce business helps to source the products
that are already isolated to go to waste from the farmers, and
they are delivered to the clients but on a lower price as
compared to the ones which have been packed to the store. The
business is done by through door to door delivery to make it sell
because most of the people are reluctant to buy such produces
but when home delivery is done with a little lower price they
buy the product. One important thing is that imperfect produce
especially the vegetables, and the fruits are nutritious and
delicious like the ones which are put in the store, and that is the
main reason why they should not go at waste but ensure that
they are also consumed because not everyone can afford the
ones in the store (Foster, 2018).
Marketing functions of the imperfect produce
Marketing is a vital aspect of every business to ensure that the
business becomes successful at the end of the day. Marketing is
involving characters such as packaging, research and the best
way to present the products and services to the clients. When

there is a good marketing strategy, then, the customers get
informed, and this helps to boost the sales of the products and
the services. One of the marketing functions which is going to
associate with my business is to ensure that research is well
carried out to help me find my targeted clients. Through
research, I have realized that most of the people become
interested in my business of the imperfect produce since the
prices of the products are little lower and in most cases, we deal
with orders and deliver them door to door (Lynch, Berardy &
Wharton, 2019).
Another marketing function that will be associated with my
business is price setting, in the business, we have decided to
offer our products at lower prices with 30% compared to the
perfect produce sold in the stores. This will help to have a more
significant number of the customers because we also get the
products at lower prices because these are fruits and vegetables
that the farmers have isolated to go at waste, but in the real
sense, they are not having any problem that can affect people.
The business will also be associated with the promotional
channels as the marketing function. We will ensure that the
business is fully advertised to get clients and also to keep the
existing customers to be able to come back. We will use social
media platforms to ensure that we can reach several good people
to buy our products. We will also use outlets to ensure that
those who are not able to access the social media are also
informed about our imperfect produce so that we can get clients
all rounds (Moreno, Cunha & Parisio, 2016).
Operation functions of the business
Operation of the business ensures that the business can run and
operate by the aim of earning money. The operation of the
business makes it possible to understand the system required for
the business, the appropriate people for the business, the
process that is necessary for the business to run smoothly and
the essential equipment needed in the business. One of the
business operations functions that will be associated with this

type of business is the use of technology. Our business will be
able to create e-commerce as one of the ways that will have to
make our products to reach most of the people. This will ensure
that the number of people can get our products without any
problem (Plazzotta, Manzocco & Nicoli, 2017).
The other operation function that will be involved in this
business is to ensure that there is a well-established process of
delivering our products to the clients. In most cases, our
business will be using an online method to make orders and
provide the products to them. This will help to promote our
business since we will be able to access several good people in
the market. The benefit of using online software than manual in
our business is to ensure that our business can keep the records
of our clients well. And also be able to get the comments of the
clients and other people concerning our business so that we can
be able to improve the services when the customers are not
contented (Porter, Reay, Bomberg & Higgins, 2018).
Location is also another operation function that will be
associated in our business, our business we will be located in
most of the town centres and market places since we are dealing
food that needs to go fast because they can get spoiled. We had
also said that majority of the clients would also be able to find
our services online by making an order through online and
payments and then the goods are delivered to the client in his or
destination. This will ensure that the business caters for many
people in the market who are interested and have realized the
importance of imperfect vegetable and fruit (Devin & Richards,
2018).
The financial function of the business
Financial function of the business is usually the activity that is
concerned with the process of planning and controlling of the
resources involving finance in the business. We have realized
finances acts as the lifeblood of every business, and therefore
without fiancés, the business will not be able to run smoothly
and meets its targets. In our business, one of the financial
functions that will be embraced is to ensure that there I

strategic planning and budgeting in the business. Finances in
the business will be able to help the business to have objectives.
The fiancés in the business will enable our business to be able
to hire employees who are ready to work and ensure that the
target of the business is met. It will also help our business to be
able to do carry out the marketing process to reach clients
(Foster, 2018).
The other financial function that will be associated with our
business is to ensure that there is profit planning and cost
control. The primary reason for carrying out a business to make
profits at the end of the day, finances will help the business to
identify some of the possible ways of improving the benefit in
the business. For instance the fiancés we help us to acquire a
variety of fruits and vegetables from different farmers at lower
prices since the products are isolated and sell the products to
our customers with relatively lower rates compared to the
market prices and this will attract many of the clients hence the
business will be able to make a profit. Managing unavoidable
risks is also another function of the finance is the business since
this will be in the right stage to help in analyzing some of the
dangers that might occur in the international markets where we
are planning to expand our business to. The business will also
be able to check the credit standing of the clients and also be
able to adhere to the loan terms that the business may take. It
will also help the business to have a variety of financial data to
assist in making some of the financial decisions in the business
(Lynch, Berardy & Wharton, 2019).
Conclusion
The business of imperfect produce is one of the unique
businesses that will attract most of the people since we have
realized that a lot of good foods are wasted. These foods can
still serve people because most of the farmers believe that if
they don't present good fruits and vegetables to the market, then
no one is willing to buy them. This idea came to ensure that
some of the people who are not able to afford the perfect food
in the market can still come for these isolated fruits and

vegetables. Because they are bad, it is only that they don't look
impressing for the farmers to present them to their clients, but
in real sense, they have the same nutrition value to the ones
which are considered to be perfect (Foster, 2018).
References
Devin, B., & Richards, C. (2018). Food waste, power, and
corporate social responsibility in the Australian food supply
chain. Journal of Business Ethics, 150(1), 199-210.
Foster, A. (2018). Imperfect Produce Pricing: Relationships
between Price Percent Discount and Demographic Traits of
Customers.
Lynch, H., Berardy, A., & Wharton, C. (2019). Food production
and dietary patterns. In Environmental Nutrition (pp. 101-122).
Academic Press.
Moreno, M. G. M., Cunha, M. M., & Parisio, F. (2016). Remote
preparation of W states from imperfect bipartite sources.
Quantum Information Processing, 15(9), 3869-3879.
Plazzotta, S., Manzocco, L., & Nicoli, M. C. (2017). Fruit and
vegetable waste management and the challenge of fresh-cut
salad. Trends in Food Science & Technology, 63, 51-59.
Porter, S. D., Reay, D. S., Bomberg, E., & Higgins, P. (2018).
Avoidable food losses and associated production-phase
greenhouse gas emissions arising from the application of
cosmetic standards to fresh fruit and vegetables in Europe and
the UK. Journal of Cleaner Production, 201, 869-878.

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