What is Lean Operations BA 341 Lean Operations Dr Bogdan Bichescu 1 What is Operations Let s look at some examples What is Operations OM focuses on the design execution and improvement of processes used to deliver the firms products and services Emphasizes effectiveness and efficiency Why should we study Operations Operations is an essential business function that can represent an important source of competitive advantage Provides a systemic approach to studying all organizational processes regardless of function e g Theory of Constraints Fundamental building block in the overall understanding of an Role of Operations in the Supply Chain 5 Some Examples of OM Tasks Manufacturing vs Services Differences between Services and Goods Some differentiating characteristics Tangible Goods vs Intangible Services Level of customer interaction Level of heterogeneity how different and variability uniqueness Level of perishability time dependence The way in which quality is designed and assessed Supporting facilities Services only Facilitating goods common to both Explicit and implicit services Services only What do you think If you drop it on your foot it won t hurt you Good or service Services never include goods and goods never include services True or false A fundamental measure of performance Productivity Measures Partial e g Output or Output or Output or Output etc Labor Capital Materials Energy Goods Services Produced Total All Resources Used Output Output Multifactor Labor Capital or Labor Materials etc An example Outputs Finished units 10 000 WIP 2 500 Dividends Inputs 1 000 Total Output Human 3 000 13 500 Material 153 Capital 10 000 Energy 540 Other Expenses 1 500 Total Input 15 193 Productivity Total measure 13 500 15 193 Another example Total Outputs units Sale Price unit Total Inputs Labor hrs Avg hourly rate hr Materials Capital Other 2014 12 500 6 20 2015 13 200 6 80 2 000 8 50 5 000 85 000 2 800 2 500 9 25 6 800 92 500 3 750 What is the percentage change in total and partial productivity of labor and materials from 2014 to 2015 Importance of Productivity Robert Reno Newsday columnist More than anything productivity determines how well we eat how many appliances we can stuff in our homes how many luxuries we can afford Productivity allows wages to grow without igniting inflation John Cunniff Associated Press If you had to single out just one explanation for the economic good times of the past decade you could not go wrong by choosing productivity Other explanations The Impact of Productivity Automotive study shows 2000 Why Differences in labor efficiencies capital efficiencies and quality For subcompact cars made in the US pretax profit per vehicle ranged from 1 464 Honda to 163 Labor hours per car in assembly ranged from 17 73 Toyota Corolla to 38 16 for some similar subcompacts Capital cost ranged from 552 dollars per vehicle Honda to 1 694 for another manufacturer These differences start in basic operations Example Pieces per hour per stamping machine ranged from 711 Toyota to 445 per hour Die changeover time ranged from 5 minutes Mistsubishi to 71 minutes For next week Read class notes textbook and rework class and textbook productivity examples on your own Start work on the first assignment available on MyOMLab which is due at midnight 11 59pm on 8 29 Start work on the first Packback QA session which is also due on 8 29 midnight