Slide 1What is Operations?What is Operations?Why should we study Operations?Role of Operations in the Supply Chain?Some Examples of OM Tasks (Manufacturing vs. Services)Differences between Services and GoodsWhat do you think?A fundamental measure of performance…An exampleAnother exampleImportance of ProductivityThe Impact of ProductivityFor next week…1BA 341 – Lean OperationsDr. Bogdan BichescuWhat is Lean Operations?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 efficiencyWhy 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 organizationRole of Operations in the Supply Chain?5Some 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., Total:Multifactor: etc. ,EnergyOutputor MaterialsOutputor CapitalOutputor LaborOutput UsedResources AllProduced Services & Goods etc. , Materials Labor Outputor CapitalLaborOutputAn exampleOutputs:Finished units - $10,000WIP - $2,500Dividends - $1,000Total Output - $13,500 Inputs:Human - $3,000Material - $153Capital - $10,000Energy - $540Other Expenses - $1,500Total Input - $15,193 Productivity?Total measure?$13,500 / $15,193 =Another exampleWhat is the percentage change in total and partial productivity of labor and materials from 2014 to 2015?2014 2015Total Outputs (units) Sale Price ($/unit)12,5006.2013,2006.80Total Inputs - Labor hrs. - Avg. hourly rate ($/hr) - Materials ($) - Capital ($) - Other ($)2,0008.505,00085,0002,8002,5009.256,80092,5003,750Importance 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 played mainly supporting rolesThe Impact of ProductivityAutomotive study shows (2000):For subcompact cars made in the US, pretax profit per vehicle ranged from $1,464 (Honda) to -$163Why? Differences in labor efficiencies, capital efficiencies and quality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 minutesFor 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 @