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CHAPTER

Operations and Productivity

DISCUSSION QUESTIONS
Discussion questions 1 through 13 appear in the text. 14. 15. 16. 17. Why should one study Operations Management? Who are some of the people who have contributed to the theory and techniques of Operations Management? Briey describe the contributions of the individuals identied in the preceding question. Figure 1.2 outlines the operations, nance/accounting, and marketing functions of three organizations. Prepare a chart similar to Figure 1.2 outlining the same functions for one of the following: (a) a summer camp (b) a small costume jewelry factory Name the ten decision areas of operations management. Name four areas that are signicant to improving labor productivity. The U.S., and indeed much of the world, has been described as a knowledge society. How does this affect productivity measurement and the comparison of productivity between the U.S. and other countries. What are the measurement problems that occur when attempting to measure productivity? Mass customization and rapid product development were identied as current trends in modern manufacturing operations. What is the relationship, if any, between these trends? Can you sight any examples? What are the ve reasons that productivity is difcult to improve in the service sector? Describe some of the actions taken by Taco Bell to increase productivity that have resulted in Taco Bells ability to serve twice the volume with half the labor.

18. 19. 20.

21. 22.

23. 24.

CRITICAL THINKING EXERCISE

Productivity in the United States averaged 2.5% for almost 100 years preceding 1973. Then it dropped to about half of that where it remained for about 25 years. In 1999 and 2000 productivity increases returned to the 2.5% range. To what do you attribute the 25-year drop in productivity?

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PROBLEMS
Problems 1.1 through 1.12 appear in the text. 1.13 John Lucy makes wooden boxes in which to ship motorcycles. John and his three employees invest 40 hours per day making the 120 boxes. (a) What is their productivity? (b) John and his employees have discussed redesigning the process to improve efciency. If they can increase the rate to 125 per day, what would be their new productivity? (c) What would be their increase in productivity? 1.14 Riverside Metal Works produces cast bronze valves on an assembly line. On a recent day, 160 valves were produced during an 8-hour shift. Calculate the labor productivity of the line. 1.15 Kleen Karpet cleaned 65 rugs in October, consuming the following resources: Labor: Solvent: Machine rental: (a) (b) 520 hours at $13 per hour 100 gallons at $5 per gallon 20 days at $50 per day

What is the labor productivity? What is the multifactor productivity?

1.16 David Upton is President of Upton Manufacturing, a producer of Go-Kart tires. Upton makes 1000 tires per day with the following resources: Labor: Raw material: Energy: Capital: (a) (b) (c) 400 hours @ $12.50 per hour 20,000 pounds per day @ $1 per pound $5,000 per day $10,000 per day

What is the labor productivity for these tires at Upton Manufacturing? What is the multifactor productivity for these tires at Upton Manufacturing? What is the percent change in multi-factor productivity if Upton can reduce the energy bill by $1,000 without cutting production or changing any other inputs?

1.17 Browse The Wall Street Journal, the money section of a daily paper, or read business news online. Obtain articles about goods versus services, about productivity, about production technology. Be prepared to share your article in a class discussion. 1.18 Cunningham Performance Auto, Inc. modies 375 autos per year. The manager, Peter Cunningham, is interested in obtaining a measure of overall performance. He has asked you to provide him with a multifactor measure of last years performance as a benchmark for future comparison. You have assembled the following data. Resource inputs were: labor 10,000 hrs., 500 suspension and engine modication kits, and energy 100,000 Kilowatt-hours. Average labor cost last year was $20 per hour, kits cost $1,000 each, and energy costs $3.00 per Kilowatt-hour. What do you tell Mr. Cunningham? 1.19 Lake Charles Seafood makes 500 wooden packing boxes for fresh seafood per day, working in two 10-hour shifts. Due to higher demand, plant managers have decided to operate three eight-hour shifts instead. The plant is now able to produce 650 boxes per day. Calculate the companys productivity before the change in work rules, and after the change. What is the percentage increase in productivity?

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CASE STUDY
ZYCHOL CHEMICALS CORP.*
Bob Richards, the production manager of Zychol Chemicals, in Houston, Texas, is preparing his quarterly report which is to include a productivity analysis for his department. One of the inputs is production data prepared by Sharon Walford, his operations analyst. The report, which she gave him this morning, showed the following: 2000 Production (units) Raw Material Used (barrels of petroleum by-products) Labor Hours Capital Cost Applied To The Department ($) 4,500 700 22,000 $375,000 2001 6,000 900 28,000 $620,000

Bob knew that his labor cost per hour had increased from an average of $13.00 per hour to an average of $14.00 per hour, primarily due to a move by management to become more competitive with a new company that had just opened a plant in the area. He also knew that his average cost per barrel of raw material had increased from $320 and $360. He had concern about the accounting procedures that increased his capital cost from $375,000 and $620,000, but earlier discussions with his boss suggested that there was nothing that could be done about that allocation. Bob wondered if his productivity had increased at all. He called Sharon into the ofce and conveyed the above information to her and asked her to proceed with preparing this part of the report.

DISCUSSION QUESTIONS
1. Prepare the productivity part of the report for Mr. Richards. He probably expects some analysis of productivity inputs for all factors, as well as a multifactor analysis for both years with the change in productivity (up or down) and the amount noted. The producer price index had increased from 120 to 125 and this fact seemed to indicate to Mr. Richards that his costs are too high. What do you tell him are the implications of this change in the producer price index? Managements expectation for departments such as Mr. Richards is an annual productivity increase of 5%. Did he reach this goal?

2.

3.

*Source: Professor, Hank Maddux III, Sam Houston State University.

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