Operations and Productivity Part III

100) Define operations management. Will your definition accommodate both manufacturing and service operations? Answer: Operations management can be defined as the management of all activities directly related to the creation of goods and/or services through the transformation of inputs into outputs. Yes. 101) Identify the items that Fredrick W. Taylor believed management should be more responsible for. Answer: He believed that management should be more responsible for matching employees to the right job, providing the proper training, providing proper work methods and tools, and establishing legitimate incentives for work to be accomplished. 102) Operations managers should be well versed in what disciplines in order to make good decisions? Answer: Management science, information technology, and often one of the biological or physical sciences. 103) Why are services typically more difficult to standardize, automate, and make efficient? Answer: Services typically require customer interaction, which makes it difficult to standardize, automate, and make efficient. 104) How do services differ from goods? Identify five ways. Answer: Pick from the following: a service is usually intangible; it is often produced and consumed simultaneously; often unique; it involves high customer interaction; product definition is inconsistent; often knowledge-based; and frequently dispersed. 105) Services are often knowledge-based. Provide two examples, and explain why they are knowledge-based. Answer: Answers will vary, but the textbook used educational, medical, and legal services. 106) Why are organizations changing from batch (large) shipments to just-in-time (JIT) shipments? Answer: Organizations are switching to JIT shipments because inventory requires a large financial investment, and impedes the responsiveness to changes in the marketplace. 107) Why are organizations becoming more global? Answer: Organizations are becoming more global with the decline in the cost of communication and transportation. Additionally, resources—capital, material, talent, and labour—are also becoming more global. 108) Identify the three productivity variables used in the text. Answer: The three common variables are labour, capital, and management. 109) What is a knowledge society? Answer: A knowledge society is one in which much of the labour force has migrated from manual work to work based on knowledge. 110) Why are operations managers faced with ethical and social challenges? Answer: Businesses have diverse stakeholders, which include owners, employees, lenders, and distributors. These stakeholders hold conflicting perspectives. 111) What are some of the ethical and social challenges faced by operations managers?Answer: Efficiently developing and producing safe quality products; maintaining a clean environment; providing a safe workplace; honoring community commitments. 112) As the administrative manager in a law office, you have been asked to develop a system for evaluating the productivity of the 15 lawyers in the office. What difficulties are you going to have in doing this, and how are you going to overcome them? Answer: Productivity measures for a law office are difficult. Simple criteria, like number of cases processed, fail to consider complexity of the case. Even counting wins is difficult, as many cases are settled with some sort of compromise. External elements such as the quality of the opposing counsel and the tenacity of the opposition also make counting look rather silly. Categories of cases can help—(i.e., uncontested divorce, no personal injury auto case, etc.) However, many firms end up counting hours billed. This in turns leads to other problems, as noted by the number of false billing cases. 113) Susan has a part-time "cottage industry" producing seasonal plywood yard ornaments for resale at local craft fairs and bazaars. She currently works 8 hours per day to produce 16 ornaments. a. What is her productivity? b. She thinks that by redesigning the ornaments and switching from use of a wood glue to a hotglue gun she can increase her total production to 20 ornaments per day. What is her new productivity? c. What is her percentage increase in productivity? Answer: a. 16 ornaments/8 hours = 2 ornaments/hour b. 20 ornaments/8 hours = 2.5 ornaments/hour c. Change in productivity = 0.5 ornaments/hour; percent change = 0.5/2 = 25% 114) A firm cleans chemical tank cars in the Edmonton area. With standard equipment, the firm typically cleaned 70 chemical tank cars per month. They utilized 10 gallons of solvent, and two employees worked 20 days per month, 8 hours a day. The company decided to switch to a larger cleaning machine. Last April, they cleaned 60 tank cars in only 15 days. They utilized 12 gallons of solvent, and the two employees worked 6 hours a day. 1. What was their raw material and their labour productivity with the standard equipment? 2. What is their raw material and their labour productivity with the larger machine? 3. What is the change in each productivity measure? Answer: Resource Solvent Labour Standard Equipment =7 = 0.22 Larger Machine =5 = .33 Percent Change = -28.57% = 50% 115) The Dulac Box plant produces wooden packing boxes to be used in the local seafood industry. Current operations allow the company to make 500 boxes per day, in two 8-hour shifts (250 boxes per shift). The company has introduced some small changes in equipment, and conducted appropriate job training, so that production levels have risen to 300 boxes per shift. These changes did not require any change in the amount of capital spending or energy use. What is the firm's new labour productivity? Answer: 600 boxes per day / 16 hours = 37.5 boxes per hour 116) Mark's Ceramics spent $4000 on a new kiln last year in the belief that it would cut energy usage 25% over the old kiln. This kiln is an oven that turns "greenware" into finished pottery. Mark is concerned that the new kiln requires extra labour hours for its operation. Mark wants to check the energy savings of the new oven, and also to look over other measures of their productivity to see if the change really was beneficial. Mark has the following data to work with: Production (finished units) Greenware (pounds) Labour (hrs) Capital ($) Energy (kWh) Last Year 4000 5000 350 15000 3000 This Year 4000 5000 375 19000 2600 Were the modifications beneficial? Answer: The energy modifications did not generate the expected energy savings; also, labour and capital productivity decreased. Resource Labour Capital Energy Last Year 4000 / 350 = 11.43 4000 / 15000 = 0.27 4000 / 3000 = 1.33 This Year Change Pct. Change 4000 / 375 = 10.67 -0.76 -6.7% 4000 / 19000 = .21 -0.060 -22.2% 4000 / 2600 = 1.54 0.21 15.4% 117) Martin Manufacturing has implemented several programs to improve its productivity. They have asked you to evaluate the firm's productivity by comparing this year's performance with last year's. The following data are available: Output Labour Hours Utilities Capital Last Year 10,500 units 12,000 $7,600 $83,000 This Year 12,100 units 13,200 $8,250 $88,000 Has Martin Manufacturing improved its productivity during the past year? Answer: Productivity improved in all three categories this year; utilities showed the greatest increase, and labour the least. Resource Last Year 10500 / 12000 = Labour 0.88 10500 / 7600 = Capital 1.38 10500 / 83000 = Energy 0.13 This Year Change Pct. Change 12100 / 13200 = 0.9 0.04 4.8% 12100 / 8250 = 1.47 0.09 6.2% 12100 / 88000 = 0.14 0.01 7.69% 118) Felicien grows mirlitons (that's Cajun for Chayote squash) in his 100 by 100 foot garden. He then sells the crop at the local farmers' market. Two summers ago, he was able to produce and sell 1200 pounds of mirlitons. Last summer, he tried a new fertilizer that promised a 50%increase in yield. He harvested 1900 pounds. Did the fertilizer live up to its promise? Answer: Since the productivity gain was 58.3%, not 50%, the fertilizer was at least as good as advertised. Two Summers ago 1200 ÷ 10,000 = .12 1bs/sq. ft Last Summer 1900 ÷ 10,000 = .19 lbs/sq. ft Change (.19 - .12) ÷ .12 = 58.3% 119) The Dulac Box plant produces wooden packing boxes to be used in the local seafood industry. Current operations allow the company to make 500 boxes per day, in two 8-hour shifts (250 boxes per shift). The company has introduced some moderate changes in equipment, and conducted appropriate job training, so that production levels have risen to 300 boxes per shift. Labour costs average $10 per hour for each of the 5 full-time workers on each shift. Capital costs were previously $3,000 per day, and rose to $3,200 per day with the equipment modifications. Energy costs were unchanged by the modifications, at $400 per day. What is the firm's multifactor productivity before and after the changes? Answer: MFP before: 500 boxes / ($10 × 5 × 16 + $3000 + $400) = 500 / 4200 = 0.119 boxes/dollar MFP after: 600 boxes / ($10 × 5 × 16 + $3200 + $400) = 600 / 4400 = 0.136 boxes/dollar 120) Gibson Products produces cast bronze valves for use in offshore oil platforms. Currently, Gibson produces 1600 valves per day. The 20 workers at Gibson work from 7 a.m. until 4 p.m., with 30 minutes off for lunch and a 15 minute break during the morning work session and another at the afternoon work session. Gibson is in a competitive industry, and needs to increase productivity to stay competitive. They feel that a 20% increase is needed. Gibson's management believes that the 20% increase will not be possible without a change in working conditions, so they change work hours. The new schedule calls on workers to work from 7:30 a.m. until 4:30 p.m., during which workers can take one hour off at any time of their choosing. Obviously, the number of paid hours is the same as before, but production increases, perhaps because workers are given a bit more control over their workday. After this change, valve production increased to 1800 units per day. a. Calculate labour productivity for the initial situation. b. Calculate labour productivity for the hypothetical 20% increase. c. What is the productivity after the change in work rules? d. Write a short paragraph analyzing these results. Answer: (a) Workers are active for eight hours per day; labour productivity is 10 valves/hour (b) If Productivity rises by 20%, to 12 valves/hour; output would be 12 × 8 × 20 = 1920 (c) New productivity is 1800 / (20 × 8) = 11.25 valves/hour (d) Gibson did not gain the desired 20% increase in productivity, but they did gain over 11%, without extra equipment or energy, and without increasing the labour cost. 121) A local university is considering changes to its class structure in an effort to increase professor productivity. The old schedule had each professor teaching 5 classes per week, with each class meeting an hour per day on Monday, Wednesday, and Friday. Each class contained 20 students. The new schedule has each professor teaching only 3 classes, but each class meets daily for an hour. New classes contain 50 students. a. Calculate the labour productivity for the initial situation (students/hour). b. Calculate the labour productivity for the schedule change (students/hour). c. Are there any ethical considerations that should be accounted for? d. Suppose that each teacher also is required to have 2 hours of Office Hours each day he/she taught class. Is the schedule change a productivity increase? Answer: (a) Professors teach 100 students in 15 hours or 6.67 students/hour. (b) Professors teach 150 students in 15 hours or 10 students/hour. (c) Responses should focus on honoring stakeholder commitment and can include students per professor ratio, class sizes, quality of education, etc. (d) Initial productivity is 100 students in 21 hours or 4.76 students/hour. New productivity is 150 students in 25 hours or 6 students/hour, an increase or 1.24 students/hour. 122) A grocery chain is considering the installation of a set of 4 self-checkout lanes. The new self-checkout lane setup will replace 2 old cashier lanes that were staffed by a cashier and bagger on each lane. One cashier mans all 4 self-checkouts (answering questions, checking for unscanned items, taking coupons, etc). Checkout on the new lanes takes 2 minutes (customers bag their own orders) while checkout with the old lanes took only 45 seconds. In addition the electricity costs for both setups are $.05 per checkout while bagging (material) costs are $.1 per checkout with the old system and $.15 for the new system. The new lanes also require $100 in capital costs. Assume that the lanes are always in use for 8 hours per day (1 shift) and that a worker makes $10/hour. a. How many checkouts did the old system provide in a shift? b. How many checkouts does the new system provide? c. What is the multifactor productivity for each system? Answer: (a) 2 lanes ∗ 8 hours ∗ 3600 seconds/hour ∗ 1checkout/45 seconds = 1280 checkouts (b) 4 lanes ∗ 8 hours ∗ 60 minutes/hour ∗ 1checkout/2min = 960 checkouts (c) Cost for the old system 4 workers ∗ 8 hours ∗ $10/hour + $.1 ∗ 1280 + $.05 ∗ 1280 = $512. Cost for the new system 1 worker ∗ 8 hours ∗ $10/hour + $.15 ∗ 960 + $.05 ∗ 960 + $100 = $372. Multifactor productivity for old system = 1280 checkouts / $512 = 2.5 checkouts/$. Multifactor productivity for new system = 960 checkouts / $372 = 2.6 checkouts/$. 123) A swimming pool company has 100,000 labour hours available per summer and with a labour productivity of 5 pools per 6,000 hours. a. How many pools can the company install this summer? b. Suppose the multifactor productivity was one pool per $25,000. How much should the company expect to spend this summer constructing the pools? Answer: (a) 100,000 hours ∗ 5 pools/6000 hours = 83.33 or 83 pools (b) 83 pools ∗ $25,000/pool = $2,075,000 124) An industrial plant needs to make 100,000 parts per month to meet demand. Each month contains 20 working days, each of which allows for 3 separate 8 hour shifts. a. If a worker can produce 10 parts/hour, how many workers are needed on each shift? b. If each shift has 100 workers, what is the productivity of an individual worker? c. If material costs are $10/part, capital costs are $100,000 and labour costs are $10/hour, what is the multifactor productivity of the plant from part A? Answer: a. 100,000 parts ∗ 1 hour / 10 parts ∗ 1 shift / 8 hours ∗ 1 worker/60 shifts = 20.83 = 21 workers b. 100,000 parts / (60 shifts/worker ∗ 100 workers ∗ 8 hours/shift) = 2.08 parts/hour c. 100,000 parts / ($10/part ∗ 100,000 parts + $100,000 + 21 workers ∗ 60 shifts/worker ∗ 8 hours/shift ∗ $10/hour) = .083 parts/$1 125) The local fast food store experienced the following number of customers on the night shift: Hour 12 AM 1 AM 2 AM 3 AM 4 AM 5 AM Customers 23 20 15 5 2 1 If the store was staffed by two workers, what was the average productivity per worker, in customers/hour? Answer: (23 + 20 + 15 + 5 + 2 + 1) customers/ (2 workers ∗ 6 hours/worker) = 5.5 customers/hour 126) Brandon Production is a small firm focused on the assembly and sale of custom computers. The firm is facing stiff competition from low-priced alternatives, and is looking at various solutions to remain competitive and profitable. Current financials for the firm are shown in the table below. In the first option, marketing will increase sales by 50%. The next option is Vendor (Supplier) changes, which would result in a decrease of 10% in the cost of inputs. Finally there is an OM option, which would reduce production costs 25%. Which of the options would you recommend to the firm if it can only pursue one option? In addition, comment on the feasibility of each option. Business Function Current Value Cost of Inputs $50,000 Production Costs $25,000 Revenue $80,000 Answer: Marketing would increase sales to $120,000 ($80,000 ∗ 1.5) but increase cost of inputs and production costs to $112,500 (($50,000 + $25,000) ∗ 1.5). This would net an additional $2500 of profit ($120,000 - $112,500 - current profit of $5000). Vendor (Supplier) Changes would decrease cost of inputs to $45,000 ($50,000 ∗ .9), resulting in $5,000 of additional profit (savings) ($50,000 - $45,000). Finally, the OM option would save $6250 ($25,000 - $25,000 ∗ . 75), resulting in an additional $6250 of profit. Thus the OM option is the most profitable. Comments on feasibility should centre on the near impossibility of increasing revenue by 50%, while noting the other two options are difficult but not impossible.