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Production is the creation of goods and services.


Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.

What functions do all organizations perform to create goods and services?

marketing (generating demand); production/operations (creates the product); finance/accounting (tracks how well the organization is doing)

Why study OM?

Four reasons - it's a major function of any organization; we want to know how goods and services are produced; we want to understand what operations managers do; we study OM because its a costly part of any organization

What categories can the significant events in operations management be broken down into?

The cost focus (1776-1980), the quality focus (1980-1995), and the customization focus (1995-2015).

Eli Whitney

Ely Whitney (1800) is credited for the early popularization of interchangeable parts, which was achieved through standardization and quality control.

Who is credited with interchangeable parts, when?

Ely Whitney in 1800

Frederick W. Taylor

Frederick W. Taylor (1881), known as the father of scientific management, contributed to personnel selection, planning and scheduling, motion study, and the now popular field of ergonomics. One of his major contributions was his belief that management should be more resourceful and aggressive in the improvement of work methods.

__ contributions was __

Another of Taylor's; the belief that management should assume more responsibility for (1) matching employees to the right job, (2) providing the proper training, (3) providing the proper work methods and tools, and (4) establishing legitimate incentives for work to be accomplished.

By ___ combined what they knew __

1913, Henry Ford and Charles Sorensen; about standardized parts with the quasi-assembly lines of the meatpacking and mail-order industries and added the revolutionary concept of the assembly line.

Walter Shewhart

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

W. Edwards Deming (1950) believed, as did Frederick Taylor, that management must do more to improve the work environment and processes so that quality can be improved.


Economic activities that typically produce an intangible product (such as education, entertainment, lodging, government, financial, and health services).


Productivity is the ratio of outputs (goods and services) divided by the inputs (resources, such as labor and capital). Improving productivity means improving efficiency.

What does efficiency mean, what is the difference between being efficient and effective?

Efficiency means doing the job well - with a minimum of resources and waste (productivity). Efficient means doing a job well done, such as applying the 10 decisions of operations management, whereas effective means doing the right thing, such as developing and using the correct strategy.

Only through __ can the standard of living improve.

increases in productivity

High production may imply __, but it does not imply __

only that more people are working or that employment levels are high; high productivity.

productivity equation

productivity = units produced / input used

Multifactor productivity is also known as __

total factor productivity.

What are some measurement problems of productivity?

Quality may change while productivity stays the same, external elements may cause changes in productivity, and precise units of measurement may be lacking

productivity variables

Productivity variables are the three factors critical to productivity improvement - labor, capital, and the art and science of management.

What are the productivity variables and how much do they contribute to the annual increase?

labor (10%), capital (38%), and management (52%)

__ are a major impediment to productivity, costing __

Illiteracy and poor diets; countries up to 20% of their productivity.

What are the three key variables for improved labor productivity?

1) Basic education appropriate for an effective labor force. 2) Diet of the labor force. 3) Social overhead that makes labor available, such as transportation and sanitation.

When __, we can expect __

the capital invested per employee drops; a drop in productivity.

Using labor rather than capital may __

reduce unemployment in the short run, but it also makes economies less productive and therefore lowers wages in the long run.

knowledge societies

Knowledge societies are those in which much of the labor force has migrated from manual work to technical and information-processing tasks requiring ongoing education.

Why has productivity in the service sector proven difficult?

typically labor intensive; frequently focused on unique individual attributes or desires; often an intellectual task performed by professionals; often difficult to mechanize and automate; often difficult to evaluate for quality

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