Why Manufacturing Matters (in Thailand)

GDP from Manufacturing and service sections In Thailand

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500,000

1,000,000

1,500,000

2,000,000

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3,000,000

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2002 2003 2004 2005 2006 2007

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GDP from Manufacturing

GDP from service-education, health, social sevice

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How to improve the productivity (ผลิ�ตภาพ) of an Organization

Organization

Finance Operations Marketing

2

inputs

outputstyproductivi

Managementsystem

Operations Management Operations Management (supplement topic)(supplement topic)

• APICS defines operations management as "the field of study that focuses on the effective planning, scheduling, use and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the organization" (APICS Dictionary, 11th edition)

• APICS was founded in 1957 as the American Production and Inventory Control Society

• Currently, APICS becomes The Association for operations management , a not-for-profit international education organization, offering certification programs, training tools and networking opportunities to increase workplace performance.

3

• Operations Management includes:– Forecasting– Capacity planning

(การวางแผนก�าลิ�งการผลิ�ต)– Scheduling

(การทำ�าตารางการผลิ�ต)– Managing inventories– Assuring quality– Motivating employees– Deciding where to locate facilities– Supply chain management– And more . . .

Scope of Operations Management

Production planning and control

(current topic)

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5

Supply Chain ManagementManaging supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer (Supply Chain Council)

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Production Planning and Control

• Production control is:

“the task of predicting, planning and scheduling work, taking into account manpower, materials availability and other capacity restrictions, and cost so as to achieve proper quality and quantity at the time it is needed and then following up the schedule to see that the plan is carried out, using whatever systems have proven satisfactory for the purpose.” 1

1Reinfeld, N.V., 1959. Production Control. , Prentice-Hall, Englewood Cliffs, NJ.

Production planning andcontrol systems

ManMachineMaterialsCapitalInformation

QualityQuantityDelivery time

Inventory management

MRP, ERP, JIT

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Scope of production control and the flow of information

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Scope of production control and the flow of information (extended version)

ForecastingAggregation planning (long-rang planning)

Master production schedule

(short-rang planning)

Inventory controlShop scheduling

MonitoringControl

Marketing and sales

Production engineering

Production engineering

Human resource (work force)

Testing and inspecting

purchasing

Raw materials

InventoryShipping finished

goods

assembling machining

1 2 3

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5

6 7

8

3 9

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1012

8

9

10

11

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Production planning and control

• Pond draining/re-order point system

• Push System/ Material Requirement Planning System (MRP)

• Pull System/ Just In Time (JIT)

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Pond draining/re-order point system

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Push System/ Material Requirement Planning System (MRP)

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Pull System/ Just In Time (JIT)

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Productivity

• Partial measures– output/(single input)

• Multi-factor measures– output/(multiple inputs)

• Total measure– output/(total inputs)

Productivity = Outputs

Inputs20

Productivity GrowthProductivity Growth

Current Period Productivity – Previous Period ProductivityPrevious Period Productivity

Productivity Growth =

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Measures of ProductivityMeasures of Productivity

Partial Output Output Output Output

measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them

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Units of output per kilowatt-hourDollar value of output per kilowatt-hour

Energy Productivity

Units of output per dollar inputDollar value of output per dollar input

Capital Productivity

Units of output per machine hourmachine hour

Machine Productivity

Units of output per labor hourUnits of output per shiftValue-added per labor hour

Labor Productivity

Examples of Partial Productivity Examples of Partial Productivity MeasuresMeasures

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Example 3

7040 Units Produced

Cost of labor of $1,000

Cost of materials: $520

Cost of overhead: $2000

What is the multifactor productivity?

Ans. 2.0 units per dollar of input24

Example 3 Solution

MFP = OutputLabor + Materials + Overhead

MFP = (7040 units)$1000 + $520 + $2000

MFP = 2.0 units per dollar of input

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Productivity

Productivity = Output

Input

26

Productivity

Labor productivity = Policies processed

Employee hours

Example 1.1aExample 1.1a 27

Productivity

Labor productivity = 600 policies

(3 employees)(40 hours/employee)

Example 1.1aExample 1.1a 28

Productivity

Labor productivity = 5 policies/hour

Example 1.1aExample 1.1a 29

Productivity

Labor productivity = 5 policies/hour

Multifactor productivity =

Quantity at standard cost

Labor cost + Materials cost + Overhead cost

Example 1.1bExample 1.1b 30

Productivity

Labor productivity = 5 policies/hour

Multifactor productivity =

(400 units)($10/unit) $4000

$400 + $1000 + $300 $1700= = 2.35

Example 1.1bExample 1.1b 31

Productivity Measures

32

Productivity Measures

Figure 1.5aFigure 1.5a

OM ExplorerOM Explorer

Tutor 1.1—Productivity Measures

The state ferry service charges $18 per ticket plus a $3 surcharge to fund planned equipment upgrades. It expects to sell 4,700 tickets during the eight-week summer season. During that period, the ferry service will experience $110,000 in labor costs. Materials required for each passage sold (tickets, a tourist-information sheet, and the like) cost $1.30. Overhead during the period comes to $79,000.

a. What is the multifactor productivity ratio?b. If ferry-support staff work an average of 310 person-hours per week for the 8 weeks of the summer season, what is the labor productivity ratio? Calculate labor productivity on an hourly basis.

Click here to continue.Click here to continue.

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Productivity MeasuresTutor 1.1—Productivity Measures

Enter data in yellow areas. Use Tab to advance from one input cell to the next.

a. Multifactor productivity is the ratio of the value of output to the value of input.

Step 1. Enter the number of tickets sold during a season, the price per ticket, and the surcharge per ticket. To compute value of output, multiply tickets sold by the sum of price and surcharge.

Tickets sold: 4,700 Value of output:Price: $18Surcharge: $3

Step 2. Enter labor costs, materials costs per passenger, and overhead cost. For value of input, add together labor costs, materials costs times number of passengers, and overhead costs.

Labor costs: $110,000 Materials costs: $1.30 Overhead: $79,000

Value of input:

Step 3. To calculate multifactor productivity, divide value of output by value of input.

Multifactor productivity:

Figure 1.5bFigure 1.5b 34

Tutor 1.1—Productivity Measures

Enter data in yellow areas. Use Tab to advance from one input cell to the next.

b. Labor productivity is the ratio of the value of output to labor hours The value of output is computed in part a, step 1.

Step 1. Enter person-hours per week and the number of weeks in the season; multiply the two together to calculate labor hours of input.

Hours per week: 310 Weeks: 8

Labor hours of input:

Step 2. To calculate labor productivity, divide value of output by labor hours of input.

Labor productivity:

Click here to view the Results sheet.Click here to view the Results sheet.

Productivity Measures

Figure 1.5bFigure 1.5b 35

Productivity MeasuresTutor 1.1—Productivity Measures

Place cell pointer on green shaded areas to examine formulas.

a. Multifactor productivity is the ratio of the value of output to the value of input.

Step 1. Enter the number of tickets sold during a season, the price per ticket, and the surcharge per ticket. To compute value of output, multiply tickets sold by the sum of price and surcharge.

Tickets sold: 4,700 Value of output: $98,700Price: $18Surcharge: $3

Step 2. Enter labor costs, materials costs per passenger, and overhead cost. For value of input, add together labor costs, materials costs times number of passengers, and overhead costs.

Labor costs: $110,000 Materials costs: $1.30 Overhead: $79,000

Value of input:$195,110

Step 3. To calculate multifactor productivity, divide value of output by value of input.

Multifactor productivity: 0.51

Figure 1.5cFigure 1.5c 36

Tutor 1.1—Productivity Measures

Place cell pointer on green shaded areas to examine formulas.

b. Labor productivity is the ratio of the value of output to labor hours The value of output is computed in part a, step 1.

Step 1. Enter person-hours per week and the number of weeks in the season; multiply the two together to calculate labor hours of input.

Hours per week: 310 Weeks: 8

Labor hours of input: 2,480

Step 2. To calculate labor productivity, divide value of output by labor hours of input.

Labor productivity: $39.80

Productivity Measures

Figure 1.5cFigure 1.5c 37