Operating Management - the Goal
1. (Chapters 1, 2 and 3) For Alex Rogo, Lou and Bob Donovan. What performance measures are important to each of them? How about Bill Peach?
Alex Rogo：His performance measure is the efficiency. That is to complete the order at a relatively lower cost and increase the economy scale. Alex said, “We can't just dedicate the entire plant to one order at a time. The economies of scale would disappear. Our costs would go well, they'd be even worse than they are now. We can't run the plant just by the seat- of-the-pants.”
Lou: His performance measure is whether the operation makes money. In order to evaluate the profitability, he thinks that net profit, return on investment and cash flow should be used as measurements.
Bob Donovan: His performance measure is to finish everything that needs to be done in time and complete the order. He said, “I just saw what had to be done, put everybody to work on it, and the hell with the rules,"
Bill Peach: His performance measure is the productivity of the whole company. He said, “The future of our business depends upon our ability to increase productivity.”
3. (Chapter 4) What do you think the goal is? What might be wrong with the other measurements Alex uses? Why does Jonah not answer Alex at the end of the chapter?
The goal is to be profitable. In another word, the goal of a manufacturing organization and all organizations in general is to make money.
Alex uses productivity as a measurement. In deed, the robots increased the productivity by 36%. But with employee number kept unchanged, the cost of employee salary did not decrease. Also, with the help of robots, the factory is able to produce more products so that the inventory number goes up. However, the company is not selling more products, which means that the additional products the robots produced is not actually adding profits. Thus, the increased productivity did not bring extra profit to the company.
I think the reason Jonah didn't answer Alex is that Jonah thinks
Alex Rogo：His performance measure is the efficiency. That is to complete the order at a relatively lower cost and increase the economy scale. Alex said, “We can't just dedicate the entire plant to one order at a time. The economies of scale would disappear. Our costs would go well, they'd be even worse than they are now. We can't run the plant just by the seat- of-the-pants.”
Lou: His performance measure is whether the operation makes money. In order to evaluate the profitability, he thinks that net profit, return on investment and cash flow should be used as measurements.
Bob Donovan: His performance measure is to finish everything that needs to be done in time and complete the order. He said, “I just saw what had to be done, put everybody to work on it, and the hell with the rules,"
Bill Peach: His performance measure is the productivity of the whole company. He said, “The future of our business depends upon our ability to increase productivity.”
3. (Chapter 4) What do you think the goal is? What might be wrong with the other measurements Alex uses? Why does Jonah not answer Alex at the end of the chapter?
The goal is to be profitable. In another word, the goal of a manufacturing organization and all organizations in general is to make money.
Alex uses productivity as a measurement. In deed, the robots increased the productivity by 36%. But with employee number kept unchanged, the cost of employee salary did not decrease. Also, with the help of robots, the factory is able to produce more products so that the inventory number goes up. However, the company is not selling more products, which means that the additional products the robots produced is not actually adding profits. Thus, the increased productivity did not bring extra profit to the company.
I think the reason Jonah didn't answer Alex is that Jonah thinks