Why study OM?
Four reasons
1. OM is one of the three major business functions of any organization and is integratedly related to all the other business functions. All orgs market, finance, and produce (operate), and its important to know how the OM activity functions.
Identify four people who have contributed to the theory and techniques of operations management
1. Eli Whitney -- early popularization of interchangeable parts (achieved through the standardization of quality conrol)
2. Frederick W. Taylor -- management should be more resourceful and aggressive in the improvements of work methods
3 & 4. Henry Ford +
Profit-and-loss statement + three strategic options for the firm
pg 7 table 1.1
What are the three basic functions of a firm?
1. Marketing (selling) -- generates the demand, takes the order for product or service
2. Finance (accounting) -- tracks how well the organization is doing, pays the bills, collects the money
3. Operations/Production -- creates the product
Identify the 10 strategic OM decisions
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supply-chain management
8. Inventory management
9. Scheduling
10. Maintenance
pg 8 table 1.2 (f
Four areas that are significant to improving labor productivity
1. Design of goods and services?
2. Managing quality
3. process and capacity design
4. supply-chain-management
U.S. described as "knowledge society" How does this affect productivity measurement and the comparison of productivity between the U.S. and other countries?
Measurement of productivity is an excellent way to evaluate a country's ability to provide an improving standard of living for it's people. Only through increases in productivity can the standard of living improve. Only through increases in productivity c
What are the measurement problems that occur when one tries to measure productivity?
Precise units of measure are often unavailable
Productivity
The ratio of outputs (goods and services) divided by the inputs (resources, such as labor and capital)
Operations Managers Job in regards to productivity
Enhance (improve) the ratio of outputs to inputs
Improving productivity means improving efficiency
High production does not mean high productivity
Mass customization and rapid product development were identified as challenges to modern manufacturing operations. What is the relationship between these challenges? Examples?
pg 19
5 reasons productivity is hard to improve in the service sector
Service sector work is
1. Typically labor intensive
2. Frequently focus on unique individual attributes
3. Often an intellectual task performed by professionals
4. Often difficult to mechanize and automate
5. Often difficult to evaluate
What has Taco bell done to serve "Twice the volume with half the labor
pg 18
Labor Productivity Solved Problem pg. 21
Current= 240/300 = .8 crates per labor hour
Potential= 260/308= .844 crates per labor hour
Using current productivity as a base the increase will be = .844/.8=1.055= 5% increase
Current: 40 hrs per day make 120 boxes
Increase: 125 boxes per day
What is their productivity?
What is new productivity ?
What is their increase in productivity per hour?
What will be their percentage change in productivity?
120/40=3
125/40=3.125
increase= .125
percentage= 4.16
1.5
current: 5 hrs a day to produce 100 care packages
new: 5 hrs a day to produce 133 care packages
productivity?
new productivity?
percentage increase?
current: 20 packages per labor hour
new: 26.6 packages per labor hour
26.6/20= 1.33= 33% increase
1.7 -- show the percent change in productivity
Multi-factor basis (dollars as common denom)
Last year:
units: 1,000
Labor hours: 300 (X 10)
Resin (pounds): 50 (x 5)
Capital invested: 10,000 ( x .01)
Energy (BTU): 3,000 (x .50)
Now
Units: 1,000
Labor hours
...
1.9-- cleaned 65 rugs
Labor: 520 hours @ $ 13 per hour
Solvent: 100 gallons at $ 5 per gallon
Machine Rental: 20 dys @ $50 per day
What is the labor productivity per dollar?
What is the multifactor productivity
Labor productivity per dollar?
65/520 hours= .125 rugs per labor hour
1.11
...
Give an example of a situation in which project management is needed?
...
The management of projects involves three phases
1. Planning: goal setting, defining the project and team organization
2. Scheduling: relates people, money, and supplies to specific activities and relates activities to each other
3. Controlling: the firm monitors resources, costs, quality, and budgets.
Three popular techniques that allow managers to plan, schedule, and control
1. Gantt charts
2. PERT
3. CPM
Project organization
1. Projects can be defined as a series of related tasks directed toward a major output
2. PROJECT ORGANIZATION is developed to make sure existing programs continue to run smoothly on a day-to-day basis while new projects are successfully completed
3. Proj
Project organization may be most helpful when
1. Work tasks can be defined with a SPECIFIC GOAL and DEADLINE
2. The job is UNIQUE or somewhat UNFAMILIAR to the existing organization.
3. The work contains COMPLEX INTERRELATED tasks requiring SPECIALIZED skills
4. The project is TEMPORARY but CRITICAL
Project managers receive high visibility in the firm for
1. making sure that all necessary activities are finished in proper sequence and on time
2. the project comes within the budget
3. the project meets its quality goals
4. the people assigned to the project receive the motivation, direction, and information
Work Breakdown Structure defined
First: carefully establish the project's objectives then break the project down into manageable parts.
Work breakdown structure (WBS) : defines the project by dividing it into its major subcomponents (or task) which are then subdivided into more detailed
Work Breakdown structure
Level
1. Project
2. Major tasks in the project
3. Subtasks in major tasks
4. Activities (or "work packages" to be completed)
Project Scheduling -- sequencing and alloting time to all project activities
...
Gantt Chart
Low-cost means of helping managers make sure that:
1. activities are planned
2. order of performance is documented
3. activity time estimates are recorded
4. overall project time is developed
On simple projects: permit managers to observe the progress of
Project scheduling serves what purposes
1. Shows the relationship of each activity to others and to the whole projects
2. Identifies the precedence relationships among activities
3. encourages the setting of realistic time and cost estimates for each activity
4. helps make better use of people,
PERT and CPM follow six basic steps
1. Define the project and prepare the work breakdown structure
2. Develop the relationship among the activities. Decide which activities must precede and which must follow
3. Draw the network connecting all the activities
4. Assign time and/or cost estima
difference between PERT and CPM
PERT employs three time estimates for each activity. These time estimates are used to compute expected values and standard deviations for the activity. CPM makes the assumption that activity times are known with certainty and hence requires only one time
Activity on Node
NODES designate activities --> most use AoN
1. we only list the immediate predecessor
Activity on Arrow
ARROWS represent activities. nodes represent the starting and finishing time of an activity and are called an EVENT. NODES consume neither time nor resources. Identify the node (event) with a number.
Critical path analysis
the LONGEST time path through the network
ES and EF are determined during the FORWARD PAS
LS and LF and determined during the BACKWARD PASS
ES time rule
1. If a activity has only a single immediate predecessor, its ES equals the EF of the predecessor
2. If an activity has multiple immediate predecessors, its ES is the maximum of all EF values of its predecessors
ES= Max (EF of all immediate predecessors)
Earliest finish time rule
The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time
EF= ES + activity time
Backward pass
Begins with the last activity in the project
Latest finish time rule
If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity the immediately follows it
If an activity is an immediate predecessor to more than one activity, its LF is hte minimum of all LS values of all acti
Latest Start time rule
The latest start time (LS) of an activity is the difference of its latest finish time (LF) and its activity time
LS=LF-activity time
Calculating Slack time &
Slack= LS-ES
Slack= LF-EF
Identifying critical path
The activities with zero slack are called the critical activities and are said to be on the critical path. The critical path is a continuous path through the project network that :
1. Starts at the first activity in the project
2. Terminates at the last a
PERT
Optimistic time (a) , pessimistic time(b) , most likely time (m)
Using PERT, we often assume that activity time estimates follow the BETA probability distribution --- appropriate for determining the EXPECTED VALUE and VARIANCE for activity completion time
To find the EXPECTED ACTIVITY TIME of PERT
t( the beta distribution) weights three time estimates
t is used in the project network to compute all earliest and latest times
PERT makes two assumptions:
1. total project completion times follow a normal probability distribution
2. activity times are s
Variance of PERT
Variance= [(b-a)/6]squared
Project variance
Found by summing the variance of CRITICAL activities
Project standard deviation
Square root of the project variance
Crashing
The process by which we shorten the duration of a project in the cheapest manner possible so that total completion is reduced
Crash time: the shortest duration required to complete an activity
Crash cost: logical for the crash cost of an activity to be hi
Crashing a project (step 1 &2)
Four steps
1. Compute the crash cost per week (or other time period) for each activity in the network. If crash costs are linear over time, the following formula
Crash cost per period = (crash cost-normal cost)/(normal time-crash time)
2. Using the curren
Crashing a project (step 3&4)
3. If there is only one critical path, select the activity on this critical path that (a) can still be crashed and (b) has the smallest crash cost per period. CRASH THIS ACTIVITY BY ONE PERIOD.
If there is more than one critical path, then select one acti
Advantages of PERT (and CPM)
1. useful when scheduling and controlling LARGE projects
2. Straightforward concept (not mathematically complex)
3. Graphical networks help highlight RELATIONSHIPS among project activities
4. Critical Path & slack time analysis help pinpoint activities th
Limitations of PERT ( and CPM)
1. Project activities have to be CLOSELY DEFINED, INDEPENDENT, and STABLE in their RELATIONSHIPS
2. PRECEDENCE relationships MUST be SPECIFIED and NETWORKED together
3. Time estimates tend to be subjective and are subject to FUDGING by managers (who fear
Product decision
The selection, definition, and design of products
Objective: to develop and implement a product strategy that meets the demans of the marketplace with a competitive advantage .
- product strategy may focus on developing a competitive advantage via 1. diff
Product life-cycle
may be a matter of a few days (concert t-****), months (seasonable fashions), years (Madden NFL football video games), or decades (Boeing 737) --> task for operations manager: design a system that helps introduce new products successfully (develop STRATEG
Introductory phase-- Strategy options
Production techniques are still being "fine -tuned" for the market. May warrant unusual expenditures for
1. research, 2. product development 3. process modification and enhancement 4. supplier development
Growth Phase -- Strategy options
Product design has begun to stabilize --> effective forecasting of capacity requirements is necessary
May be necessary to ADD CAPACITY or ENHANCE existing capacity to accommodate the increase in product demand
Maturity phase-- strategy options
Competitors have been established SO high volume, innovative production may be appropriate. 1. Improved cost control 2. reduction in operations 3. pairing down of the product line may be effective or necessary for profitability and market share
Decline stage -- strategy options
May need to be ruthless with these products (poor products in which to invest resources and managerial talent)
UNLESS dying products make some UNIQUE CONTRIBUTION to the firm's reputation or its product line OR can be sold with an unusually high contribut
Product-by-value analysis definition
A list of products, in descending order of their individual dollar contribution to the firm, as well as the TOTAL ANNUAL DOLLAR CONTRIBUTION of the product (low contribution of a per-unit basis by a particular product may look substantially different if i
Product-by-value report allows
management to evaluate possible strategies for each product.
These may include 1. increasing cash flow (increasing contribution by raising price or lowering cost) 2. increasing market penetration (improving quality and/or reducing cost or price) 3. reduci
Product-by-value report may
tell management which product offerings should be eliminated and which fail to justify further investment in research and development or capital equipment .
Product-by-value analysis FOCUSES attention on the strategic direction for each product
Aggressive new product development requires that organizations build structures internally that have open communication with
customers, innovative product development cultures, aggressive R & D, strong leadership, formal incentives, and training
Operations managers must be aware of these dynamics and be able to anticipate changes in product opportunities, the products themselves, product volume, and product mix
1. Understanding the customer
2. Economic change
3. sociological and demographic
4. technological change
5. political and legal change
6. market practice, professional standards, suppliers, distributors
Quality Function Deployment
QFD is used early in the design process to help determine WHAT WILL SATISFY THE CUSTOMER and WHERE TO DEPLOY QUALITY EFFORTS
Refers to both
1. determining what will satisfy the customer
2. translating those customer desires into the target design
a. the i
House of Quality
A graphic technique (involving 7 steps) for defining the relationship between customer desires and product (or service).
7 steps of House of Quality
1. Identify customer WANTS (what do cust. want in this product?)
2. Identify HOW the good/service will satisfy customer wants
3. Relate customer WANTS to product HOWS
4. Identify relationships between the firm's HOWS
5. Develop importance ratings
6. Evalu
Product Development Stages
Product concepts are developed from a variety of sources, both external and internal to the firm. Concepts that survive the product idea stage progress through various stages, with nearly constant review, feedback, and evaluation in a highly participative
Quality HOUSE need more info
Quality plan (last house) is a set of specific tolerances, procedures, methods, and sampling techniques that will ensure that the production process meets the customer requirements
QFD effort is devoted to meeting customer requirements. The SEQUENCE of ho
Organizing for Product Development
4 approaches
1. organization with distinct departments
advantage: fixed duties and responsibilities
disadvantage: lack of forward thinking
2. assign a product manager to "champion" the product through the product development system and related organizatio
Product development teams
teams charged with moving from market requirements for a product to achieving product success
Objective: make the good or service a success, including marketability, manufacturability, and serviceability
Concurrent engineering
Use of cross-functional teams in product design and manufacturing --> implies speedier product development through simultaneous performance of various aspects of product development --> dominant structure for product development
Manufacturability and value engineering
Activities that help improve a product's design, production, maintainability, and use. May be the best cost-avoidance technique available to operations managemen. Yeild value improvement by focusing on achieving the functional specifications necessary to
Manufacturability and value engineering benefits
1. Cost reduction
2. Reduced complexity of the product
3. additional standardization of components
4. improvement of functional aspects of the product
5. Improved job design and job safety
6. improved maintainability (serviceability) of the product
7. rob
Robust Design
A design that can be produced to requirements EVEN with unfavorable conditions in the PRODUCTION process
Modular design
A design in which parts or components of a product are subdivided into modules that are easily interchanged or replaced
Computer-aided design (CAD)
interactive use of a computer to develop and document a product
Design for manufacture and assembly (DFMA)
software that allows designers to look at the effect of the design on manufacturing the products
Standard for the exchange of product data (STEP)
a standard that provides a format allowing the electronic transmission of three-dimensional data
Computer-aided manufacturing
The use of information technology to control machinery
3-D printing
an extension of CAD that build prototypes and small lots
Virtual reality
a visual form of communication in which images substitute for reality and typically allow the user to respond interactively
Value analysis
seeks improvements that lead to either a better product, or a product made more economically, or a product with less environmental impact
takes place DURING the production process, when it is clear that a new product is a success.
Sustainability
meeting the needs of the present without compromising the ability of future generations to meet their needs
Life Cycle Assessment (LCA)
a formal evaluation of the environmental impact of a product
Time-based competition
Competition based on time; rapidly developing new products and moving them to market
Internal development strategies - speeding development
1. Migrations of existing products
2. Enhancements to existing products
3. New internally developed products
External Development strategies -- speeding development
1. Alliances
2. Joint ventures
3. purchase technology or expertise by acquiring the developer
Joint venture
firms establishing join ownership to pursue new products or markets
Alliances
cooperative agreements that allow firms to remain independent, but pursue strategies consistent with their individual mission
Before anything can be produced
a product's FUNCTIONS and ATTRIBUTES must be defined
Engineer drawing
A drawing that shows the dimensions, tolerances, materials and finishes of a component (shows how to make one item on the bill of material)
Bill of material
A list of the hierarchy of components, their description, and the quantity of each required to make ONE UNIT OF PRODUCT ( in the food-service industry = PORTION-CONTROL STANDARDS)
In more complex products, a bill of material is referenced on other bills o
Make-or-buy decision
distinguishes between what the firm wants to PRODUCE and what it wants to PURCHASE--> critical to product definition
Group technology
A product and component coding system that specifies the size, shape, and type of processing; it allows similar products to be grouped
Assembly drawing
an exploded view of the product, usually a three-dimensional drawing known as an ISOMETRIC DRAWING
Assembly chart
a graphic means of identifying how components flow into subassemblies and final products
Route sheet
A listing of all the operations necessary to produce a component with the material specified in the bill of material
Work order
an instruction to make a given quantity of a particular item
Engineering change notice (ECN)
A correction or modification of an engineering drawing or bill of material
Configuration management
a system by which a product's planned and changing components are accurately identified
Product life-cycle management (PLM)
an umbrella of software programs that attempts to bring together the phases of product design and manufacture. The idea behind PLM software is that product design and manufacture decisions can be performed more creatively, faster, and more economically wh
Process-Chain-Network Analysis (PCN)
Analysis that focuses on the ways in which processes can be designed to optimize interaction between firms and their customers
Process chain
a sequence of steps that accomplishes an activity, such as building a home, completing a tax return, or preparing a sndwhich
Process participant
Can be a manufacturer, a service provider, or a customer
Network
a set of participants
Process domain
Each participant has a PROCESS DOMAIN that includes the set of activities over which it has control
The activities are organized into three PROCESS REGIONS for each participant
Direct interaction region (process chain)
includes process steps that involve interaction between participants
ex: sandwich buyer directly interacts with employees of a sandwich store
Surrogate (substitute) interaction region (process chain)
includes process steps in which one participant is acting on another participants's resources, such as their information, materials, or technologies. DIRECT INTERACTION IS LIMITED ex: when the sandwich SUPPLIER is making sandwiches in the restaurant kitch
Independent processing region (process chain)
includes steps in which the sandwich supplier and/or sandwich customer is acting on resources where each has maximum control
ex: firm that assembles pre-packages sandwiches ex: sandwiches built at home
Adding service Efficiency
Service productivity of notoriously low (in part because of customer involvement in the DESIGN or the DELIVERY of the service, or both)
-- this complicates the product design challenge
Increase service efficiency and limit interaction
1. limit the options
2. delay customization
3. modularization
4. automation
5. moment of truth
Documents for service
Because of the high interaction of most services, the documents for moving the product to production often take the form of explicit JOB INSTRUCTIONS OR SCRIPT
Decision trees (product design)
Helpful when there are a series of decisions and various outcomes that lead to SUBSEQUENT decisions followed by other outcomes
To form a decision tree
1. Be sure that all possible alternatives and states of nature (beginning on the left and moving right) are entered at the end of the appropriate branch. This includes an alternate of "doing nothing"
2. Payoffs are entered at the end of the appropriate br
Managing quality helps build successful strategies of
1. Differentiation
2. low cost
3. response
Improved Quality
Sales gains via:
1. improved response
2. flexible pricing
3. improved reputation
Reduced Costs via
1. increased productivity
2. lower rework and scrap costs
3. lower warranty costs
Operations manager's objective:
to build a total quality management system that identifies and satisfies customer needs --> total quality takes care of the customer
Quality
the totality of features and characteristics of a product or service that bears on its ability to satisfy stated of implied needs
user based quality
quality "lies in the eyes of the beholder"
higher quality= better performance, nicer features, and other improvements
manufacturing based quality
quality= conforming to standards and "making it right the first time
product based quality
views quality as a precise and measurable variable
Combination of qualities
The characteristics that connote quality must be first identified through research (user), then translated into specific product attributes (product) then manufacturing process is organized to ensure that products are made precisely to specifications (man
Implications of quality
1. Company reputation
2. Product liability
3. Global implications (meet global quality, design, and price expectations)
ISO 9000
A set of quality standards developed by the International Organization for Standardization (ISO)
ISO 9000's 8 quality management principles
1. top management leadership
2. customer satisfaction
3. continual improvement
4. involvement of people
5. process analysis
6. use of data-driven decision making
7. a systems approach to management
8. mutually beneficial supplier relationships
ISO standard encourages
establishment of quality management procedures, detailed documentation, work instructions, and record keeping.
Assessment includes: self-appraisal and problem identification
ISO's latest modification
emphasized how an organization can use a QUALITY management approach to achieve SUSTAINED success.
Encourages organizations to plan for their economic survival through continuing the systematic improvement of performance, efficiency, and effectiveness
Cost of Quality (COQ)
1. Prevention costs
2. Appraisal costs
3. Internal failure costs
4. External failure costs
Prevention costs
Costs associated with reducing the potential for defective parts or services
ex: training, quality improvement programs
Appraisal costs
Costs related to evaluating products, processes, parts, and services
Ex: testing, labs, inspectors
Internal failure costs
Costs that result from production of defective parts or services before delivery to customers
Ex: rework, scrap, downtime
External failure costs
Costs that occur after delivery of defective parts or services
Ex: returned goods, liabilities, lost goodwill, costs to society, rework (hardest to estimate)
Total Quality Managment (TQM)
Management of an entire organization so that it excels in all aspects of products and services that are important to the customer
Seven concepts of TQM
1. continuous improvement
2. six sigma
3. employee empowerment
4. benchmarking
5. just-in-time (JIT)
6. Taguchi concepts
7. knowledge of TQM tools
Continuous Improvement
Plan-Do-Check-Act: a continuous improvement model of plan, do, check, act
Six Sigma
A program to save time, improve quality, and lower costs
Statistical sense: describes a process, product, or service with an extremely high capability
Program sense: design to reduce defects to help lower costs, save time, and improve customer satisfactio
Six Sigma (cont.)
A comprehensive system-- a STRATEGY (focuses on total customer satisfaction), a DISCIPLINE (follows the formal six sigma improvement model , DMAIC), and a set of tools-- for achieving and sustaining business success (seven tools)
DMAIC five-step process improvement model
1. DEFINES: the project's purpose, scope, and outputs and then identifies the required process information (keeping in mind the customer's definition of quality)
2. MEASURES: the process and collects data
3. ANALYZES: the data, ensuring repeatability and
Set of seven tools
check sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control
Employee empowerment
involving employees in every step of the production process
-- TQM programs that delegate responsibility for quality to shop-floor employees tend to be twice as likely to succeed at those implemented with "top-down" directives
Techniques for building employee empowerment
1. building communication networks that include employees
2. developing open, supportive supervisors
3. moving responsibility from both managers and staff to production employees
4. building high-morale organizations
5. creating such formal organization s
Quality circle
A group of employees who meet regularly to solve work-related problems --> receive training in group planning, problem solving, and statistical quality control
Benchmarking
Selecting a demonstrated standard of products, services, costs, or practices that represent the very best performance for processes or activities very similar to your own.
Idea: develop a target at which to shoot and then to develop a standard or benchmar
Steps for benchmarking
1. Determine what to benchmark
2. Form a benchmark team
3. Identify benchmark partners
4. Collect and analyze benchmarking information
5. Take action to match or exceed the benchmark
Typical performance measures used in benchmarking
Percentage of defect, cost per unit/order, processing time per unit, service response time, return on investment, customer satisfaction rates, customer retention rates
Just-in-time (JIT)
Designed to produce or deliver goods just as they are needed --> philosophy of continuing improvement and enforced problem solving
JIT and QUALITY
Cuts the cost of quality
Ex: scrap, rework, inventory investment, and damage costs are directly related to inventory on hand . Because there is less inventory on hand, costs are lower. Inventory HIDES bad quality whereas JIT immediately EXPOSES bad qualit
JIT and Quality
Improves Quality
Ex: shrinks lead time, keeps evidence of errors fresh and LIMITS the number of potential sources of error. JIT creates an early WARNING system of quality problems (both within the firm and with vendors )
JIT and QUALITY
Better quality and less inventory are better, easier to employ JIT system: Often the purpose of inventory is to protect against poor production performance resulting from unreliable quality. If consistent quality exists, JIT allows firms to REDUCE ALL THE
Taguchi Concepts
three concepts aimed at improving both product and process quality
1. quality robustness
2. quality loss function
3. target-oriented quality
Quality robust
Products that are consistently built to meet customer needs in spit of adverse conditions in the production process
Quality loss function
A mathematical function that identifies all costs connected with poor quality and shows how these costs increase as product quality moves from what the customer wants
Quality loss equation
L=D(squared) x C
L= loss to society
D(squared)= square of the distance from the target value
C= cost of the deviation at the specific limit
Target-oriented quality
strives to keep the product at the desired specifications, producing more (and better) units near the target --> a philosophy of continuous improvement to bring the product exactly on target
Check-Sheet
An organized method of recording data
Scatter Diagram
A graph of the value of one variable vs. another variable
Cause-and-effect diagrams
A schematic technique used to discover possible locations of quality problems --> a tool that identifies process elements (causes) that may affect an outcome
Ishikawa diagram (fish-bone chart)
(cause and effect?) Causes: material, machinery/equipment, manpower, methods --> after development POSSIBLE QUALITY PROBLEMS and INSPECTION POINTS are HIGHLIGHTED
Pareto charts
A method of organizing errors, problems, or defects to help focus on problem-solving efforts. --> also, a graphic way of classifying problems (defects) by their level of importance (frequency)
Flowchart (Process diagram)
A chart (block diagrams) that describes the steps in a process (present a process or a system using annotated boxes and interconnected lines)
Histogram
A distribution that shows the frequency of occurrences of a variable
Statistical Process Control Chart (SPC)
A chart with time on the horizontal axis for plotting values of a statistic --> monitors standards, makes measurements, and takes corrective action a a product or service is being produced. Samples of process outputs are examined; if they are within accep
Control Charts
graphic presentations of data over time that show upper and lower limits for the process we want to control. Constructed in such a way that new data can be quickly compared with past performance data. We take samples of the process output and plot the ave
Inspection
Goal: detect a bad process immediately
Can involve: measurement, tasting, touching, weighing, or testing of a product (even destroying)
Does not: change a product or add value but is a VEHICLE for improving the system
OM need to know: 1. when to inspect 2
When and where to inspect
1. At your supplier's plant while the supplier is producing
2. At your facility upon receipt of goods from your supplier
3. Before costly or irreversible processes
4. During the step-by-step production process
5. When production or service is complete
6.
Source inspection
employees self-check their own work
Controlling or monitoring at the point of production or purchase-- at the source
PokaYoke
a foolproof device or technique that ensures production of good units every time
Check list
A type of poka-yoke that lists the steps needed to ensure consistency and completeness in a task
Quality characteristics may be measured as either
Attributes or Variables
Attribute inspection
classifies items as being either good or defective --> does not address the DEGREE of failure
Variable inspection
measures such dimensions as weight, speed, size, or strength to see if an item falls within an acceptable range
TQM in services vs products
Approach to product comparison differs because of service's poor definition of the
1) intangible differences between products and
2) the intangible expectations customers have of these products
Aspect of service quality
1. Tangible component of many services is important (how well service is designed and produced
Ex: checkout bill at the hotel, warm the food is at taco bell, how well your car runs after you pick it up at the shop
Aspect of service quality
2. SERVICE QUALITY is related to the SERVICE PROCESS
OM manager can design processes (service products) that have these attributes and can ensure their quality (TQM)
Aspect of service quality
3. Manager may be able to influence both the quality of the service and the expectation. Don't promise more than you can deliver
4. The quality control system must recognize and HAVE A SET OF ALTERNATIVE PLANS FOR LESS-THAN OPTIMAL OPERATING CONDITIONS
Service Recovery
Training and empowering frontline workers to solve a problem immediately
LEARN routine
Listen, Empathize, Apologize, React, Notify (ensuring the complaint is fed back into the system)
KEYS to quality service
1. Designing the product
2. managing the service process
3. Matching customer expectations to the product
4. Preparing for the exceptions
Capacity
The "throughput" or the number of units a facility can hold, receive, store or produce in a given time
Capacity decisions
-Often determine capital requirements and therefore a large portion of FIXED COST
- whether demand will be satisfied or whether facilities will be idle
Capacity planning can be viewed in three horizons
1. Long range capacity
2. Intermediate range
3. Short run
Long range capacity
Greater than 3 years
function of adding facilities and equipment that have a long lead time
Intermediate range
(3-36 months) we can add equipment, personel, and shifts
we can subcontract and we can BUILD or USE inventory
this is the "aggregate planning" task
Short run
(up to 3 months) we are primarily concerned with scheduling jobs and people as well as allocating machinery --> modifying capacity in the short run is difficult, as we are usually constrained by existing capacity
Design capacity
the maximum theoretical output of a system in a given period under ideal conditions, normally expressed as a rate, such as the number of tons of steel that can be produced per week, per month, or per year. "maximum number of units the company is capable o
Effective capacity
the capacity a firm EXPECTS the achieve given the current operating constraints, often lower then design capacity because the facility may have been designed for an earlier version of the product or a different product mix than is currently being produced
Two measures of system performance
1. Utilization
2. Efficiency
Utilization
the percent of DESIGN CAPACITY actually achieved
Efficiency
the perfect of EFFECTIVE CAPACITY actually achieved --> operations managers tend to be evaluated on efficiency --> the key to improving efficiency is often found in correcting quality problems and in effective scheduling, training, and maintenence.
Utilization formula
Utilization= Actual output/Design Capacity
Efficiency
Efficiency= Actual output/effective capacity
Actual (or Expected/rated)
Actual= (Effective capacity)(Efficiency)
With a knowledge of effective capacity, a manager can find the expected output of a facility
4 considerations for a good capacity decision
1. Forecast demand accurately (product life cycle, sales, etc.)
2. Match technology increments and sales volume (
3. Find the optimum operating size (volume)
4. Build for change (build flexibility into facilities and equipment; changes will occur in proce
Demand Exceeds Capacity
1. firm may curtail demand by raising prices, scheduling long lead times, and discouraging marginally profitable business
2. long term solution: increase capacity
Capacity Exceeds demand
1. price reductions or aggressive marketing
2. product changes
3. layoffs and plant closing
Tactics for adjusting capacity to demand
1. Making staffing changes (increasing, decreasing)
2. Adjusting equipment
3. Improving processes to increase throughput
4. Redesigning products to facilitate more throughput
5. Addressing process flexibility to better meet changing product preferences
6.
Service-Sector Demand and Capacity Mangement
Demand management= scheduling customers
Capacity management = scheduling the workforce
Capacity Analysis
determining the throughput capacity of workstations in a system and ultimately the capacity of the entire system
Bottleneck
An operation that is the limiting factor or constraint --> has the lowest effective capacity of any operation in the system and thus limits the system's output
Bottleneck time
The time of the slowest workstation (the one that takes the longest) in the production system
Throughput time
the time it takes a unit to go through production from start to end
Bottleneck (cont.)
1) the BOTTLENECK is the operation with the longest (slowest) process time, after dividing by the number of parallel (redundant) operations, 2) the SYSTEM CAPACITY is the inverse of the BOTTLENECK TIME, and 3) the THROUGHPUT TIME is the total time through
Theory of constraints
A body of knowledge that deals with anything that limits an organization's ability to achieve it's goals
Constraints can be physical (process or personnel availability, raw materials, or supplies) or non-physical ( procedures, morale, and training)
TOC 5 step process
1. Identify the constraints
2. Develop a plan for overcoming the identified constraints
3. Focus resources on accomplishing step 2
4. Reduce the effects of the constraints by offloading work or by expanding capability. Make sure that the constraints are r
4 principles of bottleneck management
1. Release work orders to the system at the pace set by the bottleneck's capacity
2. Lost time at the bottleneck represents lost capacity for the whole system
3. Increasing the capacity of a non-bottleneck is a mirage
4. Increasing the capacity of the bot
Break-even analysis
A means of finding the point, in dollars and units, at which costs equal revenues
Firms must operate above this level to achieve profitability
Requires an estimation of fixed costs, variable costs, and revenue
Contribution
The difference between selling price and variable cost
Only when total contribution exceed total fixed costs will there be profit
Revenue function (of break-even)
1. Revenue begins at the origin and proceeds upward to the right, increasing by the selling price of each unit
2. Where the revenue function crosses the total cost line (the sum of fixed and variable costs) is the break-even point, with a profit corridor
Assumptions of the break-even
1. costs and revenue are shown as straight lines, increase linearly, and in direct proportion to the volume of units being produced
2. neither fixed nor variable costs need to be a straight line
ex: fixed costs change as more capital equipment used, labor
Break-even equation
TR=TC
Px=F + Vx
P=price per unit (after all discounts)
Break-even point in units
F/(P-V)
Total fixed costs/ (Price-variable cost)
Break-even point in dollars
F/1-(V/P)
Total fixed cost/1-(Variable cost-price)
Multiproduct break-even
Weight each product's contribution by its proportion of sales
Applying Expected Monetary Value (EMV) to Capacity Decisions
pg 311 when there is uncertainty
Net Present Value
P= F/(1+i)nth
1. compute the present value of all cash flows for each investment alternative
2. When deciding among alternatives you pick the investment with the highest net present value
3.. When making several investments, those with the higher net pres
Limitations of NPV
1. Investments with the same NPV may have different projected lives and different salvage values
2. Investments with the same NPV may have different cash flows (may make substantial differences in the company's ability to pay its bills)
3. The assumption
Quality house
House 1: Customer requirements + Design characteristics
House 2: Specific components
House 3: production process
House 4: Quality plan
Slack
Slack= LS- ES
Slack = LF-EF
Variance for time
Variance for times= [(pessimistic time-optimistic time)/6)]squared
Break even
BEP$= F/ 1-(V/P)
BEPx= F/(P-V)
Expected production
Effective capacity x Efficiency = expected production
Forecasting
the art and science of predicting future events
Forcasting may involve
1. Taking historical data (such as pat sales) and projecting them into the future with a mathematical model
2. a subjective or intuitive prediction
3. be based on demand-driven data (such as customer plans to purchase, and projecting them into the future)
Forecasts may be influenced by
a product's position in its life cycle-- whether in an introduction, growth, maturity, or decline stage
A forecast is usually classified by
the FUTURE TIME HORIZON that it covers
Time horizons fall into three categories
1. Short-range forecast
2. Medium-range forecast
3. Long-range forecast
Short-range forecast
1. time span of up to 1 year
2. generally less than 3 months
Used for
a. planning purchasing
b. job scheduling
c. workforce levels
d. job assignments
e. production levels
Medium-range forecast
(intermediate)
1. spans from 3 months to 3 years
Useful in
a. sales planning
b. production planning and budgeting
c. cash budgeting
d. analysis of various operating plans
Long-range forecast
1. Generally 3 years or more in time span
Used in
a. planning for new products
b. capital expenditures
c. facility location or expansion
d. research and development
Medium and long-range forecasting differ from short-range because
1. M and L deal with MORE COMPREHENSIVE ISSUES supporting management decisions regarding planning and products, plants, and processes
2. ST EMPLOYS DIFFERENT METHODOLOGIES (mathematical techniques such as moving averages, exponential smoothing, and trend
Economic Forecasts
...
Technological forecasts
...
Demand Forecasts
Projections of demand for company's products of services. They need demand driven forecasts, where the focus is on rapidly identifying and tracking customer desires
May use:
1. Point of-sale (POS) data
2. retailer-generated reports of customer preferences
The forecast is only the
estimate of the demand until the demand becomes known --> forecasts drive decisions in many areas --> impact of product demand forecast on
1. supply-chain management
2. human resources (HR)
3. capacity
Supply-Chain management
...
Collaborative planning, forecasting, and replenishment (CPFR)
...
Human Resources
...
Capacity
...
Seven steps in the forecasting system
Determine the use of the forecast
Select the items to be forecasted
Determine the time horizon of the forecast
Select the forecasting model(s)
Gather the data needed to make the forecast
Make the forecast
Validate and implement results
2 General Forecasting approaches
...
Quantitative forecasts
...
Qualitative forecasts
...
4 Different Qualitative Methods
1. Jury of executive opinion
2. Delphi method
3. Sales force composite
4. Market survey
Jury of executive opinion (qualitative)
...
Delphi Method (qualitative)
...
Sales force composite (qualitative)
...
Market Survey (qualitative)
...
Quantitative forecasting methods
Time-series models
1. Naive approach
2. Moving averages
3. Exponential smoothing
4. Trend projection
Associative Model
5. Linear regression
Time-series models
Naive approach
Moving averages
Exponential smoothing
Trend projection
Associative Models
Linear regression
4 Components of a time series
1. Trend
2. Seasonality
3. Cycles
4. Random variations
Trend
...
Seasonality
...
Cycles
...
Random variations
...
Naive Approach
...
Moving-average
...
Moving average equation
...
Weighted Moving average equation
...
3 Problems of moving averages
Increasing n smooths the forecast but makes it less sensitive to changes
Does not forecast trends well
Requires extensive historical data
Exponential smoothing
Form of weighted moving average
Weights decline exponentially
Most recent data weighted most
Requires smoothing constant ()
Ranges from 0 to 1
Subjectively chosen
Involves little record keeping of past data
Exponential smoothing equation
...
Smoothing constant
Smoothing constant generally .05 ? a ? .50
As a increases, older values become less significant
Chose high values of when underlying average is likely to change
Choose low values of when underlying average is stable
Selecting the smoothing constant
When it is high it gives more weight to recent data
When it is low it gives more weight to past data
Measuring forecast error
...
3 popular ways of measuring the forecast error
1. Mean absolute deviation (MAD)
2. Mean squared error (MSE)
3. Mean absolute percent error (MAPE)
Mean Absolute deviation (MAD)
...
Mean Squared Error (MSE)
...
Mean Absolute Percent Error (MAPE)
...
Exponential smoothing WITH TREND ADJUSTMENT (equation)
...
Trend Projection
...
Notes on the use of the LEAST SQUARED method
...
Seasonal variations
...
Steps to get the Seasonal forecast
...
Cycles
...
Associative forecasting models (regression and correlation analysis)
...
linear-regression analysis
...
Regression analysis EQUATIONS
...
Standard error of the estimate (standard deviation of the regression)
...
Coefficient of correlation
...
Coefficient of determination
...
Multiple regression
...
Monitoring and controlling forecasts
...
Tracking signal
...
Bias error
...
Adaptive forecasting/smoothing
...
Focus forecasting
...
Focus forecasting is based on 2 principles
...
Forecasting in the service sector
...
Why study OM?
Four reasons
1. OM is one of the three major business functions of any organization and is integratedly related to all the other business functions. All orgs market, finance, and produce (operate), and its important to know how the OM activity functions.
Identify four people who have contributed to the theory and techniques of operations management
1. Eli Whitney -- early popularization of interchangeable parts (achieved through the standardization of quality conrol)
2. Frederick W. Taylor -- management should be more resourceful and aggressive in the improvements of work methods
3 & 4. Henry Ford +
Profit-and-loss statement + three strategic options for the firm
pg 7 table 1.1
What are the three basic functions of a firm?
1. Marketing (selling) -- generates the demand, takes the order for product or service
2. Finance (accounting) -- tracks how well the organization is doing, pays the bills, collects the money
3. Operations/Production -- creates the product
Identify the 10 strategic OM decisions
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supply-chain management
8. Inventory management
9. Scheduling
10. Maintenance
pg 8 table 1.2 (f
Four areas that are significant to improving labor productivity
1. Design of goods and services?
2. Managing quality
3. process and capacity design
4. supply-chain-management
U.S. described as "knowledge society" How does this affect productivity measurement and the comparison of productivity between the U.S. and other countries?
Measurement of productivity is an excellent way to evaluate a country's ability to provide an improving standard of living for it's people. Only through increases in productivity can the standard of living improve. Only through increases in productivity c
What are the measurement problems that occur when one tries to measure productivity?
Precise units of measure are often unavailable
Productivity
The ratio of outputs (goods and services) divided by the inputs (resources, such as labor and capital)
Operations Managers Job in regards to productivity
Enhance (improve) the ratio of outputs to inputs
Improving productivity means improving efficiency
High production does not mean high productivity
Mass customization and rapid product development were identified as challenges to modern manufacturing operations. What is the relationship between these challenges? Examples?
pg 19
5 reasons productivity is hard to improve in the service sector
Service sector work is
1. Typically labor intensive
2. Frequently focus on unique individual attributes
3. Often an intellectual task performed by professionals
4. Often difficult to mechanize and automate
5. Often difficult to evaluate
What has Taco bell done to serve "Twice the volume with half the labor
pg 18
Labor Productivity Solved Problem pg. 21
Current= 240/300 = .8 crates per labor hour
Potential= 260/308= .844 crates per labor hour
Using current productivity as a base the increase will be = .844/.8=1.055= 5% increase
Current: 40 hrs per day make 120 boxes
Increase: 125 boxes per day
What is their productivity?
What is new productivity ?
What is their increase in productivity per hour?
What will be their percentage change in productivity?
120/40=3
125/40=3.125
increase= .125
percentage= 4.16
1.5
current: 5 hrs a day to produce 100 care packages
new: 5 hrs a day to produce 133 care packages
productivity?
new productivity?
percentage increase?
current: 20 packages per labor hour
new: 26.6 packages per labor hour
26.6/20= 1.33= 33% increase
1.7 -- show the percent change in productivity
Multi-factor basis (dollars as common denom)
Last year:
units: 1,000
Labor hours: 300 (X 10)
Resin (pounds): 50 (x 5)
Capital invested: 10,000 ( x .01)
Energy (BTU): 3,000 (x .50)
Now
Units: 1,000
Labor hours
...
1.9-- cleaned 65 rugs
Labor: 520 hours @ $ 13 per hour
Solvent: 100 gallons at $ 5 per gallon
Machine Rental: 20 dys @ $50 per day
What is the labor productivity per dollar?
What is the multifactor productivity
Labor productivity per dollar?
65/520 hours= .125 rugs per labor hour
1.11
...
Give an example of a situation in which project management is needed?
...
The management of projects involves three phases
1. Planning: goal setting, defining the project and team organization
2. Scheduling: relates people, money, and supplies to specific activities and relates activities to each other
3. Controlling: the firm monitors resources, costs, quality, and budgets.
Three popular techniques that allow managers to plan, schedule, and control
1. Gantt charts
2. PERT
3. CPM
Project organization
1. Projects can be defined as a series of related tasks directed toward a major output
2. PROJECT ORGANIZATION is developed to make sure existing programs continue to run smoothly on a day-to-day basis while new projects are successfully completed
3. Proj
Project organization may be most helpful when
1. Work tasks can be defined with a SPECIFIC GOAL and DEADLINE
2. The job is UNIQUE or somewhat UNFAMILIAR to the existing organization.
3. The work contains COMPLEX INTERRELATED tasks requiring SPECIALIZED skills
4. The project is TEMPORARY but CRITICAL
Project managers receive high visibility in the firm for
1. making sure that all necessary activities are finished in proper sequence and on time
2. the project comes within the budget
3. the project meets its quality goals
4. the people assigned to the project receive the motivation, direction, and information
Work Breakdown Structure defined
First: carefully establish the project's objectives then break the project down into manageable parts.
Work breakdown structure (WBS) : defines the project by dividing it into its major subcomponents (or task) which are then subdivided into more detailed
Work Breakdown structure
Level
1. Project
2. Major tasks in the project
3. Subtasks in major tasks
4. Activities (or "work packages" to be completed)
Project Scheduling -- sequencing and alloting time to all project activities
...
Gantt Chart
Low-cost means of helping managers make sure that:
1. activities are planned
2. order of performance is documented
3. activity time estimates are recorded
4. overall project time is developed
On simple projects: permit managers to observe the progress of
Project scheduling serves what purposes
1. Shows the relationship of each activity to others and to the whole projects
2. Identifies the precedence relationships among activities
3. encourages the setting of realistic time and cost estimates for each activity
4. helps make better use of people,
PERT and CPM follow six basic steps
1. Define the project and prepare the work breakdown structure
2. Develop the relationship among the activities. Decide which activities must precede and which must follow
3. Draw the network connecting all the activities
4. Assign time and/or cost estima
difference between PERT and CPM
PERT employs three time estimates for each activity. These time estimates are used to compute expected values and standard deviations for the activity. CPM makes the assumption that activity times are known with certainty and hence requires only one time
Activity on Node
NODES designate activities --> most use AoN
1. we only list the immediate predecessor
Activity on Arrow
ARROWS represent activities. nodes represent the starting and finishing time of an activity and are called an EVENT. NODES consume neither time nor resources. Identify the node (event) with a number.
Critical path analysis
the LONGEST time path through the network
ES and EF are determined during the FORWARD PAS
LS and LF and determined during the BACKWARD PASS
ES time rule
1. If a activity has only a single immediate predecessor, its ES equals the EF of the predecessor
2. If an activity has multiple immediate predecessors, its ES is the maximum of all EF values of its predecessors
ES= Max (EF of all immediate predecessors)
Earliest finish time rule
The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time
EF= ES + activity time
Backward pass
Begins with the last activity in the project
Latest finish time rule
If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity the immediately follows it
If an activity is an immediate predecessor to more than one activity, its LF is hte minimum of all LS values of all acti
Latest Start time rule
The latest start time (LS) of an activity is the difference of its latest finish time (LF) and its activity time
LS=LF-activity time
Calculating Slack time &
Slack= LS-ES
Slack= LF-EF
Identifying critical path
The activities with zero slack are called the critical activities and are said to be on the critical path. The critical path is a continuous path through the project network that :
1. Starts at the first activity in the project
2. Terminates at the last a
PERT
Optimistic time (a) , pessimistic time(b) , most likely time (m)
Using PERT, we often assume that activity time estimates follow the BETA probability distribution --- appropriate for determining the EXPECTED VALUE and VARIANCE for activity completion time
To find the EXPECTED ACTIVITY TIME of PERT
t( the beta distribution) weights three time estimates
t is used in the project network to compute all earliest and latest times
PERT makes two assumptions:
1. total project completion times follow a normal probability distribution
2. activity times are s
Variance of PERT
Variance= [(b-a)/6]squared
Project variance
Found by summing the variance of CRITICAL activities
Project standard deviation
Square root of the project variance
Crashing
The process by which we shorten the duration of a project in the cheapest manner possible so that total completion is reduced
Crash time: the shortest duration required to complete an activity
Crash cost: logical for the crash cost of an activity to be hi
Crashing a project (step 1 &2)
Four steps
1. Compute the crash cost per week (or other time period) for each activity in the network. If crash costs are linear over time, the following formula
Crash cost per period = (crash cost-normal cost)/(normal time-crash time)
2. Using the curren
Crashing a project (step 3&4)
3. If there is only one critical path, select the activity on this critical path that (a) can still be crashed and (b) has the smallest crash cost per period. CRASH THIS ACTIVITY BY ONE PERIOD.
If there is more than one critical path, then select one acti
Advantages of PERT (and CPM)
1. useful when scheduling and controlling LARGE projects
2. Straightforward concept (not mathematically complex)
3. Graphical networks help highlight RELATIONSHIPS among project activities
4. Critical Path & slack time analysis help pinpoint activities th
Limitations of PERT ( and CPM)
1. Project activities have to be CLOSELY DEFINED, INDEPENDENT, and STABLE in their RELATIONSHIPS
2. PRECEDENCE relationships MUST be SPECIFIED and NETWORKED together
3. Time estimates tend to be subjective and are subject to FUDGING by managers (who fear
Product decision
The selection, definition, and design of products
Objective: to develop and implement a product strategy that meets the demans of the marketplace with a competitive advantage .
- product strategy may focus on developing a competitive advantage via 1. diff
Product life-cycle
may be a matter of a few days (concert t-****), months (seasonable fashions), years (Madden NFL football video games), or decades (Boeing 737) --> task for operations manager: design a system that helps introduce new products successfully (develop STRATEG
Introductory phase-- Strategy options
Production techniques are still being "fine -tuned" for the market. May warrant unusual expenditures for
1. research, 2. product development 3. process modification and enhancement 4. supplier development
Growth Phase -- Strategy options
Product design has begun to stabilize --> effective forecasting of capacity requirements is necessary
May be necessary to ADD CAPACITY or ENHANCE existing capacity to accommodate the increase in product demand
Maturity phase-- strategy options
Competitors have been established SO high volume, innovative production may be appropriate. 1. Improved cost control 2. reduction in operations 3. pairing down of the product line may be effective or necessary for profitability and market share
Decline stage -- strategy options
May need to be ruthless with these products (poor products in which to invest resources and managerial talent)
UNLESS dying products make some UNIQUE CONTRIBUTION to the firm's reputation or its product line OR can be sold with an unusually high contribut
Product-by-value analysis definition
A list of products, in descending order of their individual dollar contribution to the firm, as well as the TOTAL ANNUAL DOLLAR CONTRIBUTION of the product (low contribution of a per-unit basis by a particular product may look substantially different if i
Product-by-value report allows
management to evaluate possible strategies for each product.
These may include 1. increasing cash flow (increasing contribution by raising price or lowering cost) 2. increasing market penetration (improving quality and/or reducing cost or price) 3. reduci
Product-by-value report may
tell management which product offerings should be eliminated and which fail to justify further investment in research and development or capital equipment .
Product-by-value analysis FOCUSES attention on the strategic direction for each product
Aggressive new product development requires that organizations build structures internally that have open communication with
customers, innovative product development cultures, aggressive R & D, strong leadership, formal incentives, and training
Operations managers must be aware of these dynamics and be able to anticipate changes in product opportunities, the products themselves, product volume, and product mix
1. Understanding the customer
2. Economic change
3. sociological and demographic
4. technological change
5. political and legal change
6. market practice, professional standards, suppliers, distributors
Quality Function Deployment
QFD is used early in the design process to help determine WHAT WILL SATISFY THE CUSTOMER and WHERE TO DEPLOY QUALITY EFFORTS
Refers to both
1. determining what will satisfy the customer
2. translating those customer desires into the target design
a. the i
House of Quality
A graphic technique (involving 7 steps) for defining the relationship between customer desires and product (or service).
7 steps of House of Quality
1. Identify customer WANTS (what do cust. want in this product?)
2. Identify HOW the good/service will satisfy customer wants
3. Relate customer WANTS to product HOWS
4. Identify relationships between the firm's HOWS
5. Develop importance ratings
6. Evalu
Product Development Stages
Product concepts are developed from a variety of sources, both external and internal to the firm. Concepts that survive the product idea stage progress through various stages, with nearly constant review, feedback, and evaluation in a highly participative
Quality HOUSE need more info
Quality plan (last house) is a set of specific tolerances, procedures, methods, and sampling techniques that will ensure that the production process meets the customer requirements
QFD effort is devoted to meeting customer requirements. The SEQUENCE of ho
Organizing for Product Development
4 approaches
1. organization with distinct departments
advantage: fixed duties and responsibilities
disadvantage: lack of forward thinking
2. assign a product manager to "champion" the product through the product development system and related organizatio
Product development teams
teams charged with moving from market requirements for a product to achieving product success
Objective: make the good or service a success, including marketability, manufacturability, and serviceability
Concurrent engineering
Use of cross-functional teams in product design and manufacturing --> implies speedier product development through simultaneous performance of various aspects of product development --> dominant structure for product development
Manufacturability and value engineering
Activities that help improve a product's design, production, maintainability, and use. May be the best cost-avoidance technique available to operations managemen. Yeild value improvement by focusing on achieving the functional specifications necessary to
Manufacturability and value engineering benefits
1. Cost reduction
2. Reduced complexity of the product
3. additional standardization of components
4. improvement of functional aspects of the product
5. Improved job design and job safety
6. improved maintainability (serviceability) of the product
7. rob
Robust Design
A design that can be produced to requirements EVEN with unfavorable conditions in the PRODUCTION process
Modular design
A design in which parts or components of a product are subdivided into modules that are easily interchanged or replaced
Computer-aided design (CAD)
interactive use of a computer to develop and document a product
Design for manufacture and assembly (DFMA)
software that allows designers to look at the effect of the design on manufacturing the products
Standard for the exchange of product data (STEP)
a standard that provides a format allowing the electronic transmission of three-dimensional data
Computer-aided manufacturing
The use of information technology to control machinery
3-D printing
an extension of CAD that build prototypes and small lots
Virtual reality
a visual form of communication in which images substitute for reality and typically allow the user to respond interactively
Value analysis
seeks improvements that lead to either a better product, or a product made more economically, or a product with less environmental impact
takes place DURING the production process, when it is clear that a new product is a success.
Sustainability
meeting the needs of the present without compromising the ability of future generations to meet their needs
Life Cycle Assessment (LCA)
a formal evaluation of the environmental impact of a product
Time-based competition
Competition based on time; rapidly developing new products and moving them to market
Internal development strategies - speeding development
1. Migrations of existing products
2. Enhancements to existing products
3. New internally developed products
External Development strategies -- speeding development
1. Alliances
2. Joint ventures
3. purchase technology or expertise by acquiring the developer
Joint venture
firms establishing join ownership to pursue new products or markets
Alliances
cooperative agreements that allow firms to remain independent, but pursue strategies consistent with their individual mission
Before anything can be produced
a product's FUNCTIONS and ATTRIBUTES must be defined
Engineer drawing
A drawing that shows the dimensions, tolerances, materials and finishes of a component (shows how to make one item on the bill of material)
Bill of material
A list of the hierarchy of components, their description, and the quantity of each required to make ONE UNIT OF PRODUCT ( in the food-service industry = PORTION-CONTROL STANDARDS)
In more complex products, a bill of material is referenced on other bills o
Make-or-buy decision
distinguishes between what the firm wants to PRODUCE and what it wants to PURCHASE--> critical to product definition
Group technology
A product and component coding system that specifies the size, shape, and type of processing; it allows similar products to be grouped
Assembly drawing
an exploded view of the product, usually a three-dimensional drawing known as an ISOMETRIC DRAWING
Assembly chart
a graphic means of identifying how components flow into subassemblies and final products
Route sheet
A listing of all the operations necessary to produce a component with the material specified in the bill of material
Work order
an instruction to make a given quantity of a particular item
Engineering change notice (ECN)
A correction or modification of an engineering drawing or bill of material
Configuration management
a system by which a product's planned and changing components are accurately identified
Product life-cycle management (PLM)
an umbrella of software programs that attempts to bring together the phases of product design and manufacture. The idea behind PLM software is that product design and manufacture decisions can be performed more creatively, faster, and more economically wh
Process-Chain-Network Analysis (PCN)
Analysis that focuses on the ways in which processes can be designed to optimize interaction between firms and their customers
Process chain
a sequence of steps that accomplishes an activity, such as building a home, completing a tax return, or preparing a sndwhich
Process participant
Can be a manufacturer, a service provider, or a customer
Network
a set of participants
Process domain
Each participant has a PROCESS DOMAIN that includes the set of activities over which it has control
The activities are organized into three PROCESS REGIONS for each participant
Direct interaction region (process chain)
includes process steps that involve interaction between participants
ex: sandwich buyer directly interacts with employees of a sandwich store
Surrogate (substitute) interaction region (process chain)
includes process steps in which one participant is acting on another participants's resources, such as their information, materials, or technologies. DIRECT INTERACTION IS LIMITED ex: when the sandwich SUPPLIER is making sandwiches in the restaurant kitch
Independent processing region (process chain)
includes steps in which the sandwich supplier and/or sandwich customer is acting on resources where each has maximum control
ex: firm that assembles pre-packages sandwiches ex: sandwiches built at home
Adding service Efficiency
Service productivity of notoriously low (in part because of customer involvement in the DESIGN or the DELIVERY of the service, or both)
-- this complicates the product design challenge
Increase service efficiency and limit interaction
1. limit the options
2. delay customization
3. modularization
4. automation
5. moment of truth
Documents for service
Because of the high interaction of most services, the documents for moving the product to production often take the form of explicit JOB INSTRUCTIONS OR SCRIPT
Decision trees (product design)
Helpful when there are a series of decisions and various outcomes that lead to SUBSEQUENT decisions followed by other outcomes
To form a decision tree
1. Be sure that all possible alternatives and states of nature (beginning on the left and moving right) are entered at the end of the appropriate branch. This includes an alternate of "doing nothing"
2. Payoffs are entered at the end of the appropriate br
Managing quality helps build successful strategies of
1. Differentiation
2. low cost
3. response
Improved Quality
Sales gains via:
1. improved response
2. flexible pricing
3. improved reputation
Reduced Costs via
1. increased productivity
2. lower rework and scrap costs
3. lower warranty costs
Operations manager's objective:
to build a total quality management system that identifies and satisfies customer needs --> total quality takes care of the customer
Quality
the totality of features and characteristics of a product or service that bears on its ability to satisfy stated of implied needs
user based quality
quality "lies in the eyes of the beholder"
higher quality= better performance, nicer features, and other improvements
manufacturing based quality
quality= conforming to standards and "making it right the first time
product based quality
views quality as a precise and measurable variable
Combination of qualities
The characteristics that connote quality must be first identified through research (user), then translated into specific product attributes (product) then manufacturing process is organized to ensure that products are made precisely to specifications (man
Implications of quality
1. Company reputation
2. Product liability
3. Global implications (meet global quality, design, and price expectations)
ISO 9000
A set of quality standards developed by the International Organization for Standardization (ISO)
ISO 9000's 8 quality management principles
1. top management leadership
2. customer satisfaction
3. continual improvement
4. involvement of people
5. process analysis
6. use of data-driven decision making
7. a systems approach to management
8. mutually beneficial supplier relationships
ISO standard encourages
establishment of quality management procedures, detailed documentation, work instructions, and record keeping.
Assessment includes: self-appraisal and problem identification
ISO's latest modification
emphasized how an organization can use a QUALITY management approach to achieve SUSTAINED success.
Encourages organizations to plan for their economic survival through continuing the systematic improvement of performance, efficiency, and effectiveness
Cost of Quality (COQ)
1. Prevention costs
2. Appraisal costs
3. Internal failure costs
4. External failure costs
Prevention costs
Costs associated with reducing the potential for defective parts or services
ex: training, quality improvement programs
Appraisal costs
Costs related to evaluating products, processes, parts, and services
Ex: testing, labs, inspectors
Internal failure costs
Costs that result from production of defective parts or services before delivery to customers
Ex: rework, scrap, downtime
External failure costs
Costs that occur after delivery of defective parts or services
Ex: returned goods, liabilities, lost goodwill, costs to society, rework (hardest to estimate)
Total Quality Managment (TQM)
Management of an entire organization so that it excels in all aspects of products and services that are important to the customer
Seven concepts of TQM
1. continuous improvement
2. six sigma
3. employee empowerment
4. benchmarking
5. just-in-time (JIT)
6. Taguchi concepts
7. knowledge of TQM tools
Continuous Improvement
Plan-Do-Check-Act: a continuous improvement model of plan, do, check, act
Six Sigma
A program to save time, improve quality, and lower costs
Statistical sense: describes a process, product, or service with an extremely high capability
Program sense: design to reduce defects to help lower costs, save time, and improve customer satisfactio
Six Sigma (cont.)
A comprehensive system-- a STRATEGY (focuses on total customer satisfaction), a DISCIPLINE (follows the formal six sigma improvement model , DMAIC), and a set of tools-- for achieving and sustaining business success (seven tools)
DMAIC five-step process improvement model
1. DEFINES: the project's purpose, scope, and outputs and then identifies the required process information (keeping in mind the customer's definition of quality)
2. MEASURES: the process and collects data
3. ANALYZES: the data, ensuring repeatability and
Set of seven tools
check sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control
Employee empowerment
involving employees in every step of the production process
-- TQM programs that delegate responsibility for quality to shop-floor employees tend to be twice as likely to succeed at those implemented with "top-down" directives
Techniques for building employee empowerment
1. building communication networks that include employees
2. developing open, supportive supervisors
3. moving responsibility from both managers and staff to production employees
4. building high-morale organizations
5. creating such formal organization s
Quality circle
A group of employees who meet regularly to solve work-related problems --> receive training in group planning, problem solving, and statistical quality control
Benchmarking
Selecting a demonstrated standard of products, services, costs, or practices that represent the very best performance for processes or activities very similar to your own.
Idea: develop a target at which to shoot and then to develop a standard or benchmar
Steps for benchmarking
1. Determine what to benchmark
2. Form a benchmark team
3. Identify benchmark partners
4. Collect and analyze benchmarking information
5. Take action to match or exceed the benchmark
Typical performance measures used in benchmarking
Percentage of defect, cost per unit/order, processing time per unit, service response time, return on investment, customer satisfaction rates, customer retention rates
Just-in-time (JIT)
Designed to produce or deliver goods just as they are needed --> philosophy of continuing improvement and enforced problem solving
JIT and QUALITY
Cuts the cost of quality
Ex: scrap, rework, inventory investment, and damage costs are directly related to inventory on hand . Because there is less inventory on hand, costs are lower. Inventory HIDES bad quality whereas JIT immediately EXPOSES bad qualit
JIT and Quality
Improves Quality
Ex: shrinks lead time, keeps evidence of errors fresh and LIMITS the number of potential sources of error. JIT creates an early WARNING system of quality problems (both within the firm and with vendors )
JIT and QUALITY
Better quality and less inventory are better, easier to employ JIT system: Often the purpose of inventory is to protect against poor production performance resulting from unreliable quality. If consistent quality exists, JIT allows firms to REDUCE ALL THE
Taguchi Concepts
three concepts aimed at improving both product and process quality
1. quality robustness
2. quality loss function
3. target-oriented quality
Quality robust
Products that are consistently built to meet customer needs in spit of adverse conditions in the production process
Quality loss function
A mathematical function that identifies all costs connected with poor quality and shows how these costs increase as product quality moves from what the customer wants
Quality loss equation
L=D(squared) x C
L= loss to society
D(squared)= square of the distance from the target value
C= cost of the deviation at the specific limit
Target-oriented quality
strives to keep the product at the desired specifications, producing more (and better) units near the target --> a philosophy of continuous improvement to bring the product exactly on target
Check-Sheet
An organized method of recording data
Scatter Diagram
A graph of the value of one variable vs. another variable
Cause-and-effect diagrams
A schematic technique used to discover possible locations of quality problems --> a tool that identifies process elements (causes) that may affect an outcome
Ishikawa diagram (fish-bone chart)
(cause and effect?) Causes: material, machinery/equipment, manpower, methods --> after development POSSIBLE QUALITY PROBLEMS and INSPECTION POINTS are HIGHLIGHTED
Pareto charts
A method of organizing errors, problems, or defects to help focus on problem-solving efforts. --> also, a graphic way of classifying problems (defects) by their level of importance (frequency)
Flowchart (Process diagram)
A chart (block diagrams) that describes the steps in a process (present a process or a system using annotated boxes and interconnected lines)
Histogram
A distribution that shows the frequency of occurrences of a variable
Statistical Process Control Chart (SPC)
A chart with time on the horizontal axis for plotting values of a statistic --> monitors standards, makes measurements, and takes corrective action a a product or service is being produced. Samples of process outputs are examined; if they are within accep
Control Charts
graphic presentations of data over time that show upper and lower limits for the process we want to control. Constructed in such a way that new data can be quickly compared with past performance data. We take samples of the process output and plot the ave
Inspection
Goal: detect a bad process immediately
Can involve: measurement, tasting, touching, weighing, or testing of a product (even destroying)
Does not: change a product or add value but is a VEHICLE for improving the system
OM need to know: 1. when to inspect 2
When and where to inspect
1. At your supplier's plant while the supplier is producing
2. At your facility upon receipt of goods from your supplier
3. Before costly or irreversible processes
4. During the step-by-step production process
5. When production or service is complete
6.
Source inspection
employees self-check their own work
Controlling or monitoring at the point of production or purchase-- at the source
PokaYoke
a foolproof device or technique that ensures production of good units every time
Check list
A type of poka-yoke that lists the steps needed to ensure consistency and completeness in a task
Quality characteristics may be measured as either
Attributes or Variables
Attribute inspection
classifies items as being either good or defective --> does not address the DEGREE of failure
Variable inspection
measures such dimensions as weight, speed, size, or strength to see if an item falls within an acceptable range
TQM in services vs products
Approach to product comparison differs because of service's poor definition of the
1) intangible differences between products and
2) the intangible expectations customers have of these products
Aspect of service quality
1. Tangible component of many services is important (how well service is designed and produced
Ex: checkout bill at the hotel, warm the food is at taco bell, how well your car runs after you pick it up at the shop
Aspect of service quality
2. SERVICE QUALITY is related to the SERVICE PROCESS
OM manager can design processes (service products) that have these attributes and can ensure their quality (TQM)
Aspect of service quality
3. Manager may be able to influence both the quality of the service and the expectation. Don't promise more than you can deliver
4. The quality control system must recognize and HAVE A SET OF ALTERNATIVE PLANS FOR LESS-THAN OPTIMAL OPERATING CONDITIONS
Service Recovery
Training and empowering frontline workers to solve a problem immediately
LEARN routine
Listen, Empathize, Apologize, React, Notify (ensuring the complaint is fed back into the system)
KEYS to quality service
1. Designing the product
2. managing the service process
3. Matching customer expectations to the product
4. Preparing for the exceptions
Capacity
The "throughput" or the number of units a facility can hold, receive, store or produce in a given time
Capacity decisions
-Often determine capital requirements and therefore a large portion of FIXED COST
- whether demand will be satisfied or whether facilities will be idle
Capacity planning can be viewed in three horizons
1. Long range capacity
2. Intermediate range
3. Short run
Long range capacity
Greater than 3 years
function of adding facilities and equipment that have a long lead time
Intermediate range
(3-36 months) we can add equipment, personel, and shifts
we can subcontract and we can BUILD or USE inventory
this is the "aggregate planning" task
Short run
(up to 3 months) we are primarily concerned with scheduling jobs and people as well as allocating machinery --> modifying capacity in the short run is difficult, as we are usually constrained by existing capacity
Design capacity
the maximum theoretical output of a system in a given period under ideal conditions, normally expressed as a rate, such as the number of tons of steel that can be produced per week, per month, or per year. "maximum number of units the company is capable o
Effective capacity
the capacity a firm EXPECTS the achieve given the current operating constraints, often lower then design capacity because the facility may have been designed for an earlier version of the product or a different product mix than is currently being produced
Two measures of system performance
1. Utilization
2. Efficiency
Utilization
the percent of DESIGN CAPACITY actually achieved
Efficiency
the perfect of EFFECTIVE CAPACITY actually achieved --> operations managers tend to be evaluated on efficiency --> the key to improving efficiency is often found in correcting quality problems and in effective scheduling, training, and maintenence.
Utilization formula
Utilization= Actual output/Design Capacity
Efficiency
Efficiency= Actual output/effective capacity
Actual (or Expected/rated)
Actual= (Effective capacity)(Efficiency)
With a knowledge of effective capacity, a manager can find the expected output of a facility
4 considerations for a good capacity decision
1. Forecast demand accurately (product life cycle, sales, etc.)
2. Match technology increments and sales volume (
3. Find the optimum operating size (volume)
4. Build for change (build flexibility into facilities and equipment; changes will occur in proce
Demand Exceeds Capacity
1. firm may curtail demand by raising prices, scheduling long lead times, and discouraging marginally profitable business
2. long term solution: increase capacity
Capacity Exceeds demand
1. price reductions or aggressive marketing
2. product changes
3. layoffs and plant closing
Tactics for adjusting capacity to demand
1. Making staffing changes (increasing, decreasing)
2. Adjusting equipment
3. Improving processes to increase throughput
4. Redesigning products to facilitate more throughput
5. Addressing process flexibility to better meet changing product preferences
6.
Service-Sector Demand and Capacity Mangement
Demand management= scheduling customers
Capacity management = scheduling the workforce
Capacity Analysis
determining the throughput capacity of workstations in a system and ultimately the capacity of the entire system
Bottleneck
An operation that is the limiting factor or constraint --> has the lowest effective capacity of any operation in the system and thus limits the system's output
Bottleneck time
The time of the slowest workstation (the one that takes the longest) in the production system
Throughput time
the time it takes a unit to go through production from start to end
Bottleneck (cont.)
1) the BOTTLENECK is the operation with the longest (slowest) process time, after dividing by the number of parallel (redundant) operations, 2) the SYSTEM CAPACITY is the inverse of the BOTTLENECK TIME, and 3) the THROUGHPUT TIME is the total time through
Theory of constraints
A body of knowledge that deals with anything that limits an organization's ability to achieve it's goals
Constraints can be physical (process or personnel availability, raw materials, or supplies) or non-physical ( procedures, morale, and training)
TOC 5 step process
1. Identify the constraints
2. Develop a plan for overcoming the identified constraints
3. Focus resources on accomplishing step 2
4. Reduce the effects of the constraints by offloading work or by expanding capability. Make sure that the constraints are r
4 principles of bottleneck management
1. Release work orders to the system at the pace set by the bottleneck's capacity
2. Lost time at the bottleneck represents lost capacity for the whole system
3. Increasing the capacity of a non-bottleneck is a mirage
4. Increasing the capacity of the bot
Break-even analysis
A means of finding the point, in dollars and units, at which costs equal revenues
Firms must operate above this level to achieve profitability
Requires an estimation of fixed costs, variable costs, and revenue
Contribution
The difference between selling price and variable cost
Only when total contribution exceed total fixed costs will there be profit
Revenue function (of break-even)
1. Revenue begins at the origin and proceeds upward to the right, increasing by the selling price of each unit
2. Where the revenue function crosses the total cost line (the sum of fixed and variable costs) is the break-even point, with a profit corridor
Assumptions of the break-even
1. costs and revenue are shown as straight lines, increase linearly, and in direct proportion to the volume of units being produced
2. neither fixed nor variable costs need to be a straight line
ex: fixed costs change as more capital equipment used, labor
Break-even equation
TR=TC
Px=F + Vx
P=price per unit (after all discounts)
Break-even point in units
F/(P-V)
Total fixed costs/ (Price-variable cost)
Break-even point in dollars
F/1-(V/P)
Total fixed cost/1-(Variable cost-price)
Multiproduct break-even
Weight each product's contribution by its proportion of sales
Applying Expected Monetary Value (EMV) to Capacity Decisions
pg 311 when there is uncertainty
Net Present Value
P= F/(1+i)nth
1. compute the present value of all cash flows for each investment alternative
2. When deciding among alternatives you pick the investment with the highest net present value
3.. When making several investments, those with the higher net pres
Limitations of NPV
1. Investments with the same NPV may have different projected lives and different salvage values
2. Investments with the same NPV may have different cash flows (may make substantial differences in the company's ability to pay its bills)
3. The assumption
Quality house
House 1: Customer requirements + Design characteristics
House 2: Specific components
House 3: production process
House 4: Quality plan
Slack
Slack= LS- ES
Slack = LF-EF
Variance for time
Variance for times= [(pessimistic time-optimistic time)/6)]squared
Break even
BEP$= F/ 1-(V/P)
BEPx= F/(P-V)
Expected production
Effective capacity x Efficiency = expected production
Forecasting
the art and science of predicting future events
Forcasting may involve
1. Taking historical data (such as pat sales) and projecting them into the future with a mathematical model
2. a subjective or intuitive prediction
3. be based on demand-driven data (such as customer plans to purchase, and projecting them into the future)
Forecasts may be influenced by
a product's position in its life cycle-- whether in an introduction, growth, maturity, or decline stage
A forecast is usually classified by
the FUTURE TIME HORIZON that it covers
Time horizons fall into three categories
1. Short-range forecast
2. Medium-range forecast
3. Long-range forecast
Short-range forecast
1. time span of up to 1 year
2. generally less than 3 months
Used for
a. planning purchasing
b. job scheduling
c. workforce levels
d. job assignments
e. production levels
Medium-range forecast
(intermediate)
1. spans from 3 months to 3 years
Useful in
a. sales planning
b. production planning and budgeting
c. cash budgeting
d. analysis of various operating plans
Long-range forecast
1. Generally 3 years or more in time span
Used in
a. planning for new products
b. capital expenditures
c. facility location or expansion
d. research and development
Medium and long-range forecasting differ from short-range because
1. M and L deal with MORE COMPREHENSIVE ISSUES supporting management decisions regarding planning and products, plants, and processes
2. ST EMPLOYS DIFFERENT METHODOLOGIES (mathematical techniques such as moving averages, exponential smoothing, and trend
Economic Forecasts
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Technological forecasts
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Demand Forecasts
Projections of demand for company's products of services. They need demand driven forecasts, where the focus is on rapidly identifying and tracking customer desires
May use:
1. Point of-sale (POS) data
2. retailer-generated reports of customer preferences
The forecast is only the
estimate of the demand until the demand becomes known --> forecasts drive decisions in many areas --> impact of product demand forecast on
1. supply-chain management
2. human resources (HR)
3. capacity
Supply-Chain management
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Collaborative planning, forecasting, and replenishment (CPFR)
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Human Resources
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Capacity
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Seven steps in the forecasting system
Determine the use of the forecast
Select the items to be forecasted
Determine the time horizon of the forecast
Select the forecasting model(s)
Gather the data needed to make the forecast
Make the forecast
Validate and implement results
2 General Forecasting approaches
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Quantitative forecasts
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Qualitative forecasts
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4 Different Qualitative Methods
1. Jury of executive opinion
2. Delphi method
3. Sales force composite
4. Market survey
Jury of executive opinion (qualitative)
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Delphi Method (qualitative)
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Sales force composite (qualitative)
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Market Survey (qualitative)
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Quantitative forecasting methods
Time-series models
1. Naive approach
2. Moving averages
3. Exponential smoothing
4. Trend projection
Associative Model
5. Linear regression
Time-series models
Naive approach
Moving averages
Exponential smoothing
Trend projection
Associative Models
Linear regression
4 Components of a time series
1. Trend
2. Seasonality
3. Cycles
4. Random variations
Trend
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Seasonality
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Cycles
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Random variations
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Naive Approach
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Moving-average
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Moving average equation
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Weighted Moving average equation
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3 Problems of moving averages
Increasing n smooths the forecast but makes it less sensitive to changes
Does not forecast trends well
Requires extensive historical data
Exponential smoothing
Form of weighted moving average
Weights decline exponentially
Most recent data weighted most
Requires smoothing constant ()
Ranges from 0 to 1
Subjectively chosen
Involves little record keeping of past data
Exponential smoothing equation
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Smoothing constant
Smoothing constant generally .05 ? a ? .50
As a increases, older values become less significant
Chose high values of when underlying average is likely to change
Choose low values of when underlying average is stable
Selecting the smoothing constant
When it is high it gives more weight to recent data
When it is low it gives more weight to past data
Measuring forecast error
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3 popular ways of measuring the forecast error
1. Mean absolute deviation (MAD)
2. Mean squared error (MSE)
3. Mean absolute percent error (MAPE)
Mean Absolute deviation (MAD)
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Mean Squared Error (MSE)
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Mean Absolute Percent Error (MAPE)
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Exponential smoothing WITH TREND ADJUSTMENT (equation)
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Trend Projection
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Notes on the use of the LEAST SQUARED method
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Seasonal variations
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Steps to get the Seasonal forecast
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Cycles
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Associative forecasting models (regression and correlation analysis)
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linear-regression analysis
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Regression analysis EQUATIONS
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Standard error of the estimate (standard deviation of the regression)
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Coefficient of correlation
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Coefficient of determination
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Multiple regression
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Monitoring and controlling forecasts
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Tracking signal
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Bias error
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Adaptive forecasting/smoothing
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Focus forecasting
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Focus forecasting is based on 2 principles
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Forecasting in the service sector
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