CHAPTER 1 – OPERATIONS AND 6.

Human Resources and Job Design

PRODUCTIVITY 7. Supply-chain management
8. Inventory management
Operations Management – activities that relate to 9. Scheduling
the creation of goods and services through the 10. Maintenance
transformation of inputs to outputs.
- The efficient production of goods and OPERATIONS FOR GOODS AND SERVICES
services requires effective applications of the Services are especially important because
concepts, tools, and techniques of OM. almost 80% of all jobs are in service firms.
- Operations is one of the three functions
that every organization performs. Services – economic activities that typically
produce an intangible product.
Evolution of OM
Differences between Goods and Services
- Industrial Revolution
- Scientific Management Characteristics of Characteristics of Goods
- Quality Revolution Services - Tangible
- Human Relations - Intangible - Product can usually be
- Produced and kept in inventory
- Operations Research consumed - Similar products
- Globalization simultaneously produced
- Internet Revolution - Unique - Limited customer
- High customer involvement in
E-Business or E-Commerce interaction production
- Inconsistent product - Product standardized
- B2B (business to business) definition - Standard tangible
- B2C (business to consumer) - Often knowledge-based product tends to make
- C2B (consumer to business) - Services dispersed feasible
- C2C (consumer to consumer) - Quality may be hard to - Product typically
evaluate produced at a fixed
Three Functions in Organizing to Produce - Reselling is unusual facility
Goods and Services - Many aspects of quality
for tangible products
1. Marketing are easy to evaluate
- Product often has some
2. Production/Operations
residual value
3. Finance/Accounting
Supply Chain – a global network of organizations
and activities that supplies a firm with goods and
services. Service Sector – the segment of the economy that
includes trade, financial, lodging, education, legal,
Four Reasons to Study OM
medical and other professional occupations.
Good OM managers are scarce and, as a
Productivity – the ratio of outputs (goods and
result, career opportunities and pay are excellent.
services) divided by one or more inputs (such as
1. We study how people organize themselves labor, capital, or management)
for productive enterprise - Only through increases in
2. To understand what operations managers productivity can the standard of living improve
do.
3. It is such a costly part of an organization.
inputs transformation outputs
Ten Strategic Operations Management Decision
1. Design of goods and service
2. Managing Quality PRODUCTIVITY MEASUREMENT
3. Process and capacity design units produced
4. Location strategy Productivity=
input used
5. Layout Strategy
TYPES OF PRODUCTIVITY 1. To beat the competition
2. Guide the management
Single-factor productivity – indicates the ratio of
3. Indicator progress
one resource (input) to the gods and services
4. Maximum utilization or scarce
produced (outputs)
resources
Multi-factor productivity – indicates the ratio of 5. Key to national prosperity
many or all resources (inputs) to the goods and
Measurement Problems:
services produced (outputs). - Quality may change
Total Factor Productivity - External elements
- Precise units of measure may be lacking
Productivity Improvement
Productivity Variables
- Increase output while input remains the
The three factors critical to productivity
same improvement – labor, capital, and the art and
- Decrease input while output remains the science of management.
same
- Increase input resulting in a very large New Challenges in Operations Management
increase in output One of the reasons OM is such an exciting
- Decrease input by a very large amount discipline is that an operations manager is
with a resultant small reduction in output confronted with ever-changing issues, from
technology, to global supply chain, to sustainability.
Factors that Affect or Influence Productivity
- Global focus
- Technical factors - Supply-chain partnering
- Production factors - Sustainability
- Organizational factors - Rapid product development
- Personnel factors - Mass customization
- Finance factors - Just-in-time performance
- Management factors - Empowered employee
- Government factors
Risk of Globalization
- Location factors
- Cultural differences
Ways to improve productivity - Supply chain logistics
- Product development - Safety, security and stability
- Specialization and standardization - Quality problems
- Corporate image
- Market, consumer and product research
- Loss of capabilities
- Value analysis
- Process planning and research Strategic Planning Tools
- Method study
- 5 Forces Model of Michael Porter (new
- Safety
entrant threat, substitute threat, buyers
- Operator training power, suppliers power, rivalry among
- Production planning and control competitors)
- Material control - SWOT Analysis
Importance of Productivity
- Productiveness increases the overall
efficiency of an organization
- Increased production due to efficient
utilization of organizational resources
leads to lower cost production resulting
in better sales and profits
- Concept of productivity can be viewed
from the following points:
CHAPTER 2 – THE GLOBAL ENVIRONMENT
AND OPERATIONS STRATEGY
Reasons to globalize OM
- To improve Supply Chain
- To improve Operations
- To improve Products
- To reduce Cost (labor, taxes, tariffs)
- To attract and retain global talent
- To understand the markets
DEVELOPING MISSIONS AND STRATEGY
Key-Success Factors (KSFs) – activities or
factors that are key to achieving competitive
advantage.
Core Competencies – a set of skills, talents, and
capabilities in which a firm is particularly strong.
Activity Map – a graphical link of competitive
advantage, KSFs, and supporting activities.
Outsourcing – transferring a firm’s activities that
have traditionally been internal to external
suppliers.

Mission – the purpose or rationale for an GLOBAL OPERATION STRATEGY OPTIONS

organization’s existence.
Global – a strategy in which operating decisions
Strategy – how an organization expects to achieve are centralized and headquarters coordinates the
its missions and goals. standardization and learning between facilities.

Competitive Advantage – the creation of a unique Transnational – a strategy that combines the
advantage over competitors. benefits of global-scale efficiencies with the
benefits of local responsiveness.
- Product selection and design
- Quality International – a strategy in which global markets
- Process are penetrated using exports and licenses.
- Location
Multi-Domestic – a strategy in which operating
- Layout
decisions are decentralized to each country to
- Human Resources
enhance local responsiveness.
- Supply Chain
- Inventory
- Scheduling
- Maintenance
Different strategies to achieve competitive
advantage
- Differentiation – being unique
- Cost Leadership – being cheaper
- Response – being faster
ISSUES IN OPERATIONS STRATEGY
Resources view – a method managers use to
evaluate the resources at their disposal and
manage or alter them to achieve competitive
advantage.
Value-chain analysis – a way to identify those
elements in the product/service chain that uniquely
add value.
Five forces model – a method of analyzing the five
forces in the competitive environment.
Strategy Development and Implementation
SWOT Analysis – a method of determining internal
strengths and weaknesses and external
opportunities and threats.
 Activity-on-arrow (AOA) – a network diagram in
which arrows designate activities.
CHAPTER 3 – MANAGING PROJECTS
Critical path analysis – a process that helps
Three phases of management of projects determine a project schedule.
- Planning Forward pass – a process that identifies a;; the
- Scheduling early times.
- Controlling
Backward pass – an activity that finds all the late
Project organization – an organization formed to start and late finish times.
ensure that programs (projects) receive the proper
management and attention. Slack time – free time for an activity. Also, referred
to as free float or free slack.
- It can be temporary or permanent. A
permanent organization is usually called Three time estimates in PERT
a matrix organization.
- Optimistic time – the best activity
Project Scheduling – involves sequencing and completion time that could be obtained
allotting time to all project activities. in a PERT network.
- Pessimistic Time – the worst activity
- Gantt charts – planning charts used to time that could be expected in a PERT
schedule resources and allocate time. network.
- activities are planned - Most likely time – the most probable
- order of performance is documented time to complete an activity in a PERT
- activity time estimates are recorded network.
- overall project time is developed
Crashing – shortening activity time in a network to
Project Controlling – using a feedback loop to reduce time on the critical path so total completion
revise the project plan and having the ability to shift time is reduced.
resources to where they are needed most.
Four steps of crashing a project
PROJECT MANAGEMENT TECHNIQUES
1. Compute the crash cost per week for each
PERT (Program Evaluation and Review activity in the network.
Technique) – a project management technique
that employs three time estimates for each activity.
( crashcost−normal cost)
CPM (Critical path method) –a project crash cost per period=
(normal time−crash time)
management technique that uses only one time
factor per activity.
Six Basic Steps in PERT and CPM: 2. Find the critical path in the project network.
3. Select the activity on this critical path that
1. Define the project and prepare the work can still be crashed and has the smallest
breakdown structure crash cost period.
2. Develop the relationships among the 4. Update all the activity times.
activities
3. Draw the network connecting all the
activities
4. Assign time and/or cost estimates to each
activity.
5. Compute the longest time path through the
network.
6. Use the network to help plan, schedule,
monitor, and control the project.
Critical Path – the computed longest paths through
a network.
Activity-on-node (AON) – a network diagram in
which nodes designate activities.
 CHAPTER 4 – FORECASTING DEMAND
Forecasting - process of predicting future events.
Types of Forecast
- Technological - predict technological
progress
- Economic – predict inflation rate and
planning indicators that are valuable in
helping organizations prepare medium
to long range forecast.
- Demand Forecast – predict sales of
existing products/services and
projections of a company’s sales for
each time period in the planning horizon
Forecasting Time Horizons
- Short range – time span of 1 year but is
generally less than 3 months.
- Medium range – 3 months to 3 years
- Long range – 3 years or more
Strategic Importance of Forecasting
- Supply chain – supplier relation,
innovation of product, speed and cost to
market
- Human resources – hiring, training,
laying off of workers
- Capacity – capacity shortages can
result to undependable delivery, loss of
customer’s loss of market share.
Seven steps in the Forecasting System
1. Determine the use of forecast
2. Select the items to be forecasted
3. Determine the time horizon of the forecast
4. Select the forecasting models
5. Gather the data needed to make forecast
6. Make the forecast
7. Validate and implement the results
FORECASTING TECHNIQUES
Qualitative models
Forecasts that incorporate such factors as
the decision maker’s intuition, emotions, personal
experiences, and value system.
Jury of executive opinion – a forecasting
technique that uses the opinion of a small group of
high level managers to form a group estimate of
demand.
Delphi Method – a forecasting technique using a
group process that allows experts to make
forecasts.
Sales force composite – a forecasting technique
based on salespersons’ estimates of expected
sales
Market survey – a forecasting method that solicits
input from customers regarding future purchasing
plans.
Quantitative Models
Time-Series Models – a forecasting technique that
uses a series of past data points to make a
forecast. Naïve approach, moving average and
exponential smoothing are under time-series
models.
- Naïve approach – a forecasting
technique which assumes that demand
in the next period is equal to demand in
the most recent period.
- Moving average – a forecasting
method that uses an average of the n
most recent periods of data to forecast
the next period.
- Exponential Smoothing – a weighted-
moving-average forecasting technique
in which data points are weighted by an
exponential function.
Four components of time-series
- Trend
- Seasonality
- Cycles
- Random variations
Casual Models – use variables or factors that
might influence the quantity being forecasted
- The goal of it is to develop the best
statistical relationship between a
dependent variable and one or more
independent variables.
Associative Models – usually consider several
variables that are related to the quantity being
produced.
- Linear-Regression Analysis – a
straight-line mathematical model to
describe the functional relationship
between independent and dependent
variables.
 - Standard error of the estimates – a
measure of variability around the
regression line – its standard deviation.
- Coefficient of correlation – a measure
of the strength of the relationship
between two variables.
Multiple-regression – an associative forecasting
method with more than one independent variable.
CHAPTER 5 - PRODUCT DESIGN
Product Design – effective and efficient
development of ideas to generation that leads to a
new product.
Product Decision – the selection, definition, and
design of products.
OBJECTIVE OF PRODUCT DECISION
To develop and implement a product
strategy that meets the demands of the market
place with a competitive advantage.
Product Innovation can be driven by:
- Markets
- Technology
- Packaging
PRODUCT LIFE CYCLES
Introductory Phase
- Product are still being “fine-tuned” for
the market
- to gain market demand
- Product positioning
They may warrant unusual expenditures
- Research
- Product development
- Process modification
- Enhancement
Growth Phase
- Product design begin to stabilize and
effective forecasting of capacity is
necessary.
- Adding capacity or enhancing existing
capacity to accommodate the increase
in product demand.
Maturity Phase
- Competitors are established
- Maintain market share
- High-volume, innovative production may
be appropriated.
- Improved cost control, reduction in
operations and a pairing down of the
product line
- Termination ( to avoid continuous loss
by withdrawing)
Decline Phase
- ways to improve the product
- Dying products are typically poor
product in which to invest resources and
managerial talent.
Product-by-Value Analysis
- 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.
- It allows management to evaluate
possible strategies for each product.
GENERATING NEW PRODUCTS
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.
Opportunities:
1. Understanding the customer
2. Economic Change
3. Sociological and demographic change
4. Technological change
5. Political and legal change
PRODUCT DEVELOPMENT
A firm requires cash for product
development, an understanding of the marketplace,
and the necessary human talents.
Quality Function Deployment (QFD)
A process for determining customer
requirements (wants) and translating them into the
attributes (how) that each functional area can
understand and act on.
Product Development Stages  Computer-aided design (CAD) –
interactive use of a computer to develop
Product concepts are developed from a
and document a product.
variety of sources, both external and internal to the
 Design for manufacture and assembly
firm.
(DMFA) – software that allows designers to
Stage 1: Concept look at the effect of design on
manufacturing of the product.
2: Feasibility
 Standard for the exchange of product
3: Customer Requirements data (STEP) – a standard that provides a
format allowing the electronic transmission
4: Functional Specification of three-dimensional data.
5: Product Specification  Computer-aided manufacturing (CAM) –
the use of information technology to control
6: Design Review machinery.
7: Test Market  3D Printing - an extension of CAD that
builds prototypes and small lots.
8: Introduction to Market
Value Analysis – a review of successful products
9: Evaluation that takes place during the production process.
- it seeks improvements that lead to
House of Quality Sequence Indicates How to
either a better product, or a product made more
Deploy Resources to Achieve Customer
economically, or a product with less environmental
Requirements
impact.
Design Characteristics
Time-Based Competition – competition based on
time; rapidly developing products and moving them
Specific Components
to market.
Production Process Joint Ventures – firms establishing joint ownership
to pursue new products or markets.
Quality Plan
Alliances – cooperative agreements that allow
Product Development Teams – teams charged firms to remain independent, but pursue strategies
with moving from market requirements for a product consistent with their individual missions.
to achieving product success.
Concurrent Engineering – use of cross-functional
teams in product design and preproduction
manufacturing.
Manufacturability and Value Engineering – -
activities that help improve a product’s design,
production, maintainability, and use.
ISSUES FOR PRODUCT DESIGN

 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.