Mgt 2

• Operations Management


  It explores the way organizations produce and distribute goods and services. Everything that we wear, eat, sit on, use or read comes to us courtesy of the operations managers who organized its production and distribution.
• Operations


  The systematic development and control of the processes that transform inputs into goods and services. The operations function comprises a significant percentage of the employees and physical assets in most organizations.
• Business Organizations have three basic functional areas


  • Finance
  • Marketing
  • Operations
• Supply Chain


  The sequence of organization, their facilities, functions and activities that are involved in producing and delivering a product or service.
• Transformation process


  Conversion of inputs into outputs wherein a process is applied to convert raw materials into finished products
• Value-added


  The difference between the cost of inputs and the value or price of outputs
• Characteristics of Goods vs Services


  • Output (Tangible vs Intangible)
  • Customer Contact (Low vs High)
  • Labor Content (Low vs High)
  • Uniformity of Output (High vs Low)
  • Measurement of productivity (Easy vs Difficult)
  • Opportunity to correct problems before delivery (High vs Low)
  • Inventory (Much vs Little)
  • Wages (Narrow Range vs Wide Range)
  • Patentable (Usually vs Not usually)
• Capacity of the Process

  Business organization produced goods/services based on the number of customers who wanted to buy the product. The most ideal situation is when Output = Demand.
• Sources of variation


  • Variety of goods or services being offered
  • Structural variation in demand
  • Random variation
  • Assignable variation
• Scope of Operations Management


  • Involves people in product and service design, process selection, selection and management of technology, design of work systems, location planning, facilities planning, and quality improvement of the organization's products and services
• Distinctive Characteristics of Service Operations


  Inputs are the customers themselves, and resources are the facilitating goods, employee labor, and capital at the command of the service manager
• Simultaneity


  Services are created and consumed simultaneously and, thus, cannot be stored
• Perishability


  A service is a perishable commodity. Because a service cannot be stored, it is lost forever when not in use
• Options to manage variable demand and time-perishable capacity


  • Smooth demand
  • Adjust service capacity
  • Allow customers to wait
• Intangibility


  Services are ideas and concepts; products are things. Service innovations are not patentable.
• Heterogeneity


  The interaction between customer and employee in services, creates the possibility of a more satisfying human work experience. In services, work activity is oriented toward people rather than toward things.
• Non-ownership Characteristics of Services


  Customer do not purchase an asset but, instead, have use of the asset for a specific time, whether it is the use of human labor, technology, or a physical asset.
• Service package


  • Supporting facility
  • Facilitating Goods
  • Information
  • Explicit services
  • Implicit services
• Service process matrix


  Classifies services across two dimensions: degree of labor intensity and degree of interaction and customization
• Types of services in the service process matrix


  • Service factory
  • Service shop
  • Mass Service
  • Professional service
• Nature of Service Act


  • Tangible actions directed to the costumer
  • Tangible actions directed at the customers possessions
  • Intangible actions directed at the costumers' intellect
  • Intangible actions performed on the costumers' assets
• Forecasting


  A statement about the future value of a variable such as demand. It is a basic input in the decision process of operation management because they provide information on future demand.
• Important aspects of Forecast


  • Expected level of demand
  • Degree of accuracy that can be assign to a forecast
• Importance of Forecasting in the planning process


  • They enable managers to anticipate the future so they can plan accordingly. Used in accounting, finance, marketing, operations, and human resources.
• Forecasting


  A basic input in the decision process of operation management because they provide information on future demand
• Primary goal of operations

  To have too much supply to demand
• Forecast to demand


  Essential for determining how much capacity or supply will be needed to meet demand
• Two important aspects of Forecast


  • Expected level of demand
  • Degree of accuracy that can be assigned to a forecast (Forecasts accuracy)
• Expected level of demand


  Can be a function of some structural variation, such as a trend or seasonal variation
• Forecasts accuracy


  A function of the ability of forecaster correctly model demand, random variation, and sometimes unforeseen events
• Importance of Forecasting in the planning process


  They enable managers to anticipate the future so they can plan accordingly
• Some uses of forecasts in business organization


  • Accounting
  • Finance
  • Human resources
  • Marketing
  • MIS
  • Operations
  • Product/ service design
• Use of forecasts to help manager plan the system


  Planning the system generally involves long-range plans about the types of products and services to offer, what facilities and equipment to have, where to locate, and soon
• Use of forecasts to help them plan the use of the system


  Planning the use of the system refers to short- range and intermediate- range planning, which involve tasks such as planning inventory and workplace levels, planning purchasing and production, budgeting, and scheduling
• Features common to all forecasts


  • Forecasting techniques generally assumes that the same underlying causal system that existed in the past will continue to exist in the future
  • Forecasts are not perfect; actual results usually differ from predicted values; the presence of randomness precludes perfect forecasts. Allowance should be made for forecast errors
  • Forecasts for groups of items tend to be more accurate than forecasts for individual items because forecasting errors among items in a group usually have a cancelling effect
  • Forecasts accuracy decreases as the time period covered by the forecasts – the time horizon- increases
• Elements of a good Forecasts


  • The forecast should be timely
  • The forecast should be accurate, and the degree of accuracy should be stated
  • The forecast should be reliable: it should work consistently
  • The forecasts should be expressed in meaningful units
  • The forecasts should be in writing
  • The forecasts techniques should be simple to understand and use
  • The forecasts should be cost- effective: the benefits should overweigh the cost
• Steps in forecasting Process


  • Determine the purpose of the forecast
  • Establish a time horizon
  • Select forecasting technique
  • Obtain, clean, and analyses appropriate data
  • Make the forecasts
  • Monitor the forecasts
• Two General Approaches to forecasting


  • Qualitative methods
  • Quantitative methods
• Qualitative methods


  Consist mainly of subjective inputs, which often defy precise numerical description
• Quantitative methods


  Involves either the projection of historical data or the development of associative models that attempt to utilize causal (explanatory) variables to make forecasts