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EC207 Study Guide - Midterm Guide: User Friendly, Remanufacturing, Exponential Distribution

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Shadab Qaiser
Study Guide

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Chapter 1 Notes
Operations Management
-is the management of activities and resources that create goods and/ or provide services
-Refers to operating at minimum cost and time
-refers to achieving the intended goals (quality and timeliness)
Function within Organizations
The Historical Evolution of Operations Management
Craft production,
-highly skilled workers using simple, flexible tools produced goods according to customer
Industrial Revolution
-Division of labour: breaking up a production process into small tasks so that each worker
performs a small portion of the overall job
-Interchangeable parts: Parts of a product made to such precision that they do not have to be
custom fitted.
Scientific Management
-Based on observation, measurement, analysis and improvement of work methods and economic
incentives. Emphasizes output, not popular with workers
-Mass Production: System in which lower-skilled workers use specialized machinery to produce
high volumes of standardized goods.
The Human Relations Movement
-Emphasizes the workers in work design. More emphasis on motivation. Giving special attention to
workers is critical for improving productivity.
Decision Models and Computers
-mid 1990s, the internet began to play a major role in operations, and more companies now use
entree resources planning (ERP) software to co-ordinate their sales, materials management,
production planning/manufacturing, and accounting/finance activities.
The Influence of Japanese Manufacturers
-Total quality management (TQM) : involving every employee in a continual effort to improve
quality and satisfy the customers
-Lean Production: System that uses minimum amounts of resources to produce a high volume of
high quality goods with some variety
Chapter 2 Notes
Operations Strategy
-Nine Strategic Decision Categories:
1. Facility - how to specialize or focus each facility: by market, product group, or production
process type.
2. Capacity - Long term capacity decisions relate to size of plants and major equipment.
The main issue is whether and how to change the capacity in anticipation of future
3. Vertical integration/outsourcing - Cost, coordination, and control are the important
decision factors.
4. Supplier Relationship/Partnership - using competitive arms length or close
relationships(partnerships). Determines how the quality of purchased goods will be
assured; either work with a supplier to assure/control its production process or inspect
the incoming parts.
5. Product Mix and New Products - The challenge of operations management increases
as the variety of products and the rate of new product introduction increase. These
require flexible production systems. Products designed for easy manufacturing and
assembly and effective product development process increase operations strengths.
6. Process Types and Technology - types: job shop, batch flow, assembly line, and
continuous flow. The process type determines the appropriate technologies and degree
of process automation.
7. Human Resources - With co-operation of the personal department, workers/staff are
rewarded to work as a team to achieve the company goals, incentives can be used.
8. Quality - product quality is determines during the design and production. A major
decision is whether to assign the responsibility of quality control to the workers.
9. Operations infrastructure and Systems - these decision include effective planning and
control (including forecasting, material requirements planning, and scheduling)m using a
software program for planning and control.
-Formulation of an Operations Strategy
1. Link the organization goals to the operations strategy; determine operations
requirements of the organizational goals.
2. Categorize/segment the customers into types. For each category, determine which
of the four competitive priorities competitive priorities (cost, quality, delivery, and
flexibility) should be emphasized.
3. Group product lines into types… ex. low volume vs high volume
4. Conduct an operations audit to determine the strengths/weaknesses of the current
operations strategy in each of the nine strategic decision categories. Also for each
customer category, assess the relative standing of products (relative to desired
competitive priorities) against those of most relevant competitors.
5. Assess the degree of focus at each plant.
6. Develop an operations strategy and reallocate product line to plants if necessary.
For each of the nine strategic decision categories, state the objectives, policies,
and actions plans. Deploy these policies and action plans.
Generic Operating Strategies:
1. Low Labour-cost Strategy
2. Scale Based Strategies: capital intensive methods to enhance higher labour
productivity and lower unit costs
3. Focused Factories Strategy: smaller factories that focus on narrow lines to take
advantage os specialization and achieve higher quality
4. Flexible Factories strategy: reduce the time needed to ass new product and
process designs (used flexible equipment that allowed volume and design
5. Continuous Improvement strategy: new product features and continuous
improvement of products/processes
6. Quality based strategies: focus on maintaining or improving the quality of an
organizations goods or services.
7. Time bases strategies: focus on reducing the time required to accomplish
various activities/tasks.
-A measure of productivity use of resources, usually expresses as the ratio of output to input.
-We should not confuse productivity with efficiency.
-Efficiency is a narrower concept that pertains to getting the most out of a fixed set of resources;
productivity is a broader concept that pertains to better use of overall resources.
-Total productivity and profit of a company are directly related. Total productivity is:
Revenue/total cost, whereas profit is:
Revenue - total cost
Chapter 3
Uses of Forecasts in business organizations:
-Accounting: new product/process cost estimates, profit projections, cash management
-Finance: Equipment/Replacement needs, timing and amount of funding/borrowing needed
-Human Recourses: Hiring activities (recruitment, interviewing, training etc.)
-Marketing: Pricing and promotion, e-business strategies, global competition strategies
-MIS: New/revised information systems, internet services
-Operations: Schedules, capacity planning, work assignments and workloads, inventory planning,
make-or-buy decisions, outsourcing, project management
-Product/service design: Revision of current features, design of new products or services.
Steps in the Forecasting Process
1. Determine the purpose of the forecast. Determine the level of detail required, the amount of
resources that can be justified, and the level of accuracy needed.
2. Establish a forecasting horizon.
3. Gather and analyze relevant historical data. Endure data us of past demand rather than sales or
shipments. Identify assumptions that are made.
4. Select a forecasting technique
5. Prepare the forecast
6. Monitor the forecast. If it is not doing well, re-examine the parameters of the technique or use a
different one.
Approaches to Forecasting
Judgmental methods (Qualitative)
-Use non quantitative analysis of historical data and/or analysis of subjective inputs
-Historical Analogies: demand for similar products
-Sales Force Opinions: The sales staff or the customer service staff is often a good source of
information because of their direct contact with the customers
-Consumer Surveys: organization seeking consumer input
-Executive opinions: a small group of upper managers may meet and collectively develop a
forecast. This approach is used as part of a long term strategic planning and new product
-Expert Opinions: the Delphi Method; experts complete a series of questionnaires, each
developed from the previous one, to achieve a consensus forecast
-Time series models: Extend the pattern of data into the future
-Associative models: Use explanatory variables to predict future demand for the variable of
Time Series Models: Introduction and Averaging
-A time series is a time ordered sequence of observations taken at regular intervals over a period of
-Underlying behaviour of a time series:
1. Level (average) - or constant, a horizontal patten
2. Trend - a persistent upward or downward movement in the data; population growth,
increasing incomes, etc.
3. Seasonality - the regular repeating wavelike variations generally related to actors such
as the calendar, weather, or recurring events.
4. Cycles - wavelike variations lasting more than one year; related to a variety of economic,
political, and even agricultural conditions
5. Irregular variations - due to unusual one time explainable circumstances not reflective
of typical behaviour; severe weather conditions, strikes, promotions. Should be identified
and removed from data
6. Random variations - residual variations that remain after all other behaviours have been
accounted for (also called noise). This randomness arises from the combined influence of
many relatively unimportant factors and it cannot be reliably predicted. Time series
techniques smooth random variations in the data.
Naive Methods
-The naive method can be used with a stable series (level or average with random variables), with
seasonal variations, or with trend. With a stable series, the last data point becomes the naive
forecast for the next period.
Averaging method
-Moving average : technique that averages a number of recent actual values as forecast for
current period. It is updated as new values becomes available.
-The advantage of a moving average forecast are that it is easy to understand.
-Disadvantage is that all values in the moving average forecast are weighted equally
-Weighted Moving Average: a variation of moving average where the more recent values in the
time series are given larger weight in calculating a forecast
-Exponential smoothing: weighted average method based on previous forecast plus a
percentage of the difference between that forecast and the previous one
Techniques for Trend
Trend-adjusted exponential smoothing
- variations of exponential smoothing used when a time series exhibits trend
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