Final Exam Flashcards
the three competitive strategies
cost leadership, differentiation, and combination
the holy grail of operations
short lead time/on time, low cost, high performance/quality
order qualifiers
minimum level of service to be considered by the consumer; base level of features and functions
order winners
criteria that is most important to customers at the time of purchase (may vary at different times and from customer to customer); the features that win you a customer
order losers
failure to deliver the expected level of criteria can result in a customer being lost forever (dependability, personalization, and speed are particularly vulnerable)
the goal directed actions a firm intends to take in its quest to gain and sustain a competitive advantage
strategy
cost leader
supply product or service for the cheapest; emphasis on using tech to drive down operational costs; simple and standard product designs
differentiation
offer product that has functions and features no one else has (deliver quicker or keep your promises); unique product that allows a firm to charge a premium price
combination
a combination between cost leader and differentiation; will not last; stuck and difficult to grow
markets to compete in
broad or narrow
broad market
everyone is a potential customer
narrow market
small segment of the population
why not always choose a broad market
limited resources of time, money, and people; want to be efficient in our marketing
productivity
ratio of outputs to inputs in a production process; ship more products out the door using less materials and less manpower
what is operations management
turning sales into profit; creating profit
what makes operations difficult
lots of gray areas in decision making; IT DEPENDS
to be successful the firm must ____, ____, ____
- decide on a competitive strategy 2. understand order qualifier and order winner criterion 3. position themselves to be better than their competitors
four growth strategies
concentration, vertical integration, horizontal integration, and diversification
concentration
focus on the firm’s core business and increase the number of products or services served
vertical integration
buy out suppliers or distributors
horizontal integration
buy out competitors
diversification
grow by getting into different industries (reduces risk)
why vertical integration?
total control over costs and quality and supplies, profits in house
why horizontal integration?
instantly gaining market share, increase economies of scale, reduce competition
what is the big thing to remember about productivity
productivity measures are RELATIVE so they have to be compared to something else
productivity=`
total output/total input
how can you compare the productivity of two very different size companies
look at costs as a % of revenue
product development
the process beginning with the perception of a market opportunity and ending with the production, sale, and delivery of the product
successful product development determines ______ in the future
competitive positioning
without ______ the firm will not survive
innovating products and processes
changes over time
customer expectations (phone example)
innovation involves _______ with periods of _____
incremental improvements; radical innovation
radical innovation
disruption
incremental improvements
evolution
Why do a lot of product designs fail?
quality, inability to scale, timing, marketing message
apple vs. rio
rio did not have the infrastructure to legally get mp3s
how important is VoC or voice of the customer in product design
customers give great ideas for incremental improvements but not radical innovation
comcast example
customer service was terrible so listened to customers and fixed it; could possibly be out of business if they didn’t do this; but focusing too much on the customer made them miss the disruption of streaming
product design hits that people didn’t think would work
ring doorbell and post it notes
product misses
hershey could have bought mars candy; coke had three chances to buy a bankrupt Pepsi; Netflix tried to sell themselves to blockbuster
5 things to think about when prioritizing which product designs should move forward
urgency, market size, profit potential, cost, timing
most common financial tool to estimate the profit potential and cost requirements
net present value
positive net present value indicates
the projected earnings generated exceed the anticipated costs so move forward with the project
a _______ shows an optimistic, pessimistic, and most likely scenario
sensitivity analysis
most successful businesses that last understand what
what business they are truly in
BIG NO NO
do not let your product define your business (transatlantic steamers disrupted by planes because they were in the transatlantic shipping business not the people and good moving business)
its important to ______ fast in product design
fail
product development is a ______ process
iterative (two steps forward, one step back)
planning is great but you must be
flexible
scenario planning
what are all the possible scenarios and let me come up with a plan for each
first mover advantage is
a little bit of a myth
second mover advantage
look at everyone else’s mistakes and do it better (apply not first ipod)
process
a series of independent tasks that transform an input into an output that is of higher value to the org
why do we need to analyze processes
- to identify inefficient tasks 2. to identify ineffective tasks 3. to understand where value can be added
what do you do with inefficient tasks
fix them
what do you do with ineffective tasks
scrap them
______ can provide enormous value to a company
process improvements
what is more important? 1 million in sales or half a million in savings
the savings because it happens every time you do a process and it goes straight to your bottom line; a dollar of savings is a dollar of profit
cycle time
time required to complete a function, job, or task form start to finish (time from a unit starting production to it being finished)
utilization
the proportion of available time that a piece of equipment or system is operating (want this high but not 100%)
the use of a diagram to present the major elements of a process
process flowcharting
what is the first step in analyzing a process
flow chart it! or draw it out
WIP
work in process; material that has been removed from inventory, put into the production process, but not yet finished or shipped
finished goods inventory
material that has been removed from inventory, finished the production process, but not yet shipped
buffer
a storage area between stages where the output of one stage is placed prior to being used in a downstream stage
starving
occurs when the activities in a stage must stop because there is no material to work on
bottleneck
stage in the process that limits the performance or capacity of the entire system
what do you fix first
THE BOTTLENECK
throughput rate
the number of units going through a process per unit time
what does flowcharting allow you to do
visually allows you to analyze a process, identify bottlenecks, redundant tasks, series/parallel tasks, and determine system capacity
good for cross functional processes
swim lane flow charts
good for analyzing process statistics
flow diagram
the entire process can never go faster than the
bottleneck
steps for analyzing a process
- map out the process step by step 2. gather the facts from all perspectives 3. determined the designed output of each step 4. compare designed output vs. actual output 5. identify the bottleneck in the process 6. calculate the financial impact of the bottleneck 7. remedy the bottleneck, reevaluate, and find new bottleneck
ways to implement a new process
- create the urgency 2. form a coalition 3. answer “why do we need to change?” 4. answer what’s in it for me 5. communicate 6. remove obstacles 7. create small wins 8. reevaluate and improve 9. anchor it in place
successful companies tend to focus on
gaining more customers to gain more profit
failing companies tend to focus on
improving processes to cut costs
make to order vs. make to stock
important distinction (make to stock-order at end) (make to order-order at beg)
cycle time =
[set up time + (batch size * time per unit)]/batch size; minutes per unit
as batch size goes up the cycle time goes ____
down; why? because fixed set up time is spread out over more units
operations loves big ___
batch sizes
throughput rate =
1/cycle time (units per minute)
capacity equals the
throughput rate which is units per amount of time
the bottleneck equals the
total process capacity (no ADDING)
what is a service
anything sold that cannot be dropped on your foot; cannot be inventoried, intangible, and time perishable
what does time perishable mean
today’s capacity cannot be used to meet tomorrow’s demand
what is the fastest growing service sector globally
healthcare
what is the purpose of providing good service
customer retention, grow the business (positive reviews, word of mouth, etc), good service equals more money
a _____% increase in customer loyalty can increase profits ____-____%
5
25
85
is it better to meet customer expectations or exceed them?
short term - exceed them
long term - meet them
how are starbucks and waho both so successful in customer satisfaction even though they are so different in how they treat them
they set customer expectations and meet them
How do you set customer expectations
reputation and marketing; keep their promise by meeting those expectations
how do you measure customer satisfaction
surveys, retention rate, net promoter score
how many positive reviews does it take to cancel out one negative review
12
when customer expectations are in line with expectations set by the firm, satisfaction is ____
high
most conflict comes from
a misunderstanding of expectations
customer ____ drives customer satisfaction
compatibility
the fit between the needs of the individual customer and the firm’s ability to meet those needs is important
in a service environment what is the reality about variability
it cannot be eliminated
customers measure quality of service by how their variability is accommodated
customers introduce variability but complain about inconsistency
five types of customer variability
arrival, request, capability, effort, and subjective preference variability
arrival variability
customers arrive at times when there are not enough service providers
request variability
travelers request a room with a view; don’t know what they will request when they get here
capability variability
a patient being unable to explain symptoms to a doctor; how helpful are customers in helping us serve them
effort variability
shoppers leaving carts in the parking lot; not putting forth the effort
subjective preference variability
interpreting service action differently; the most difficult to overcome
what is our choice when facing variability
accommodate it or reduce it
customers that rely on good customer experiences tend to
accommodate the variability
companies that rely on operational simplicity tend to
try to reduce variability
four strategies for dealing with variability
classic reduction, classic accommodation, uncompromised reduction, low cost accommodation
classic reduction
ex. restaurant menu; companies that use this tend to attract customers who are willing to trade-off an excellent service for low price
classic accommodation
involves experienced/more employees to compensate for variations among customers; costs more and forces company to bear brunt of variability; success of strategy hinges on company’s ability to persuade customer to pay more
uncompromised reduction
uses knowledge of the customer to develop procedures that enable good service, while minimizing variability; try to reduce variability in a way that customers don’t really notice; ex. college chooses students with test scores in a narrow range so the school does not have to support more than one curriculum
low cost accommodation
companies persuade customers to serve themselves; experience varies with customer’s capability and effort; effective for high arrival or request variability; customer has to feel compensated so lower prices
what is behavioral science/economics
the study of why people act and make decisions the way they do
why is behavioral science important
if you understand the dynamics of decision making, you can influence it in your favor
rational decision making
- consider the options, then pick the one that maximizes profit or experience 2. assess pros and cons objectively without prejudice
irrational decision making
allows irrelevant biases, emotions, and environment to influence our decisions
predictably irrational
susceptible to the same influences over and over
we as humans are
predictably irrational
how to influence behavior in service operations
not all parts of an encounter are equal
finish strong
always leave them wanting more
recovery paradox
customers after a service failure and appropriate recovery have higher repurchase intention and loyalty than customers who are satisfied at the very beginning; recovery must be “appropriate” in the eyes of customer and some failure is not recoverable (safety related or repeated failure)
framing expectations
expectations change the way we perceive experiences (ex. blind taste test the same bottles were equal but when given different price tags people said higher price wine was better)
we inherently expect higher priced items to be ______ quality and this extends to brand name, packaging, presentation…
quality
why does framing expectations work
confirmation bias; we don’t want to admit that we were wrong so we convince ourselves that the higher priced thing was better
the lesson from framing expectations
start with a higher price to frame expectations then offer a discount to get down to market price (college tuition)
decoy effect
want you to purchase the bundle so when facing two options for the same price but one has more stuff, you choose that one cause you think you are getting a deal
free effect
people have an emotional response to “free” and there is pain associated with spending money (so even if it is more profitable to spend money to get the higher gift card, people will still choose the free option)
what is the number one characteristic employees want from managers
to show that they care about their career and well being (do that by understanding what motivates them and how they perceive different events)
what is the most important part of any company
employees
behavioral management theory
people have different wants and needs that motivate them; people react differently to every situation; turn management into leadership
pitfalls of having subject matter experts as managers
they have a harder time relating and understanding especially when the employees are not on the same level as them; pros also know what to do so easily that they have trouble communicating it and hard to teach (not a lot of time spent in conscious brain)
what is the most valuable commodity in the world
data
data analytics
process of inspecting, cleaning, and modeling data with the goal of discovering useful information to support decision making
why is data analytics important
support decision making to take action; to make predictions about the possibility of a future event; helps you focus (or target) specific customers or problems
data dilemma
convenience of personalization vs. invasion of privacy
4 types of data analytics
descriptive, diagnostic, predictive, and prescriptive
descriptive analytics
answers the question what happened?; gives valuable insight into the past; signals something is wrong/right without explaining why
diagnostic analytics
answers why something happened; measure data against other data to find relationships and dependencies
predictive analytics
answers what is likely to happen; uses the finding of diagnostic analytics to detect tendencies, clusters and exceptions, and to predict future trends
prescriptive analytics
answers what action to take; takes the predicted options and suggests a range of prescribed actions and the potential outcomes of each action (self driving cars and AI)
what field of business has data analytics transformed
marketing
no need for expensive and ineffective shotgun approach; now use
targeted marketing to send targeted advertisements to the right people, at the right time, with the right message
data analytics is also super helpful in operations with
forecasting (manpower planning)
how many data points does google collect on you
5,000
examples of data analytics in operations
optimization models (how can we maximize calories while minimizing cost); credit acceptance (cluster a prospective customer into a group); route optimization
predictive maitenance
condition based monitoring; maintenance should be done at the right time on the right part; ideally want to fix/maintain a part before it fails; use sensors to monitor conditions of parts at all times
IOT
internet of things
what real world events can cause production variability
machine downtime, human attendance, human emotions, quality defect rate, raw material supply issues
what does having a buffer between stations do to throughput
reduces the impact of variability
changes the output of dice reduced the variability directly
which is better buffer or reducing variability
increasing WIP inventory costs money and reducing variability is difficult to do but better (have to attack the root cause of variability
why is waiting line management important
no one likes to wait in lines even when waiting at home; time is valuable, perception that the business is poorly run; smart phones have greatly softened the negative experience
one thing that disney does to handle lines
virtual queues
what times of variability contribute to waiting times
arrival, request, effort, and capability
what are techniques to reduce or eliminate waiting
online troubleshooting; automation (self check out and ATMs); be transparent; segregate customers (disney fastpass and I85 toll lanes); distract them
waiting line management is very important for what types of companies
airlines, amusement parks, fast food chains (chick fil a)
what are some decisions disney or GDOT have to make when segregating customers
it is based on value
what can be used to help calculate optimal number of workers, queues, lines, etc for the manager to evaluate
simulation software
do we want to eliminate waiting altogether
probably not; impulse buying in grocery stores; waiting a little longer can increase sales
why is quality important
everything we buy we expect a certain level of quality (order qualifier/order winner); also penalty for poor quality is much greater than the benefit of good quality
what is the most important part on any product
the one that fails
one example of poor quality management
challenger; did not keep track of the manufacturer recommendation so used the o ring in much colder temp; part design was fine but NASA’s application of how they used it was wrong
name a few companies that have suffered for quality issues
chipoltle (e coli); samsung exploding phones, boeing
what is the definition of quality
hard to pin down but you know it when you see it
quality is not the same as
luxury
how can you recover from poor quality
be honest and up front; if you have built up a good reputation you can recover; does not need to be a pattern of behavior
types of quality
product, process, and decision quality
product quality
characteristics that meet customers acceptability
process quality
consistent results within a specified range
decision quality
ethical or moral? like Volkswagon turning off the car emissions during the tests
costs of quality
appraisal, prevention, internal failure, external failure, and opportunity costs
appraisal costs
inspecting, auditing, testings
prevention costs
efforts to keep defects from occurring
internal failure costs
caught internally and either scrapped or corrected
external failure costs
defect seen by the customer
opportunity costs
loss of future business due to quality issues (hard to quantify but very large)
total quality management (TQM)
manage the entire organization to excel in all dimensions of products and services that are important to customers
two operational goals of total quality management
- careful design of the product or service 2. ensure the organization’s systems can consistently produce the design
six sigma
a philosophy and set of methods to eliminate defects in products and processes; seeks to reduce variation in the processes that lead to defects; (goal is no more than 3.4 defects per million opportunities)
what is the overall focus of the six sigma methodology
to understand and achieve what the customer wants
Six Sigma DMAIC
define, measure, analyze, improve, control
define
identify customers and their priorities
measure
determine how to measure the process and how it is performing
analyze
determine the most likely causes of defects
improve
identify means to remove the causes of defects
control
determine how to maintain improvements
who implemented lean manufacturing
toyota
lean manufacturing
activities designed to achieve high-volume production using minimal inventory and work; identify and eliminate waste, improve timing of production resources (just in time), remove anything that does not add value in the eyes of customer
lean is based on the logic that
nothing will be produced until it is needed
who gets to define what a defect is
the customer
push manufacturing
workers maximize output of their workstations regardless of customer demand; efficiency of each station is the goal and focuses on keeping individuals busy; high WIP inventory and bottlenecks; make same amount of items regardless of sales (downside lots of defects)
pull manufacturing
production line is controlled by the last operation (sales); efficiency of entire process is goal; want material busy and not just people; operators only work when there is a need; controls/eliminates WIP and bottlenecks; no buffer in system if problem arises
two lean concepts
quality at the source and just-in-time production
quality at the source
do it right the first time and if something goes wrong stop the process immediately (workers are personally responsible and become empowered)
just-in-time production
producing what is needed, when it is needed and nothing more; anything over the minimum is waste; typically applied to repetitive manufacturing; exposes problems otherwise hidden by inventory; vendors deliver several times a day
six sigma tools
flowchart, run chart, pareto chart, checksheet, cause and effect diagram, opportunity flow diagram, process control chart
flow chart
a diagram of the sequence of operations
run chart
depict trends in data over time; time is always the x axis
checksheet
basic form to standardize data collection
fish bone diagram
shows what the possible causes of a problem are in a standardized way; helpful in defining root causes (equipment, personnel, procedures, material, customers, information, other)
process control chart
used to assure that processes are in statistical control; monitor process in real time; upper and lower limit
project
a series of tasks that need to be completed in order to reach a specific outcome
project management
planning, directing, and controlling resources to meet the technical, cost and time constraints of the project
success is defined as
being on time, on budget and on scope; key resource is people’s time
project management constraint theory
the triangle; scope, cost, and time
types of project organization
pure project, functional project, and matrix project
pure project
self contained team works full time on a project; PM is manager of employee; one project at a time
functional project
may work on multiple projects within your function; needs of project may coincide with daily job
matrix project
blends functional and pure; uses people from different functional areas to work on project under PM; employees have two bosses; PM must be able to negotiate
most important part of the success/failure of a project
statement of work
statement of work
written description of the objectives to be achieved, with a brief statement of the work to be done and a proposed high level schedule; must be clear; sets expectations, prevents scope creep
critical path method
activities in a project that form the longest chain in terms of their time to complete; if any task on the CP are delayed the entire project is delayed
immediate predecessor
activity that needs to be completed before another activity can begin
popular tool to visualize tasks and their relationships
Gantt charts
burndown chart
track actual progress against planned progress
pitfall of burndown
how do you measure actual progress
earned value management (EVM)
combined measurement of scope, schedule, and cost in a project (adding cost as a metric helps identify discrepancies in work accomplished to date)
one major factor these systems don’t take into account
the quality
how to measure quality
pull in experts to evaluate at milestones
should suppliers be treated as vendors or partners
partners share the risk and are more invested in the success of your business
how do we measure and monitor quality
statistical process control
how can we monitor quality
by observing variation in output
what is statistical process control
it is used to keep processes stable, consistent and predictable; monitors quality while the product is being produced, every output measure has a target value and a level of acceptable variation
the smaller the standard deviation the
more the process is under control (less variation there is in the output)
control charts
show how process output varies over time
x bar =
average or mean
sigma =
standard deviation
range of variation that a process is able to maintain
process control limits
range of variation that is considered acceptable by the designer or customer
specification limits
if PCL > SL
process is incapable because the process can produce outside the spec limits
if SL > PCL
process is capable because it will only produce within the spec limits
a process is ____ if its standard deviation is small
consistent
a process is _____ if its average performance is close to the target
accurate
shows how well the parts being produced fit into the range specified by the design specifications
process capability index (Cpk)
if the Cpk is larger than 1 it indicates that the process is
capable
_____ is related to standard deviation and you fix this first
consistency
getting more accurate but less consistent means a _____ capable process
less
if our process is not capable what can we do about it
accept more defects, reduce the variation (smaller standard deviation), re evaluate the spec limits
used when a product or service is either good or bad
p charts or process control charts
when doing p charts, the bigger the confidence level the ______ the spec limits
bigger
narrower spec limits
the process is more under control but you are less confident about not having defects
performed on goods that already exists to determine what percentage of the products conform to specifications; executed through a sampling plan
acceptance sampling
advantages of acceptance sampling
economies, fewer inspections/inspectors, applicability to destructive testing
disadvantages of acceptance sampling
risk of accepting “bad” lots and rejecting “good” lots, paperwork of lot sizes; less information than 100% inspection
process of making prediction on future based on past and present data (done by analyzing trends)
forecasting
_____ and ____ are absolutely linked
inventory and forecasting
is it better to under or over estimate forecasts
almost always better to over estimate than under; would rather risk having excess than going through a stock out of inventory
what is the foundation of any successful ops team
forecasting
if a forecast is not accurate the _____ are put under great stress
supply chain and inventory
forecasts are more accurate for _____ periods of time
shorter
every forecast should
be a range and include a confidence level
relies on subjective opinions from one or more experts
qualitative
relies on data and analytical techniques
quantitative
examples of qualitative research/forecasting
market research, expert analysis, historical analogy
example of quantitative forecasting
time series, causal relationships, simulation
models that predict future demand based on past data
time series
models that use statistical techniques to establish relationships between various items and demand
causal relationships
models that incorporate some randomness and non-linear effects
simulation
assumes the most accurate forecast of future demand is a simple (linear) combination of past demand
moving average (time series)
when do you use moving average
typically when there is no seasonality or trend
two types of moving average
simple moving average and weighted moving average
taking average of previous demand to forecast future demand
simple moving average
taking average of previous demand to forecast future demand but gives more importance to some of the data
weighted moving average
identifies the relationship between two or more variables
least squares method: linear regression
___ is the indicator of best fit for linear regression
r2
how do you validate your forecast
test it against historical data to validate accuracy; track forecast vs actual; make corrections as necessary
how do you choose the right model
it can be a hybrid; have a lot of flexibility in creating forecasts; don’t just rely on the data but use your intelligence to make adjustments; always keep improving!
incorporates real time data to update forecasts; no longer relying on solely historical data for analysis
demand forecasts (ex. point of sale data)
_____ is different from demand forecasting in that the company is influencing what the future demand will be
demand shaping
2 main types of forecasting errors or variation
quantity demanded or product specifications
how do you handle errors in quantity forecasted
inventory and robust supply chain that can handle variation
how do you handle errors in product specifications
flexible manufacture
three components of demand
randomness, trends, and seasonality
weighted moving average model with sophistication; prediction of the future depends mostly on the most recent observation and the error from the latest forecast
exponential smoothing
exponential smoothing with trend
double exponential smoothing
exponential smoothing with trend and seasonality
triple exponential smoothing
the raw material, components, work in process, or finished goods that are held at a location in the supply chain
inventory
the set of policies and controls that monitor levels of inventory
inventory management system
why is inventory management necessary
maintain independence of operations; meet variation in demand; allow flexibility in production scheduling; provide a safeguard for variation in raw material delivery; take advantage of economic purchase order size
what is usually the largest corporate asset
inventory
effective inventory mgt occurs from an accurate _____ and reliable ____
forecast
supply chain
cost of inventory
holding (carrying) costs, ordering costs, opportunity costs, cash flow
costs for rend, handling, insurance, utilities, etc.; spoilage and obsolescence
holding or carrying costs
inability to purchase additional inventory
cash flow cost of inventory
costs of placing an order
ordering costs
cost of stock out; foregone investment earnings
opportunity costs
managing inventory takes ____ and ____
time and money
80/20 rule
Pareto; 80% of the inventory is concentrated in 20% of the skus
ABC method
allows us to focus on the most important inventory items; A (high dollar volume, B (moderate dollar volume) C (low dollar volume)
other inventory models
single period, multi period fixed order quantity, multi period fixed time period
used when we are making a one time purchase of an item; seeks to balance the costs of inventory overstock and under stock
single period
used when we want to maintain an item in stock and when we restock a certain number of units must be ordered
multi period fixed order quantity
item is ordered at certain intervals of time
multi period fixed time period
event triggers the reordering of inventory
multi period fixed quantity (event is usually inventory falling below certain level)
time triggers the reordering of inventory
multi period fixed time
fixed order quantity assumptions
demand is constant and uniform; lead time, cost per unit, and ordering cost are constant
the amount of inventory carried in addition to expected demand
safety stock
common safety stock approach
to keep a certain number of lead times of supply
The process of optimizing the shipment of
goods and services from supplier to
customer
supply chain management
goals of supply chain management (SCM)
optimize production, decrease manufacturing time,
minimize inventory, streamline order
fulfillment, and reduce cost.
ULTIMATE goal of supply chain management
match supply and demand
what can we do to influence demand
pricing, promotion, placement, and product (change it)
what can we do to influence supply
capacity, inventory, and service level
disadvantage of vertical integration
a company cannot be the best at everything
developments that enabled companies to create global supply chains
real time communication technology, large scale shipping, and logistics technology
why is supply chain management so difficult
uncertainty in demand/supply
changing customer requirements
decreasing product life cycles
conflicting objectives in supply chain/inside the firm
the further away from the customer you get, the bigger the safety margin and the bigger the inventory swing that the raw material supplier has to have
bullwhip effect (inventory requirements vary much more); additional safety is added in every step and there is a time lag in information
how to mitigate the bullwhip effect
all steps have access to the same info
coordinated response to sales
faster response rate for orders and deliveries
vertically integrate
why go global if it is so difficult to manage
it is more complex but the cost savings are probably worth it
when not to outsource
when it involves: intellectual property, proprietary info/processes, core competencies, or difficult to coordinate
requires an integrated effort between sales, product development,
manufacturing, supply chain, logistics, quality control, finance, etc.
operations planning
operations planning starts with
a forecast from sales
decisions can be made through either
intuition, reason, or combo
not just gut feel
combines past experiences and personal values
not always based on reality, only your perceptions
intuition
uses available facts and figures
ignores issues form past
reason
best way to make decisions
a combination of intuition and reason
start with reason and let intuition take it from there
revenue management
how do we maxiize profit
price can be optimally set for various customer groups because different groups value it differently
price segmentation
one of the most important decisions that operations has to make is how to
handle variation in demand
three operations planning strategies
chase strategy, stable workforce, and level strategy
match demand by hiring and laying off employees as necessary; no inventory buildup and no overtime; requires access to large pool of available resources who require little training; difficult to maintain motivated employees
chase strategy
match demand by varying work hours of employees; no inventory buildup, no hiring, no termination, still may have difficulty motivating employees
stable workforce (overtime)
keep production level throughout year and use inventory to match demand; no hiring, no termination, no overtime, may result in periods of hight inventory or lost sales
level strategy
Fixed and variable costs incurred in the production of a product
basic production costs
Hiring, Training, Laying off personnel; start/stop costs
production rate changes
costs of holding inventory
inventory holding costs
costs associated with expediting, satisfaction, cancellation
shortage costs
four types of operations planning costs
basic production costs, production rate changes, inventory holding costs, and shortage costs
