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BUS5 140 notes

Operations management involves managing resources to create and deliver products and services, focusing on aspects like what resources are needed, when, where, and who will do the work. The document discusses the historical context of operations management, notable figures, and the distinction between goods and services, as well as key concepts like productivity, modular design, process analysis, and forecasting methods. It also covers breakeven analysis and the challenges of forecasting accuracy and errors.

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BUS5 140 notes

Operations management involves managing resources to create and deliver products and services, focusing on aspects like what resources are needed, when, where, and who will do the work. The document discusses the historical context of operations management, notable figures, and the distinction between goods and services, as well as key concepts like productivity, modular design, process analysis, and forecasting methods. It also covers breakeven analysis and the challenges of forecasting accuracy and errors.

Uploaded by

tristanjgeex
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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What is operations management?

MANAGE RESOURCES TO CREATE AND DELIVER PRODUCT AND SERVICES

What What resources/what amounts When Needed/scheduled/ordered Where Work to be done How Designed Who To do the work

Heritage of Operations Management: World War II: Britain


 Operations Research: study all factors involved in battle, human and technical, to understand and learn from what happened.
 Depth Charges:  Experience: 100 – 150 feet
 Statistical Analysis:  Chance to hit a diving U-Boat is already low  If a U-boat is not deep, 100-150 is too deep  Objects are partly visible  “Battle of the Atlantic”

More recent:  During 1940 – 1950, Toyota was on the edge of bankruptcy  Taiichi Ohno was credited for the Toyota Production System  Drive out all unnecessary or static
processes or items in a system to keep cost low:

Operations Management Notable Figures: Frederick W. Taylor “Father of scientific management”, George Danzig “Linear Programming and Simplex Method”, Thomas Saaty
“Analytical Hierarchy Process”, Nash “Nash Equilibrium”

Goods VS Servies:

Goods: Tangible product, Consistent product definition, Production usually separate from consumption, Can be inventoried, Low customer interaction

Service: Intangible product, Produced and consumed at same time, Often unique, High customer interaction, Inconsistent product definition, Often knowledge-based, Frequently
dispersed

Productivity = Outputs/ Inputs Partial measures: output/(single input) Multi-factor measures: output/(multiple inputs) Total measure: output/(total inputs)

MEASUREMENT PROBLEMS: Quality may change while the quantity of inputs and outputs remains constant, External elements may cause an increase or decrease in productivity,

SECTION 2:

MODULAR DESIGN OR MODULARITY: Subdivide a system into smaller parts (modules) that can be independently manufactured, and used in different systems to drive multiple
functionalities

PROCESS ANALYSIS AND DESIGN: Flow Diagrams - Shows the movement of materials, Time-Function Mapping - Shows flows and time frame – Reduce delays etc, Process
Charts - Uses symbols to show key activities – Focus on value adding key activities, Service Blueprinting - focuses on customer/provider interaction

Design and effective capacity:

Capacity:  Upper limit of the rate of output  Measures of capacity:  Capacity of $30 million a year  100 televisions a day  There are 150 beds in a hospital Design capacity vs
Effective Capacity:  Design: the maximum an object is designed for  Effective: design capacity minus allowances So, effective < design

Breakeven analysis: Break Even:  The output at which total cost equals total revenue Cost:  Fixed Cost  Variable Cost = VC/unit x Output  Total Cost = Fixed Cost + VC/unit x
Output Revenue:  Price x Output Break-even is the output where:  Revenue = Total Cost

Break-even in units:  BEP = FC / (Price – VC) Break-even in dollar value:  BEP$= FC/ ( 1 – VC/Price) Note:  FC: fixed cost  VC: variable cost

Realities of forecasting: A statement about the future value of a variable of interest such as demand.  Assumes causal system past ==> future  Forecasts are rarely perfect
because of randomness  Forecasts more accurate for groups vs. individuals  Forecast accuracy decreases as time horizon increases

Qualitative Methods: JUDGMENTAL FORECASTS Executive opinions, Sales force opinions, Consumer surveys Delphi method  Opinions of managers and staff  Achieves a
consensus forecast  Predict when an event will take place

Decomposition of a time series: TIME SERIES FORECASTS Trend - long-term movement in data Seasonality - short-term regular variations in data Cycle – wavelike variations of
more than one year’s duration Irregular variations - caused by unusual circumstances Random variations - caused by chance

Forecasting Errors: FORECAST ACCURACY Error - difference between actual value and predicted value, Mean Absolute Deviation (MAD)  Average absolute error, Mean Squared
Error (MSE)  Average of squared error, Mean Absolute Percent Error (MAPE)  Average absolute percent error

SOURCES OF FORECAST ERROR: Model may be inadequate, Irregular variations, Incorrect use of forecasting technique

FORECAST ACCURACY Note: Number of forecasting errors may or may not be the same as the number of data points

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