Opman Finals Theories and Formulas - TOS Based

Key Issues for Operations Managers Today

• Economic conditions

• Innovating

• Quality problems

• Risk management

• Competing in a global economy

Tools for Monitoring the Forecast

• Control Charts

• Tracking Signal

Control Charts

a very useful tool for detecting non randomness in errors.

Tracking Signal

Relates the cumulative forecast to the average absolute error (MAE) to detect any bias in errors over time.

Bias

the persistent tendency for forecasts to be greater or less than the actual values of a time series.

The control chart

is generally superior in the monitoring forecasts approaches since the latter uses cumulative errors.

Effective product and service design can help the organization achieve competitive advantage/operations strategy:

• Packaging products and ancillary services to increase sales

• Using multiple-use platforms

• Implementing tactics that will achieve the benefits of high volume while satisfying customer needs for variety

• Continually monitoring products and services for small improvement opportunities

• Reducing the time it takes to get a new or redesigned product or service to the market

Formula of Total Cost

TC = FC + VC

Formula of Total Revenue

TR = R x Q

Formula of Profit

P = TR - TC or = (R x Q) - (FC + v x Q)

Formula of Quantity at Breakeven Point

Q_BEP = FC/R - v

Formula of Amount of Quantity needed to make a profit

Q = P + FC/ R - v

Formula of Payback Financial Analysis

Initial Cost / Annual Savings

Maximin

Choose the alternative with the best of the worst possible payoffs.

This approach is essentially a pessimistic one.

Maximax

Choose the alternative with the best possible payoff.

This approach is also called optimistic.

Laplace

Choose the alternative with the best average payoff.

This approach treats the states of nature as equally likely.

Minimax Regret

Choose the alternative that has the least of the worst regrets.

This approach seeks to minimize the difference between the payoff that is realized and the best payoff for each state of nature.

EMV (Expected Monetary Value) Approach

Determine the expected payoff of each alternative and choose the alternative that has the best expected payoff.

Formula of FVPI (Expected Value of Perfect Information)

EVPI = EPO_certainty − EPO_max/EMV

The creation of goods and services using processes and systems that are sustainable are :

non-polluting; conserving of energy and natural resources; economically efficient; safe and healthful for workers, communities, and consumers; and socially and creatively rewarding for all working people

The Lowell Center advocates designing and

operating processes in ways that:

• wastes and ecologically incompatible byproducts are reduced, eliminated or recycled on-site

• chemical substances or physical agents and conditions that present hazards to human health or the environment are eliminated

• energy and materials are conserved, and the forms of energy and materials used are most appropriate for the desired ends

• work spaces are designed to minimize or eliminate chemical, ergonomic and physical hazards.

Layout

Refers to the configuration of departments, work centers, and equipment, with particular emphasis on movement of work (customers or materials) through the system.

Product Layouts

Used to achieve a smooth and rapid flow of large volumes of goods or customers through a system.

This type of layout is less plentiful in service environments because processing requirements usually exhibit too much variability to make standardization feasible.

U-Shaped Layouts

it often requires approximately half the length of a straight production line.

This line permits increased communication among workers on the line because workers are clustered, thus facilitating teamwork.

Process layouts (functional layouts)

are designed to process items or provide services that involve a variety of processing requirements.

in this facility layout, layouts feature departments or other functional groupings in which similar kinds of activities are performed.

Fixed-Position Layouts

The item being worked on remains stationary, and workers, materials, and equipment are moved about as needed it is also used in large construction projects.

Attention is focused on timing of material and equipment deliveries so as not to clog up the work site and to avoid having to relocate materials and equipment around the work site.

Cellular Layouts

is a type of layout in which workstations are grouped into what is referred to as a cell.

Single-minute exchange of die (SMED)

enables an organization to quickly convert a machine or process to produce a different (but similar) product type

Right-sized equipment

often smaller than equipment used in traditional process layouts, and is mobile, so it can quickly be reconfigured into a different cellular layout in a different location.

Assembly Line

arranging of workers or machines in the sequence that operations need to be performed.

Line Balancing

The process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements.

minimizes the idle time along the line and results in a high utilization of labor and equipment

Idle Time

occurs if task times are not equal among workstations.

Formula of Cycle Time

Operating time per day / Desired output rate

Percentage of Idle Time

= (Idle time per cycle / N_actual × Cycle time) × 100

Formula for Efficiency of the Line

100% − Percent Idle Time or

(N_Actual × Cycle time − Idle time / N_actual

× Cycle time) × 100

Key Aspects of SCM

The goal of SCM is to match supply to demand as effectively and efficiently as possible.

Trends in Supply Chain Management:

• Measuring Supply Chain ROI

• “Greening” the Supply Chain

• Reevaluating Outsourcing

• Integrating IT

• Managing Risks

• Adopting Lean Principles

• Being Agile.

Measuring Supply Chain ROI

Enables managers to incorporate economics into outsourcing and other decisions, giving them a rational basis for managing their supply chains.

“Greening” the Supply Chain

• redesigning products and services

• reducing packaging

• near-sourcing to reduce pollution from transportation

• choosing “green” suppliers

• managing returns

• and implementing end-of-life programs,

• particularly for appliances and electronic equipment.

Reevaluating Outsourcing

Companies are taking a second look at outsourcing, especially global suppliers.

Managing Risks

For some businesses, the supply chain is a major source of risk, so it is essential to adopt procedures for _____.

Lean Principles

Many businesses are turning to these to improve the performance of their supply chains.

Ways of Lean Principles:

• eliminating non-value-added processes;

• improving product flow by using pull systems rather than push systems;

• using fewer suppliers and supplier certification programs (eliminate the need for inspection of incoming goods);

• never ceasing to improve the system

Being Agile

Flexible enough to be able to respond fairly quickly to unpredictable changes or circumstances

Benefits of Outsourcing

• Lower prices may result from lower labor costs

• The ability of the organization to focus on its core strengths

• Permits the conversion of some fixed costs to variable costs

• It can free up capital to address other needs

• Some risks can be shifted to the supplier

• The ability to take advantage of a supplier’s expertise

• Makes it easier to expand outside of the home country

Risks of Outsourcing

• Inflexibility due to longer lead times

• Increased transportation costs

• Language and cultural differences

• Loss of jobs, control, and business knowledge

• Lower productivity

• Knowledge transfer and intellectual property concerns

• Increased effort required to manage the supply chain

Examples of Ethical Issues are:

• Bribing government or company officials to secure permits or favorable status.

• “Exporting smokestacks” to developing countries.

• Claiming a “green” supply chain when the level of “green” is only minimal.

• Ignoring health, safety, and environmental standards.

• Violating basic worker rights.

• Mislabeling the country of origin.

• Selling products abroad that are banned at home.

how to deal with ethical issues:

• Develop an ethical supply chain code of behavior.

• Monitor supply chain activities.

• Choose suppliers that have a reputation for good ethical behavior.

• Incorporate compliance with labor standards in supplier contracts.

• Address any ethical problems that arise swiftly.

Strategic Responsibilities

• Supply Chain Strategy Alignment

• Network Configuration

• Information technology

• Products and services

• Capacity planning

• Strategic partnerships

• Distribution strategy

• Uncertainty and risk reduction

Supply Chain Strategy Alignment

Aligning supply and distribution strategies with organizational strategy and deciding on the degree to which outsourcing will be employed

Network Configuration

Determining the number and location of suppliers, warehouses, production/operations facilities, and distribution centers

Information Technology

Integrating systems and processes throughout the supply chain to share information, including forecasts, inventory status, tracking of shipments, and events.

Products and Services

Making decisions on new product and services selection and design

Capacity Planning

Assessing long-term capacity needs, including when and how much will be needed and the degree of flexibility to incorporate

Strategic Partnerships

Partnership choices, level of partnering, and degree of formality

Distribution Strategy

Deciding whether to use centralized or decentralized distribution, and deciding whether to use the organization’s own facilities and equipment for distribution or to use third-party logistics provider

Uncertainty and Risk Reduction

Identifying potential sources of risk and deciding the amount of risk that is acceptable.

Tactical Responsibilities

• Forecasting

• Sourcing

• Operations planning

• Managing inventory

• Transportation planning

• Collaborating

Forecasting

Prepare and evaluate forecasts

Sourcing

Choose suppliers and some make-or-buy decisions

Operations Planning

Coordinate the external supply chain and internal operations

Managing Inventory (strategic)

Decide where in the supply chain to store the various types of inventory (raw materials, semi finished goods, finished goods)

Transportation Planning

Match capacity with Demand

Collaborating

Work with supply chain to coordinate plans.

Operational Responsibilities

• Scheduling

• Receiving

• Transforming

• Order

• fulfilling

• Managing Inventory

• Shipping

• Information sharing

• Controlling

Scheduling

Short-term scheduling of operations and distribution

Receiving

Management of inbound deliveries from suppliers

Transforming

Conversion of inputs to outputs

Order Fulfilling

Linking production resources and/or inventory to specific customer orders

Managing Inventory (operating)

Maintenance and replenishment activities

Shipping

Management of outbound deliveries to distribution centers and/or customers

Information Sharing

Exchange of information with supply chain partners

Controlling

Control of quality, inventory, and other key variables and implementing corrective action, including variation reduction, when necessary

Logistics

refers to the movement of materials, services, cash, and information in a supply chain.

Movements within a facility

Incoming shipments

Outgoing shipments

The ABC Approach

Classifying inventory according to some measure of importance, and allocating control efforts accordingly

Basic Economic Order Quantity (EOQ) Model

It is used to identify a fixed order size that will minimize the sum of the annual costs of holding inventory and ordering inventory

MEMORIZE AND UNDERSTAND FORMULAS OF

Basic EOQ Model

EPQ Model

Quantity Discount Model

Reorder Point and Safety Stock

Transcendent Perspective

“To rise above or extend notably beyond ordinary limits”

Quality is both absolute and universally recognizable, a mark of uncompromising standards, and high achievement

Product Perspective

Related to quantity of some product attribute

Implies that larger number of product attributes are equivalent to higher quality

User Perspective

“Fitness for intended use”

How well the product performs its intended function

Value Perspective

Consumers no longer buy solely on the basis of price

They compare the quality of the total package of goods and services that a business offers with price and competitive offerings

Value

relationship of product benefits to price

Manufacturing Perspective

Having standards for goods and services and meeting these standards

Specifications

Targets and tolerances determined by designers of goods and services

Customer Perspective

The need to create satisfied customers

“meeting or exceeding customer expectations”

Product Quality Dimensions

• Performance

• Aesthetics

• Special Features

• Conformance

• Reliability

• Durability

• Perceived Quality

• Serviceability

• Consistency

Service Quality Dimensions

• Convenience

• Reliability

• Responsiveness

• Time

• Assurance

• Courtesy

• Tangibles

• Consistency

• Expectations

Costs of Quality:

Appraisal

Prevention

Internal Failures

External Failures

Incurred BEFORE customers receive the goods

Appraisal

Prevention

Internal Failures

Occurs AFTER customers receive the goods

External Failures

Appraisal Costs

Costs related to measuring, evaluating, and auditing materials, parts, products, and services to assess conformance with quality standards

Prevention Costs

Costs related to reducing the potential for quality problems

Internal Failure Costs

Costs related to defective products or services before they are delivered to customers

External Failure Costs

Costs related to delivering substandard products or services to customers

Benefits of Good Quality

• An enhanced reputation for quality

• The ability to command premium prices

• An increased market share

• Greater customer loyalty

• Lower liability costs

• Fewer production or service problems

• Higher productivity

• Fewer complaints from customers

• Lower production costs

• Higher profits

Total Quality Management Approaches:

• Find out what customers want

• Design a product or service that will meet (or exceed) what customers want

• Design processes that facilitate doing the job right for the first time

• Keep track of results, and use them to guide improvement in the system

• Extend these concepts throughout the supply chain

• Top management must be involved and committed

Elements of TQM:

• Continuous Improvement

• Competitive Benchmarking

• Employee Empowerment

• Team Approach

• Decisions Based on Facts

• Knowledge of Tools

• Supplier Quality

• Champion

• Quality at the Source

• Suppliers

Continuous Improvement

The philosophy that seeks to improve all factors related to the process of converting inputs into outputs on an ongoing basis

Competitive Benchmarking

This involves identifying other organizations that are the best at something and studying how they do it to learn how to improve your operation

Employee Empowerment

Giving workers the responsibility for improvements and the authority to make changes to accomplish them provides strong motivation for employees