operations management test 1

operations management definition

The design operation and improvement of systems that transform inputs into goods and services efficiently

transformation process

Inputs such as labor materials capital and information are converted into outputs such as goods and services

productivity definition

The ratio of output to input

productivity formula

output divided by input

why is productivity important

It improves efficiency reduces cost increases profitability and strengthens competitiveness

goods vs services

Goods are tangible and can be stored Services are intangible produced and consumed at the same time

competitive priorities

Cost quality speed and flexibility

cost priority

Competing by producing at the lowest possible cost

quality priority

Providing consistent high quality products or services

speed priority

Delivering products or services quickly

flexibility priority

Ability to adapt to changes in demand or customization

order qualifiers

Minimum requirements needed to be considered by customers

order winners

Features that make customers choose one company over another

forecasting definition

predicting future demand to support planning decisions

why is forecasting important

It helps plan inventory staffing production and budgeting

qualitative forecasting

Based on judgment experience or expert opinion

quantitative forecasting

Based on historical data and mathematical models

MAD definition

Mean Absolute Deviation measures average forecast error

MSE definition

Mean Squared Error measures forecast error and penalizes large errors

why measure forecast error

To evaluate accuracy and improve forecasting methods

capacity definition

Maximum output a system can produce

design capacity

Maximum theoretical output under ideal conditions

effective capacity

Realistic output considering normal interruptions

utilization definition

How much of design capacity is being used

utilization formula

Actual output divided by design capacity

efficiency definition

How well actual output compares to effective capacity

efficiency formula

Actual output divided by effective capacity

bottleneck definition

The slowest step in a process that limits total system output

why do companies hold inventory

To meet demand prevent stockouts and smooth production

holding costs

Costs of storing inventory such as storage insurance and damage

ordering costs

Costs of placing and receiving orders

stockout costs

Costs of running out of inventory such as lost sales and dissatisfaction

EOQ definition

Economic Order Quantity is the optimal order size that minimizes total cost

EOQ formula

Square root of 2DS divided by H

safety stock

Extra inventory kept to prevent stockouts during uncertainty

reorder point

Inventory level that triggers a new order

JIT definition

Just in Time inventory arrives only when needed

aggregate planning definition

Medium term planning that balances supply and demand

chase strategy

Adjusting production to match demand using hiring layoffs or overtime

level strategy

Keeping production steady and using inventory to absorb changes

hybrid strategy

Combination of chase and level strategies

why use aggregate planning

To balance costs capacity and customer demand efficiently

essay answer structure

Define the concept explain purpose describe use in operations and give a simple example