Fundamentals of Operations Management

What is Operations Management?

The management of processes that create goods and/or provide services

What is a good?

A tangible item

What is a service?

An act or work done for someone

What are typical inputs in operations management?

Workers, Capital, Raw materials

What is the output of the assembly process?

Product or service

What does the Operations function in an organization do?

Creates goods and services

What does the Finance function in an organization do?

Provides funds and economic analysis of investment proposals

What does the Marketing function in an organization do?

Assesses customer wants and needs and communicates them to others

What is the Operations Function?

The production of goods and services involving the transformation of inputs into finished products

What are some quantitative approaches used in operations management?

Linear Programming, inventory techniques

What is a trade-off?

A balance achieved between two incompatible features

What is Supply Chain Management?

The strategic coordination of the flow of goods and services to and from a company

What does competitiveness mean?

How effectively an organization meets the wants and needs of customers relative to others

What are the key purchasing criteria?

Price, Quantity, Variety, On time delivery

What are order qualifiers?

Minimum standards of acceptability for purchase that allow a product to be considered

What are order winners?

Characteristics that create the perception of being better than the competition and allow the product to be purchased

What is strategic planning?

A process that takes into account how organizations compete and assesses an organization's own competencies

What is a SWOT analysis?

A tool where strengths and weaknesses are internal

What is supply chain strategy?

A strategy that specifies how to cooperate with the organization's supply chain to achieve goals and be competitive

What is a responsive/agile supply chain?

A flexible chain that can quickly respond to changes in production requirements

What is a lean supply chain?

A supply chain focused on eliminating non-value-added activities to create an efficient

What is near sourcing?

Using nearby suppliers to shorten the supply chain

What is operations strategy?

A set of well-coordinated policies

What are examples of generic operations strategies?

Themes like low labor cost or scale-based strategy

What are quality-based and time-based strategies?

Strategies that focus on maintaining high quality or reducing production time

What is productivity?

The measure of output per unit input used to produce it

"Capacity"

"The upper limit on the load that an operating unit can handle. Usually measured as a maximum. Different time frames include long term (1–5 years)

"Outsourcing"

"Refers to the practice of delegating the production of a product or delivery of a service to an external company. If production/service is outsourced

"Strategic Capacity Planning"

"Used to achieve a match between the long-term supply capabilities of an organization and the predicted long-term demand."

"Overcapacity vs Undercapacity"

"Overcapacity causes operating costs that are too high. Undercapacity causes strained resources and possible loss of customers."

"Design Capacity"

"The maximum obtainable output rate under ideal conditions."

"Effective Capacity"

"The maximum output rate given work breaks

"Economies of Scale"

"Fixed costs spread out over more units and volume purchase discounts."

"Diseconomies of Scale"

"Worker fatigue, equipement breakdown, less room for error

"Break-Even Analysis"

"Focuses on the relationship between costs, revenue and volume

"Make or Buy Analysis"

"Involves deciding whether to buy a machine (fixed cost) and make the product in-house (variable cost) or to buy the product (variable cost with no fixed cost)."

"Strategic Capacity Planning Process"

"1. Forecast demand for products.

2. Calculate capacity requirements to meet the forecast.

3. Measure existing capacity and decide how to bridge gaps.

4. Generate alternatives.

5. Evaluate each alternative economically.

6. Consider non-economic aspects."

"What is a process?"

"A process is a sequence of activities

"What is process selection?"

"Process selection refers to deciding how the production of goods or services will be organized. The first step is to decide whether to make or buy products. Every production process is different."

"What are the main process types?"

Job Shop

• Small scale, high variety of goods

Batch

• moderate volume and variety of goods

Repetitive

• high volumes of standardized goods

Continuous

• Very High volumes of non discrete goods

"What is process design?"

"Process design determines the structure of a process — the sequence of operations

"What is layout in operations management?"

"Layout refers to the arrangement of departments

"What is a product layout?"

"A product layout is used to achieve a smooth and rapid flow of large volumes and low varieties of goods or customers through a system. In manufacturing

"What is a process layout?"

"A process layout is designed to handle customized

"What is a fixed position layout?"

"A fixed position layout keeps the item being worked on stationary

"What is assembly line balancing?"

"Assembly line balancing is the process of assigning tasks to workstations so that each workstation has approximately equal time requirements. This minimizes idle time and increases utilization."

"What is designing process layouts?"

• In a process layout, similar equipment is grouped in a department, design of process (Functional) Layouts involves determining the position of the departments on the facility floor

"What are major considerations for developing capacity alternatives?"

"1. Cost of expansion vs benefits.

‘2. Flexibility of operations.

3. Expected demand and uncertainty.

4. Long-term strategic goals.

5. Availability of capital and resources.

6. Possible technological or process changes.

7. Impact on workforce and facilities."

Precedence Network

Diagram of activities and their sequential relationships, using nodes and arrows

"Linear Programming"

"A quantitative tool managers use to obtain optimal solutions for problems with restrictions or limitations."

"What are linear programming models?"

"Mathematical representations of constrained optimization problems."

"What are the three components of a linear programming model?"

"1. Objective function(s): the expression to be maximized or minimized.

2. Decision variables: unknowns to be solved for (choices).

3. Constraints: equations/inequalities that limit feasible values of decision variables."

"What is product or service design?"

"Product or service design determines the form and function of a product or service. Businesses select offerings based on expected profit contribution and often redesign them to boost demand or leverage new technology."

"What are the key questions of product and service design?"

"1. Is there demand?

2. Can we do it?

3. What level of quality is appropriate?

4. Does it make sense economically?"

"What are the main reasons for product design or redesign?"

"Design or redesign is initiated by market opportunities or threats

"What are common sources of ideas for new or redesigned products?"

Employees, supply chains, customers, competition, research and developement

"What are important product design considerations?"

Life cycles, standardization, mass customization, product reliability

"What are the stages of the product life cycle?"

"Incubation → Growth → Maturity → Saturation → Decline."

"What is concurrent engineering?"

"Concurrent engineering means bringing design and manufacturing engineers together early in the design phase to simultaneously develop both the product and the process

"What is computer-aided design (CAD)?"

"The use of computers to create, modify, analyze, or optimize a product or a service

"What is standardization in product design?"

"Standardization is the extent to which there is an absence of variety in a part or product. Advantages: Economies of scale and cost reduction. Disadvantages: Reduced variety limits customer appeal and premature design lock-in resists modification."

"What is design for mass customization?"

"A strategy to produce standardized goods or services while incorporating some degree of customization. Often involves delayed differentiation — postponing final product configuration until customer preferences are known."

"What is material selection in product design?"

"Careful consideration of materials is crucial to achieving performance and cost objectives for any product."

"What is component commonality?"

"The practice of using the same component in multiple products to reduce costs and simplify production or inventory management."

"What are the degrees of newness in product or service design?"

"1. Modification of an existing product/service.

2. Expansion of an existing line or service offering.

3. Clone of a competitor’s product or service.

4. Entirely new product or service."

"What is design for reliability?"

"Design for reliability ensures a product, part, or system performs as intended function under a prescribed set of normal conditions

"What is Quality Function Deployment (QFD)?"

"A structured approach for integrating the voice of the customer into product design to ensure that customer needs and expectations are considered throughout the development process."

"What is the Kano Model?"

"A theory of product and service design that provides insights into which attributes are most important to customers and how they influence satisfaction. It defines three categories of quality."

"What are the three types of quality in the Kano Model?"

"1. Basic Quality – Expected features; their absence causes dissatisfaction but their presence doesn’t increase satisfaction.

2. Performance Quality – Directly related to customer satisfaction; more is better.

3. Excitement Quality – Unexpected features that delight customers and increase satisfaction when present."

"What is demand forecasting?"

"Demand forecasting is the estimate of expected demand for a specified period of time in the future. It is one of the most important applications of forecasting in operations management."

"What are forecasts used for in organizations?"

"Forecasts are basic inputs for many kinds of organizational decisions

"What are features common to all forecasts?"

"1. Forecasts rely on randomness.

2. Forecasts are more accurate for groups of items than individual items.

3. Forecast accuracy decreases as the time horizon increases."

"What are the elements of a good forecast?"

"A good forecast should be timely, accurate, reliable, meaningful units

"What are the steps in the forecasting process?"

"1. Determine the purpose of the forecast.

2. Establish a forecasting horizon.

3. Gather and analyze relevant historical data.

4. Select a forecasting technique.

5. Prepare the forecast.

6. Monitor the forecast."

"What are the main approaches to forecasting?"

Judgemental

Quantitative

"What are judgmental forecasting methods?"

"1. Executive opinions – pooling of senior management insights for strategic or new product forecasts.

2. Historical analogies – using demand for similar products.

3. Consumer surveys – using questionnaires or focus groups."

"What is a time series model?"

"A time series is a time-ordered sequence of observations taken at regular intervals. It may exhibit patterns such as: level, trend, seasonality, cycles, iregular variations, randome variations

"What are common time series forecasting methods?"

Naive, Averaging, Trend models, techniques for seasonality

"What is the naïve forecasting method?"

Is simple to use and is very low cost but does generally have low accuracy

• With stable series, the last data point becomes the naïve forecast for the next period

• With seasonal variations, the naïve forecast for this season is equal to the value of the series of the last season

• For data with trend, the naïve forecast is equal to the last seen value of series plus or minus the difference between the last two values of the series.

"What is the moving average forecasting method?"

"Uses the average of a set number (n) of the most recent actual data values to develop forecasts. Formula: Ft = (Sum of demand in previous n periods) / n. It’s easy to calculate but can lag behind changes; fewer data points make it more responsive."

"What is the weighted moving average method?"

"Similar to the moving average but assigns different weights to each period

"What is exponential smoothing?"

"A sophisticated weighted averaging method where each new forecast equals the previous forecast plus a percentage of the forecast error (difference between actual and forecast)."

"What is forecast accuracy?"

"Forecast accuracy measures how close forecasts are to actual results. Accurate forecasts support efficient operations; inaccurate ones lead to over/underproduction or resource misallocation."

"What are the main measures of forecast accuracy?"

"1. Mean Absolute Deviation (MAD) 2. Mean Squared Error (MSE) 3. Mean Absolute Percent Error (MAPE)."

"What are control charts used for in forecasting?"

"Control charts plot forecast errors over time to check if they remain within preset control limits

"What is a tracking signal in forecasting?"

"A ratio of cumulative forecast error to MAD