CPROBS2 Reviewer

CH1 INTRODUCTION
Production Creation of goods &
services
Operations Management Set of
activities that create value in the
form of goods and services by
transforming inputs into outputs
ESSENTIAL FUNCTIONS
1. Marketing Generates
demand
2. Production/operations
Creates product
3. Finance/accounting
Why study OM?
1. One of the major functions of
any organization
2. Need to know how goods &
services are produced
3. Costly part of an organization
THE STRATEGIC DECISIONS
1. Design of goods & services
- Whats required
- Determines quality,
sustainability, and human
resources
2. Managing Quality
- Customers quality
expectations
- Identify and achieve
quality
3. Process and capacity design
- Production of
goods/services
4. Location Strategy
- Nearness to customers,
suppliers, and talent

Considers cost,
infrastructure, etc.
5. Layout Strategy
- Efficient flow of materials,
people, and information.
6. Human resources and job
design
- Recruit, motivate, and
retain employees
7. Supply-chain management
- Determines whats to be
purchased, from whom,
and under what conditions
8. Inventory management
- Customer satisfaction,
supplier capability,
production schedule.
9. Scheduling
10.
Maintenance
- Considers facility, prod,
and personnel
HISTORY
Eli Whitney
-

Showed that machine

tools could make standard
parts to exact specs.

Frederick Taylor
-

Father of Scientific
Management
Created efficiency
principles

Henry Ford
-

Moving assembly line to

make Model T

W. Edwards Deming

PRODUCTIVITY VARIABLES
1. Labor 10% annual increase

2. Capital 38% annual

increase
3. Management 52% annual
increase

CH 4 FORECASTING
Forecasting
-

Process of predicting a future

event
Underlying basis of all
business decisions

Short-range forecast
-

Up to 1 year; usually less

than 3 months
Purchasing, job
scheduling, workforce
levels, job assignments,
production levels

STEPS IN FORECASTING
1.
2.
3.
4.
5.
6.
7.

FORECASTING APPROACHES
Qualitative Methods
-

Medium-range forecast
-

3 months to 3 years
Sales & production
planning, budgeting

3+ years
New product planning,
facility location, research
& development

Technological Predicts rate of

technological process; impacts
devt of new products
Demand Predicts sales of existing
producs & services

Stable situation; w/ data

Existing product/tech
Involves math (ew jk)

QUALITATIVE METHODS

TYPES OF FORECASTS
Economic Addresses business
cycle (inflation rate, money supply,
etc.)

Vague situation; little data

New products/tech
Involves intuition

Quantitative Methods

Long-range forecast
-

Determine use
Select items to be forecasted
Determine time horizon
Select forecasting model/s
Gather data
Make forecast
Validate & implement results

Jury of Executive Opinion

- Small group of high-level
experts & managers
- Managerial experience +
statistical models
Sales Force Composite
- Very optimistic
- Sales rep
Delphi Method
- Decision makers, staff,
respondents
Consumer Market Survey
- Ask customers!!!

STRATEGIC IMPORTANCE OF
FORECASTING
-

Human Resources
Capacity
Supply Chain Management

QUANTITATIVE METHODS

Time-Series Models
1. Nave Approach
- Assumes demand in next
period is same
- Cost effective & efficient
2. Moving Averages
- Series of arithmetic means
- Little/No trend
- Often for smoothing
3. Exponential smoothing
- Form of weighted moving
average
- Little record of past data
4. Trend projection
Associative Model
5. Linear regression

Time Series Forecasting

- Set of evenly spaced
numerical data
- Based on past values
- Components:
Trend
Persistent;
upward
Changes due to
population, tech,
age, culture, etc.
Several years
duration
Cyclical
Repeating
up&down
Affected by
business
Multiple years
Seasonal
Up & downs
Due to weather
W/in the yr
Random

Unpredictable
Unforeseen
events
Short &
nonrepeating

CH 5 DESIGN OF GOODS &

SERVICES

Product Design
-

Good/Service the
organization provides
Typically focuses on core
products
Customers buy
satisfaction, not just
physical goods
Fundamental to strategies

Product Strategy Options

-

Differentiation
Low cost
Rapid response

Product Life Cycles

-

Few hours to decades

Introduce new products
successfully

Introduction
-

Research
Product development
Process modification
Supplier development

Growth
-

Product design stabilizes

Effective forecasting
capacity
Adding/Enhancing
capacity

Maturity
Decline

Established competitors
High volume; innovative
Improved cost control

Unless product makes a

special contribution to the
organization

Product-by-Value Analysis
-

Lists products in
descending order of their
individual dollar
contribution to the firm
Lists the total annual
dollar contribution of the
product
Helps management
evaluate alternative
strategies

New Product Opportunities

1. Understanding the customer
2. Economic change
3. Sociological & demographic
change
4. Technological change
5. Political/Legal change
6. Market practice, professional
standards, suppliers,
distributors
Quality Function Development
1. Customer wants
2. How goods/services will
satisfy customer wants
3. Relate customer wants to
product hows
4. Relationship of firms hows
5. Importance ratings
6. Evaluate competing products
7. Compare performance

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CH 5s SUSTAINABILITY
Sustainability
-

It meets the needs of the

present without
compromising the ability
of future generations to
meet their own needs.

Basically, sustainability is the

ability to create new things without
having to compromise the
environments (i.e., cutting down
trees, etc.)

CH 7 PROCESS STRATEGY
-

How to produce a
product / provide a service
that:
Meets/Exceeds
customer
requirements
Meets cost &
managerial goals
Has long term effects on

Efficiency &
production flexibility
Costs & quality

4 Basic Strategies
-

Process focus
Repetitive focus
Product focus
Mass customization