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BA 357 Midterm #2 DETAILED Study Guide

by: Mikaela Mulvahill

BA 357 Midterm #2 DETAILED Study Guide BA 357

Marketplace > Oregon State University > Business > BA 357 > BA 357 Midterm 2 DETAILED Study Guide
Mikaela Mulvahill
GPA 3.27

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Here's the study guide for our second midterm! It's super detailed and has everything you need to know.
Operations Management
Dr. Guanyi Lu
Study Guide
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This 9 page Study Guide was uploaded by Mikaela Mulvahill on Thursday February 11, 2016. The Study Guide belongs to BA 357 at Oregon State University taught by Dr. Guanyi Lu in Winter 2016. Since its upload, it has received 116 views. For similar materials see Operations Management in Business at Oregon State University.


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Date Created: 02/11/16
BA 357 Midterm #2 Study Guide Project Management  Project structures o Pure project  People are dedicated to one thing, super focused  Advantages: project manager has full authority, team members report to one boss, shortened communication lines  Disadvantages: duplication of resources, organizational goals and policies are ignored, lack of tech. transfer, team members have no functional “home” area o Functional project  Worker can have several projects  Not always the best choice  Advantages: team member can work on several projects, have a functional area to call “home”  Disadvantages: aspects of the project that are not directly related to the functional area get short changed, motivation is often low o Matrix project  More than one boss, therefore different messages can be sent  Advantages: better comm. (communication) between functional areas, functional home, policies of organization are followed  Disadvantages: too many bosses, potential for sub- optimization  Progress o Budgeted Cost of Work Scheduled (BCWS)  Planned  If actual progress > planned progress, we are ahead of schedule o Budgeted Cost of Work Performed (BCWP)  Worked o Schedule Variance  BWCP – BCWS >= 0  If positive, you are doing better than you planned. If 0, you are doing what you planned. o Cost Variance  BCWP – AC >= 0  AC = actual cost  BCWP >= AC, should be positive because you are then saving money because actual cost is lower than your budget. o Schedule Performance Index  BCWP / BCWS >= 1  Same as schedule variance o Cost Performance Index  BCWP / AC >= 1 o Variance must be greater than or equal to 0 o Index must be greater than or equal to 1  Critical Path Management o Critical path  the path that takes the longest time to complete the activities; and is the quickest amount of time that a project can be completed o Critical path method (CPM) helps to identify the critical path(s) in the project o Project  is made up of a sequence of activities that form a network representing a project o Slack  Is the maximal time that an activity can be delayed without delaying the project completion  Slack = LS – ES or LF – EF  Also: Slack = LS –ES = LF – EF  If you delay the activities with 0 slack, it delays the project completion  You can have more than one critical path in a project  Early Start  ES = 0 for starting activities  ES = max (EF of all predecessors for non-starting activities)  Early Finish  EF = ES + Activity time, for all activities  Backward Pass  Begin at ending activities and work backward  Late Finish  LF = shortest project completion time, for ending activities  LF = min (LS of all successors for non-ending activities)  Late Start  LS = LF – Activity Time, for all activities  Crash Activities o Crashing activities is used to expedite the process in the cheapest way possible o Steps to crash:  Identify the critical path  Identify the lowest cost possible actions  Re-identify to see if the critical path changes; if it does, you are done. If it doesn’t, look at the other options that you have to crash  Probability o Always work with the critical path o 3 time estimates  a: good times  m: most likely times  b: bad times o Beta distribution (aka weighted average)  E(t) = (a + 4m + b) / 6 o Variance of activity time  Var(t) = ((b-a)/6)^2 OR sigma*2 o Z  Z = (x – mu) / square root of n Capacity Management  General idea: the amount of output that a system is capable of achieving over a specific period of time  Definitions o Input definition: the upper limit or ceiling on the load that an operating unit can handle o Output definition: the upper limit on the rate of output  Expressions of capacity: hrs available per year, models per year  Time dimension o Long range  >1 year  ex: buildings o Intermediate range  6 – 8 months  capacity varies due to hiring, laying off, minor equipment purchases, subcontracting, ect. o Short range  1 month or less  tied into daily or weekly scheduling process  ie: adjustments to eliminate variance between planned and actual output  Importance of Capacity decisions (don’t need to memorize… but have a general idea) o Involves long term commitment o Impacts ability to meet future demands o Major determinant of initial costs o Affects operating costs o Affects competitiveness o Affects ease of management  Theories of Capacity Management o Before demand  Add capacity in ADVANCE of demand increase  You will never have an empty supply o After demand  Add capacity AFTER demand increase o Frequently  Add capacity FREQUENTLY in attempt to match capacity with demand  This is the best thing to do (if you don’t consider the cost of change) o Strategies for matching capacity to demand  Making staffing changes (overtime, number of employees, ect)  Subcontracting or outsourcing  Adjusting equipment and processes  Buffer inventory before bottleneck  Purchasing, leasing, or sharing additional equipment  Redesigning the product to facilitate more throughput  Ie: if you outsource to other countries, you will need to pull more money out of your working capital to pay for it… kind of counterintuitive  Capacity Utilization o Capacity utilization rate = actual output / BEST operating level  Not the max, but the BEST o Capacity expansion assumes that capacity will grow o If market demand is stable, choose the big moves o If market demand is unstable, choose the small moves  Service Process o Best operating point is near 70% capacity (this is the cutoff) o Planning service capacity:  Time  Location  Volatility of demand  Capacity utilization and service quality o Caveats: capacity affects not only service quality but also conformance quality Service Process  Intangible / time and location dependent / heterogeneity / lots of interactions  Even when capacity > total demand, we could have waiting lines form. Need more resources to reduce waiting lines  If we have flexibility, we may improve o Ie cross-train employees to add flexibility and improve capacity  Variability alone can generate waiting lines  The smaller the variability, the smaller the average waiting time  The average waiting time is smaller when there are more resources  Capacity pooling reduces the average waiting time  Psychology of waiting lines (don’t need to memorize, just have a general idea) o Unoccupied time feels longer than occupied time o Pre-process waits feel longer than in-process waits o Uncertain waits feel longer than known, finite waits o Unexplained waits feel longer than explained waits o Unfair waits feel longer than equitable waits  Satisfaction = perception – expectation Production Process / Layouts  Customer decoupling point o Where inventory is positioned to allow entities in the supply chain to operate independently  This is when you need customer info and feedback to continue  Flexibility  Cost o Lead time  Is the time needed to respond to a customer order  Make to stock: ---------------*------ customer  Make to order: ---*------------------ customer  Make to stock has a shorter manufacturing lead time  Types of Production firms o Make to stock  Firms that serve customers from finished goods inventory  Ie: tvs, clothing, packaged food products  Essential issue: satisfying customers to balance the level of inventory against the level of customer service  Uses lean manufacturing to achieve higher service levels for a given inventory investment o Assemble to order  Firms that combine a number of preassembled modules to meet a customer’s specifications  Benefit of going from make to stock to assemble to order: lower inventory costs  Primary task: to define a customer’s order in terms of alternative components since these are carried in inventory  Capability required: a design that enables as much flexibility as possible in combining components o Make to order  Firms that make the customer’s product from raw materials, parts, and components  Ie: Boeing  Customer order decoupling point could be in either raw materials at the manufacturing site or the supplier inventory  Depending on how similar the products are, it might not even be possible to pre-order parts o Engineer to order  Firm that will work with the customer to design and then will make the product  Make to order and engineer to order are usually combined into one group  ******refer to make to order******  Different Manufacturing Layouts o Job Shop  Over 70% of business in the US is in a job shop layout  Requires a small are, so production volume is low  Used for prototype samples  Demand is not specialized, so it can be diverse  Ie: car shop o Project layout  A combo of multiple paths  Doesn’t have typical characteristics of an assembly line  Ie: the Boeing video o Work center  Worker has all of his supplies/machines arranged around him  Usually the company just has a few, talented employees  Is known for tweaking components to make the product  Used for high end products  Ie: video about making the watch o Manufacturing cell  Material enters the machine; machine doesn’t move  Once the component is done in one machine, we move the product to the next machine  Machines are arranged with different uses in assigned areas o Assembly line  Ie: Ford o Continuous Process  Nonstop  When you have continuous flow, some process become irrelevant *** like cycle time (especially cycle time) and flow time  Ie: the video about washing vegetables  Can still use Little’s Law  Product Process Matrix o Study the slide with the product process matrix (it’s a little difficult to put into Word, sorry) o If jobs are on the diagonal, that is good and means it’s a good fit  Break Even Analysis o Breaking even is when you start to make a profit on the process o Breakeven demand = purchase cost of process or equipment / (price per unit – cost per unit) OR = total fixed costs of process or equipment / (unit price to customer – variable cost per unit) Quality Management  Total Quality Management (TQM) o Managing the entire organization so that it excels on all dimensions of products and services that are important to the customer  Two Fundamental Operational goals o Improve design quality o Improve performance quality  Quality Specifications o Design quality: inherent value of the product in the marketplace o Conformance quality: degree to which the product or service design specifications are met  The later a defect is found, the more expensive it is to fix it  4 Types of Cost o Appraisal cost: associated with actual inspection and testing o Prevention cost: to prevent defects, employees need to know how to fix what they are doing  training o Internal failure cost: problem is found during manufacturing, so just have to repair product o External failure cost: problem is in hands of customer and cost is very high; product recall  Statistical Process Control o Is a set of techniques designed to evaluate quality from a conformance view o Stats on variations  Process capability: determines how good a process is at making parts when it is running properly (measure the overall variations)  Control charts: are used to check continuously whether the process is running properly (differentiate two types of variations) o Assignable variation  Variation that is caused by factors that can be clearly identified and possibly even managed o Common variation  Variation that is inherent in the process o General form of Control Charts o It it’s outside the limits, something is wrong o As long as the sample is between UCL and LCL, then it’s “in control”, and only common variation o If out of control, might have assignable variation o When a process is in control, it does not mean the process is producing good quality products o P charts  Attributes are quality characteristics that are classified as either conforming or not conforming to specification  Each sample should contain 2 defects  For these charts, it’s extremely important to look back over his graphs on the power point slides o X bar charts and R charts  Variables refer to measurable quality characteristics  For these charts, it’s extremely important to look back over his graphs on the power point slides o Cpk  The greater Cpk is, the more capable the process is in terms of producing quality products  Threshold Cpk = 1.3  If Cpk is less than 1.3, it is an incapable process  The larger the Cpk, the better it is because that means it’s farther from the tolerance level o The fundamental assumption for statist process control is:  Good process produces good products  Six Sigma o Six sigma companies want 2.0 o If the question doesn’t specify if it is centered, by default we assume that the defect rate is 3.4 defects per million o If specified, the process has 2 defects per billion o ***Process control is a warning system o Works to eliminate defects in the system


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