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Chapter Notes

by: Callie Lusk

Chapter Notes MGMT 314

Callie Lusk
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Operations Management
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This 7 page Class Notes was uploaded by Callie Lusk on Thursday September 15, 2016. The Class Notes belongs to MGMT 314 at Western Kentucky University taught by Buchanan in Fall 2016. Since its upload, it has received 14 views. For similar materials see Operations Management in Management at Western Kentucky University.

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Date Created: 09/15/16
Operations Management Exam #1 Preparation Chapter Two Notes Reasons to globalize 1. Reduce costs (labor, taxes, tariffs, etc.)  Foreign locations with lower wage rates can lower direct and indirect costs  Examples: World Trade Organization, European Union 2. Improve Supply chain  Locating facilities closer to unique resources  Examples: Auto design to California, Athletic show production to China 3. Provide betters goods and services  Objective and subjective characteristics of goods and services.  Examples: on-time deliveries, cultural variables 4. Understand the Market  Interacting with foreign customers and suppliers can lead to new opportunities  Example: Cell phone design in Europe, Cell phones fade from Japan 5. Learn to improve operations  Remain open to the free flow of ideas  Example: General Motors partnered with a Japanese auto manufacturer to learn new approaches to production and inventory control. 6. Attract and retain global talent  Offer better employment opportunities  I.e. Better growth opportunities and isolation against unemployment, relocate unneeded personnel to more prosperous locations. Cultural and Ethical Issues  Cultures and attitudes can both be very different. o Refer to consumer behavior notes on difference Mission Statements  Tell an organization where it is going o Organization’s purpose for being o Answers the question “what do we provide society?” o Provides boundaries and focus  The strategy is the plan to get there o Functional areas have strategy o Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses. Factors that affect an Organizations Mission  Customers  Environment  Philosophy and values  Profitability and growth  Public image  Benefit to society Three Strategic Ways to Competitive Advantage  Differentiation: better, or different o Competing on differentiation: uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perceptions of value. o Example: Walt Disney World Magic Kingdom  Cost leadership: cheaper o Competing on cost: provide the maximum value as perceived by the customer. Does not imply low quality. o Example: Southwest Airlines- secondary airports, no frills service, efficient utilization of equipment  Response: rapid response o Competing on response: flexibility is matching market changes in design innovation and volumes o Reliability is meeting schedules o Timeliness is quickness in design, production, and delivery. Ten strategic Operations Management Decisions 1. Goods and services 2. Quality 3. Process and capacity design 4. Location selection 5. Layout design 6. Supply chain 7. Inventory 8. Scheduling Managing Global Service Operations  Requires a different perspective on: o Capacity planning o Location planning o Facilities design and layout o Scheduling  Issues in Operations Strategy o Resources View o Value Chain analysis o Porter’s Five Forces model o Operating in a system with many external forces o Constant Change SWOT Analysis  Internal Strengths  Internal Weaknesses  External Opportunities  External Threats Strategy Development & Implementation  Analyze the environment  Determine the corporate mission  Form a strategy o Identify key success factors o Build and staff the organization o Integrate OM with other activities **Key success factors (test) Operations Management Exam #1 Preparation Chapter Four Notes Forecasting  The process of predicting a future event** o Underlying basis of all business decisions o Good forecasting is essential to operations  Involves taking historical data and projecting it into the future using some sort of mathematical model. Forecasting Time Horizons  Short-range forecast o Up to one year, generally less than 3 months  Purchasing, job scheduling, workforce levels, job assignments, etc. o Tends to be more accurate than long-term forecasts  Medium-range forecast o 3 months to 3 years  Sales and production planning, budgeting o Deal with more comprehensive issues  Long-range forecast o More than 3 years  New product planning, facility location, research and development. o Deal with more comprehensive issues Influence of Product Life Cycle  As products pass through life cycles, forecasts are useful in projecting o Staffing levels o Inventory levels o Factory capacity  Product life cycle includes: o Introduction o Growth o Maturity o Decline Types of Forecasts  Economic forecasts o Addresses business cycle  Technological forecasts  Demand Forecasts Strategic importance of forecasting  Human resources o Hiring o Training o Laying off workers  Capacity o Undependable delivery o Loss of market o Moss of customers  Supply chain management o Good supplier relations and price advantages Seven Steps in Forecasting  Determine the use of the forecast  Select the items to be forecasted  Determine the time horizon of the forecast  Select the forecasting model  Gather the data  Make the forecast  Validate and implement the results Realities  It is seldom that forecasts are perfect**  Most techniques assume an underlying stability in the system  Product family and aggregated forecasts are more accurate than individual product forecasts Forecasting Approaches  Qualitative Method o Used when situation is vague and little data exist  New products  New technology o Involves intuition, experience  Forecasting sales on the internet (example) o Example: Delphi method  Panel of experts whose judgements are valued.  Quantitative Method o Used when situation is stable and historical data exists  Existing products  Current technology o Involves mathematical techniques  Forecasting sales of color televisions (example) o Approaches  Naïve  Moving averages  Exponential smoothing  Trend projection  Linear regression Sales Force Composite  Each salesperson projects his or her sales  Sales reps know customers wants  Tends to be overly optimistic  Combines at the district and national level Time Series Forecasting  Set of evenly spaced numerical data o Obtained by observing response variable at regular time periods  Forecast based only on past values, no other variables are important  Four components o Trend  Persistent, overall upward or downward pattern  Changes due to population, technology, etc. o Cyclical  Repeating up and down movements  Affected by business cycles, political, and economic factors  Multiple years duration  Often casual or associative relationships o Seasonal  Regular pattern of up and down fluctuations  Due to weather customs, etc.  Occurs within a single year o Random  Erratic, unsystematic, ‘residual’ fluctuations  Due to random variation or unforeseen approaches o Naïve Approach  Assumes demand in the next period is the same as demand in most recent period  Example: if January sales are 68, February sales will be 68.  Sometimes cost effective and efficient  Can be good starting point Moving Average Method**  Series of arithmetic means  Used if little or no trend  Used often for smoothing  Provides overall impression of data over time Potential problems with moving average  Increasing ‘n’ smooths the forecast but makes it less sensitive to changes  Do not forecast trends well  Requires extensive historical data Seasonal Variations in Data  The multiplicative seasonal model can adjust trend data for seasonal variations in demand.  Steps in the process: o Find average historical demand for each season o Compute the average demand over all seasons o Compute a seasonal index for each season o Estimate next year’s total demand o Divide the estimate of total demand by the number of seasons, then multiply it by the seasonal index for that season. Focus Forecasting  This approach uses historical data to test multiple forecasting models for individual items  The forecasting model with the lowest error is then used to forecast the next demand.  Sophisticated forecasting models are not always better than simple ones  There is no single technique that should be used for all products or services Forecasting in the service sector  Presents unusual challenges o Special needs for short-term records o Needs differ greatly as function of industry and product o Holidays and other calendar events o Unusual events


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