Production & operarions management review

Review for

Comprehensive

ExaminationAugust 17, 2014

PRODUCTION &

OPERATIONS

MANAGEMENT

Organization of the Production & Operations Function

Production and Operations Concept

Principles of Productivity and Forecasting

Plant, Facility and Capacity Planning

Process and Methods Analysis

Quality Management

Inventory Management

Emerging Trends in Production and Operations Management

Supply Chain Management and ERP

JIT and Lean Operations Management

PERT/CPM Applications in Project Management

TQM. 5S, Six Sigma and Kaizen

REVIEW OUTLINE

ORGANIZATION

FUNCTIONAL CHARTS

Figure 1.1

FUNCTIONAL CHARTS

DEFINITION

WHAT IS OPERATIONS MANAGEMENT?

Production is the creation of goods and

services

Operations management (OM) is the set

of activities that create value in the form

of goods and services by transforming

inputs into outputs

PRODUCTIVITY CHALLENGE

Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such

as labor and capital)

The objective is to improve productivity!

Important Note!Production is a measure of output only

and not a measure of efficiency

IMPROVING PRODUCTIVITY AT STARBUCKS

A team of 10 analysts continually look for ways to shave time. Some improvements:

Stop requiring signatures on credit card purchases under $25

Saved 8 seconds per transaction

Change the size of the ice scoop

Saved 14 seconds per drink

New espresso machines Saved 12 seconds per shot

Operations improvements have helped Starbucks increase yearly revenue per outlet by $250,000 to $1,000,000 in seven years.

Productivity has improved by 27%, or about 4.5% per year.

▶ Measure of process improvement

▶ Represents output relative to input

▶ Only through productivity increases can our standard of living improve

PRODUCTIVITY

Productivity =Units produced

Input used

PRODUCTIVITY CALCULATIONS

Productivity =Units produced

Labor-hours used

= = 4 units/labor-hour1,000

250

Labor Productivity

One resource input single-factor productivity

MULTI-FACTOR PRODUCTIVITY

Output

Labor + Material + Factory OHProductivity =

► Also known as total factor productivity

► Output and inputs are often expressed in dollars

Multiple resource inputs multi-factor productivity

COLLINS TITLE PRODUCTIVITY

Staff of 4 workers 8 hrs/day 8 titles/day

Payroll cost = $640/day Overhead = $400/day

Old System:

14 titles/day Overhead = $800/day

New System:

8 titles/day

$640 + 400

14 titles/day

$640 + 800

=Old multifactor

productivity

=New multifactor

productivity

= .0077 titles/dollar

= .0097 titles/dollar

PRODUCTIVITY AT TACO BELL

Improvements:

▶ Revised the menu

▶ Designed meals for easy preparation

▶ Shifted some preparation to suppliers

▶ Efficient layout and automation

▶ Training and employee empowerment

▶ New water and energy saving grills

FORECASTING METHODS

Copyright ©2013 Pearson Education14 -

21

Naïve Method

The forecast for the next period is the demand for the current period

Moving Average Method

Weighted Moving Average Method

Exponential Smoothing Method

Linear Regression Method

MOVING AVERAGE METHOD

Compute a three-week moving average forecast for the arrival of medical clinic patients in week 4. The numbers of arrivals for the past 3 weeks were:

Week Patient Arrivals

1 400

2 380

3 411

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WEIGHTED AVERAGE METHOD

Compute the forecast for the arrival of medical patients in week 4 using the weighted average method. The numbers of arrivals were as follows:

WeekPatient Arrivals

Weight

1 400 20%

2 380 30%

3 411 50%

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EXPONENTIAL SMOOTHING METHOD

Compute the forecast for the arrival of patients in week 4 using the exponential smoothing method. The smoothing constant is α = 0.10:

WeekPatient Arrivals

Previous Forecast

1 400

2 380

3 411 415

FNew = FPrevious + α (Actual – FPrevious)

LINEAR REGRESSION METHOD

Compute forecast for week 7 using the linear regression method.

Week Patient Arrivals

1 400

2 380

3 411

4 415

5 421

6 427

Y = A(X) + B

Where A = slope, B = Y-intercept


Formula Result

ΣX 21

ΣY 2,454

n 6

ΣX2 91

ΣY2 1,005,116

ΣXY 8,720


nΣXY – ΣXΣY 6(8720)-(21)(2,454) 786

A = ------------- = ---------------------- = ----- = 7.485714

nΣX2 – (ΣX)2 6(91) – (21)2 105

ΣY – AΣX 2,454 – (7.485714)(21) 2296.8

B = ---------- = --------------------------- = -------- = 382.8

n 6 6

Y7 = A(X7) + B = 7.485714 (7) + 382.8 = 435.2


nΣXY – ΣXΣY

R = -------------------------------------- = 0.828103

√(𝒏𝚺𝑿𝟐 – (𝚺𝑿)𝟐)(𝒏𝚺𝒀𝟐 – (𝚺𝒀)𝟐)

REGRESSION COEFFICIENT

0 < /r/ < 0.3 = Weak Correlation

.3 < /r/ < 0.7 = Moderate Correlation

/r/ > 0.7 = Strong Correlation

FinishStart

A

B

C

D

E

F

G

H

I

J

KA —

B —

C A

D B

E B

F A

G C

H D

I A

J E,G,H

K F,I,J

Immediate

Predecessor

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CRITICAL PATH METHOD

Duration

(Days)

FinishStart

A

B

C

D

E

F

G

H

I

J

KPath Time (days)

A-I-K 33A-F-K 28A-C-G-J-K 67B-D-H-J-K 69B-E-J-K 43

Paths are the sequence of activities

between a project’s start and finish.02 -

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Activity Duration

Earliest Start (ES)

Latest Start (LS)

Earliest Finish (EF)

Latest Finish (LF)

Slack (LS-ES)

On the Critical Path?

A 12 0 2 12 14 14-12=2 No

B 9 0 0 9 9 9-9=0 Yes

C 10

D 10

E 24

F 10

G 35

H 40

I 15

J 4

K 6

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Latest finish time

Latest start time

Activity

Duration

Earliest start timeEarliest finish time

0

2

12

14

A

12


K

6

C

10

G

35

J

4

H

40

B

9

D

10

E

24

I

15

FinishStart

A

12

F

10

0 9

9 33

9 19 19 59

22 5712 22

59 63

12 27

12 22 63 690 12

48 63

53 63

59 63

24 59

19 59

35 59

14 24

9 19

2 14

0 9

63 69

PERT/CPM

S = 0

S = 2

S = 26

S = 0

S = 36

S = 2

S = 2

S = 41 S = 0

S = 0 S = 0

The critical path is

B–D –H –J - K with

a project duration

of 69 days.

GANTT CHART

Production & operarions management review

Business

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