Chapter 1 Objectives:

QUESTION NO 1

Define Operations Management (4):

ANSWER

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

QUESTION NO 2

What are the three major financial areas of organisations?

ANSWER

The three major functional areas of organizations are (4):

a. Finance: responsible for securing financial resources at favourable prices and allocating those
resources throughout the organization, as well as budgeting, analyzing investment proposals, and
providing funds for operations.

b. Marketing: responsible for assessing consumer wants and needs, and selling and
promoting the organizations goods and services.

c. Operations: management of systems or processes that create goods and/or provide

Compare and Contrast service and manufacturing operations (6):

Service: low percentage of goods, High percentage service, intangible

Manufacturing: high percentage of goods, low percentage service,

Differences:

Degree of customer Contact

Uniformity of input

Labor contents of job

Uniformity of output

Measurement of productivity

Production and delivery

Quality Assurance

Amount of inventory

Describe the operations function (8): The operations function includes many interrelated activities,
such as forecasting, capacity planning, scheduling, managing inventories, assuring quality,
motivating employees, deciding where to locate facilities, and more. The operations function
consists of all activities directly related to producing goods or services.

What is the nature of the Operation Manager’s job? (9): The primary function of the
operation manager is to guide the system by decision making. He/she is the key figure in the
system: he or she has the ultimate responsibility for the creation of goods or provision of
services.

Differentiate between design and operation of production systems (10):

The design of a production system includes long-range capacity, process selection, layout,
design of work systems, and location.

The operations of a production system include quality control, aggregate planning,

Describe the key aspects of operations management decision making (12): Operations
management make many key decisions that affect the entire organization, such as:

What: What resources will be needed, and in what amounts? How will
resources be allocated?

When: When will each resource be needed? When should the work be
scheduled? When should supplies be ordered? When is corrective action
needed?

Where: Where will the work be done?

How: How will the product/service be designed? How will the work be
done (organization, methods, equipment)?

Who: Who will do the work?

Briefly describe the historical evolution of operations management (18-21):

During the industrial revolution (1770s), goods were produced in small shops by craftsmen
and their apprentices. In the 18th century a number of innovations substituted machine power
for human power (steam engine). The development of the gauging system gave the industrial
revolution a boost, reducing the need for custom made goods. The scientific management era
brought Fredrick Taylor’s methods to light. He studied work methods of work to identify the best
method for doing each job. His method’s emphasized maximizing output. In the early 10th
century, mass production, interchangeable parts, and division of labour maximized output in
the automobile industry as well as others. The human relations movement emphasized the
importance of the human element in job design. Managers became aware of the idea that
worker motivation is critical to improve productivity. **See Table 1.7 on page 22 for
timeline**
Identify current trends in business that impact operations management (21-24):

Although different organizations have different priorities, and are affected differently by trends,
major trends that impact operations management are:

The internet, ecommerce, e business

Management of technology

Globalization

Management of supply chains

Agility
Chapter 2 Objectives

List and briefly discuss the primary ways that business organizations compete.

Business and organizations compete through:

Identifying consumer wants and needs is a basic input in an organization’s decision-making process,
and central to competitiveness. The ideal is to achieve a perfect match between those wants and
needs and the organization’s goods and/or services.

Pricing is usually a key factor in consumer buying decisions. It is important to understand the trade-
off decision consumers make between price and other aspects of a product or service such as
quality.

Advertising and promotions are ways organizations can inform potential customers about features
of their products or services, and attract buyers.

List five reasons for the poor competitiveness of some companies.

1. Lack of quality

2. Poor location

3. Slow response to changing market needs

4. Inflexibility of design or services offered

5. Unmotivated/incompetent workers and managers

Define the term strategy and explain why strategy is important for competitiveness.
 Strategies: Plans for achieving organizational goals.

Strategies have a major impact on what the organization does and how it does it. Strategies can be
long term, intermediate term, or short term. To be effective, strategies must be designed to support
the organization’s mission and its organizational goals.

Contrast strategy and tactics.

Tactics are the methods and actions used to accomplish strategies. They are more specific in
nature that strategies, and they provide guidance and direction for carrying out actual operations.

Discuss and compare organization strategy and operations strategy, and explain why it is important
to link the two.

The organization strategy provides the overall direction for the organization. It is broad in
scope, covering the entire organization. Operations strategy is narrower in scope, dealing primarily
with the operations aspect of the organization.

Describe and give examples of time-based strategies.

Time-Based Strategy: Strategy that focuses on reduction of time needed to accomplish tasks.
Organizations have achieved time reduction in some of the following:

Planning time: The time needed to react to a competitive threat, to develop strategies and select
tactics, to approve proposed changes to facilities, to adopt new technologies, and so on.

Product/Service Design Time: The time needed to develop and market new or redesigned products
or services.

Processing Time: The time needed to produce goods or provide services. This can involve
scheduling, repairing equipment, methods used, inventories, quality, training, and the like.

Changeover Time: The time needed to change from producing one type of product or service to
another. This may involve new equipment settings and attachments, different methods, equipment,
schedules, or materials.

Delivery Time: The time needed to fill orders.

Response Time for Complaints: These might be customer complains about quality, timing of
deliveries, and incorrect shipments. These might also be complains from employees about working
conditions (e.g. safety, lighting, heat or cold), equipment problems, or quality problems.

Define the term productivity and explain why it is important to organizations and to countries.

Productivity: A measure of the effective use of resources, usually expressed as the ratio of
output to input. Productivity ratios are used by companies for planning work-force requirements,
scheduling equipment, financial analysis, determining how competitive a company is, and other
important tasks. Countries use productivity growth ratios to determine rates of inflation and
standard of living of its people. Productivity increases add value to the economy while keeping
inflation in check.

QUESTION NO 6

List some of the reasons for poor productivity and some ways of improving it.
ANSWER

Generally, the methods, capital, quality, technology and management are the largest contributors
to poor productivity. Ways of improving productivity include:

1. Develop productivity measure for all operations

2. Look at the system as a whole in deciding which operations are most critical.

3. Develop methods for achieving productivity improvements, such as soliciting ideas from
workers, studying how other firms have increased productivity, and re examining the ways work is
done.

4. Establish reasonable goals for improvement.

5. Make it clear that management supports and encourages productivity improvement.

6. Measure improvements and publicize them.

1. List the elements of a good forecast.

-The forecast should be timely.

-The forecast should be accurate.

-The forecast should be reliable.

-The forecast should be expressed in meaningful units.

-The forecast should be in writing.

-The forecast technique should be simple to understand and use.

-The forecast should be cost-effective: The benefits should outweigh the costs.

2. Outline the steps in the forecasting process.

-1. Determine the purpose of the forecast.

2. Establish a time horizon.

3. Select a forecasting technique.

4. Gather and analyse relevant data.

5. Make a forecast.

6. Monitor the forecast.

-Executive opinions: A small group of upper-level managers may meet and collectively develop a
forecast. It has the advantage of bringing together the considerable knowledge and talents of
various managers. However, there is a risk that the view of one person will prevail, and the
possibility that diffusing responsibility for the forecast over the entire group may result in less
pressure to produce a good forecast.

Salesforce opinions: The sales staff or the customer service staff is often a good source of
information because of their direct contact with consumers. They are often aware of any plans the
customers may be considering for the future. One disadvantage is that they may be unable to
distinguish between what the customers would like to do and what they actually will do. Another is
that these people are sometimes overly influenced by recent experiences. In addition, if forecasts
are used to establish sales quotas, there will be a conflict of interest because it is to the
salesperson’s advantage to provide low sales estimates.

Consumer Surveys: Since it is the consumers who ultimately determine demand, it seems natural to
solicit input from them. The obvious advantage of consumer surveys is that they can tap
information that might not be available elsewhere. Disadvantages: A considerable amount of
knowledge and skill is required to construct a survey, administer it, and interpret the results for valid
information. Surveys can be expensive and time consuming.

4. Compare and contrast qualitative and quantitative approaches to forecasting.

-Qualitative methods consist mainly of subjective inputs, which often defy precise numerical
description. Quantitative methods involve either the projection of historical data or the
development of associative models that attempt to utilize causal variables to make a forecast.
Qualitative techniques permit inclusion of soft (human opinions & hunches) information in the
forecasting process. Those factors are often omitted or downplayed when quantitative techniques
are used because they are difficult to quantify. Quantitative techniques consist mainly of analyzing
objective, or hard, data. They usually avoid personal biases that sometimes contaminate qualitative
methods.

5. Briefly describe averaging techniques, trend and seasonal techniques, and regression analysis, and
solve typical problems.

Averaging techniques smooth fluctuations in a time series because the individual highs and lows in
the data offset each other when they are combined into an average. A forecast based on an average
thus tends to exhibit less variability than the original data. This can be advantageous because many
of these movements merely reflect random variability rather than a true change in the series.

6. Describe two measures of forecast accuracy.

- Three commonly used measures for summarizing historical errors are the mean absolute deviation
(MAD), the mean squared error (MSE), and the mean absolute percent error (MAPE). mean absolute
deviation (MAD) is the average absolute forecast error. mean squared error (MSE) is the average of
squared forecast errors. mean absolute percent error (MAPE) is the average absolute percent error.

7. Describe two way of evaluating and controlling forecasts.

-A control chart is a visual tool for monitoring forecast errors. In order for the forecast errors to be
judged “in control”, two things must happen. One is that all errors are within the control limits. The
other is that no patterns, trends, and cycles are present. A tracking signal is the ratio of cumulative
forecast error to the corresponding value of MAD used to monitor a forecast. It relates the
cumulative forecast error to the average absolute error. The intent is to detect any bias in errors
over time.

8. Identify the major factors to consider when choosing a forecasting technique.

- The two most important factors are cost and accuracy. Other factors to consider in selecting a
forecasting technique include the availability of historical data: the availability of computer software:
the ability of decision makers to utilize certain techniques: the time needed to gather and analyse
data and to prepare the forecast; and any prior experience with a technique.