Question set for the OM oral exam

1. Name the three essential functions all organizations perform

1. Marketing – generates demand
2. Production/operations – creates the product (Production is a measure of output only
and not a measure of efficiency)
3. Finance/accounting – tracks how well the organization is doing, pays bills, collects
the money
2. Name the five basic management functions
Planning, organizing, staffing, leading, controlling

3. Identify the 10 strategic decisions of operations management

1. Design of goods and services

- Defines what is required of operations

- Product design determines cost, quality, sustainability and human resources
2. Managing quality

- Determine the customer’s quality expectations

- Establish policies and procedures to identify and achieve that quality
3. Process and capacity design

- How is a good or service produced?

- Commits management to specific technology, quality, human resources, and
investments
4. Location strategy

- Nearness to customers, suppliers, and talent

- Considering costs, infrastructure, logistics, and government
5. Layout strategy

- Integrate capacity needs, personnel levels, technology, and inventory

- Determine the efficient flow of materials, people, and information
6. Human resources and job design

- Recruit, motivate, and retain personnel with the required talent and skills
- Integral and expensive part of the total system design
7. Supply chain management

- Integrate supply chain into the firm’s strategy

- Determine what is to be purchased, from whom, and under what conditions
8. Inventory management

- Inventory ordering and holding decisions

 - Optimize considering customer satisfaction, supplier capability, and production
schedules
9. Scheduling

- Determine and implement intermediate- and short-term schedules

- Utilize personnel and facilities while meeting customer demands
10. Maintenance

- Consider facility capacity, production demands, and personnel

- Maintain a reliable and stable process
4.
a. Define ``Production’’
Production is a measure of output only and not a measure of efficiency;
the creation of goods and services

b. what is ``Operations Management’’?

Operations management (OM) is the set of activities that creates value in the form of goods and
services by transforming inputs into outputs

5.
a. Define Productivity.
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as
labor and capital)

b. How is productivity measured?

- Measure of process improvement

- Represents output relative to input
- Only through productivity increases can our standard of living improve

c. How does one compute single-factor productivity, how multi-factor productivity ?

Labor productivity

- One resource input  single-factor productivity

Multi-factor productivity

- Also known as total factor productivity

- Output and inputs are often expressed in dollars
- Multiple resource inputs  multi-factor productivity
6. What is the objective of inventory management and what are its four basic functions?
The objective of inventory management is to strike a balance between inventory investment and
customer service

Functions of inventory

1. To provide a selection of goods for anticipated demand and to separate the firm from
fluctuations in demand
2. To decouple or separate various parts of the production process
3. To take advantage of quantity discounts
4. To hedge against inflation

7. Name the four types of inventory

 Raw material
- Purchased but not processed
 Work-in-process (WIP)
- Undergone some change but not completed
- A function of flow time for a product
 Maintenance/repair/operating (MRO)
- Necessary to keep machinery and processes productive
 Finished goods
- Completed product awaiting shipment

8. What is ABC analysis?

 Divides inventory into three classes based on annual dollar volume
- Class A - high annual dollar volume
- Class B - medium annual dollar volume
- Class C - low annual dollar volume
 Used to establish policies that focus on the few critical parts and not the many trivial
ones
Other criteria than annual dollar volume may be used

- High shortage or holding cost

- Anticipated engineering changes
- Delivery problems
- Quality problems
Policies employed may include

1. More emphasis on supplier

development for A items
2. Tighter physical inventory
control for A items
3. More care in forecasting A
items
9. What are the assumptions of the basic EOQ model?
1. Demand is known, constant, and independent
2. Lead time is known and constant
3. Receipt of inventory is instantaneous and complete
4. Quantity discounts are not possible
5. Only variable costs are setup (or ordering) and holding
6. Stockouts can be completely avoided

10. Name the five capacity options in Aggregate planning

The objective of aggregate planning is usually to meet forecast demand while minimizing cost over
the planning period

Aggregate planning:

- Combines appropriate resources into general terms

- Part of a larger production planning system
- Disaggregation breaks the plan down into greater detail
- Disaggregation results in a master production schedule
Capacity options:

1. Changing inventory levels

- Increase inventory in low demand periods to meet high demand in the future
- Increase costs associated with storage, insurance, handling, obsolescence, pilferage, and
capital investment
- Shortages may mean lost sales due to long lead times and poor customer service
2. Varying workforce size by hiring or layoffs
- Match production rate to demand
- Training and separation costs for hiring and laying off workers
- New workers may have lower productivity
- Laying off workers may lower morale and productivity
3. Varying production rates through overtime or idle time
- Allows constant workforce
- May be difficult to meet large increases in demand
- Overtime can be costly and may drive down productivity
- Absorbing idle time may be difficult
4. Subcontracting
- Temporary measure during periods of peak demand
- May be costly
- Assuring quality and timely delivery may be difficult
- Exposes your customers to a possible competitor
5. Using part-time workers
- Useful for filling unskilled or low skilled positions, especially in services

11. Define ``Level Strategy’’, define ``Chase strategy’’ and define ``Mixed Strategy’’
Level strategy:

- Daily production is uniform

- Use inventory or idle time as buffer
- Stable production leads to better quality and productivity

Chase strategy:

- Match output rates to demand forecast for each period

- Vary workforce levels or vary production rate
- Favored by many service organizations

Mixed strategy:

- may be the best way to achieve minimum costs

 - There are many possible mixed strategies
- Finding the optimal plan is not always possible
Some combination of capacity options, a mixed strategy, might be the best solution

12. Name and describe two methods of aggregate planning which You know, name their
advantages and disadvantages
Graphical Methods

Popular techniques

- Easy to understand and use

- Trial-and-error approaches that do not guarantee an optimal solution
- Require only limited computations

1. Determine the demand for each period

2. Determine the capacity for regular time, overtime, and subcontracting each period

3. Find labor costs, hiring and layoff costs, and inventory holding costs

4. Consider company policy on workers and stock levels

5. Develop alternative plans and examine their total cost