Typical Issues for Operational Cases:

 Capacity Planning: Determining the optimal level of resources (manpower, equipment, etc.) needed to meet demand while minimizing costs.
 Location Selection: Choosing the best locations for facilities, warehouses, or distribution centers based on factors like proximity to suppliers/customers and
infrastructure.
 Technology Adoption: Evaluating and implementing new technologies (automation, IoT, etc.) to enhance efficiency and productivity.
 Supply Chain Optimization: Optimizing inventory levels, distribution networks, and transportation routes to reduce costs and improve efficiency.
 Process Improvement: Identifying and redesigning workflows and processes to eliminate waste and enhance operational efficiency.
 Quality Management: Implementing measures to ensure product/service consistency, reliability, and compliance with quality standards.
 Risk Management: Identifying and mitigating risks related to supply chain disruptions, regulatory compliance, etc., to ensure business continuity.
 Customer Service Enhancement: Improving customer service operations to enhance satisfaction and loyalty.
 Cost Red: Analyzing costs across various operational activities & implementing strategies to reduce exp without compromising quality or service.
 Inventory Management: Optimizing inventory levels, turnover rates, and ordering policies to minimize carrying costs while meeting demand.
 Procurement: Sourcing, purchasing, and acquiring goods/services/materials from external suppliers/vendors.
 Switch Suppl: Evaluating and deciding to change existing suppliers due to various reasons such as cost, quality, or service considerations.
Typical Operations Concepts:
Chapter 1: Operations and Productivity
What is Operations Management?
Production: the creation of goods and services
Operations Management (OM): Activities that add value to the creation of goods and services by transforming inputs to outputs.
Organizing to produce goods and services Organizations need to perform three functions to ensure smooth production and the organization’s survival:
1. Marketing: generates demand or takes orders for products or services.
2. Production/Operations: creates the product.
3. Finance/Accounting: tracks the organization's performance, pays bills, and collects money.
Why Study Operations Management? We study OM for four reasons:
1. To understand how the OM activity functions and how people organize themselves for productive enterprise.
2. To know how goods and services are produced.
3. To understand the role of operations managers.
4. To find ways an organization can improve profitability and service to society, as OM is a costly part of an organization.
The Heritage of Operations Management Notable contributors to OM include:
 Eli Whitney (1800): Popularized interchangeable parts through standardization and quality control.
 Frederick W. Taylor (1801): Advocated for finding the best production methods and emphasized managerial responsibility in matching employees to
jobs, providing training, work methods, and incentives.
Other fields such as industrial engineering, management science, physical sciences, and information sciences have also contributed to OM.
Operations in the Service Sector Services: Economic activities that produce intangible products (e.g., education, entertainment, lodging, government, financial,
and health services).
Characteristics of Goods vs. Services
Characteristics of Goods Characteristics of Services
Tangible product Intangible product
Consistent product definition Inconsistent product definition
Can be inventoried Cannot be inventoried
Production separate from consumption Produced and consumed simultaneously
Low customer interaction High customer interaction
Distributed to more clients Frequently dispersed
Easy to automate Knowledge-based, hard to automate
Often not unique Often unique
Productivity Productivity: the ratio of outputs (goods and services) divided by one or more inputs (e.g., labor, capital, or management).
Efficiency improves when productivity improves, achieved by:
 Reducing inputs while keeping output constant.
 Increasing output while keeping inputs constant.
Types of Productivity
 Single-factor productivity: ratio of one resource (input) to goods and services produced (outputs).
 Multifactor Productivity: ratio of many or all resources (inputs) to goods and services produced (outputs).
Measurement Problems
 Quality changes while the quantity of inputs and outputs remains constant.
 External factors may influence productivity.
 Precise units of measure may be lacking.
 Productivity measurement is particularly challenging in the service sector due to the intangible nature of the end product.
Productivity Variables
Managers can improve productivity by adjusting labor, capital, or management. Key factors for improved labor productivity include basic education, diet, and
social overhead.
Challenges in Developed Nations
  Maintaining and enhancing labor skills.
 Utilizing labor effectively with strong commitment.
Capital-Labor Trade-off
There is a trade-off between capital and labor influenced by interest rates.
Management's Role in Productivity
Management ensures effective use of labor and capital to increase productivity, selecting new capital investments and improving existing ones.
Knowledge Society
A society where much of the labor force works based on knowledge rather than manual labor.
Improving Productivity in the Service Sector
Improving productivity in the service sector is challenging due to its labor-intensive, individual-focused, and difficult-to-mechanize nature.
Ethics and Social Responsibility
Managers must balance meeting market demands with social responsibility, focusing on increasing productivity, developing safe quality products, and maintaining
a safe workplace and environment.

Chapter 3: Managing Projects

Overview of Project Management
 Steps involved:
1. Planning: Goal setting, defining the project, and organizing teams.
2. Scheduling: Allocating resources to activities or relating activities to each other.
3. Controlling: Monitoring resources and budgets, revising plans, and adjusting resources to meet time and cost demands.
 Project Organization: Ensures proper management and attention to projects or programs.
Tools and Techniques
 Work Breakdown Structure (WBS): Divides work into detailed parts to define the project clearly.
 Gantt Charts: Planning charts used for scheduling resources, identifying priorities, setting realistic estimates, and optimizing resource
utilization.
 Computer Programs: Provide detailed cost breakdowns, labor curves, forecasts, and various reports.
 PERT (Program Evaluation and Review Technique): Utilizes three estimates for each activity.
 CPM (Critical Path Method): Utilizes one estimate per activity.
Critical Path Analysis
 Critical Path: Longest time path through a network, activities on which delay the entire project if not completed on time.
 Activity-on-Node (AON): Network diagram where nodes represent activities.
 Activity-on-Arrow (AOA): Network diagram where arrows represent activities.
 Dummy Activity: Inserted into a network to maintain logic.
 Forward Pass: Identifies early start and finish times of activities.
 Backward Pass: Identifies late start and finish times of activities.
 Slack Time: Free time for an activity, critical activities have zero slack time.
 Optimistic, Pessimistic, and Most Likely Time: Estimates used in PERT analysis.
 Expected Activity Time: Formula calculates expected time for an activity.
 Variance of Activity Completion Time: Measure of variation in completion time.
 Project Variance: Sum of variances of activities on the critical path.
 Z Score: Measures deviation from expected completion date.
 Crashing: Shortening activity time to reduce project completion time.
 Crash Cost per Period: Formula calculates cost to crash an activity.
Advantages and Limitations of PERT and CPM
 Advantages:
 Useful for scheduling large projects.
 Straightforward approach.
 Identifies critical activities.
 Limitations:
 Activities must be well-defined and independent.
 Time estimates can be subjective.
 Overemphasis on critical activities or paths.

Chapter 4: Forecasting
Forecasting is the process of predicting future events and making estimates about future demand. It plays a crucial role in organizational planning
and decision-making, enabling businesses to prepare for future demands effectively. Forecasts can be categorized into three main types: short-
range, medium-range, and long-range forecasts, each serving different purposes and employing different methodologies.
Short-range Forecast
 Time Frame: Up to 1 year
 Applications: Planning purchasing, job scheduling, workforce levels, job assignments, and production levels
 Characteristics: Utilizes more quantitative methodologies and is generally more accurate
Medium-range Forecast
 Time Frame: 3 months to 3 years
 Applications: Sales and production planning, budgeting
 Characteristics: Supports management decisions, often uses a mix of quantitative and qualitative methods
Long-range Forecast
 Time Frame: More than 3 years
 Applications: Planning for new products, capital expenditures
 Characteristics: Involves wide-ranging issues, supports strategic management decisions, relies more on qualitative methods
Understanding the product life cycle (Introduction, Growth, Maturity, Decline) is critical to effective forecasting. Forecasting methods are divided into
economic forecasts, technological forecasts, and demand (or sales) forecasts, each with specific applications and methodologies.
The forecasting process involves seven steps, from determining the forecast's purpose to validating and implementing the results. Both qualitative
and quantitative approaches are employed, with methods ranging from the Delphi method and sales force composite to time-series models and
associative models.
Quantitative forecasts leverage mathematical models based on historical data and causal variables, employing techniques like moving averages,
weighted moving averages, and exponential smoothing. These methods aim to predict future demand by analyzing past trends and adjusting for
seasonal variations and forecast errors.
Key Forecasting Techniques
 Naive Approach: Assumes future demand equals recent demand
 Moving Averages: Averages past data to predict future demand
 Weighted Moving Average: Assigns weights to past data points to emphasize more recent trends
 Exponential Smoothing: A weighted average technique that applies exponential weights to past observations
Forecast accuracy is assessed using measures like forecast error, mean absolute deviation (MAD), and mean absolute percent error (MAPE). Seasonal
forecasts and tracking signals help adjust forecasts based on historical data, ensuring they remain aligned with actual demand patterns.
Forecasting is an iterative process, continually refined as new data becomes available, making it an indispensable tool for effective organizational
planning and resource allocation.
Chapter 5: Design of Goods and Services
Designing goods and services involves strategic decisions that link product decisions with investment, market share, and the product life cycle.
Effective product strategy incorporates considerations for differentiation, cost leadership, and rapid response to market needs.
Product Life Cycle Phases
 Introduction: Product is fine-tuned, with ongoing development of product, process, and suppliers.
 Growth: Product design stabilizes, necessitating effective capacity planning.
 Maturity: High-volume production with established competitors. Innovation may be required.
 Decline: Product growth ceases, potentially leading to termination unless it serves a unique purpose.
Tools like Product-by-Value Analysis and methods such as brainstorming facilitate the generation of new product ideas, while steps from
understanding customer needs to market testing guide product development.
Quality Function Deployment (QFD) translates customer requirements into specific product attributes, supported by techniques like the House of
Quality. Product development can be organized using various approaches, from traditional department-focused methods to integrated product
teams and Japanese approaches emphasizing teamwork.
Product design also encompasses manufacturability and value engineering to improve production and product use, incorporating principles of
modular design, CAD/CAM, and robust design.
Service design differs from product design, focusing on customer-provider interactions and optimizing service delivery through late customization,
modularity, and automation of service components.
Decision Trees in Product Design
Decision trees aid in evaluating different design choices by quantifying the expected outcomes of various paths, facilitating informed decision-
making in product and service design.
Transitioning to production involves careful planning to ensure product designs are efficiently turned into market-ready goods and services,
highlighting the importance of detailed planning and coordination across the production process.
Chapter 6: Managing Quality
Quality management is pivotal for meeting customer needs and enhancing company reputation. It involves a comprehensive approach to improve
product quality and service, reducing the risk associated with product liability and enhancing global competitiveness.
Cost of Quality
Costs associated with quality are categorized into prevention, appraisal, and the costs of failing to meet quality standards. International quality
standards like ISO 9000 and ISO 14000 establish criteria for quality and environmental management, respectively, offering a framework for
continuous improvement and regulatory compliance.
Total Quality Management (TQM) and methodologies like Six Sigma emphasize continuous improvement and customer satisfaction through
systematic problem solving and employee empowerment.
Tools for generating ideas, organizing processes, and identifying problems, such as check sheets, Pareto charts, and cause-and-effect diagrams,
support quality management efforts. Statistical Process Control (SPC) and control charts monitor the production process to ensure quality standards
are consistently met.
Inspection strategies, including source inspection and poka-yoke techniques, prevent defects and ensure quality throughout the production process.
Statistical methods, including the use of control charts for variables and attributes, help manage process variation and maintain quality standards.
Chapter 7: Process Strategy
Process strategy involves choosing the right mix of production processes to effectively and efficiently create goods and services. Four main process
strategies are identified:
1. Process Focus: Suitable for low-volume, high-variety production. It emphasizes flexibility and expertise but may suffer from lower
equipment utilization and more complex production planning.
2. Repetitive Focus: Uses modules in a product-oriented production process, benefiting from standardized production but requiring stable
product demand.
3. Product Focus: Optimized for high-volume, low-variety processes, leading to high equipment utilization and simpler scheduling.
4. Mass Customization: Aims to provide customized products at low costs through flexible processes and equipment.
Each strategy has distinct advantages and challenges, requiring careful consideration of the firm’s product lines, demand variability, and operational
efficiencies. Effective process strategy supports organizational goals by aligning production capabilities with market needs, enhancing
competitiveness through optimized resource use and product quality.
Chapter 8: Location Decisions
Location decisions significantly impact a company's costs, ability to serve customers, and overall profitability. Factors influencing location decisions
include labor productivity, exchange rates, local attitudes, costs, and shifts in demographics and customer demand.
Location Options
 Expanding an existing facility
 Adding a new location while maintaining current sites
 Closing the existing facility and moving
Location strategies differ between industries, with industrial firms focusing on minimizing costs, while retail and service firms prioritize maximizing
revenue. Location analysis methods, such as the factor-rating method, location cost-volume analysis, and the center-of-gravity method, aid in
evaluating the trade-offs associated with different location choices.
Geographic Information Systems (GIS) support location decisions by providing detailed data on geographic and demographic characteristics,
enhancing the decision-making process by offering insights into customer distribution, competition, and market potential.
Chapter 9: Layout Strategy
The layout strategy aims to develop an economic layout that maximizes space utilization, enhances flow of work, materials, and information, and
improves employee morale and safety. Different types of layouts—office, retail, warehouse, fixed-position, process-oriented, and product-oriented—
are designed to meet specific operational needs and objectives.
Effective layout design considers factors such as customer interaction, inventory management, equipment utilization, and flexibility to adapt to
changes in product or service demand. Techniques such as flow diagrams, time-function mapping, and value-stream mapping facilitate the analysis
and improvement of layout designs, promoting efficient operations and customer satisfaction.
Chapter 10: Human Resources and Job Design
Human resource strategy focuses on effectively utilizing labor and designing jobs to optimize organizational performance. Key considerations
include employment stability, work schedules, job design, and labor specialization. Flexible scheduling, job enlargement, job rotation, and job
enrichment are strategies to improve job satisfaction and efficiency.
Employee empowerment and the design of self-directed teams contribute to a more engaged and productive workforce. Ergonomic considerations
and methods analysis enhance safety and efficiency, while motivation and incentive systems, including bonuses, profit-sharing, and knowledge-
based pay, aim to align employee efforts with organizational goals.
Ethical considerations, such as fairness, equity, and safe working conditions, are fundamental to responsible job design and labor standards,
ensuring a respectful and productive work environment.
Chapter 11: Inventory Management
Inventory management is crucial for balancing the costs associated with holding inventory against the benefits of the ability to meet customer
demand promptly. Types of inventory include raw materials, work-in-progress, MRO, and finished goods.
Main inventory decisions revolve around what to keep in inventory, how to track it, when to replenish, and how much to order. Effective inventory
management strategies minimize costs while maximizing service levels, employing models like the Economic Order Quantity (EOQ), Production
Order Quantity Model, and techniques for managing probabilistic demand and supply variables.
Just-In-Time (JIT) inventory principles aim to minimize inventory levels, reducing waste and enhancing operational efficiency. Proper inventory
management supports operational and financial performance by optimizing inventory levels, reducing costs, and improving customer satisfaction.
Chapter 12: Aggregate Planning
Aggregate planning involves determining the optimal production level, inventory, and workforce to meet forecasted demand over the medium term.
It bridges the gap between long-term strategic planning and short-term operational decisions, incorporating capacity, demand, and mix options to
develop a comprehensive production plan.
Strategies for aggregate planning include adjusting inventory levels, varying workforce size, subcontracting, and changing production rates to match
demand fluctuations. The goal is to minimize costs while ensuring flexibility to adapt to market changes, supporting organizational objectives for
efficiency, customer service, and profitability.
Chapter 13: Aggregate Planning
Aggregate Planning is about determining the optimal quantity and timing of production for the intermediate future, typically spanning from 3
months to 1 year. The goal is to balance production, inventory, workforce, and other variables to meet demand in the most cost-effective way. Key
decisions include adjusting workforce levels, varying production rates, managing inventory levels, and considering subcontracting. Aggregate
planning involves both capacity and demand management strategies to match supply with demand effectively.
Strategies for Aggregate Planning:
1. Chase Strategy: Adjusting workforce levels and production rates to match demand. This strategy avoids inventory costs but can lead to
higher labor costs due to hiring and layoffs.
2. Level Strategy: Maintaining a constant output rate, workforce level, or a combination, regardless of fluctuating demand. This may result
in higher inventory costs but stabilizes employment.
3. Mixed Strategy: A combination of adjusting output, workforce levels, and other variables to develop a more balanced approach. It often
yields a better overall solution but is more complex to implement.
Techniques used in aggregate planning include the graphical method for comparing demand forecasts with capacities, the transportation method of
linear programming for optimizing production and transportation costs, and management coefficients models that incorporate managerial
experience into planning.
Chapter 14: Material Requirements Planning (MRP) and ERP
Material Requirements Planning (MRP) is a system designed to meet production requirements by timing the supply of materials to coincide with
production schedules. It uses the master production schedule (MPS), bill of materials (BOM), and inventory data to calculate requirements for
materials, ensuring that materials are available for production and products are available for delivery to customers. MRP helps in minimizing
inventory levels and planning manufacturing, purchasing, and delivery activities.
Enterprise Resource Planning (ERP) integrates all departments and functions across a company onto a single computer system that can serve all
those different department's particular needs. It covers everything from production planning and inventory control to financial systems and human
resources. The implementation of ERP systems can be complex and costly but offers significant benefits in integrating processes, improving
efficiencies, and providing real-time information.
Chapter 15: Short-Term Scheduling
Short-term scheduling focuses on the allocation of resources to tasks over a relatively short time horizon, typically ranging from a few days to a few
weeks. The goal is to optimize the use of resources, minimize completion times, maximize utilization, and meet due dates. Techniques include
forward and backward scheduling, which determine the starting and finishing times for jobs based on due dates and processing times. Priority rules,
such as first-come-first-served (FCFS) and shortest processing time (SPT), help manage job queues at work centers. Advanced methods like the
Theory of Constraints (TOC) focus on identifying and managing bottlenecks to improve throughput and system performance.
Chapter 16: JIT and Lean Operations
Just-In-Time (JIT) and Lean Operations focus on minimizing waste and maximizing value to the customer through continuous improvement and
synchronization of material flows. The JIT approach aims to produce or deliver goods just as they are needed, reducing inventory levels and
improving cash flow. Lean operations seek to streamline production processes, eliminate non-value-added activities, and improve product quality.
Key principles of JIT and Lean include:
 Continuous improvement in all areas of the production process.
 Elimination of waste (anything that doesn't add value for the customer).
 Reduction of variability and inefficiency in production.
 Implementation of pull systems to replace push systems in material flow.
 Involvement of employees in problem-solving and process improvements.
These methodologies rely on close collaboration with suppliers, a commitment to quality at every stage, and flexibility in production processes to
respond quickly to customer needs. The benefits of JIT and Lean include reduced lead times, lower costs, improved product quality, and higher
customer satisfaction.