CHAPTER 1 include purchasing, production and/or service,

INTRODUCTION TO OPERATIONS MANAGEMENT marketing, and sales.

3. Supporting processes. These support the core
processes. Examples include accounting, human
Goods Physical items produced by business resources, and IT (information technology)
organizations.
Services Activities that provide some combination of
time, location, form, and psychological value.
Operations management The management of
systems or processes that create goods and/or
provide services.
Supply chain A sequence of organizations—their
Business processes form a sequence of suppliers and
facilities, functions, and activities—that are involved in
customers
producing and delivering a product or service.
Process Variation
Variation occurs in all business processes. It can be
due to variety or variability.
There are four basic sources of variation:
A simple product supply chain 1. The variety of goods or services being offered.
The greater the variety of goods and services,
Value-added The difference between the cost of the greater the variation in production or
inputs and the value or price of outputs service requirements.
2. Structural variation in demand. These variations,
which include trends and seasonal variations,
are generally predictable. They are particularly
important for capacity planning.
3. Random variation. This natural variability is
present to some extent in all processes, as
well as in demand for services and products,
and it cannot generally be influenced by
managers.
The operations function involves systems for 4. Assignable variation. These variations are caused
converting inputs into outputs by defective inputs, incorrect work methods,
out-of-adjustment equipment, and so on. This
type of variation can be reduced or eliminated
by analysis and corrective action.

Chapter 3
Forecasting

Forecast
The three major functions of business organizations - a statement about the future value of a variable
overlap of interest
- is an estimate about the future value of a
Lead time The time between ordering a good or variable such as demand
service and receiving it. 3.1 INTRODUCTION
- Primary goal of OM: to match supply to
1.5 PROCESS MANAGEMENT demand.
Process consists of one or more actions that - Having a forecast of demand is essential for
transform inputs into outputs. determining how much capacity or supply will
Process management is the central role of all be needed to meet demand.
management. Two Possible Sources of Anticipated Demand
- actual customer orders: planning is
3 categories of business processes: straightforward, little to no forecasting needed
1. Upper-management processes. These govern the - forecasts: most anticipated demand is derived
operation of the entire organization. Examples include Two Aspects of Forecasts
organizational governance and organizational - Expected level of demand: can be a function of
strategy. some structural variation, such as a trend or
2. Operational processes. These are the core seasonal variation
processes that make up the value stream. Examples - Forecasts accuracy: a function of the ability of
forecasters to correctly model demand,
 random variation, and sometimes unforeseen - plan the use of system; short-range and
events intermediate-range planning, which involve
Forecasts are made regarding a specific time horizon tasks such as planning inventory and
- time horizon may be fairly short (e.g., an hour, workforce levels, planning purchasing and
day, week, or month), or somewhat longer production, budgeting, and scheduling
(e.g., the next six months, the next year, the Business forecasting pertains to more than predicting
next five years, or the life of a product or demand.
service) - Forecasts are also used to predict profits,
- Short-term forecasts; ongoing operations revenues, costs, productivity changes, prices
- Long-range forecasts; can be an important and availability of energy and raw materials,
strategic planning tool interest rates, movements of key economic
indicators (e.g., gross domestic product,
Forecasts are the basis for budgeting, planning inflation, government borrowing), and prices of
capacity, sales, production and inventory, personnel, stocks and bonds.
purchasing, and more. 3.2 FEATURES COMMON TO ALL FORECASTS
Forecasts affect decisions and activities throughout an Forecasting techniques generally assume that the
organization: same underlying causal system that existed in the
past will continue to exist in the future.
Business Examples
Organization - Forecasts are not perfect; actual results
usually differ from predicted values
Accounting New product/process cost - Forecasts for groups of items tend to be more
estimates, profit projections, accurate than forecasts for individual items
cash management. because forecasting errors among items in a
Finance Equipment/equipment group usually have a canceling effect.
replacement needs, timing and - Forecast accuracy decreases as the time
amount of funding/borrowing period covered by the forecast—the time
needs. horizon—increases.
3.3 ELEMENTS OF A GOOD FORECAST
Human Hiring activities, including
A properly prepared forecast should fulfill certain
Resources recruitment, interviewing, and
training; requirements:
layoff planning, including - timely
outplacement counseling. - accurate
- reliable
Marketing Pricing and promotion, - meaningful units
e-business strategies, global
- in writing
competition strategies.
- simple to understand and use
MIS New/revised information - cost-effective
systems, internet services. 3.4 FORECASTING AND THE SUPPLY CHAIN
- Accurate forecasts are very important for the
Operations Schedules, capacity planning,
supply chain.
work assignments and
workloads, inventory - Inaccurate forecasts can lead to shortages and
planning, make-or-buy excesses throughout the supply chain.
decisions, outsourcing, project
management. —--SAMPLE PROBLEM SOLVING—-----

Product/service Revision of current features,

design design of new products or
services.
CHAPTER 6
Forecasting is also an important component of yield
Process Selection and Facility Layout
management, which relates to the percentage of
capacity being used.
- Accurate forecasts can help managers plan
6.1 Introduction
tactics (e.g., offer discounts, don’t offer
Process selection involves determining how the
discounts) to match capacity with demand,
production of goods or services will be organized,
thereby achieving high yield levels.
impacting capacity planning, facility layout, equipment,
Two Uses of Forecasts
and work system design.
- plan the system; involves long-range plans
Process selection occurs when new products or
about the types of products and services to
services are being planned. However, it also occurs
offer, what facilities and equipment to have,
periodically due to technological changes in products
where to locate
or equipment, as well as competitive pressures.
Key Aspects of Process Strategy: ● Linking key product or service requirements to
Capital Intensity: Determines process capabilities
equipment-labor balance. ● Helps match process choices with market
Process Flexibility: Influences adaptability to conditions.
changes. ● Key dimensions include product range, order
sizes, pricing strategies, and order-winning
6.2 Process Selection requirements.
Process choice is demand-driven. Key questions in ​
process selection: Sustainable Production:
Variety: How much variety does the process need to ● Focus on non-polluting, energy-conserving,
handle? and safe processes.
Volume: How much volume does the process need to ● Goals include waste reduction, hazard
handle? elimination, and energy/material conservation.
Lean Process Design:
Usually, volume and variety are inversely related. ● Aim for waste reduction and variance
However, flexibility of personnel and equipment reduction.
is directly related to variety. ● Achieve level production for improved process
flow.
Lower Variety: Less need for flexibility. ● Benefits include reduced inventory, quicker
Higher Variety: Greater need for flexibility. response times, and increased productivity.

Example: In a bakery, if the worker makes only cakes, 6.3 Technology

there's little need for flexibility. But if they make Technological Innovation:
cakes, pies, cookies, etc., flexibility is crucial ● Discovery and development of new or
for both worker and equipment. improved products, services, or processes.
● Influences business processes significantly.
Process Types ● Examples: Laser technology in surgery,
Job Shop: advances in medical diagnostic equipment,
● Small scale operation. high-speed internet connections.
● Handles low-volume, high-variety goods or Information Technology (IT):
services. ● Science and use of computers and electronic
● Requires high flexibility and skilled workers. equipment for storing, processing, and sending
● Examples: Tool and die shop, veterinarian's information.
office. ● Examples: Electronic data processing,
Batch: barcodes, RFID tags, e-commerce, email,
● Moderate volume with moderate variety. internet.
● Processing is intermittent. Automation:
● Equipment flexibility is lower than job shop. ● Machinery with sensing and control devices
● Examples: Bakeries, movie theaters, airlines. operating automatically.
Repetitive: ● Low variability, reduced labor costs, increased
● Higher volumes of standardized goods or productivity, consistency.
services. ● Examples: ATMs, automated inspection,
● Slight flexibility in equipment. package sorting, robotics.
● Lower skilled workers. Types of Automation:
● Examples: Production lines, automatic ● Fixed Automation: Specialized equipment for
carwashes. fixed operations, high volume, low variety.
Continuous: ● Programmable Automation: General-purpose
● Very high volume, highly standardized output. equipment controlled by computer programs,
● No equipment flexibility. suitable for low-volume products.
● Worker skills vary based on complexity. ● Flexible Automation: Customized equipment
● Examples: Petroleum products, steel with less changeover time, suitable for product
production. variety.
Project: Computer-Integrated Manufacturing (CIM):
● Nonroutine, unique objectives in a limited time ● Integrating computer systems for various
frame. manufacturing activities.
● Equipment and worker skills vary. ● Benefits: Rapid response to customer orders,
● Examples: Putting on a play, launching a new reduced indirect labor costs.
product. Internet of Things (IoT):
● Extension of internet connectivity into devices,
Product or service profiling - allowing information exchange.
 ●Applications: AI, machine learning, quality Fixed-Position Layouts. Used when the product
improvement, predictive maintenance. remains stationary, and materials, labor, and
3D Printing: equipment are moved around it. Common in
● Additive manufacturing creating 3D objects large construction projects and shipbuilding.
layer by layer. Combination Layouts. Many layouts represent
● Benefits: Cost-effective production, faster combinations of the pure types. For example,
prototyping, on-demand manufacturing. supermarkets use a mix of process and
● Applications: Replacement parts production, product layouts.
customized items, micro-manufacturing. Cellular production Layout in which workstations are
Drones: grouped into a cell that can process items that
● Definition: Unmanned aircraft for remote have similar processing requirement.
operations. Group technology The grouping into part families of
● Uses: Assessing storm damage, monitoring items with similar design or manufacturing
crops, delivering medical supplies. characteristics.
● Challenges: Possibility of collisions, Service Layouts: Similar to manufacturing layouts,
mechanical failure, regulatory issues. service layouts can be categorized as product,
process, or fixed-position layouts. Examples
include
6.4 PROCESS STRATEGY Warehouse and Storage Layouts: Similar to the
Importance of Flexibility: Flexibility is highlighted as previous section, focusing on factors like the
a competitive strategy, but it may not always be frequency of orders, item placement, aisle
the best choice in processing decisions. It can widths, storage rack heights, and
be expensive and less efficient than less loading/unloading processes.
flexible alternatives. Flexibility should be Retail Layouts: Emphasizes the influence of layout
adopted carefully, matching it with situations design on sales volume and customer
where a clear need for flexibility exists. attitudes, with some large chains using
standard layouts for consistency and cost
6.5 STRATEGIC RESOURCE ORGANIZATION: savings.
FACILITIES LAYOUT Office Layouts: Reflects trends towards openness
Layout refers to the configuration of departments, and communication facilitation due to
work centers, and equipment, with particular increased electronic communication.
emphasis on the movement of work Restaurant Layouts: Stresses the importance of
(customers or materials) through the system. process workflow for smooth operations, from
Layout decisions are crucial because they receiving to customer service.
require significant investments, involve Hospital Layouts: Highlights the significance of
long-term commitments, and impact the cost patient care and safety, with easy access to
and efficiency of operations. critical resources like medical equipment.

The three basic types of layout: Product layouts are 6.6 Designing Product Layouts: Line Balancing
most conducive to repetitive processing, The goal of a product layout is to arrange workers or
process layouts are used for intermittent machines in the sequence which operations
processing, and fixed-position layouts are used need to be performed. The sequence is
when projects require layouts. referred to as a production line or an
assembly line.
Types of Layouts: Line balancing The process of assigning tasks to
Product Layouts are used to achieve a smooth and workstations in such a way that the
rapid flow of large volumes of goods or workstations have approximately equal time
customers through a system. Ideal for requirements.
repetitive processing, where a smooth and
rapid flow of large volumes of goods or —--SAMPLE PROBLEM SOLVING—-----
customers is required. The work is divided into
standardized tasks, enabling specialization of
equipment and division of labor. Examples Chapter 8
include assembly lines. Location Planning and Analysis
Process Layouts. Suited for intermittent processing,
accommodating a variety of processing
requirements. Departments or functional 8.1 THE NEED FOR LOCATION DECISIONS
groupings perform similar activities, and items Existing organizations may need to make location
are moved in lots or batches. Examples decisions for a variety of reasons.
include hospitals and universities. ● to expand their markets.
● expansion at an existing location
 ● depletion of basic inputs. 2. Security Concerns: Increased security risks and
● a shift in markets causes them to consider theft contribute to additional costs, while border
relocation security may delay shipments.
8.2 THE NATURE OF LOCATION DECISIONS 3. Unskilled Labor: Quality and productivity may
Profit-oriented organizations base their decisions on suffer due to low labor skills, necessitating
profit potential additional training.
whereas nonprofit organizations strive to achieve a 4. Import Restrictions: Some countries impose
balance between cost and the level of customer restrictions on manufactured goods, favoring
service they provide. local suppliers.
5. Criticisms: Ethical concerns arise regarding unfair
Location Options: labor practices and environmental standards in
Expand Existing Facility: certain countries.
- Cost-effective if space available with desirable 6. Productivity: Low labor productivity may offset low
features. labor costs or other advantages.
Add new locations while retaining existing ones:
- Consider impact on total system. RISKS:
- Defensive strategy against competitors. 1. Protecting intellectual property rights:
Shut down at one location and move to another: Outsourcing to foreign countries raises
- Weigh costs and benefits against staying. concerns about preserving intellectual property
Do Nothing: rights.
- Maintain status quo if no attractive alternatives 2. Political: Political unrest and instability pose risks
found. to personnel safety and asset security.
3. Terrorism: Terrorism threatens personnel and
8.3 GLOBAL LOCATIONS assets, impacting willingness to work in
Facilitating Factors affected areas.
Two key factors that have made globalization 4. Economic: Fluctuations in economic conditions can
attractive and feasible for business organizations. negatively affect profitability.
Trade Agreements. 5. Ethical: Changing laws, corruption, and bribery
- tariffs and quotas can have a detrimental effect present legal and ethical challenges.
on trade 6. Cultural: Variances in culture can impact business
- trade agreements that are fair to all sides can strategies and consumer perceptions.
help trade to flourish. 7. Quality: Lax quality controls can result in recalls
Technology. Technological advances in and liability issues.
communication and information sharing have
been very helpful. These include texting, —---PROBLEM SOLVING—-----------
e-mail, cell phones, teleconferencing, and the
internet.

BENEFITS:
1. Markets: Companies aim to expand their markets
and serve existing customers better by
understanding local needs and responding
quickly to issues.
2. Cost Savings: Potential savings in transportation,
labor, raw materials, and taxes are significant
factors driving globalization.
3. Legal and Regulatory: Favorable liability, labor
laws, and less restrictive regulations can
reduce operational hurdles.
4. Financial: Avoidance of currency fluctuations and
tariffs, along with government incentives,
attract businesses to certain regions.
5. Other: Globalization opens doors to new ideas,
perspectives, and solutions for products and
services.

DISADVANTAGES:
1. Transportation Costs: Poor infrastructure and long
distances can lead to high transportation costs,
offsetting savings elsewhere.