Week 4Quality ManagementOPERATIONS MANAGEMENT.docx

Week 4:
Quality Management
OPERATIONS MANAGEMENT
1
Outline
Quality definition
Dimension of quality in product and services
Quality assurance
Quality leaders
Cost of quality
Total quality management and tools
Definition of Quality
Quality is a predictable degree of uniformity and dependability,
at low cost and suitable to the market (Deming)
Quality is fitness for use (Juran)

Quality is the conformance to requirements (Crosby)
Quality is the (minimum) loss imparted by a product to
society from the time the product is shipped. (Taguchi)
Why Quality
4
Managing quality supports differentiation, low cost, and
response strategies
Quality helps firms increase sales and reduce costs
Building a quality organization is a demanding task
4
Ethics and Quality Management
5
Operations managers must deliver healthy, safe, quality
products and services
Poor quality risks injuries, lawsuits, recalls, and regulation
Organizations are judged by how they respond to problems
5

Dimensions of Quality for Manufacturing Product
Performance: Product’s primary operating characteristics
Features: Secondary characteristics that supplement the
products basic functioning
Reliability: The probability of a product’s surviving over a
specified period of time under stated conditions of use
Durability: The amount of use one gets from a product before it
physically deteriorates or until replacement is preferable.
Serviceability: The ability to repair a product quickly and easily
Aesthetics: How a product looks, feels, tastes, or smells
Service Quality Attributes
Timeliness: Will a service be performed when promised?
Completeness: Are all items in an order included?
Courtesy: Do front-line employees greet each customer
cheerfully and politely.
Consistency: Are services delivered in the same fashion for
every customer and every time for the same customers.
Accessibility and convenience: Is the service easy to obtain?
Accuracy: Are the services performed right the first time?
Responsiveness: Can the service personnel response quickly and
resolve unexpected problem?
Quality Control
All those operational techniques and activities that are used to
fulfill requirements for quality.
The objectives are:

(i) To ensure true expression/correct translation of stated and
implied needs of the customers.
(ii) To monitor the process for realization of the product at
various stages of its operations and eliminating causes of
unsatisfactory performance at all stages of quality loop in order
to achieve economic effectiveness.
(iii) Inspection of the product/service package to determine
conformance to customer needs.
Quality Assurance
All the planned and systematic activities implemented within
the organization for quality management, to provide adequate
confidence that a product or service will satisfy given
requirements for quality (ISO - International Organization for
Standardization).
Quality assurance is a preventive activity and is therefore
required to be systematically planned in advance.
The activity includes identification and planning of the checks,
inspection, and control of processes as a part of quality control.
Quality assurance means establishment of a quality system
which can demonstrate the capability of organization to satisfy
the requirements of customers.
Quality assurance provides confidence internally to the
management and external to the customers.

10
Leaders in Quality
W. Edwards Deming14 Points for Management
Joseph M. JuranTop management commitment, fitness for use
http://www.youtube.com/watch?v=GHvnIm9UEoQ
http://www.youtube.com/watch?v=mKFGj8sK5R8
Costs of Quality: cost of doing this wrong
Prevention costs –costs to identify the cause of the defect,
corrective action to eliminate the causes of failure, training,
education, redesign the product or system, etc.
Appraisal costs – the costs of the inspection, testing to ensure
the product/process is acceptable
Internal failure- yield losses (scrap), rework costs ( rework,
repair)
External costs – defect is discovered after receiving the product
or service; loss of customer goodwill, handling complaints,
product repair, warranty replacements
11
11
Costs of Quality
12
External Failure

Internal Failure
Prevention
Appraisal
Total Cost
Quality Improvement
Total Cost
12
Principles of Total Quality Management
TQM conveys a company-wide effort that includes all
employees, suppliers, and customers, and that seeks to
continuously improve the quality of products and processes to
meet the needs and expectations of customers.
13
Customers
Employees
Suppliers
Continuous quality
Improvement for

processes and products
Customers
Satisfaction
13
Deming’s 14 Principals to implement TQM
Create consistency of purpose
Lead to promote change
Build quality into the product; stop depending on inspections
Build long-term relationships based on performance instead of
awarding business on price
Continuously improve product, quality, and service
Start training
Emphasize leadership
Drive out fear
Break down barriers between departments
Stop criticizing workers
Support, help, and improve
Remove barriers to pride in work
Institute education and self-improvement
Put everyone to work on the transformation
Continuous improvement
Six sigma
Employee empowerment
Benchmarking
Juts-in-time
Taguchi concept of quality robustness

Knowledge of TQM tools
Seven concepts for effective TQM
© 2011 Pearson Education, Inc. publishing as Prentice Hall
Continuous Improvement
Represents continual improvement of all processes
Involves all operations and work centers including suppliers and
customers
People, Equipment, Materials, Procedures
4. Act
Implement the plan document
2. Do
Test the plan
3. Check
Is the plan working?
Plan
Identify the pattern and make a plan

Shewhart’s PDCA Model
15
Tools of TQM
16
Tools for Generating Ideas
Check sheets
Scatter diagrams
Cause and effect diagrams
Tools to Organize the Data
4. Pareto charts
5. Flow charts
Tools for Identifying Problems
6. Histogram
7. Statistical process control (SPC)chart
16
2/14/2016
17
Exhibit S6.1
Group size in a restaurant

1. Check Sheet
Equipment with accessories
2.Scatterplot of Customer Satisfaction and Waiting Time in an
Upscale Restaurant
18
Exhibit S6.6
3. Cause-and-effect or fishbone diagram
19
Material
Machinery
Methods
Manpower
Inadequate
supply of magazines
Inadequate special meals on-board
Insufficient clean pillows
& blankets on-board

Broken luggage carousel
Mechanical delay on plane
Deicing equipment not available
Overbooking policies
Bumping policies
Mistagged bags
Poor check-in policies
Understaffed ticket counters
Understaffed crew
Poorly trained attendants
Dissatisfied Airline Customer
19
2/14/2016
20
Poor
Exam

performance
Poor
scheduling
Poor
planning
Health
problem
Class
performance
Forgot exam date
Missed review
Needed
prerequisites
Over my head
Too much materials
Class too hard
I was sick
Relative was sick
Poor performance in
Course work
Didn’t study

Didn’t do homework
Didn’t do teamwork
Cut classes
Slept in classes
No case presentation
4. Pareto Chart of issues in an emergency room
21
Pareto chart identify the vital few and trivial many and
highlights problems
that should be given attention. This is graphical picture of the
relative
frequencies of different types of quality problem with the most
frequent problem
type obtaining clear visibility.
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22
5. Flow Diagram and Process Chart of an Office Procedure—
Present Method*
*Requisition is written by supervisor, typed by secretary,

approved by superintendent, and approved by purchasing agent;
then order is prepared by a stenographer.
2/14/2016
23
6. Histogram of Hole Diameters
24
Histogram are used to display
continuous data that can be
measured.
7. Statistical Process Control (SPC)Chart
25
A chart with time on the horizontal axis to plot values of a
statistic
Upper control limit
Target value
Lower control limit
Time

Four key steps
Measure the process
When a change is indicated, find the assignable cause
Eliminate or incorporate the cause
Restart the revised process
25
Transparency Masters to accompany Heizer/Render – Principles
of Operations Management, 5e, and Operations Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
S6-26
Patterns to Look for in Control Charts

26
Ask the students to imagine a product, and consider what
problem might cause each of the graph configurations
illustrated.
2/14/2016
27
Thank you
2/14/2016
28
What are the four major categories of cost associated with
quality?
What are the TQM tools?
How does a Pareto chart differ from a run chart?
Draw a cause-and-effect diagram for your poor or good
performance in your last year’s exam.
Answer the questions from the case Ritz-Carlton Hotel (page
246)
Tutorial
Week 3:
Demand Forecasting

1
Outline
Forecasting
Types of forecasts
Approaches to forecasts
What is Forecasting?
Process of predicting a future event
Forecasting is an underlying basis of
many business decisions
Production
Inventory
Personnel
Facilities

Sales will be $200 Million!
3
9
Common Forecasting Examples

Weather forecast (for Ships/fishermen)
Stock market forecast (stock mkt. players)
Forecast of economic growth
Sales/demand forecast
Forecast getting married next session
Short-range forecast
Up to 1 year, generally less than 3 months
Purchasing, job scheduling, workforce levels, job assignments,
production levels
Medium-range forecast
3 months to 3 years
Sales and production planning, budgeting
Long-range forecast
3+ years
New product planning, facility location, research and
development
Forecasting Time Horizons
5
Seven Steps in Forecasting
Determine the use of the forecast
Select the items to be forecasted
Determine the time horizon of the forecast
Select the forecasting model(s)

Gather the data
Make the forecast
Validate and implement results
6
Forecasting Approaches
Used when situation is ‘stable’ & historical data exist
Existing products
Current technology
Involves mathematical techniques
e.g., forecasting sales of color televisions
2.Quantitative Methods
Used when situation is vague &
little data exist for new products
or new technology.
Involves intuition, experience. e.g., forecasting sales on Internet
1.Qualitative Methods
7
16
1.Overview of Qualitative Methods

Delphi method: Jury of executive opinion- Pool opinions of
high-level experts
Market research: estimates from individual salespersons
Consumer Market Survey
8
2. Overview of Quantitative Approaches
Naive approach
Moving averages: Simple moving average, weighted moving
average
Exponential smoothing
Trend projection
Linear regression
Time-series Models
Causal models
9
22

Trend
Seasonal
Cyclical
Random
Time Series Components
10
Components of Demand
Demand for product or service
||||
1234
Year
Average demand over four years

Seasonal peaks
Trend component
Actual demand
Random variation
11
1. Naive Approach
Assumes demand in next period is the same as demand in most
recent period
e.g., If May sales were 48 units, then June sales will be 48 units
Sometimes cost effective and efficient- starting point of many
forecasting technique
12
SMA is a series of arithmetic means
Used if little or no trend
Used often for smoothing
Provides overall impression of data over time

2(i). Simple Moving Average (SMA)
Moving average =
∑ demand in previous n periods
n
Ft = Forecast for the coming period
N = Number of periods to be averaged
A t-1 = Actual occurrence in the past period for up to “n”
periods
13
January10
February12
March13
April16
May19
June23
July26
Actual3-Month
MonthShed SalesMoving Average
(12 + 13 + 16)/3 = 13 2/3
(13 + 16 + 19)/3 = 16

(16 + 19 + 23)/3 = 19 1/3
Moving Average Example
10
12
13
(10 + 12 + 13)/3 = 11 2/3
14
15
Simple Moving Average Problem (1)
Question: What are the 3-week and 6-week moving average
forecasts for demand?
Assume you only have 3 weeks and 6 weeks of actual demand
data for the respective forecasts
Used when trend is present
Older data usually less important
Weights based on experience and intuition
2(ii). Weighted Moving Average

Weighted
moving average
=
∑ (weight for period n)
x (demand in period n)
∑ weights
16
Weighted Moving Average
Weights AppliedPeriod
3Last month
2Two months ago
1Three months ago
6Sum of weights
January10
February12
March13
April16
Actual3-Month Weighted
MonthShed SalesMoving Average

10
12
13
[(3 x 13) + (2 x 12) + (10)]/6 = 121/6
17
Form of weighted moving average
Weights decline exponentially
Most recent data weighted most
Ranges from 0 to 1
Subjectively chosen
a = Smoothing constant
Involves little record keeping of past data
3. Exponential Smoothing
18
Exponential Smoothing
New forecast =last period’s forecast
+ a (last period’s actual demand

– last period’s forecast)
Ft = Ft – 1 + a(At – 1 - Ft – 1)
whereFt=forecast for period t
Ft – 1=previous forecast
a=smoothing (or weighting)
19
Exponential Smoothing Example
Predicted demand = 142 Ford Mustangs
Actual demand = 153
Smoothing constant a = .20
20
Actual demand = 153
New forecast= 142 + .2(153 – 142)

21
Actual demand = 153
New forecast= 142 + .2(153 – 142)
= 142 + 2.2
= 144.2 ≈ 144 cars
22
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23
Exponential Smoothing Problem (2) Data
Question: What are the exponential smoothing forecasts for
periods 2-
Assume F1=D1

2/7/2016
24
Exponential Smoothing Problem (2)
Solution
F2=820+(0.5)(820-820)=820
F3=820+(0.5)(775-820)=797.75
The objective is to obtain the most accurate forecast no matter
the technique
We generally do this by selecting the model that gives us the
lowest forecast error
Forecast error= Actual demand - Forecast value
= At - Ft

25
Common Measures of Error
Mean Absolute Deviation (MAD)
MAD =
∑ |actual - forecast|
n
Mean Squared Error (MSE)
MSE =
∑ (forecast errors)2
n
26

ExampleTimeActualForecasted
with Absolute ErrorForecasted withAbsolute
Error2001168175.57.5177.59.52002159174.7515.75172.513.520
03175173.181.82165.879.132004190173.3616.64173.4316.57M
AD(41.71/4)
=10.42(48.7/4)
=12.17
a =0.1
a =.5
27
Seasonal Variations In Data
The multiplicative seasonal model can adjust trend data for
seasonal variations in demand

28
Forecasting in the Service Sector
Presents unusual challenges
Special need for short term records
Needs differ greatly as function of industry and product
Holidays and other calendar events
Unusual events
29

Fast Food Restaurant Forecast
20% –
15% –
10% –
5% –
11-121-23-45-67-89-10
12-12-34-56-78-910-11
(Lunchtime)
(Dinnertime)
Hour of day
Percentage of sales
Figure 4.12

30
Tutorial
2/7/2016
32
Question 1
1
2
3
4
5
6
7
8
9

10
11
12
487
602
551
587
509
457
349
386
490
507
516
573
Month
demand
Month
Demand
13
14
15
16
17
18

19
20
21
22
23
24
528
622
608
592
536
504
461
391
437
503
562
570
Month
25
26
27
28
29
30

31
32
33
34
35
36
Demand
517
595
619
602
545
486
431
416
444
492
538
575
2/7/2016

33
Questions:
Computer 3-months moving average of this demand. Does this
series still show seasonal variation.
b. Compute 12-months moving average of this demand.
c. Plot the original data and two moving average and interpret
the
result.
2/7/2016
34
2. Practice moving average forecast
Q2. Compute the 3-period and 5 –period moving average for the
following data
Week
1
2
3
4
5
6

7
8
9
Actual sales
110
102
108
121
112
105
114
106
115
35
Week
1
2
3
4
5

6
7
8
9
Actual sales
110
102
108
121
112
105
114
106
115
Q3.Compute 4-period weighted moving average and find out the
sales
for the week 10.
Weights
period-10.1
period-20.2
period-30.3
period-40.4
3. Practice weighted moving average forecast

n
A
+
...
+
A
+
A
+
A
=
F
n
-
t
3
-
t
2
-

t
1
-
t
t
n
A
+
...
+
A
+
A
+
A
=
F
n
-
t
3
-

t
2
-
t
1
-
t
t
Week
Demand
1
650
2
678
3
720
4
785
5
859
6
920
7
850
8

758
9
892
10
920
11
789
12
844
Sheet: Sheet1
Week
Demand
WeekDemand
1820
2775
3680
4655
5
Week
Demand
0.5
1
820
820.00
2

775
820.00
3
680
797.50
4
655
738.75
5
696.88
Week 2:
Operations Strategy
MGMT19126:: OPERATIONS MANAGEMENT

1
Outline
Global view of operations
Mission and strategy
Strategies for competitive advantages
Operations management (OM) strategy
Reasons to Globalize
Improve the supply chain
Reduce costs (labor, taxes, tariffs, etc.)
Improve operations
Understand markets
Improve products
Attract and retain global talent

3
Developing Missions and Strategies
Mission statements tell an organization where it is going.
The Strategy tells the organization how to get there.
4
Mission
Mission - where are you going?
Organization’s purpose for being
Answers ‘What do we provide society?
Provides boundaries and focus

5
Example- Google’s mission
Google’s mission is to organize the world’s information and
make it universally accessible and useful.
Hard Rock Cafe
Our Mission: To spread the spirit of Rock ‘n’ Roll by delivering
an exceptional entertainment and dining experience. We are
committed to being an important, contributing member of our
community and offering the Hard Rock family a fun, healthy,
and nurturing work environment while ensuring our long-term
success.
Figure 2.2

7
Benefit to Society
Mission
Factors Affecting Mission
Philosophy and Values
Profitability and Growth
Environment
Customers
Public Image

8
Sample MissionsSample Company MissionTo manufacture and
service an innovative, growing, and profitable worldwide
microwave communications business that exceeds our
customers’ expectations.Sample Operations Management
MissionTo produce products consistent with the company’s
mission as the worldwide low-cost manufacturer.
Figure 2.3
Sample Missions
Figure 2.3Sample OM Department MissionsProduct designTo
design and produce products and services with outstanding
quality and inherent customer value.Quality managementTo
attain the exceptional value that is consistent with our company
mission and marketing objectives by close attention to design,
procurement, production, and field service operationsProcess
designTo determine and design or produce the production
process and equipment that will be compatible with low-cost

product, high quality, and good quality of work life at
economical cost.
10
11
Strategy
Action plan to achieve mission-purpose
Functional areas have strategies- action plan
Strategies exploit opportunities and strengths, avoid threats, and
overcome weaknesses
Strategy

Analysis
Strategy Development: SWOT Analysis
Internal Strengths
Internal Weaknesses
External Opportunities
External Threats
12

13
Top-down perspective
What the business wants operations to do- corporate and
business strategy
Operations resources perspective
What operations resources can do
What day-to-day experience suggests operations should do
Bottom-up perspective
Market requirement perspective
What the market position requires operations to do

Operations strategy
The four perspectives on operations strategy
14
1
Broad strategic objectives for an operation applied to
stakeholder groups

Society
Increase employment
Enhance community well-being
Produce sustainable products
Ensure clean environment
Customers
Appropriate product or
service specification
Consistent quality
Fast delivery
Dependable delivery
Acceptable price
Suppliers
Continue business
Develop supplier
capability
Provide transparent
information
Shareholders
Economic value from
investment
Ethical value from investment

Employees
Continuous employment
Fair pay
Good working conditions
Personal development
15
2
Operations strategy is different from operations management
Example: capacity decisions

Time scale
Short-term
capacity decisions
1–12 months
Demand
Long-term
capacity decisions
1–-10 years
Demand
Operations management
Operations strategy

16
Examples of Global Operations Strategies
Operations
Strategy
GM: GM, USA is extending
their business in Poland,
Argentina, China, and Thailand
Sony: purchases components
from suppliers in Thailand,
Malaysia and around the world
Boeing: worldwide
sales and production
17

Strategies for Competitive Advantage
Differentiation – better, or at least different
Cost leadership – cheaper
Response – rapid response
18
Competing on Differentiation
Uniqueness can go beyond both the physical characteristics and
service attributes to encompass everything that impacts
customer’s perception of value
Walt Disney Magic Kingdom – experience differentiation
Hard Rock Cafe – dining experience
19

Competing on Cost
Provide the maximum value as perceived by customer. Does not
imply low quality.
Southwest Airlines – secondary airports, no frills service,
efficient utilization of equipment
Wal-Mart – small overheads, shrinkage, distribution costs
20
Competing on Response
Flexibility is matching market changes in design innovation and
volumes
Institutionalization at Hewlett-Packard
Reliability is meeting schedules
German machine industry
Timeliness is quickness
in design, production,
and delivery
Johnson Electric,

Motorola
21
Issues In Operations Strategy
Resources view
Value-chain analysis
Porter’s Five Forces model
Operating in a system with many external factors
Constant change
Product Life Cycle
Product design and development critical
Frequent product and process design changes
Short production runs

High production costs
Limited models
Attention to quality
IntroductionGrowthMaturityDecline
OM Strategy/Issues
Forecasting critical
Product and process reliability
Competitive product improvements and options
Increase capacity
Shift toward product focus
Enhance distribution
Standardization
Fewer product changes, more minor changes

Optimum capacity
Increasing stability of process
Long production runs
Product improvement and cost cutting
Little product differentiation
Cost minimization
Overcapacity in the industry
Prune line to eliminate items not returning good margin
Reduce capacity
Figure 2.5
23
Tutorial #2
Discuss with example: what are the three main ways to achieve
competitive advantage.
OM strategies of two drug companies (from text)
Aldi case

Example of OM strategy
Operations Strategies of Two Drug CompaniesBrand Name
Drugs, Inc.Generic Drug Corp.Competitive AdvantageProduct
DifferentiationLow CostProduct Selection and DesignHeavy
R&D investment; extensive labs; focus on development in a
broad range of drug categoriesLow R&D investment; focus on
development of generic drugsQualityMajor priority, exceed
regulatory requirementsMeets regulatory requirements on a
country by country basis
Table 2.2

26
DifferentiationLow CostProcessProduct and modular process;
long production runs in specialized facilities; build capacity
ahead of demandProcess focused; general processes; “job shop”
approach, short-run production; focus on high
utilizationLocationStill located in the city where it was
foundedRecently moved to low-tax, low-labor-cost environment
Table 2.2
27

DifferentiationLow CostSchedulingCentralized production
planningMany short-run products complicate
schedulingLayoutLayout supports automated product-focused
productionLayout supports process-focused “job shop” practices
Table 2.2
28
DifferentiationLow CostHuman ResourcesHire the best;
nationwide searchesVery experienced top executives; other
personnel paid below industry averageSupply ChainLong-term
supplier relationshipsTends to purchase competitively to find
bargains
Table 2.2

29
DifferentiationLow CostInventoryHigh finished goods inventory
to ensure all demands are metProcess focus drives up work-in-
process inventory; finished goods inventory tends to be
lowMaintenanceHighly trained staff; extensive parts
inventoryHighly trained staff to meet changing demand
Table 2.2
30
Aldi case

Operations Strategy
ExampleStrategy Process
Customer NeedsCorporate StrategyOperations
StrategyDecisions on Processes
and Infrastructure
More ProductIncrease Org. SizeIncrease Production
CapacityBuild New Factory
Operations Strategy
Example
Strategy Process
Customer Needs

Corporate Strategy
Operations Strategy
Decisions on Processes
and Infrastructure
More Product
Increase Org. Size
Increase Production Capacity
Build New Factory
*

3
MGMT19126:
OPERATIONS MANAGEMENT
Week 1: Operations and Productivity
1

2
Text
Heizer, J and Render B (11th, 10th or 9th edition), Operations
Management, Upper Saddle River, NJ: Prentice Hall.
2
Outline
What is Operations Management?
Transformation Process
Production Systems
Goods and Services
Why study OM?
Productivity
Global company profile: Hard Rock Café

What is Operations Management?
Production is the creation of goods and services
Operations Management is the set of activities that create value
in the form of goods and services by transforming inputs into
outputs. (Heizer, 11th edition)
Or
The American Production and Inventory Control Society
(APICS) dictionary defines Operations management as-the
planning, scheduling and control of activities that transform
inputs into finished goods and services
4
Value

If a customer gets a better car without changing the price, then
value has gone up.
OM Involves Managing Transformations
Transformation
Process
(Value Adding)
Material Processing
Information processing
Customer processing
Goods or services
Input
Output

6
6
Kamrul Ahsan, PhD, S2 2009
7
Example of Transformation ProcessesOperationInput/
resourcesTransformation OutputsDepartmental storeCustomers/
Goods for sale
Staff sales
Computerized registersDisplay goods, give sales advice, sell
goodsCustomers and goods assembled togetherPublishing
housePrinters and designers, printing presses, paper, inkDesign,
print, bindPrinted materialsUniversity, Bus service, Hotel
room???
7

1/24/2016
8
The activities of operations management
ENVIRONMENT
ENVIRONMENT
INPUT
OUTPUT
GOODS AND SERVICES
INPUT TRANSFORMED RESOURCES
MATERIALS INFROMATION CUSTOMERS
FACILITIES STAFF

INPUT TRASNFORMED RESOURCES
OPERATIONS STRATEGY
DESIGN
PLANNING AND CONTROL
IMPROVEMENT
Transformation
Physical– as in manufacturing
Locational– as in transportation
Exchange– as in retailing
Storage—as in warehousing
Physiological– as in health care
Informational—as in telecommunications

Goods and Services
11
Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction

11
12
Characteristics of Service
Intangible product
Produced and consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based

12
13
Organizing to Produce Goods and Services
Essential functions:
Marketing – generates demand
Production/operations – creates the product
Finance/accounting – tracks how well the organization is doing,
pays bills, collects the money
13
Organizational Charts
Operations

Teller Scheduling
Check Clearing
Collection
Transaction processing
Facilities design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial

Personal
Mortgage
Trust Department
Commercial Bank
14
What Operations Managers (OM) Do?
Mostly take short term decisions
Org.
Policy

OM
Resource
Management
Customers
Managers
decisions
are limited by:
15
This is the typical breakdown one finds in many business

courses. It may be helpful to the students if you discuss each of
these elements in relationship to something you or they have
done. Work on a group project, for example, can provide a
useful vehicle for the discussion.
16
New Trends in OM: Summary
Ethics
Global focus
Environmentally sensitive production
Rapid product development
Environmentally sensitive production
Mass customization
Empowered employees
Supply-chain partnering
Just-in-time performance
16
Productivity

17
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to save time.
Some improvements:Stop requiring signatures on credit card
purchases under $25Saved 8 seconds per transactionChange the
size of the ice scoopSaved 14 seconds per drinkNew espresso
machinesSaved 12 seconds per shot

18
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to save time.
Some improvements:Stop requiring signatures on credit card
purchases under $25Saved 8 seconds per transactionChange the
size of the ice scoopSaved 14 seconds per drinkNew espresso
machinesSaved 12 seconds per shot
Operations improvements have helped Starbucks increase yearly
revenue per outlet by $200,000 to $940,000 in six years.
Productivity has improved by 27%, or about 4.5% per year.
19

20
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 this measure of efficiency
Important Note!
Production is a measure of output only and not a measure of
efficiency
Productivity
Measure of process improvement
Represents output relative to input
Productivity =
Units produced
Input used

21
S2, 2005
22
Productivity Variables
Productivity=
Output
Inputs(Labor + material + energy + capital + miscellaneous)
Productivity can be improved by either reducing Input while
keeping Output constant, or increasing Output while keeping
Input constant
Partial measures=output/(single input)
Multi-factor measures=output/(multiple inputs)
Total measure=output/(total inputs)

23
Productivity variables- continued
Increase in productivity -> labor, capital, and management
receive additional payments
If returns to labor, capital and management are increased
without increased productivity, prices rise
When productivity increases, sometimes downward pressure is
placed on prices- because more is being produced in the same
resources
24
Key Variables for Labor Productivity
Basic education appropriate for the labor force
Maintaining and enhancing skills in the middle of rapidly
changing technology and knowledge

24
You might first ask students to consider the conditions under
which each of the key variables is most important. Once the
conditions are identified, you might list the conditions on the
board or screen and ask students to develop a method for
comparing various countries on the basis of these conditions.
Where would they place the U.S.? Developing countries? Etc.
25
Collins Title Productivity
Staff of 4 works 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
26
Service Productivity
Typically labor intensive
Frequently focused on unique individual attributes or desires
Often an intellectual task performed by professionals
Often difficult to mechanize
Significant Events in OM

27
10 OM Decisions
Goods and service design
Quality
Process and capacity design
Location selection
Layout design
Human resources and job design
Supply-chain management
Inventory
Scheduling
Maintenance
28

Tutorial : Week 1
Review: ( Rapid review page 61)
Define operations management.
Why study OM? What operations managers do?
New trends in OM
Explain the distinction between goods and services.
Explain the difference between production and productivity.
30
The Hard Rock Cafe
First opened in 1971
Now – 110 restaurants in over 40 countries
Rock music memorabilia
Creates value in the form of good food and entertainment
3,500+ custom meals per day in Orlando
How does an item get on the menu?
Role of the Operations Manager

Price
Quality
Value
=
Department: Management
Unit Name: Production and Operations Management
Unit Code: MGMT19126
Instructor Name: Dr. Mohamad Atyeh
Assessment 1: Take home / First
Assignment
Submission: Week 6, Monday February 29, 2016
At 12:00 pm
Student’s Name:
ID #:
INSTRUCTIONS
1. You are expected to answer all the questions

2. You have to submit a hardcopy and a softcopy
3. Please ensure best practice and avoid PLAGIRISM
4. This assignment is worth 30% of your final grade
SLO 1
SLO2
SLO3
SLO4
SLO5
Satisfactory
Not Satisfactory
DO NOT WRITE IN THE AREA BELOW:

Mark ________/30
Feedback:
_____________________________________________________
___________
___________________________________________________
______________________
Instructor’s signature: __________________________
Student’s Signature: ___________________________

Production and Operations Management
MGMT19126 – 151MGB414
First Assessment (Solving Problems)- 30 marks (30%)
Question 1: Sales of quilt covers at Jim's departmental store in
Melbourne over the last 12 months are shown below:
Period
Demand
July 2012
21
August
22
Sep
15
Oct
14
Nov
12
Dec
15
Jan 2013
18
Feb
19

March
21
April
21
May
22
June
25
Calculate:
I. Use a 2-month moving average on all the data and plot the
forecast demand (5 mark)
F1= (25+22)/2 = 23.5
II. Use a 3-month moving average on all the data and plot the
forecast demand to graph created in part (I) (5 mark)
F2= (25+22+21)/3= 22.66 rounded up 22.7
III. Using MAD technique determine which is better: the 2-
month moving average or the 3-month moving average (5 mark)
IV. Compute forecasts for July 2013 using exponential

smoothing with an alpha of 0.3, and March forecast of 19.
Explain (5 mark)
Question 2: A department store may find that in a 4-month
period, the best forecast is derived by using 40% of the actual
sales (in units) for the most recent month, 30% of two months
ago, 20% of three months ago, 10% of four months ago. The
actual unit sales were as follows:
Month1Month2month3 month4 month5
110 160 85 125 ?
(i) What is the forecast for month 5? (5 mark)
(ii) Suppose sales for month 5 are 115, and then the forecast for
month 6 would be? Explain (5 mark)

Week 4Quality ManagementOPERATIONS MANAGEMENT.docx

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