This document provides an outline for reviewing key concepts in production and operations management. It covers topics such as organizing the production function, productivity and forecasting methods, facility planning, quality management, inventory management, and emerging trends like supply chain management, lean operations, and total quality management. Examples are provided to illustrate productivity improvements at Starbucks and Taco Bell. Forecasting techniques like moving average, weighted average, and regression analysis are defined. The critical path method and Gantt charts are explained as project management tools.

1. PRODUCTION &
OPERATIONS
MANAGEMENT
Review for
Comprehensive
Examination
August 17, 2014

2. REVIEW OUTLINE
 Organization of the Production & Operations Function
 Production and Operations Concept
 Principles of Productivity and Forecasting
 Plant, Faci lity and Capacity Planning
 Process and Methods Analysis
 Qual ity Management
 Inventory Management
 Emerging Trends in Production and Operations Management
 Supply Chain Management and ERP
 JIT and Lean Operations Management
 PERT/CPM Applications in Project Management
 TQM. 5S, Six Sigma and Kaizen

3. ORGANIZATION

4. FUNCTIONAL CHARTS

5. FUNCTIONAL CHARTS

6. Figure 1.1
FUNCTIONAL CHARTS

7. DEFINITION
WHAT IS OPERATIONS MANAGEMENT?
 Production is the creation of goods and
services
 Operations management (OM) is the set
of activities that create value in the form
of goods and services by transforming
inputs into outputs

11. 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 productivity!
Important Note!
Production is a measure of output only
and not a measure of efficiency

12. IMPROVING PRODUCTIVITY AT STARBUCKS
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Operations improvements have
helped Starbucks increase yearly
revenue per outlet by $250,000 to
$1,000,000 in seven years.
Productivity has improved by 27%, or
about 4.5% per year.
Stop requiring signatures
on credit card purchases
under $25
Saved 8 seconds
per transaction
Change the size of the ice
scoop
Saved 14 seconds
per drink
New espresso machines Saved 12 seconds
per shot

13. PRODUCTIVITY
Productivity =
Units produced
Input used
▶ Measure of process improvement
▶ Represents output relative to input
▶ Only through productivity increases
can our standard of living improve

14. PRODUCTIVITY CALCULATIONS
Labor Productivity
Productivity =
Units produced
Labor-hours used
1,000
250
= = 4 units/labor-hour
One resource input  single-factor productivity

15. MULTI-FACTOR PRODUCTIVITY
Output
Labor + Material + Factory OH
Productivity =
► Also known as total factor productivity
► Output and inputs are often expressed in
dollars
Multiple resource inputs multi-factor productivity

16. COLLINS TITLE PRODUCTIVITY
Old System:
Staff of 4 workers 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
New System:
14 titles/day Overhead = $800/day
8 titles/day
$640 + 400
14 titles/day
$640 + 800
=
Old multifactor
productivity
=
New multifactor
productivity
= .0077 titles/dollar
= .0097 titles/dollar

17. PRODUCTIVITY AT TACO BELL
Improvements:
▶ Revised the menu
▶ Designed meals for easy
preparation
▶ Shifted some preparation to
suppliers
▶ Efficient layout and automation
▶ Training and employee empowerment
▶ New water and energy saving grills

20. FORECASTING METHODS
Copyright ©2013 Pearson Education
14 -
21
 Naïve Method
The forecast for the next period is the demand
for the current period
 Moving Average Method
 Weighted Moving Average Method
 Exponential Smoothing Method
 Linear Regression Method

21. MOVING AVERAGE METHOD
Compute a three-week moving average forecast for the
arrival of medical clinic patients in week 4. The numbers of
arrivals for the past 3 weeks were:
Week Patient Arrivals
1 400
2 380
3 411
14 -
22

22. WEIGHTED AVERAGE METHOD
Compute the forecast for the arrival of medical patients in
week 4 using the weighted average method. The numbers
of arrivals were as follows:
Week
Patient
Arrivals
Weight
1 400 20%
2 380 30%
3 411 50%
14 -
23

23. EXPONENTIAL SMOOTHING METHOD
Compute the forecast for the arrival of patients in week 4
using the exponential smoothing method. The smoothing
constant is α = 0.10:
Week
Patient
Arrivals
Previous
Forecast
1 400
2 380
3 411 415
FNew = FPrevious + α (Actual – FPrevious)

24. LINEAR REGRESSION METHOD
Compute forecast for week 7 using the linear regression
method.
Week Patient Arrivals
1 400
2 380
3 411
4 415
5 421
6 427
Y = A(X) + B
Where A = slope, B = Y-intercept

25. LINEAR REGRESSION METHOD
Formula Result
ΣX 21
ΣY 2,454
n 6
ΣX2 91
ΣY2 1,005,116
ΣXY 8,720

26. LINEAR REGRESSION METHOD
nΣXY – ΣXΣY 6(8720) -(21)(2,454) 786
A = ------------- = ---------------------- = ----- = 7.485714
nΣX2 – (ΣX)2 6(91) – (21)2 105
ΣY – AΣX 2,454 – (7.485714)(21) 2296.8
B = ---------- = --------------------------- = -------- = 382.8
n 6 6
Y7 = A(X7) + B = 7.485714 (7) + 382.8 = 435.2

27. LINEAR REGRESSION METHOD
nΣXY – ΣXΣY
R = -------------------------------------- = 0.828103
√(풏횺푿ퟐ – (횺푿)ퟐ)(풏횺풀ퟐ – (횺풀)ퟐ)
REGRESSION COEFFICIENT
0 < /r/ < 0.3 = Weak Correlation
.3 < /r/ < 0.7 = Moderate Correlation
/r/ > 0.7 = Strong Correlation

28. Locating Facilities
Copyright ©2013 Pearson Education
11- 029

33. A
F
K
Start Finish
B
C
D
E
G
H
I
J
Immediate
Predecessor
A —
B —
C A
D B
E B
F A
G C
H D
I A
J E,G,H
K F,I,J
02 -
34
CRITICAL PATH METHOD
Duration
(Days)

34. A
F
K
Start Finish
B
C
D
E
G
H
I
J
Path Time (days)
A-I-K 33
A-F-K 28
A-C-G-J-K 67
B-D-H-J-K 69
B-E-J-K 43
Paths are the sequence of activities
02 -
between a project’s start and finish.
35
CRITICAL PATH METHOD

35. CRITICAL PATH METHOD
Activity Duration
Earliest
Start
(ES)
Latest
Start
(LS)
Earliest
Finish
(EF)
Latest
Finish
(LF)
Slack
(LS-ES)
On the
Critical
Path?
A 12 0 2 12 14 14-12=2 No
B 9 0 0 9 9 9-9=0 Yes
C 10
D 10
E 24
F 10
G 35
H 40
I 15
J 4
K 6
02 -
36

36. 02 -
37
CRITICAL PATH METHOD
Latest finish time
Latest start time
Activity
Duration
Earliest start time
Earliest finish time
0
2
12
14
A
12

37. K
6
I
48 63
15
C
S = 41
12 22 22 57
S = 2
Start Finish
14 24
10
G
35
J
4
H
9 19 19 59
40
B
9
D
9 19
10
E
24
A
12
F
10
0 9
9 33
59 63
12 27
0 12 12 22 63 69
53 63
59 63
24 59
19 59
35 59
2 14
0 9
63 69
PERT/CPM
S = 0
S = 26
S = 0
S = 36
S = 2
S = 2
S = 0
S = 0 S = 0
The critical path is
B–D –H –J - K with
a project duration
of 69 days.

38. GANTT CHART