Operations Quiz 3

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NaomiChapman
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24423
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Operations Quiz 3
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2010-06-24 13:31:25
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Business Operations
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Quiz #3 (Thu, June 24) Please review the following slides and related HW problems 1. Forecasting.ppt ALL 2. Forecasting problems ALL (Also refer to the HW problems on Forecasting) 3. Capacity 1-20 4. Location 1-11 5. Process Design n Layout 1-7, 10-26.
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  1. What is Forecasting?
    • A combination of the art and science of predicting future events.
    • -Art: managerial judgement
    • -Science: sophisticated mathematical tools & methods
  2. What is a forecast?
    • An inference of what is likely to happen in the future. Provides a basis for coordination of the plans of various functions.
    • -finance: amount of capital
    • -personnel: size and mix of workforce
    • -purchasing: proper materials
  3. Types of Forecasts?
    • 1. Technological
    • 2. Economic
    • 3. Demand
  4. When to use Qualitative Forecasting Methods?
    • 1. When data is not available
    • 2. When data is not representative of the future (new products/techology)
  5. Qualitative Forecasting Approaches?
    • 1. Jury of Executive opinion
    • 2. Sales Force
    • 3. Delphi Method
    • 4. Consumer Market Survey
  6. Describe Jury of Executivew Opinion
    • A small group of managers in various functions may meet and collectively develop a forecast
    • Advantage: Considerable knowledge & talent
    • Risk: Bandwagon effect
    • Ex: Bristol Myers Squibb/Cancer treatment
  7. Describe Delphi Method
    • Managers and staff complete a series of questionaires each developed from the previous one to achieve a consensus forecast.
    • Advantage: Anonymity encourages honest responses, useful for remote participants, avoids bandwagon effect.
    • Disadvantage: Lack of expertise, Ambiguity possible in questionaire, no accountability.
    • Ex: Rand Corp/Atomic Bomb impact
  8. Describe Sales Force Composite
    • Sales persons estimate sdales in their respective regions, aggregated at the district and national levels.
    • Advantage: Sales staff aware of customer plans, direct contact to customers
    • Risk: Hard to distinguish between customer intentions and actuality, overly influenced by recent experiences.
  9. Consumer Surveys
    • Solicit input directly from a sample of customers
    • Advantage: Tap information not available elsewhere
    • Risk: Requires considerable knowledge and skill to handle surveys, expensive and time consuming, low response rates possible
  10. Measures of Forecast Accuracy
    • 1. Mean Forecast Error (MFE)
    • 2. Mean Absolute Deviation (MAD)
    • 3. Mean Squared Error (MSE)
    • 4. Tracking Signal
  11. Mean Forecast Error
    MFE helps to determine if your method is biased or unbiased
  12. Mean Absolute Deviation
    MAD tells you the magnitude of how much you are off, the lower the better.
  13. Mean Squared Error
    The penalty exponentially increases for higher deviation.
  14. Tracking Signal
    Recalculates the cumulative errors, tracks bias AND magnitude
  15. What type of Time Series Component does this graph represent?
    Random Component (noise)
  16. What type of Time Series Component is represented?
    Trend Component
  17. What type of Trend Series component is represented?
    Cycle Component
  18. What type of Time Series Component is represented?
    Seasonal Componet
  19. Three Forecasting Methods?
    • 1) Simple Moving Average
    • 2) Weighted Moving Average
    • 3) Single Exponential Smoothing
  20. Formula for Simple Single Exponential Smoothing?
  21. When Alpha=close to zero?
    Gives a stable forecast
  22. When Alpha =close to one?
    Responsive Forecast
  23. When Alpha = 0?
    • Ft+1=Ft
    • Not Naive - same as last months forecast
  24. When Alpha is 1?
    • Ft+1=At
    • Naive - same as last months actual
  25. What is the Decision Variable and Desirable Characteristics of Simple Moving Average Forecasting method?
    • N (number of periods)
    • Stability = N Large
    • Responsiveness = N Small
  26. What is the Decision Variable and Desirable Characteristics of Weighted moving Average Forecasting Method?
    • Weight for each Period, N
    • Stability: Low Weight applied to recent period, N Large
    • Responsiveness: High Weight to more recent period, N Small
  27. Decision Variable and Desirable Characteristics for Single Exponential Smoothing Forecasting Method?
    • Alpha
    • Low Alpha = Stable
    • High Alpha = Responsiveness
  28. What is Capacity?
    Maximum rate of output
  29. List some measures of capacity?
    • Output: Rates for different products
    • Inputs: Machine hours available, seating capacity, # beds.
  30. List the importance of Capacity Decisions?
    • 1. Impacts ability to meet future demands
    • 2. Affects operating costs (under/over capacity)
    • 3. Major determinant of initial costs
    • 4. Involved long-term commitment
    • 5. Affects competitiveness (del speed/barrier to entry)
    • 6. Affects ease of management (capacity =?demand)
  31. Examples of fluctuating demand?
    • Time of day>>Movies, Bowling alleys
    • Days of week>>Repairing, Painting, U-Haul
    • Times of the month>>Financial Services, Paydays
    • Seasons of the year>>Roofing, income tax
  32. Why is it easier to manage capacity and demand in manufacturing than services?
    • 1. Processing time varies due to customer involvement
    • 2. Intangible service Output (qualitative & subjective)
    • 3. Time perishable capacity
    • 4. Service can't be inventoried
  33. How do you manage capacity and demand?
    • Capacity: What type? (money, time, equipment, human, etc)
    • How Much?
    • When needed?
    • Demand: Forecast
    • Supply: Availability
  34. Types of Capacity?
    • Human
    • -Number, Skills-Level and mix
    • Facilities
    • -Single/multiple, main/satellite
    • Equipment
    • -Computer system
    • -Substitutions, modifications
    • Tools
    • -computerized notifications
    • Money
    • -credit card firms can carry limited receivables
    • Time
    • -Hrs/day, days/week service provided
    • Alternative Sources
    • -subcontract or lease resources
  35. Two Strategies for managing capacity?
    • 1. Lead Strategy (flexibility)
    • -Build in idle capacity
    • -Expand in anticipation of increase in demand
    • (Economics of small increases vs. a large increase FP&L)
    • 2. Lag Strategy (price)
    • -Expand only after capacity has fallen below demand
  36. Capacity increases in _____________?
    Chunks or Increments
  37. Define and Measure Capacity?
    • Design Capacity: maximum obtainable output
    • Effective Capacity: Max capacity given product mix, scheduling difficulties, and other doses of reality
    • Actual output: rate of output actually achieved -cannot exceed effective capacity.
  38. Efficiency ratio?
    Efficiency = Actual Output / Effective Capacity
  39. Utilization Ratio?
    Utilization = Actual Outpu / Design Capacity
  40. Yield Management with Efficiency Utilization
  41. Developing Capacity Alternatives?
    • Do nothing
    • Design flexibility into systems
    • Differentiate between new and mature products or services
    • Take a big picture approach (motel rooms/parking)
    • Prepare to deal with capacity chunks
    • Smooth out capacity requirements
    • Identify optimal operating levels
  42. Drivers for Location Planning?
    • 1. Viewed as a marketing/operations strategy
    • 2. Growth in demand
    • 3. Depletion of basic inputs
    • 4. A shift in the market
    • 5. Closts of doing business at a particular location
  43. Why are location decisions so important?
    They are long term committments with large costs.
  44. What are the objectives of Location Decisions?
    • 1. Profit Potential
    • 2. Balance cost and customer service
  45. What options are there for Location Decisions?
    • 1. Expand existing facilities
    • 2. Add new facilities
    • 3. Move
  46. Give two short-term reasons NOT to make a location decision?
    • 1. wage rates
    • 2. exchange rates
  47. Best approach to location decision?
    Consider how location impacts development of long-term capabilities.
  48. Six Step Process for Location Decision?
    • 1. Identify sources of value
    • 2. Identify capabilities needed (for a competitive advantage)
    • 3. Assess implications of location decision on development of capabilites (quality coils)
    • 4. Identify potential locations
    • 5. Evaluate locations
    • 6. Develop strategy for building network of locations
  49. Levels of location decisions?
    • 1. Continent/Country
    • 2. Region within a country
    • 3. Community / Locality
    • 4. Specific site
  50. Factors affecting Regional & Country Level Decision?
    • 1. Minimize transportation costs and provide acceptable service
    • 2. Proper supply of labor
    • 3. Wage rates
    • 4. Unions
    • 5. Regional taxes, regulations, trade barriers
    • 6. Political stability
  51. Factors affecting Community Level Location Decision?
    • 1. Availability of acceptable sites
    • 2. Local government attitudes
    • 3. Regulations, zoning, taxes, labor supply
    • 4. Tax incentives
    • 5. Community's attitude
    • 6. Amenities
  52. Factors affecting Site Level Decision?
    • 1. Size
    • 2. Adjoining land
    • 3. Zoning
    • 4. Drainage
    • 5. Soil
    • 6. Availability of water, sewers, utilities
    • 7. Development costs
  53. List the considerations of manufacturing/distribution for location planning?
    • 1. Cost focus
    • 2. Transportation modes/costs
    • 3. Energy availability costs
    • 4. Labor cost/availability/skills
    • 5. Building/leasing costs
  54. List the considerations Service/Retail for location planning?
    • 1. Revenue focus
    • 2. Demographics, age, income, etc.
    • 3. Population/drawing area
    • 4. Competition
    • 5. Traffic volume/patterns
    • 6. Customer access/parking
  55. Cost volume profit analysis in evaluating locations?
    • 1. Determine fixed and variable costs
    • 2. Plot total costs
    • 3. Determine lowest total costs
  56. Cost Volume Profit Analysis:
    Lower volumes are best with lower _______Cost
    Higher volumes are best wtih lower _________Cost
    • Fixed
    • Variable
  57. Three methods for evaluation Locations?
    • 1. Transportation Model
    • -Decision based on movement costs of raw materials of finished goods
    • 2. Factor Rating (most popular)
    • - Decision based on quantitative and qualitative inputs
    • 3. Center of Gravity Method
    • Decision based on minimum distribution costs
  58. Using the Factor Rating Method for Location decisions, the best alternative is the one with?
    Higher composit score
  59. Factors that affect Process Selection?
    • 1. Forecasting
    • 2. Products & Service design
    • 3. Technological change
    • 4. Capacity planning
    • 5. Facilities & Equipment
    • 6. Layout
    • 7. Work design
  60. Factors to consider when deciding to make or buy components?
    • 1. Available capacity
    • 2. Expertise
    • 3. Quality consideration
    • 4. The nature of demand
    • 5. Cost
  61. List 5 Process types?
    • 1. Job Shops (small runs)
    • 2. Batch Processing
    • 3. Repetitive/Assembly (semicontinuous)
    • 4. Continuous Process
    • 5. Projects (nonroutine jobs)
  62. This process type is low volume, high variety, high flexibility?
    Job Shop
  63. This process is moderate volume, moderate variety, moderate flexibility?
    Batch
  64. This process is High Volume, Low Variety, Low Flexibility?
    Repetitive Assembly
  65. This process is very high volume, very low variety, very low flexibility?
    Continuous Flow
  66. Describe Job Shop?
    Examples of Process?
    Examples of Goods & Services?
    Competitive Advantages?
    • Customized good or services
    • Machine Shop, Beauty Shop
    • Specialty tools, Hair Styling
    • Quality (performance) & Flexibilty
  67. Describe Batch?
    Examples of Process?
    Examples of Goods & Services?
    Competitive Advantages?
    • Semi-standard goods or services
    • Bakery, Classroom
    • Cookies, education
    • Moderate cost & flexibility
  68. Describe Repetitive/Assembly?
    Examples of Process?
    Examples of Goods & Services?
    Competitive Advantages?
    • Standardized goods or services
    • Assembly line, cafeteria line
    • Automotive line, car wash
    • Low unit cost, Dependability
  69. Describe Continuous?
    Examples of Process?
    Examples of Goods & Services?
    Competitive Advantages?
    • Highly standardized goods or services
    • Steel Mill, Sugar refinery
    • Steel, Paper, Power
    • Low Price, Quality (conformance)
  70. Describe Layout?
    Layout is the configuration of departments, work centers, and equipment, with particular emphasis on movement of work (customers or materials) through the system.
  71. Three basic layout types?
    • 1. Product Layouts
    • 2. Process Layouts
    • 3. Fixed-Position
  72. Describe Product Layout and which processes use it?
    • Product Layout uses standardized processing operation to achieve smooth, rapid, high volume flow.
    • Line
  73. Describe Process Layout and which processes use it?
    • Process layout can handle varied processing requirements.
    • Job Shop or Batch (ex: hospital)
  74. Describe Fixed-Position Layout and process that uses it?
    • Fixed Position is a layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed.
    • Project! Ex: Building or freeway
  75. Importance of Layout Decisions?
    • 1. Requires substantial investments of money and effort
    • 2. Involves long-term commitments
    • 3. Has significant impact on cost and efficiency of short-term operations
  76. Eight things that cause a need for layout decisions?
    • 1. Inefficient operations
    • 2. Changes in the design of products or services
    • 3. The introduction of new products or services
    • 4. Accidents/Safety hazards
    • 5. Changes in environmental or other legal requirements
    • 6. Changes in volume of output or mix of products
    • 7. Changes in methods and equipment
    • 8. Morale problems
  77. Layout Formats?
    • 1. Group Technology Layout
    • 2. Just-In-Time Layouts
    • -May be assembly-line or
    • -Group Technology formats
    • 3. Fixed Position Layout
    • -eg Shipbuilding
  78. Cellular Layouts include?
    • 1. Cellular Manufacturing
    • 2. Group Technology
    • 3. Flexible Manufacturing Systems
  79. The advantage of Cellular Layouts?
    • They retain flexibility in the process and gain economies of scale.
    • Ex: Lazyboy Case
  80. Explain Cellular Manufacturing?
    Layout in which machines are grouped into a cell that can process items that have similar processing requirements.
  81. Explain Group Technology Layout?
    The grouping into part families of items with similar design or manufacturing characteristics.
  82. A Flow Line for Production or Service?
  83. A U-Shaped Production Line looks like?
  84. Adavantages of U-Shaped Production Line?
    • 1. Shorter distance
    • 2. Workers can alternate tasks
    • 3. Shipping & Receiving can be in 1 place
  85. Describe Process Layout?
    • Departmentalized process where work travels to dedicated process centers
  86. Functional Layout?
  87. Cellular Manufacturing Layout?
    • Part families are based on Group Technology
    • -minimizes material movement
    • -efficient, but still flexible
  88. Line Balancing?
    is the process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements.
  89. Cycle Time?
    is the maximum time allowed at each workstation to complete its set of tasks on a unit.
  90. Determine maximum Output?

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