Operation Management PDF

Operation Management Reviewer: Prelim 2nd Sem OPERATIONS MANAGEMENT FORECASTING OM involves overseeing various activities within an WHAT IS FORECASTING? organization, including procurement, production,...

Operation Management Reviewer: Prelim 2nd Sem OPERATIONS MANAGEMENT FORECASTING OM involves overseeing various activities within an WHAT IS FORECASTING? organization, including procurement, production, FORECASTING refers to the practice of predicting quality control, inventory management, and what will happen in the future by taking into distribution. consideration events in the past and present. Operations Management Framework Basically, it is a decision-making tool that helps This framework encompasses the processes, tools, businesses cope with the impact of the future's and strategies used to manage operations uncertainty by examining historical data and trends. effectively. It includes planning, organizing, staffing, QUALITATIVE FORECASTING directing, and controlling operations to achieve organizational goals. Qualitative forecasting methods rely on subjective assessments and expert judgment. They are useful Objectives of Operations Management in situations where historical data is limited, or the The primary objectives of OM include cost future is uncertain. Qualitative methods minimization, quality improvement, timely delivery, include market research, surveys, expert opinions, flexibility, and innovation. These objectives aim to and the Delphi method. enhance efficiency, competitiveness, and sustainability. Qualitative forecasting is a method of making predictions about a company's finances that uses APPLICATION OF OM judgment from experts. Expert employees perform qualitative forecasting by identifying and analyzing Demand Forecasting the relationship between existing knowledge of past Product and Service Process Design operations and potential future operations. Facilities Planning Scheduling and Sequencing This allows the experts to make estimations about Inventory Management how a company might perform in the future based Aggregate Planning on the opinions they offer and the information they Material Requirement Planning (MRP) collect from other sources, like staff polls or market research. Lean and Just-In-Time (JIT) Manufacturing Quality Management Can help a company make predictions about its Supply Chain Management (SCM) financial standing based on opinions in the Performance Management company. If you work as a manager or other high- Operations Strategy level employee, you can use forecasts to assess and edit your company's budget. Knowing how to SKILLS NEEDED IN OM use qualitative forecasting can benefit your Leadership ability company by allowing input from external and Organizational skills internal sources. Interpersonal skills Benefits of qualitative forecasting Problem-solving ability Process improvement Qualitative forecasting is important for helping Project management executives make decisions for a company. Performing qualitative forecasting can inform Financial analysis decisions like how much inventory to keep, whether Business acumen a company should hire new staff members, and Detail-oriented approach how they can adjust their sales operations. Communication skills Decision-making ability Qualitative forecasting is also crucial for developing Excellent time management projects like marketing campaigns, as it can provide information about a company's service that can Operation Management Reviewer: Prelim 2nd Sem highlight which elements of the business to feature production teams. Forecasting by executive opinion in advertisements. can ensure that a team completes a forecast quickly and considers multiple perspectives from Some benefits of qualitative forecasting include the different departments to best inform their forecast. flexibility to use sources other than numerical data, Some companies might use executive opinion the ability to predict future trends and phenomena forecasting along with a quantitative method. in business, and the use of information from experts within a company's industry. DELPHI METHOD Industries that use qualitative forecasting Delphi technique (also known as Estimate-Talk- Estimate or ETE) is a structured communication Sales: Qualitative forecasting can help companies technique or method, originally developed as a in sales make decisions like how much of a product systematic, interactive forecasting method which to produce and when they should order more relies on a panel of experts. inventory. The Delphi method involves questioning a panel of Healthcare: Healthcare employees can use experts individually to collect their opinions. qualitative forecasting to identify trends in public Interviewing or gathering information from the health and decide which healthcare operations experts one at a time rather than in a group can might be in high demand in the near future. help to prevent bias and ensure that any consensus Higher Education: Colleges or universities can about business predictions stems from the expert use qualitative forecasting to predict the number of opinions on their own. Other employees then students who might enroll for the next term or year. analyze the experts' responses and return them with additional questions until settling on a Construction and manufacturing: Qualitative prediction that makes sense for the company. forecasting can show construction and manufacturing companies the number of different Delphi method example Questionnaires materials they use to help determine which What are the most critical factors influencing materials or equipment they might need for their the future of sustainable energy next project. development in the next decade? Agriculture: Farmers can use qualitative What are the key challenges to forecasting to assess their sales and decide which implementing a new healthcare technology crops to plant for the next season based on which in a hospital setting? products consumers purchase most often. Which skills are most essential for future employees in the field of artificial Pharmaceutical: Qualitative forecasting in intelligence? pharmaceuticals can help identify which What are the top priorities for a company to medications are popular among consumers and focus on when addressing climate change which needs people are using pharmaceuticals to impacts? predict which kinds of pharmaceuticals they might benefit from developing. Healthcare: JURY OF EXECUTIVE OPINION "What are the most important factors to consider when developing a new patient A method of forecasting using a composite forecast education program?" prepared by a number of individual experts. The experts form their own opinions initially from the "What are the key barriers to accessing data given and revise their opinions according to mental health services in rural the others' opinions. Finally, the individuals' final communities? opinions are combined. This approach relies on judgments from experts in sales, finance, purchasing, administration, or Operation Management Reviewer: Prelim 2nd Sem Technology: Examples of market surveys "What are the potential impacts of emerging Demographic suveys: Ask questions about age, blockchain technology on the financial gender, education, income, and more industry?" Product surveys: Ask questions about what users think of a product "Which emerging technologies have the most potential to revolutionize Customer experience surveys: Ask questions manufacturing processes?" about how customers feel about a product or service Education: Competitor research surveys: Ask questions about how customers perceive competitors "What are the critical skills that should be prioritized in the future curriculum for Brand surveys: Ask questions about whether primary school students?" customers know a brand and what they think about it "What are the most effective strategies to Feature request surveys: Ask questions about improve student engagement in online what new features customers would like learning environments?" SALES FORCE COMPOSITE a method of forecasting future demand for a product by adding together what each member of the sales force expects to be able to sell in his or her territory. a sales forecasting method that combines sales predictions from individual sales representatives to create an overall sales forecast for a company How it works 1. Sales representatives predict sales for a specific time period in their territory Market research 2. The representatives submit their forecasts to a central forecaster Market research evaluates the success of a 3. The forecaster combines the forecasts into company's services or products by introducing a single company forecast them to potential customers and recording details CONSUMER MARKET SURVEY about how they react. Companies can conduct market research with the help of their own The survey method of demand forecasting employees or by hiring outside agencies that involves gathering data directly from consumers, specialize in market research activities. customers, or market participants to make predictions about future demand for a product or Some ways to conduct market research include service. focus groups, consumer surveys, or blind product testing, where a customer tries a product without can be used to understand customers, competitors, having heard of it before. Based on participant and products. They can help businesses make reactions, companies can decide which products or decisions about marketing, product development, services to continue producing and which might and more. need revision in the production stage. Operation Management Reviewer: Prelim 2nd Sem Consumer surveys QUANTITATIVE FORECASTING Consumer surveys ask customers of a business Quantitative forecasting uses mathematical about their experience as a consumer. Companies models and statistical techniques to make might send consumer surveys to customers predictions. It relies on historical data and through mail-in questionnaires or forms sent mathematical algorithms to project future through email. values. Other options for conducting consumer surveys A way of estimating that relies on you having include cold-calling customers on the phone and data and numbers to be able to make a inviting customers in to the office for personal definitive, mathematical estimation of how interviews. After collecting information from long things will take or how much they will consumer surveys, employees can use the details cost. they learn to help inform their predictions about a company's future based on the experience of their existing customers. FORECASTING TIME HORIZON 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, production planning, budgeting Long-range forecast 3 years+ New Product Planning, Facility Location, R&D, Long-term Goals SEVEN STEPS IN FORECASTING Forecasting follows seven basic steps. 1. Determine the use of the forecast. 2. Select the items to be forecasted. 3. Determine the time horizon of the forecast: Is it short, medium, or long term? 4. Select the forecasting model(s). 5. Gather the data needed to make the forecast 6. Make the forecast. 7. Validate and implement the results Operation Management Reviewer: Prelim 2nd Sem Naïve Approach Weighted Moving Average Estimating technique in which the last period's actuals are used as this period's forecast, without The formula for the weighted moving average uses adjusting them or attempting to establish causal different weightage for data points from different factors periods. Typically, the weightage decreases with each data point from previous periods. MOVING AVERAGE The term “moving average” refers to the technical analysis technique that smoothens the fluctuation observed in the data in order to draw insights about any available trend or pattern in the data Exponential Moving Average (EMA) similar to Simple Moving Average (SMA), measuring trend direction over a period of time. However, whereas SMA simply calculates an average of price data, EMA applies more weight to data that is more current Operation Management Reviewer: Prelim 2nd Sem