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violation of anti-trust laws and ordered PRODUCTION AND OPERATIONS it to dissolve. During his life Rockefeller MANAGEMENT donated more than $500 million to various philanthropic causes. The Industrial R...

violation of anti-trust laws and ordered PRODUCTION AND OPERATIONS it to dissolve. During his life Rockefeller MANAGEMENT donated more than $500 million to various philanthropic causes. The Industrial Revolution began in the 18th century, when agricultural societies 2. JAMES B. DUKE became more industrialized and urban. The transcontinental railroad, the cotton James Buchanan Duke (December gin, electricity and other inventions 23, 1856 – October 10, 1925) was an permanently changed society. American tobacco and electric power industrialist best known for the introduction of modern cigarette In the beginning of the 1860 in the manufacture and marketing, and his USA, farmers left the farm to work in involvement with Duke University. He the factories. was the founder of the American Tobacco Company in 1890. Reason: 1. Better Pay James Buchanan Duke, known by the 2. Protected from 4 weathers in the USA nickname "Buck", was born on 3. Benefits, if any. December 23, 1856, near Durham, North Carolina, to tobacco Captain of the 19th Century manufacturer, philanthropist, and benefactor of Duke University, 1. JOHN D. ROCKEFELLER Washington Duke (1820–1905), and John D. Rockefeller (1839-1937), his second wife, Artelia Roney. founder of the Standard Oil Company, 3. ANDREW CARNEGIE became one of the world’s wealthiest men and a major philanthropist. Born Andrew Carnegie ( November 25, into modest circumstances in upstate New 1835 – August 11, 1919) was a York, he entered the then-fledgling oil Scottish-American industrialist and business in 1863 by investing in a philanthropist. Carnegie led the Cleveland, Ohio refinery. In 1870, he expansion of the American steel established Standard Oil, which by the industry in the late 19th century and early 1880s controlled some 90 percent became one of the richest Americans of U.S. refineries and pipelines. Critics in history. accuse Rockefeller of engaging in unethical practices, such as predatory He became a leading philanthropist in pricing and colluding with railroads to the United States, Great Britain, and eliminate his competitors in order to gain the British Empire. During the last 18 a monopoly in the industry. In 1911, the years of his life, he gave away around U.S. Supreme Court found Standard Oil in $350 million (roughly $6.5 billion in 1 2023), almost 90 percent of his fortune, to Carnegie Mellon University, and the charities, foundations and universities. His Carnegie Museums of Pittsburgh, 1889 article proclaiming "The Gospel of among others. Wealth" called on the rich to use their wealth to improve society, expressed 4. CORNELIUS VANDERBILT support for progressive taxation and an Cornelius Vanderbilt (May 27, 1794 – estate tax, and stimulated a wave of January 4, 1877), nicknamed "the philanthropy. Commodore", was an American Carnegie was born in Dunfermline, business magnate who built his wealth Scotland. He immigrated to what is in railroads and shipping. After now Pittsburgh, Pennsylvania, United working with his father's business, States with his parents in 1848 at the Vanderbilt worked his way into age of 12. Carnegie started work as a leadership positions in the inland telegrapher. By the 1860s he had water trade and invested in the investments in railroads, railroad rapidly growing railroad industry, sleeping cars, bridges, and oil effectively transforming the geography derricks. He accumulated further wealth of the United States. as a bond salesman, raising money for As one of the richest Americans in American enterprises in Europe. He built history and wealthiest figures overall, Pittsburgh's Carnegie Steel Company, Vanderbilt was the patriarch of the which he sold to J. P. Morgan in 1901 for wealthy and influential Vanderbilt family. $303,450,000 (equal to $11,113,550,000 He provided the initial gift to found today); it formed the basis of the U.S. Vanderbilt University in Nashville, Steel Corporation. After selling Carnegie Tennessee. According to historian H. Steel, he surpassed John D. Roger Grant: "Contemporaries, too, Rockefeller as the richest American of often hated or feared Vanderbilt or at the time. least considered him an unmannered Carnegie devoted the remainder of his life brute. While Vanderbilt could be a to large-scale philanthropy, with special rascal, combative and cunning, he was emphasis on building local libraries, much more a builder than a wrecker working for world peace, education, and being honorable, shrewd, and scientific research. He funded Carnegie hard-working." Hall in New York City, the Peace Palace 1877 in The Hague, founded the Carnegie Corporation of New York, Carnegie The Industrial Revolution brought the Endowment for International Peace, growth of the factory system, Carnegie Institution for Science, enlarged markets and new scale Carnegie Trust for the Universities of technologies. The factory system Scotland, Carnegie Hero Fund, brought large concentrations of workers 2  and raw materials together, posing the Contributions of Management problems of organizing, directing and Pioneers controlling work. 1. Robert Owen – concentrated on The Interstate Commerce Act of 1887 is improving the working conditions of a United States federal law that was workers which led to production and designed to regulate the railroad industry, profit. particularly its monopolistic practices. The Act required that railroad rates be 2. Charles Babbage – Principles of "reasonable and just," but did not Division of Labor. Improve the empower the government to fix specific managing process. rates. 3. Frederick Taylor – 4 scientific 1877 and 1890 management principles to increase productivity in the workplace. Father of 1877 – interstate commerce act, rates of Scientific Management. Introduced the using trains published, allowed the ICC to rest period during the work day, along supervise railroad. 1890 congress with a differential pay rate system. passed the Sherman Antitrust Act – illegal companies create monopolies. 4. Henri L. Gantt – he introduced the charting for production scheduling. 1874 – Frederick W. Taylor - 4 scientific Incentive system of paying employees. management principles to increase productivity in the workplace. Father of 5. Frank/Lilian Gilbreth – introduced Scientific Management. Introduced the the employee development program – rest period during the work day, along with boost morale. a differential pay rate system. 6. Henry Fayol – Founder of Classical 1920 Management School. Researchers are looking for a relationship 7. Mary Follett – group process between the working condition and 8. Oliver Sheldon – ethics is essential productivity. to management good governance Hawthorne Effect – Elton Mayo – social 9. Chester Barnard – informal environment of employee organization, decision making 1950 to 1960 10. Hugo Munsterberg – tools of Mathematical Models were introduced psychology to industry and management and developed quantity management - – productivity Douglas Mcgregor – 3 11. Elton Mayo – Hawthorne Effect. 1. Differentiation Strategies – the org Better environment of employee is trying to be different from the rest 12. Peter Drucker – MBO 2. Cost leadership strategies – huge scale of production 13. Douglas Mcgregor - Theory X and Y 3. Market segmentation strategies – company divides the market. ---Focus 14. Frederick Herzberg – Theory of Motivation known Satisfier and Competitive Priorities Dissatisfier. Price or Cost Strategy – sells the 15. William Ouchie – Theory Z – product at a very low price. combination of Japanese and American Practice. Quality Strategy - produces high quality of goods and services. Delivery Strategy - delivery of goods Skills needed by All kinds of Manager and services at a given time. 1. Technical Skills – is the ability to use Product Mix Strategy - is a group of tools, procedures and techniques in a products, which are sold by the same specialized field. company. 2. Human Skills – is the ability to work Service Strategy – services to attract with people. more customers. 3. Conceptual Skills – is the ability to Eco-Friendly Products - produces and coordinate and integrate all of the sells eco friendly products. organization's interests and activities. Competitive Advantage – a condition or circumstances that puts a company in a favorable or superior business Production Strategies – are broad long position. term plans. Roadmap for the production department. 2 types of competitive advantages Types of Production Strategies Flexible Response Strategy - emerging changes in the market. Business Strategies – made for the entire organization. Covers all Low Cost Strategy – massive market departments. Top level management. competition by selling its product at low, low price. 4 Forecasting – is the art and science of Qualitative Forecasting – is an predicting future events, plans or weather. estimation methodology that uses expert judgement rather than In business, forecasting is the basis for numerical analysis. budgeting, planning, sales, production, inventory, manpower and more. a. Expert Opinion b. Focus Group Uses of Forecasting c. Historical Analogy d. Delphi Method 1. Helps the manager to plan e. Market Research - survey 2. To plan by using a system – long f. Panel Consensus term or short term Quantitative Method – is based on Forecasting are use in the ffg.: mathematical models. 1. Profit Inventory – represent finished and 2. Revenues unfinished goods which have not been 3. Cost sold by the company. Maintain a buffer 4. Productivity Changes to meet uncertainties in demand, supply 5. Price and availability and movements of goods. - Accounting 6. Interest rate department is in charge of the basic 7. Movement of economic indicators inventory. 8. Prices of stocks and bonds Two Periodic system (Inventory) Steps in Forecasting The Periodic System – is a physical 1. Determine the Forecast’s count of goods on hand at the end of a Objective period. FIFO,LIFO – is applied to derive 2. Select the Item to be Forecasted an inventory value. 3. Determine the forecast time The Perpetual System – requires horizon continuous recording of receipt and 4. Select The Forecasting Model disbursement for every item of inventory. I. Judgemental Forecasting Model Inventory Costing – includes all II. Time Series Model expenditures relating to inventory 5. Gather the Data Needed to Make acquisition, preparation and readiness the Forecast for sale, minus purchase discounts. 6. Make the Forecast 7. Validate and Implement the Rationale for Keeping Inventory Result 1. Time – 2. Uncertainty – 5  3. Economies of scale - one units Two Main Objectives of Inventory at a time – bulk buying Management Stages of Inventory 1. Making adequate availability of Inventories 1. Raw Materials – components 2. Minimizing costs and Investment parts of making the product in Inventories 2. Work in Process (WIP) - transformation of raw materials to Basic Concept of TQM finished goods 3. Finished goods – goods ready 1. Continuous Improvement of for delivery and sale to customers Quality 4. Goods for resale – returned 2. Central Focus on the customer goods that are salable. 3. Systematic Improvement of Operations 3 Major motives behind inventories in 4. Open work environment an Enterprise 5. Long Term Thinking 6. Development of Human 1. Transaction Motive – Resources 2. Precautionary Motive - 7. Management Responsibility for 3. Speculative Motive – TQM Leadership Scheduling – time based Benefits and Cost of Holding TQM – is an enhancement to the Inventories traditional way of doing business. Is a proven technique to guarantee survival 1. Avoiding losses of sales in world class competition. 2. Reducing ordering cost 3. Achieving Efficient Production run Inventory Management Is a discipline primarily about specifying the shape and placement of stocked Two types of cost in handling goods. It required location within facility inventories or within a location of supply network to 1. Material Cost – includes raw proceed the regular and planned course materials, order cost, of production and stocks of materials. components. Purpose: 2. Carrying cost – insurance, wages and labor. - To ensure availability of materials in sufficient quantity and when required; 6 - To minimize investment in inventories and should be kept in reasonable limits; - To keep stocks in such a way that neither there is over stocking nor understocking. Risk and Cost of Handling Inventory 1. Capital Cost 2. Cost of Ordering 3. Cost of Stock outs 4. Storage and Handling Costs 5. Risk of Price Decline 6. Risk of Obsolescence Purpose and benefits of holding an inventory 1. Avoid loss of sales 2. Gain quantity discount 3. Reduces Order Cost 4. Efficient Production 5. Reduces risk of production shortage Technique in Inventory Management 1. Determination of Stocks Levels - Minimum Level : - Lead time - Rate of consumption - Nature of Materials 7 ENTR 20053 ENTREPRENEURIAL What is digital Media? MARKETING STRATEGIES Digital media refers to mediums of Marketing - Marketing is the act of digitized information broadcast satisfying and retaining customers. It is through a screen and/or a speaker. one of the primary components of This also includes text, audio, video, business management and commerce. and graphics that are transmitted over Marketing is typically conducted by the the internet for viewing or listening to on seller, typically a retailer or manufacturer. the internet. Products can be marketed to other businesses or directly to consumers. Digital media can be used for the communication of current events, Marketing Management - Marketing entertainment, videos, or inviting management is the strategic audiences to participate in sharing and organizational discipline that focuses on discussing topics. Digital media also has the practical application of marketing the purpose of advertising to educate orientation, techniques and methods about a product, company, or service or inside enterprises and organizations and to sell a product or a service. on the management of marketing resources and activities. Three Types of Digital Media Process-based management - is a 1. Owned Media management approach that views a 2. Paid Media business as a collection of processes, 3. Earned Media managed to achieve a desired result. Processes are managed and improved by the organization for the purpose of CUSTOMER FOCUSED achieving its vision, mission and core MANAGEMENT values. Focus management is a style of Processed-based Management - is a management that focuses on management approach designed to managing attention and one's state, improve a company's operations and rather than managing time. It involves processes, so it achieves higher levels of prioritizing tasks and working on them in efficiency and expected goals. the order that makes the most sense, while also taking into account personal Benefits of Processed Based preferences and capabilities. The goal is Management to capture moments of concentration 1. Cost Saving and attention, rather than planning a 2. Improved Quality calendar and how much time to spend 3. Faster time to Market on each task. 8 CUSTOMER SERVICE Ask questions: Ask questions to clarify the customer's request and show that Customer service is the support and you're trying to understand. assistance a business offers to its customers before, during, and after they Apologize: Take responsibility for any buy or use a product or service. It's a mistakes and apologize sincerely. strategic function that can help a business Empathize: Show the customer that you grow and differentiate itself from understand and care. competitors. Respond quickly: Respond to the Customer service can include: complaint as soon as possible. Follow up: Follow up with the customer. Answering questions Troubleshooting issues Avoid challenging: Avoid challenging Offering product suggestions the customer's complaint. Handling complaints Be flexible: Be flexible in your Following up with customers approach. Processing orders Updating records Thank the customer: Thank the customer. Customer service can be provided Offer support: Offer support to the through multiple channels, such as customer. phone, email, text, chat, or in person. Companies are increasingly using AI and The way you handle a customer automation to improve customer service, complaint can make the difference such as chatbots to help with agent between keeping or losing a customer. workflows. HANDLING STRESS WHILE SERVING Providing excellent customer service can CUSTOMERS help a business: Drive brand loyalty and recognition, Differentiate itself from Here are some ways to handle stress competitors, and Ensure long-term while serving customers: success. Identify stress triggers: Figure out what causes stress, such as difficult HOW TO HANDLE CUSTOMER customers, unrealistic expectations, or a PROBLEMS heavy workload. When handling customer problems, you Practice relaxation techniques: Try can try these steps: deep breathing, mindfulness, or short Listen: Actively listen to the customer to breaks to stay calm and composed. understand their problem and how best to Maintain a healthy lifestyle: Eat a handle it. healthy diet, exercise regularly, and get 9 enough sleep to help your body cope Customer understanding: Get with stress. to know your customers and Develop coping strategies: Personal understand their background. coping strategies are essential for Customer retention: Understand high-stress roles. how customers perceive your brand and how to retain them. Take care of yourself: Take breaks, socialize, reward yourself, and exercise Other factors that can contribute to restore your energy. to a great customer experience Ask for help: Ask your manager or include: Friendly attitude, Helping colleagues for help to relieve stress. customers make informed decisions, Seamless digital Practice time management: Schedule interactions, Multi-lingual support, tasks in advance to avoid last-minute and User-friendly technology. work and manage your workload. Seek professional help: Consider TRENDS IN THE CUSTOMER seeking professional help to manage SERVICE stress. Automation FACTORS TO ENHANCE AI-powered chatbots and virtual CUSTOMERS RELATIONSHIPS assistants can handle simple and Here are some factors that can help repetitive tasks, freeing up enhance customer relations: customer service agents to focus Communication: Consistently on more complex issues. communicate with customers to Personalization understand their needs and fulfill Companies can use customer them. data to personalize the customer Feedback: Ask for and experience, such as by encourage feedback from addressing customers by name customers to identify areas for or making personalized improvement. recommendations. Loyalty programs: Offer Omnichannel support incentives to customers, such as Customers expect to be able to discounts, to encourage them to contact businesses through stay loyal to your brand. multiple channels, such as Customer service: Have a clear phone, email, chat, social media, strategy for customer service and and self-service portals. hire dedicated customer service Transparency staff. Address any issues Businesses should be promptly. transparent about how they 10  collect, use, and share customer Purpose data. Empathy The goal of environmental scanning is to Customers expect customer help management determine the service teams to be empathetic. organization's future direction. It can Predictive maintenance help identify opportunities and threats Businesses can monitor that could impact future decisions. equipment to detect potential Information issues before they become a Environmental scanning includes problem. gathering information about a variety Sentiment analysis of factors, such as economic, social, Businesses can analyze technological, legal, and environmental customer feedback to determine trends, as well as competitor and market customer sentiment and identify information. areas for improvement. Voice assistants Strategic planning Voice assistants can provide Environmental scanning is a crucial quick and easy access to component of strategic planning and is information. closely related to a SWOT analysis. Activities Some activities that can be performed ENVIRONMENTAL SCANNING as part of an environmental scan include reviewing organizational documents, Environmental scanning is a process interviewing staff, and collecting and that involves gathering and analyzing analyzing data. information about an organization's internal and external environments to Example of Environmental Scanning: help guide decision-making. SWOT stands for Strengths, Environmental scanning refers to examining external environmental Weaknesses, Opportunities, and factors that can affect an organization. Threats. This method is used to Environmental data is important for determine what the company is good at marketers as it can provide them with and the areas of improvement within its information about the potential control while maintaining awareness of competition, changing consumer tastes the threats facing the company. and preferences, future market trends, risks, and opportunities. 1. Strength – an inherent capacity of an organization which helps it 11  gain a strategic advantage over impacts the environment, and how to its competitors. improve those impacts. 2. Weakness – an inherent Environmental strategy is a firm's constraint or limitation which long-term orientation about how to creates a strategic disadvantage manage the environmental practices to for a business. gain a good fit with its stakeholders' 3. Opportunity – a favorable expectations. Proactive environmental condition in the organization’s strategies are those that involve environment enabling it to anticipation of future regulations to strengthen its position. voluntarily prevent negative 4. Threat – an unfavorable environmental impact. condition in the organization’s environment causing damage to Here are some examples of the organization. environmental strategies: Renewable energy: Using energy The 4 important factors of from the sun, water, and other Environmental Scanning sources that don't emit harmful gasses. The four important factors of Sustainability: Using natural environmental scanning are events, resources without compromising trends, issues, and expectations. future generations' economic and Events are occurrences which take place social development. in different environmental sectors of a Conserving water: Saving water business. Sometimes these events follow reduces the amount of energy and a pattern and tend to move in a specific money needed to pump, treat, and direction. supply it to homes. Resource conservation: What is Environmental Strategy? Reducing the environmental impact An environmental strategy is a company's of consumption and supply chains. plan for how to interact with the Environmental entrepreneurship: environment and its stakeholders, Using entrepreneurship to solve while environmental marketing is a environmental problems. strategy for promoting products or Biodiversity: Investing in services that benefit the environment. biodiversity and mitigating the loss of species. Environmental strategy Corporate environmental A company's long-term plan for strategies: Responding to managing its environmental practices environmental issues like waste, to meet stakeholder expectations. It can emissions, water pollution, and include identifying how a company land use. 12 What is Demand Management: Demand management Demand management is a process that Involves understanding customer wants involves analyzing, planning, and and needs, and planning how to meet controlling the demand for a company's them. It's a planning methodology that products or services. The goal is to meet helps organizations improve the customer needs while maintaining the connection between marketing and right supply levels and minimizing costs. operations. Demand management is a Forecasting – is the art and science of cross-functional process that involves predicting future events, plans or weather. Marketing: Understanding trends and buying patterns In business, forecasting is the basis for budgeting, planning, sales, production, Supply chain management: Managing inventory, manpower and more. procurement, development, manufacturing, and delivery Uses of Forecasting Customer service: Working with customers to understand their needs 1. Helps the manager to plan 2. To plan by using a system – long Inventory: Ensuring there's enough stock term or short term to meet demand Forecasting are use in the ffg.: Effective demand management can help businesses improve their efficiency 1. Profit and profitability. Some activities that are 2. Revenues part of demand management include: 3. Cost communication, modeling, sales 4. Productivity Changes forecasting, and customer evaluation. 5. Price and availability 6. Interest rate Demand management is often done after 7. Movement of economic indicators supply chain management and before 8. Prices of stocks and bonds portfolio management. Steps in Forecasting Demand management and forecasting are processes that help organizations 1. Determine the Forecast’s plan for and meet customer demand for Objective their products and services: 2. Select the Item to be Forecasted 3. Determine the forecast time horizon 4. Select The Forecasting Model 13  I. Judgemental Forecasting Projections and Trends: Analyzes Model historical data to identify growth trends II. Time Series Model and patterns 5. Gather the Data Needed to Make Scenario Planning: Allows businesses the Forecast to create "what-if" scenarios by adjusting 6. Make the Forecast variables 7. Validate and Implement the Result Easy Reporting: Simplifies sharing forecast insights across the organization Qualitative Forecasting – is an CloudZero: A cloud cost forecasting estimation methodology that uses expert solution that helps teams understand judgement rather than numerical cloud costs analysis. Epicflow: A tool for business and a. Expert Opinion portfolio management that helps b. Focus Group prioritize tasks and analyze business c. Historical Analogy success d. Delphi Method – is a round of Organization charts: Can help identify multiple questionnaires sent to areas where new staff may be needed panels of experts for validation, or where departments can be combined interpretation etc. Mean Absolute Percentage Error e. Market Research - survey (MAPE): A formula used to calculate the f. Panel Consensus accuracy of a forecast Real-time analysis: The ability to analyze and adapt to real-time data Here are some tools and guides for accurate forecasting: Seasonality assessment: Recognizing and accounting for seasonal patterns and trends Forecasting tools: Excel, Tableau, and R are tools that can help identify trends and Automation: Using advanced seasonal patterns in historical data. algorithms and machine learning Forecasting methods: Some common techniques to minimize human errors forecasting methods include straight-line, and biases moving average, simple linear regression, and multiple linear regression. Demand management is a process that Business forecasting tools: Some helps businesses meet customer business forecasting tools include: demand by planning, controlling, and regulating product and service demands. It involves a number of steps, including: 14 Forecasting: Predicting what customers coordination is essential to achieve will want in the future alignment. Demand analysis: Researching to BUSINESS IMPACT AND CRITICAL understand demand for a product or RELATIONSHIP IN BUSINESS service Planning: Setting objectives that consider Business impact analysis (BIA) market potential, financial costs, and A systematic process that predicts the logistics potential consequences of a Communicating: Consulting with disruption to a business. A BIA helps consumers to determine what they want identify critical business functions and Influencing: Using strategies to influence processes, and the financial and demand, such as offering discounts or operational impacts of disruptions. The free deliveries results of a BIA can help organizations develop a business continuity plan Prioritizing: Prioritizing production based (BCP) or disaster recovery plan (DRP). on market potential and other factors Inventory planning: Using forecasting results to plan inventory levels, including Sales and operations planning what to order, where to source raw (S&OP) materials, and how to schedule manufacturing An integrated planning process that helps companies align demand, Demand management is a supply, and financial planning. S&OP cross-functional process that involves helps companies identify potential bridging the gap between consumer risks and take action to minimize their demand, supply teams, inventory, impact. By keeping sales and marketing marketing, and customer service. activities in sync with production Effective demand management can help capabilities, companies can avoid businesses improve their efficiency and mismatches between supply and profitability. demand. Demand capacity: Demand Here are some ways that BIA and management helps you coordinate S&OP can help businesses: capacity demands, such as production time, inventory and resources. Capacity Identify critical functions planning is critical because it directly impacts cost centers. Operating A BIA can help identify the most critical expenses are impacted when demand business functions, systems, and and capacity are out of sync, so processes. This helps organizations prioritize recovery efforts and ensure 15  that vital operations continue during and Inventory management after a disruption. Manage customer demand and Predict consequences inventory levels to meet customer needs without excess or shortage. A BIA can help businesses predict the operational and financial impacts of Diversify suppliers disruptions. This helps organizations Have multiple suppliers as a backup develop strategies to mitigate these option in case your main supplier has impacts. issues. Align demand and supply Technology S&OP helps companies align demand Use technology to improve processes and supply plans, which can improve and make the supply chain more forecast accuracy, capacity planning, and streamlined. customer service. Analyze market conditions Avoid mismatches Use historical data to understand past S&OP helps companies avoid demand patterns and adapt to changing mismatches between supply and customer needs. demand by keeping sales and marketing activities in sync with production Engage stakeholders capabilities. Educate stakeholders and establish a feedback loop. Prioritize flexibility RECOMMENDATIONS ON HOW TO IMPROVE COMPANY’S DEMAND Be adaptable and prioritize flexibility. MANAGEMENT SYSTEM Forecasting Demand management helps Use historical data to forecast demand businesses meet customer needs and and plan for the future. Adjust forecasts stay competitive. It also helps prevent based on current market conditions. supply chain disruptions and operational problems. Demand planning Optimize resources and streamline operations to respond to demand fluctuations. 16 FORECASTING, 3. Production Scheduling INVENTORY MANAGEMENT, Forecasting plays a crucial role in MATERIAL REQUIREMENTS determining production schedules to meet expected demand. It helps Forecasting is the process of operations managers plan the volume predicting future events based and timing of production runs, ensuring on historical data and analysis. that goods are produced efficiently. This It helps businesses plan and leads to smoother workflow and avoids make informed decisions to meet production bottlenecks. future demand. Forecasting involves estimating 4. Financial Planning future outcomes, such as sales Forecasting supports budgeting and or market trends, using data and financial planning by providing insights statistical tools. It guides into future revenues and costs. It helps companies in preparing management make informed decisions resources and strategies to about capital investments, pricing, and handle upcoming changes. cost- cutting strategies. Financial stability is enhanced when future IMPORTANCE OF FORECASTING IN performance can be anticipated. OPERATIONS MANAGEMENT 5. Supply Chain Management 1. Demand Planning Forecasting is essential for coordinating Forecasting helps businesses predict activities across the supply chain, from future customer demand, allowing them procurement to delivery. It allows to ensure that the right products are businesses to anticipate supplier available at the right time. This reduces needs and adjust order quantities the risk of overstocking or understocking. accordingly. This leads to better It also aids in meeting customer relationships with suppliers and reduces expectations and maintaining optimal delays in the supply chain. inventory levels. 6. Risk Management 2. Resource Allocation By predicting future trends and potential Accurate forecasting allows companies to challenges, forecasting allows allocate resources like labor, materials, businesses to mitigate risks. and equipment efficiently. By Companies can develop uncertainty understanding future needs, businesses plans to deal with market fluctuations, can avoid underutilization or overuse of economic downturns, or unexpected resources. This ensures cost-effective events. This proactive approach operations while maximizing productivity. minimizes disruptions to operations. 17 APPROACHES IN FORECASTING Judgmental Forecasting Methods 1. Qualitative 1. Executive Opinion Qualitative forecasting is a method that - Forecasts made by top relies on subjective judgments, executives based on their opinions, and expert knowledge rather experience and knowledge. than statistical data. It's often used 2. Sales Force Composite when historical data is limited or - Salespeople estimate future unavailable, or when factors like new demand based on their product launches or economic changes conversations with the are difficult to quantify. customers. 3. Consumer Surveys 2. Quantitative - Forecasts based on data The quantitative approach in forecasting collected directly from consumers uses numerical data and statistical through surveys to understand methods to predict future events. It relies their preferences and future on historical data to create mathematical buying plans. models, such as trend analysis or 4. Outside Opinion regression, to forecast future outcomes. - External experts provide This approach is useful for making forecasts on areas where the accurate, data-driven predictions in company lacks expertise, like areas like sales, demand, and production. political or economic factors. 5. Opinions of Managers and FORECASTING MODELS Staff - Collecting forecasts and opinions 1. Judgemental Forecasting from managers and staff, often Model - Forecast Based on structured through the Delphi Judgment and Opinion Method. Forecasting based on judgment and opinion. Delphi Method A qualitative approach Process used to arrive at a group used to predict future or opinion or decision by surveying a panel trends. Commonly used in of experts. industries/situations where Selection of Experts data is limited such as: Initial questionnaire ○ New products Collection of responses ○ Major economic or Share feedback political changes Follow-Up Questions ○ Market expansions Reach a Consensus 18  2. Time Series Model - 1. Trends are long-term upward or Forecast on Time Series Data downward movements in the A time-ordered sequence data. of observations taken at 2. Seasonality refers to patterns regular time intervals (eg. that repeat at regular intervals, hourly, daily... etc.) such as daily, weekly, monthly, or Time series models are yearly. used to forecast future 3. Cycles are patterns that fluctuate events based on previous over a longer period than events that have been seasonality, often related to observed (and data economic cycles or collected) at regular time industry-specific factors. intervals (Engineering 4. Irregular variations are Statistics Handbook, 2010) unexpected events or anomalies that disrupt the overall pattern of Key Components of Time Series the data. Models: 5. Random variations are unpredictable fluctuations in the Time: The most fundamental aspect of data that cannot be explained by time series data is the temporal other patterns. component. Each data point is associated with a specific time period, FORECASTING TECHNIQUES such as days, weeks, months, or years. 1. Straight Line - uses historical Variable: The variable of interest is the data and trends to predict quantity being forecasted. It could be forecasts. It is used to track a sales volume, stock prices, temperature, constant or straightforward or any other metric that changes over view of the growth rate of the time. company. Pattern Recognition: Time series models 2. Moving Average - smoothing are designed to identify patterns and technique that looks at average trends within the data, such as trends, performance in a given time seasonality, and cycles. period of data to establish a prediction. The time period could be in shorter time frames like hours, days, weeks, and months Time Series Forecasts (patterns) but not for long terms that reach years. Inventory levels can be tracked using this technique 19  since you need to know the Measureable - The average months that your supply accomplishment of a goal can be will run out. Because it helps a measured by a specific criteria company see the underlying established. patterns such as how often do we Achievable - The goal is viable order raw materials from our and can be attained with the suppliers? To help predict when company’s skills and resources. to order again. Relevant - The goal is within reach and is aligned to the 3. Simple Linear Regression - company’s purpose. widely used tool for analyzing Timely - The time frame for the the relationship between goal to be accomplished is set independent and dependent from its start date to its end date. variables to make predictions. It uses a chart wherein the 2. Select the Item to be Forecasted dependent variable is visible on - Specify the product or service the y-axis and the independent intended for performance variable is seen on the x-axis. prediction. 4. Multiple Linear Regression - 3. Determine the forecast time analyzing the relationship Horizon between two or more - Identify the duration (in days, independent variables to create week, months or yearly) for which forecasts. It uses historical data the forecast will be made for the and observations from relevant selected item. trends and events. 4. Select The Forecasting Model - Choose the appropriate STEPS IN FORECASTING IN THE forecasting model based on the OPERATIONS MANAGEMENT type of data, the forecast’s purpose, and the desired 1. Determine the Forecast’s Objective accuracy. - Establish the objective as the framework, ensuring each step is Two Forecasting Models: clearly defined and aligned with I. Judgemental the overall purpose. Forecasting Model - relies on expert SMART Objective opinions, often used Specify - The goal is well- when historical data defined and clear. 20  is limited or ACCURACY AND CONTROL OF non-existent. FORECAST II. Time Series Model - uses historical data, Forecast Accuracy organized by time, ○ Is a method used to judge to identify patterns the quality and accuracy of or trends. your forecasts. It measures how closely the 5. Gather the Data Needed to predicted demand for Make the Forecast products or services Collect historical data or matches the actual market information demand. relevant to the items being ○ Measures how accurate forecast. the forecast is by Data Cleansing - the comparing the predicted process of fixing or values with the actual removing incorrect, outcomes. corrupted, incorrectly formatted, duplicate, or Forecast Error incomplete data within a ○ Forecast error is the dataset. difference between the actual demand and Data Cleansing Process forecasted demand. Error 1. Deduplication = Actual - Forecast 2. Exclusion of Irrelevant ○ Forecasters want to Observations minimize forecast errors 3. Management of Incomplete Data ○ A forecast is good when 4. Outlier Identification the error measure is small. 5. Rectification of Structural Errors 6. Validation Forecast Accuracy Metrics 6. Make the Forecast Three most common types of - Use the selected model and forecast accuracy metrics. collected data to generate the forecast. 1. Mean Absolute Deviation 7. Validate and Implement the Result (MAD) - Assess the forecast’s accuracy Calculated as the average and implement it in of absolute differences decision-making. 21  between predicted and actual values. Measures the average of the forecast errors in units. It provides a straightforward interpretation of forecast INVENTORY MANAGEMENT accuracy in the same units as the data. Inventory management is the process of overseeing and controlling a company’s stock, which includes everything from raw materials and components to finished products ready for sale. It involves tracking the 2. Mean Squared Error (MSE) movement of inventory, placing Measures the average of orders for new stock, storing items the squares of the properly, and managing their use differences between throughout production or sales. forecasted and actual Effective inventory management values. ensures that a company has the right Calculates the average of materials in the right quantities, at the the squares of the errors, right time, to meet demand without emphasizing larger errors overstocking or running out of supplies. due to squaring. IMPORTANCE OF INVENTORY MANAGEMENT Proper inventory management is crucial for the smooth operation of any 3. Mean Absolute Percent Error business, ensuring that products are (MAPE) available when customers need them Calculates the average of and in the right condition. Here’s why absolute percentage inventory management is so important: difference between predicted and actual 1. Increases Profit values. Avoids Overstocking: Effective Expresses forecast inventory management helps accuracy as a percentage, businesses avoid excess making it easier to stock, which can lead to higher interpret across different storage costs, waste, or obsolete scales. 22  items. It helps ensure that capital is not tied up in unsold products. 3. Enhances Operational Prevents Stockouts: By Efficiency maintaining optimal stock levels, Improves Order businesses can avoid running Fulfillment Speed: With out of popular items, which well-organized inventory means fewer missed sales systems, businesses can opportunities and a more stable process orders more revenue stream. quickly, ensuring that Reduces Holding Costs: items are readily Lowering the need for extra accessible for picking, warehouse space and handling packing, and shipping. fees helps in minimizing costs Reduces Waste and associated with storing excess Loss: Inventory inventory. management helps track expiration dates, 2. Improves Customer damaged goods, and Satisfaction slow-moving items, Ensures Product Availability: ensuring that stock is used Proper inventory management effectively and minimizing ensures that products are waste. available when customers need them, reducing the risk of 4. Supports Better stockouts and ensuring timely Decision-Making fulfillment of orders. Provides Real-Time Reduces Delivery Delays: With Data: Up-to-date inventory accurate inventory tracking, information helps businesses can process and businesses make ship orders more efficiently, informed decisions leading to faster deliveries and about when to reorder, happier customers. which products to Minimizes Errors and Returns: promote, and which items By managing inventory to phase out. accurately, businesses can Identifies Trends and reduce instances where the Demand Patterns: By wrong items are shipped, leading analyzing sales data and to fewer returns and exchanges, monitoring customer which enhances customer trust preferences, businesses and satisfaction. can adjust their inventory to match 23  demand, plan for 3. JIT (Just-In-Time): Minimize seasonal trends, and inventory by scheduling deliveries optimize product and production to meet demand offerings. exactly when needed, reducing Enables Forecasting: storage costs. With accurate inventory 4. EOQ (Economic Order data, businesses can Quantity): A formula that forecast demand more determines the ideal order size to accurately, plan minimize the total cost of production schedules inventory. better, and align 5. ABC Analysis: Classifies purchasing with inventory into three categories: anticipated needs. ○ A items: Most valuable and tightly controlled. EFFECTIVE INVENTORY ○ B items: Moderately MANAGEMENT important. ○ C items: Least valuable, Basics of Inventory in typically lower-cost, but Manufacturing: still essential. 1. Raw Materials: The ingredients Leveraging Digital Tools: or basic inputs waiting to be processed. Cloud-based Inventory 2. Work-in-Progress (WIP): Systems: Provide real-time Partially finished products still in visibility of your entire inventory, the production stage. from raw materials to finished 3. Finished Goods: Completed goods. products ready to be sold or Inventory Key Performance shipped to customers. Indicators (KPIs): Measure the effectiveness of inventory Key Inventory Management management, such as inventory Techniques: turnover, stockout rate, and carrying cost. 1. FIFO (First In, First Out): Cycle Counting: Regular Prioritize using the oldest stock counting of portions of inventory first to avoid spoilage and to keep records accurate obsolescence. throughout the year, avoiding 2. LIFO (Last In, First Out): Use large end-of-year stock audits. the newest inventory first, common when products have high turnover rates. 24 MATERIAL REQUIREMENTS product-based manufacturers, understand inventory requirements while balancing supply and demand. Businesses use MRP systems, which are subsets of supply chain management systems, to efficiently manage inventory, schedule production and deliver the right product—on time and at optimal cost. IMPORTANCE OF MRP DEPENDENT AND INDEPENDENT Without MRP, businesses face several DEMAND risks: Dependent Demand 1. Overstocking - Ordering too Dependent demand refers to much inventory, which increases goods whose demand is carrying costs and ties up more closely correlated with the cash in inventory overhead that demand for another good, could be used elsewhere. meaning that the need for one 2. Understocking - Inability to meet good depends on the need for demand because of insufficient another. raw materials, resulting in lost sales, canceled contracts and Independent Demand out-of-stocks. Independent demand refers to 3. Production Delays - Disruptions the demand for finished goods in the production cycle, delaying or end products that is not sub-assembly builds that result in influenced by demand for other increased production costs and products. It is typically driven by decreased output. external market conditions, such 4. Inefficient Use of Resources - as customer orders and sales Poor inventory management forecasts. leads to underutilization of labor and equipment, causing wasted MATERIAL REQUIREMENTS operational capacity and PLANNING increased costs from unplanned overtime or emergency Material Requirements Planning procurement. (MRP) is a standard supply planning system to help businesses, primarily 25 BENEFITS OF MRP 5. Increased Customer Satisfaction 1. Ability to Track By optimizing production and MRP systems enable businesses inventory processes, MRP to monitor raw materials, ensures timely delivery of components, and finished products. This leads to meeting products. This helps in keeping customer demands more an eye on stock levels, consistently, enhancing their production schedules, and order satisfaction with the service or status, ensuring everything is product. accounted for. 2. Ability to Evaluate MATERIAL REQUIREMENTS INPUTS Allows companies to assess their AND OUTPUTS inventory needs and production capabilities. It helps in evaluating Inputs current stock levels against future 1. Master Production Schedule production demands, enabling Also called master better decision-making. schedule. The master schedule 3. Better Inventory Planning outlines the anticipated MRP helps optimize inventory production activities of levels by ensuring that materials the plant. It specifies what are available when needed, products and quantities reducing excess stock and need to be produced over stockouts. This leads to a more a specific time period. efficient production process and cost savings. 2. Bill of Materials The bill of materials is a 4. Improved Utilization detailed list of all the raw With MRP, businesses can plan materials, component production schedules better, parts, subassemblies, and resulting in efficient use of assemblies required to equipment, labor, and resources. produce, manufacture, or It ensures that production is repair a one unit of a running smoothly and that specific finished product. resources are not wasted. 3. Inventory Records File Also called inventory records. 26  Contains important PROCESS OF MATERIAL real-time information on PROCUREMENT a company’s inventory. It lets managers know Materials Procurement what they have on hand, ○ Materials Procurement is where that inventory is and the process of the overall status of the identifying, selecting, inventory. negotiating, and purchasing materials Outputs and services from 1. Primary Reports external sources to meet Planned Order an organization's needs. Schedules Outline the quantity and Indirect Procurement vs Direct timing of future material Procurement orders. ○ Direct procurement Order Releases refers to acquiring goods Authorize orders to be and services that are made. directly involved in and Changes to Planned play an integral role in a Orders company’s production of Include cancellations or its products revisions of the quantity or ○ Indirect procurement time frame. involves the acquisition of goods and services 2. Secondary Reports that support the overall Performance Control operations of a business Reports but are not directly used Used to track problems to in the production of its evaluate system core products. performance. Planning Reports Procedure of Material Used in forecasting future Procurements inventory requirements. ○ Requisitioning Exception Reports Formal Request Reports on any major Specifications of problems/discrepancies Details encountered. Seek Approval ○ Planning And Scheduling 27  Identify Potential Supplier Fix Delivery Timelines Create a Bill of Materials (BOM) ○ Supplier Selections and Negotiation Supplier Selection and Evaluation Negotiate Terms and Condition Create a Purchase order ○ Receipt and Materials Inspection Receive the Purchase Order Cross- check and Evaluate the Quality and Quantity ○ Payment Issued Process Payment According to Agreed Terms 28