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Operations & Forecasting - Coggle Diagram

- - - - a primary business function along with marketing and finance, vital in achieving a company's strategic plans
      - Typically involve the greatest number of the company's employees and a large portion of the firm's capital asset
      - Should provide desirable products in the appropriate quantities, at the appropriate times of the required quality and at a reasonabel cost
  - - - Cost
      - Quality
      - Flexibility
      - Delivery
  - - - began in England in the late 18th century with the development of the steam engine which replaced human labor powered machines
      - Great britain: birthplace of industrial revolution; US became the leading nation during industrial revolution
      - The scientific method
        
        One of the new concepts inspired by the Industrial Revolution that emerged
        
        Frederick Taylor used this to experiment with work methods in search for the best way to perform a job
        
        Four principles of Taylor's Scientific Management Theory
        
        1.Scientific methods are used to discover the most efficient way to perform a task
        
        Clear divisions of responsibilities
        
        Performance-based pay
        
        Rigid hierarchy and strict surveillance of employees
      - Management Science
        
        aka Operations Research
        
        Concerned with the development and application of mathematical and statistical theory to business situations
        
        Involves the use of models to describe and provide an undeerstanding of a problem and its alternative solutons
        
        developed a wide body of models of PPIC
  - - - improved ability to record, summarize, analyze and communicate data has reduced the need for so many layers of management, and organizations have become flatter, more flexible, organizations have become flatter, more flexible, and more responsive to the changing environment
      - Enterprise Resource Planning (ERP) Systems
        
        help provide a unified database for a corporation
    - - rely on employing only a minimum of inventories or other resources to make products
      - Successful implementation of JIT requires that companies develop reliable supplier networks, sound preventive maintenance programs, and excellent quality control programs
    - - Business process engineering (BPR)
        
        A strategic management approach that is focused on fundamentally rethinking and redesigning core business processes to achieve significant improvement in performance and efficiency
        
        Focuses on optimizing end-to-end processes and eliminating redundancies
        
        BPR is not a one-time project, but a continuous journey of innovation and optimization. Organizations must continuously evaluate and refine their processes to adapt to evolving business.
        
        in pharmaceutical operations
        
        BPR can be applied to clinical research process since we have the tools
        
        Reengineering systems can be applied to PPI
      - to adopt new approach which involves creativeness
    - - Advances in information technology allow manufacturers to track orders and match production to changes in demand.
      - The game plan is to use information to better coordinate inventory replenishment with upstream and downstream supply chain partners.
      - includes
        
        Electronic Data Interchange (EDI);
        
        Efficient Consumer Response (ECR); and
        
        Vendor Managed Inventory (VMI).
      - Four supply chain initiatives that help companies to take back power from their supplier:
        
        Honing the skills of procurement;
        
        Embracing supplier optionality;
        
        Reevaluating the relationship between suppliers and buyers; and
        
        Making the supply chain visible.
  - - - Job shop manufacturing business contracts to make-to-order custom products, typically in low volumes
        
        These factories need general-purpose production equipment and employees who have a broad range of skills.
        
        Generally classified as high-variety, low-volume manufacturers
    - - mass production facilities that produce a high volume of the same or similar units of product that follow the same path through the production steps
      - made to stock
    - - Adopted in pharmaceutical manufacturing
        This facility makes some intermediate variety of products and produces an intermediate volume of each.
      - The production equipment used must be capable of performing some variety of tasks, but the range of possible operations is much narrower than in a job shop.
  - - - Immediate critical time frame
      - Typical decisions are: assignment of work to work stations or to machines, sequencing of these works on a given machine, short-term inventory control issues. Notice that all these decision levels are strongly connected.
    - - provides a framework to build strategic tactical and operational control models.
      - In addition to classifying strategy as it relates to time, people think of strategy as it relates to the focus of the factory.
      - A focused factory has process technology adequate for its product mix and volume, and has reliable, high quality products in tune with the market.
    - - concerned with the definition of the product line, the determination of the location, size and number of plants and warehouses that the firm needs in order to serve its market.
      - It is also concerned with the acquisition of new production equipment, and the design of working centers within each plant.
      - An essential characteristic of the strategic decisions is that they have long lasting effects thus forcing long planning horizons in the analysis. This in turn requires considerations of uncertainties in the decision making process.
    - - The basic problem to be resolved is the effective allocation of resources to satisfy the demand and the technological constraints.
      - Typical decisions to be made are the size of regular work-force, the rate of production, the distribution of goods in existing distribution channels, and setting company targets for inventory levels.
      - done within the framework of the long range planning process.
      - tactical is subset of strategic
- - - - 1st step:to determine market potential, or total industry-wide sales expected in a particular product category for the time period of interest.
      - 2nd step: the company’s sales potential can be estimated.
        
        Sales potential = the maximum total revenue it hopes to generate from a product or the number of units of it the company can hope to sell.
        
        expressed as percentage
        
        equivalent to the company’s estimated maximum market share for the time period.
  - - - tends to be several months up to 2 years into the future and is referred to as intermediate term.
      - Both quantitative and qualitative forecasting may be used in this time frame.
    - - daily up to months in the future.
      - These forecasts are used for operational decision making such as inventory planning, ordering and scheduling of the workforce.
      - Usually quantitative methods such as time series analysis are used in this time frame.
    - - tends to be completed at high levels in the organization. The time frame is generally considered longer than 2 years into the future.
      - Detailed knowledge about the products and markets are required due to the high degree of uncertainty. This is commonly technologies and opening new facilities. Often no historical data is available.
  - - - Are appropriate when past data are not available.
      - Usually applied to intermediate- or long-range decisions.
      - subjective, based on the opinion and judgment of consumers and experts
      - Types
        
        Executive Judgment (Top Down)
        
        Get the opinion of managers on the forecasted sales of the product.
        
        Much more demanding; the bosses want a lot of sales.
        
        Concern: very much higher and more demanding, not reasonable because of demand
        
        Sales Force Opinion (Bottom Up)
        
        Salesmen are consulted. They know the market. They provide forecasted sales (conservative) for the product or product lines.
        
        More on conservative side; they will give a lower forecast because they don't want to commit to selling more that they can’t conveniently deliver.
        
        It goes for the safe choice. Their sales are based on their commission, if they can’t hit commission because of the forecast, they are then at a disadvantage.
        
        Delphi Method
        
        Market Surveys
        
        A better forecast would be a mixture of the Top Down and Bottom Up methods.
        
        Don’t just rely on the sales force. External entities may make the forecast.
        
        The better forecasting method lay in between executive and sales force opinion.
    - - used to forecast future data as a function of past data.
      - Appropriate to use when past numerical data is available and when it is reasonable to assume that some of the patterns in the data are expected to continue into the future.
        These methods are usually applied to short- or intermediate-range decisions.
      - examples of forecasting methods (categorized as time-series methods)
        
        Causal (econometric) forecasting methods
        
        Last period demand (naïve)
        
        Simple and weighted N-Period moving averages
        
        Simple exponential smoothing
      - Quantitative forecasting models are often judged against each other by comparing their accuracy performance measures
        
        Mean Absolute Deviation (MAD)
        
        Mean Squared Error (MSE)
        
        Mean Percentage Error (MPE)
      - Casual (Econometric) Forecasting Methods
        
        In statistical modeling, regression analysis is a set of statistical processes for estimating the relationships among variables.
        
        based on the relationship between one or more independent variables and a dependent variable. This approach relies on historical data to identify patterns and relationships that inform predictions about future events
        
        It might either be linear regression or multiple regression
  - - - The popular Fitbit may be producing six different models. Each model may be offered in several different colors. Each of those colors may come in small, large, and extra large. The forecast of each model will be far more accurate than the forecast for each specific end item.
    - - The farther away the forecast is from the current date, the more uncertainty it will contain.
  - - - -A consistent upward or downward movement of the demand. This may be related to the product's life cycle.
    - - A pattern in the data that tends to last more than one year in duration.
    - - Many products have a seasonal pattern, generally predictable changes in demand that are recurring every year.
      - Fashion products and sporting goods are heavily influenced by seasonality.
    - - Often demand can be influenced by an event or series of events that are not expected to be repeated in the future.
        
        Often, they are related to events such as interest rates, the political climate, consumer confidence or other market factors.
      - Examples might include an extreme weather event, a strike at a college campus, or a power outage.
    - - Random variations are the unexplained variations in demand that remain after all other factors are considered. Often this is referred to as noise.