written report

· Qualitative forecasting methods

· Quantitative forecasting using patterns of demand

· Long-range quantitative forecasting methods

· Short-range quantitative forecasting methods

· Selecting a forecasting method

( 8/1/2020 )Forecast is a prediction of future events, used for planning purposes.

Forecasts of future demand are needed at all levels of “Organizational Decision Making”

· Operations managers need reliable estimates of the demand for goods and services.

· Operations managers need estimates of the resources necessary to produce those goods and services and the time required to do so.

( 8/1/2020 )“Forecasting Demand for Services” is just as important as

“Forecasting Demand for Manufacturing Products”, especially when heavy capital investment is needed to provide those services.

For Example:

“How could airlines plan their purchases of aeroplanes without forecasts of demand for air travel”?

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· ( 8/1/2020 )Quantitative (Statistical)

· Qualitative (Judgmental)

( 8/1/2020 )Quantitative Forecasting Methods Uses “Historical” data

and is based on assumptions that current trends will continue into the future.

This type of forecasting is based on the observation of a pattern in levels of demand “over time”. This pattern is known as a

“time series”.

( 8/1/2020 )There are 5 basic patterns of time series:

· Historical—this illustrates an average level of demand .

· Trend—a trend is represented by an upward or downward slope .

· Cyclical— business cycles often span 4 to 8 years , while life cycles vary widely in duration. It is difficult to quantitatively address this component because a sufficient data history is rarely available.

· Seasonal—this usually repeats annually, but could be based on a day, week or month.

· Random—the magnitude of this component means it cannot be precisely forecast at a given time . However, the significance of the random factor's size can be observed, and it may be possible to predict the bounds of the random factor, which can help to determine the reliability of a forecast.

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Any forecast based on a pattern of demand relies on that pattern continuing in the future.

When using such forecasts it is important to identify the conditions that existed when the data were collected, and compare these against the conditions that now exist and those that are likely to exist in the future.

There are 2 factors that cause changes in the patterns

of demand for a particular product or service over time:

External Factors Internal Factors

( 8/1/2020 )Those factors that management cannot directly control.

Some economic factors, such as a booming economy, may influence demand, but their influence may not be equal for all products and services.

Other factors may positively affect one product while reducing the demand for another.

Those factors that are easier for management to control.

Examples include advertising and promotions to encourage customers to make purchases during off-peak demand periods, and developing products that have different seasonal peak demands in order to level production resource requirements.

( 8/1/2020 )Long-Range Quantitative Forecasting:

· Involves timeframes for more than one year.

· Statistical techniques are necessary to quantify probable future demand.

· Three methods are used to conduct long-range forecasts:

1. Simple Leaner regression Analysis

· Enables estimation of statistical relationships between variables.

· It is a causal method that relates a dependent variable to one or more independent variables by linear equation.

· The independent variables might be the external or internal variables that are assumed to affect demand.

2. Multiple Regression Analysis

· Reflects the relationship between a dependent variable and two or more independent variable.

3. Coefficient of correlation

· Is the statistical means of quantifying the relative importance of the relationship between two variables.

( 8/1/2020 )Short-Range Quantitative Forecasting:

· Operations Managers also need to make short-term forecasts. For example, number of workers to schedule next week OR the amount of inventory to order for next month.

· These events are not so much affected by trend patterns and cycles as by random or short-term factors.

· Common methods in this regard are as follows:

1. Simple Moving Average

2. Weighted-moving Average

3. Exponential Smoothing Method

4. Adjusted Exponential Smoothing

( 8/1/2020 )Qualitative Forecasting:

· When historical data is not available or current trends are likely to change. For example, if we need to forecast the length of time before a current technology becomes obsolete, we may base such a forecast on the opinions and expertise of people who are knowledgeable about changing technology.

· Qualitative forecasting methods may also be used in combination with quantitative methods to adjust quantitative forecasts when their record of accomplishment is poor, when the decision maker has important contextual knowledge or to compensate for specific events.

· Different methods are available such as:

1. Market Research

2. Surveys

3. Opinions

4. Delphi method

( 8/1/2020 )Qualitative

OR

Quantitative Forecasting Method?

( 8/1/2020 )Forecasting Method Selection:

· Cost and accuracy—a trade-off is sometimes necessary between these two factors.

· Data available—this will determine which type of qualitative or quantitative forecasting method should be used.

· Time span—long-range forecasts have different factors to short-range forecasts.

· Nature of products and services—different forecasting methods are appropriate for different products and services.

· Impulse response and noise dampening— the performance of the selected model must be continuously tracked because forecasting models differ in their impulse response and noise dampening capabilities.

Gaither and Frazier (2002, p. 92–95)

( 8/1/2020 )Short-term Forecasts: Quantitative time series methods are commonly used in the short-term as it is inexpensive to generate large numbers of forecasts, and good quality results (minimal errors) can be obtained. Causal models are not used as extensively for short-term forecasts. Whilst they are more accurate than simple time series forecasts, they take more time to develop, they are less likely to be understood and used, and they require more training. Qualitative judgment methods are rarely used. They are too costly to apply to thousands of routine short-term forecasts.

Medium-term Forecasts: Quantitative time series methods should not be used for medium-term forecasts, as it is unlikely that existing patterns will continue very far into the future. Causal models are most often used in the medium-term, as they are better at identifying turning points in trends. Qualitative judgment methods can also identify turning points and can be used when historical data are not available.

Long-term Forecasts: For long-term forecasts, aggregate demand for a product family expressed in homogeneous units, such as dollars of sales or tonnes of steel is more appropriate than forecasts for individual products or services. Causal models (adjusted for judgment) and judgment methods are preferred for long-term forecasting.

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( Module 5.1 Essential Resources )

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· Min, H. and Wen-Bin, V.Y. (2008). Collaborative Planning, Forecasting and Replenishment: Demand Planning in Supply Chain

Management. International Journal of Information Technology and Management, 7(1), 4-20.

· Acar, Y. & Gardner, E.S. (2012). Forecasting method selection in a global supply chain. International Journal of Forecasting, 28, 842-848.

· Weatherford, L.R. & Kimes, S.E. (2003). A comparison of forecasting methods for hotel revenue management. International Journal of Forecasting, 19, 401-405.

· Rai. B. (2016). Introduction to forecasting –With Examples. YouTube. Retrieved

Please answer the following questions and discuss in the module 5 discussion forum.

1. Investigate the types of qualitative forecasting techniques used in your organisation. How do senior managers identify the appropriate forecasting technique to use in different circumstances? Do you think these techniques are used appropriately in your organisation.

2. Visit the website of the government statistician in your country to examine and discuss the past year's breakdown (by month) of economic indicators. For example, Australian economic indicators can be found under Key Products on the Australian Bureau of Statistics website:

Conclusion

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MGT603

Systems Thinking

Dr. Arezou PourMirza Subject Coordinator & Lecturer

( Strategic Planning of Operations Methods )

· Analyse, select and apply systems modelling tools in integrating, optimising and enhancing business operations within contemporary organisations.

· Synthesise technological and non- technological solutions to business problems that promote integration and that optimise whole-of-enterprise operations.

· Production Capacity

· Capacity Planning Strategy

· Capacity Planning Decisions

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Capacity Planning is a crucial element of operations

strategy because it has major cost and operational implications .

( 8/8/2020 )Capacity Decisions are:

· Made when there is uncertainty about future demand.

· Depend on the growth (or decline) of demand for products/services.

· Aimed at using an organization's resources to maximize long-term profit while meeting cash-flow requirements.

The cost of potential excess capacity must be balanced against the cost of potential lost sales due to too little capacity.

Excess capacity costs money, especially for capital-intensive organisations (e.g. paper mills, utilities and steel mills). However, too little capacity can result in the inability to meet customer demand, particularly in service industries. Tight capacity does allow for higher equipment utilisation and a better return on investment.

( 8/8/2020 )Four activities that are relevant to Capacity Planning Decisions:

· Estimating the capacities of the present facilities.

· Forecasting the long-range future capacity needs for all products and services.

· Identifying and analysing sources of capacity to meet future capacity needs.

· Selecting from the alternative sources of capacity.

Gaither and Frazier (2002, p.165)

Production Capacity is “the maximum production rate of an organisation”.

However, organisations rarely operate at maximum rates of production, even when there are strong reasons for doing so.

( 8/8/2020 )Capacity is measured in different ways,

depending on the nature of the goods/services and other operational factors.

Two useful concepts are:

· Theoretical Capacity —the maximum output capability possible, allowing no adjustments for preventive maintenance, unplanned downtime, shutdowns and so on.

· Demonstrated Capacity —the proven capacity calculated from actual output performance data. Demonstrated capacity is generally less than theoretical capacity. It takes into account the production losses due to machine breakdowns, rework, sick time and so on.

( 8/8/2020 )Some measures of capacity:

Capacity can be expressed in terms of “outputs” or “inputs”. It is important to note that no single capacity measure is universally applicable.

Commonly used methods include:

· Output measures

· Input measures

· Average utilisation rate

· Peak capacity

· Effective capacity

· Bottlenecks

( 8/8/2020 )For Capacity Planning Strategy:

· Assessing existing capacity

· Forecasting future capacity requirements

· Choosing between alternative ways to build capacity

· Evaluating the financial options

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In developing a long-range capacity plan, an “organisation must make a basic economic trade-off” “between the cost of capacity and the opportunity cost of not having adequate capacity”.

· Capacity Cost: initial investment in facilities and the annual cost of operating and maintaining those facilities.

· Opportunity Cost: The cost of not having sufficient capacity. It incurs from lost sales and reduced market share.

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Capacity Strategy: how much 'capacity cushion' is best for various processes.

=> Capacity Cushion is when we subtract demand from effective capacity.

Conditions leading to large capacity cushions include:

· where the demand is uncertain , or where product mix changes .

· where finished goods inventory cannot be stored .

· where customer service is important .

· where capacity comes in large increments .

· where supply of material or human resources is uncertain .

( 8/8/2020 )Economies of Scale means that “for any given production facility

there will be a level of outputs that result in the least average unit cost ”. This level of output is called the facility’s “best operating level” .

As the best operating level is approached for a particular facility, economies of scale are achieved.

( 8/8/2020 )When Economies of Scale Occur:

· Fixed costs are spread further—as the facility utilisation rate increases, the average unit cost drops because fixed costs are spread over more units. Increments of capacity are often rather large.

· Purchased materials may be cheaper—higher volumes give the purchaser more bargaining power and the opportunity for quantity discounts.

· Process advantages may develop—as volume increases, processes shift toward a line flow. High volume may justify investment in more efficient technology. Benefits of dedicated resources include reduced inventory, reduced set-up costs, enhanced learning effects and process improvements.

separate products or services share activities , such as the same distribution channels or the same manufacturing facilities.

Gaither and Frazier (2002, p.173) define economies of scope as “... the ability to produce many product models in one highly flexible production facility more cheaply than in separate production facilities.”

If a particular product is not being produced at a high enough level to reach economies of scale in distribution, another product could be made to share the same distribution channel.

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For Example:

· Where a competitive priority is fast delivery, this requires large capacity cushions.

· Where quality management is a priority, uncertainty will be reduced and capacity may be affected.

· Where schedules are predictable, uncertainty will again be reduced and a smaller cushion may be allowed.

· Where capital expenditure is high, there will be pressure for high utilisation, and a lower capacity cushion.

· Where a capacity decision is made to build another facility, a suitable location will need to be found.

Step 1. Estimate capacity requirements—Begin with a long-range forecast of demand, productivity, competition and technological change, then convert demand into comparable units of capacity.

Step 2. Identify gaps—A 'gap' is the difference between projected demand and current capacity. It will be important to use the correct capacity measure, which is determined by what is critical to the bottleneck operation. Capacity can be expanded only if the bottleneck is one of the expanded operations. Otherwise, expansion just increases idle time.

Step 3. Develop options—The base case is to do nothing. Beyond that, options include varying the timing and size of capacity additions/closings. You could consider an expansionist strategy, a 'wait-and-see' strategy, or try expanding at a different location. You could also consider short-term options, e.g. overtime, temporary workers or subcontracting.

Step 4. Evaluate the options—Qualitative judgments include how each option fits with overall capacity planning strategy, and how it can affect uncertainties in demand, competitive reaction, technological change and cost. Possible quantitative judgment aids include net present value of after-tax cash flows, computer simulation, waiting line analysis and linear programming.

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( Module 5.2 Essential Resources )

· ( 8/8/2020 )Ashayeri, J. & Selen, W. (2018). An application of a unified capacity planning system. International Journal of operations & Production Management, 25(9), 917 – 937.

· Klassen, K.J and Rohleder, T.R. (2002). Demand and capacity management decisions in services: how they impact on one another. International Journal of Operations and Production Management, 22(5/6), 527- 49.

· Poles, R. (2013) System Dynamics modelling of a production and inventory system for remanufacturing to evaluate system improvement

strategies. International Journal of Production Economics , 144, 189-199.

· VanBerkel, P.T. and Blake, J.T. (2007). A comprehensive simulation for wait time reduction and capacity planning applied in general surgery. Health care Management Science, 10, 373-385.

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( Learning Activities )

( Select a process that you are familiar with and determine the following: The average utilisation r a te Peak capacity Eff ect i ve capacity The bottleneck. Please place your answers to the above questions on the module 5 discussion forum. The recommended word count is 300 - 400 words. You may li ke to use images and diagrams. You are also welcome to include factors that may not be explicitly s t a te d but which you believe fit within the context of the subject and are worthy of inclusion. )

Service layouts present special problems. Please view the following website to examine how Space Syntax approaches layout design.

Space Syntax. (2018). Space Syntax: Connect. Retrieved from https://spacesyntax.com/ Please discuss the different factors considered in service layouts?

Please place your answers to the above questions on the module 5 discussion forum. The recommended word count is 300 - 400 words. You may like to use images and diagrams. You are also welcome to include factors that may not be explicitly stated but which you believe fit within the context of the subject and are worthy of inclusion.

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Conclusion

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MGT603/MGMT6003

Systems Thinking

Dr. Arezou PourMirza Subject Coordinator & Lecturer

( Strategic System Intervention )

· Critically evaluate the paradigm of Systems Thinking conceptualisation and its application to contemporary business issues.

· Analyse, select and apply systems modelling tools in integrating, optimising and enhancing business processes within contemporary organisations.

· Synthesise technological and non- technological solutions to business problems that promote integration and that optimise whole-of-enterprise operations

· Supply Chain Management

· Purchasing

· Just-in-time manufacturing and service delivery

· Material requirements planning

company operations management in that it involves cooperation and close coordination of various operations of suppliers and the receiving organisation .

A prime objective is a speedy flow of materials along the supply chain, and to this end,

'just-in-time' principles

have been widely adopted.

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All in all,

· The ability to plan capacity strategically is central to the long-term efficiency and effectiveness of the supply chain.

· Likewise, location and layout decisions will affect logistical efficiency that is achievable in the supply chain.

an organisation's functions with those of its suppliers in order to match the flow of materials, services and information with customer demand .

All members of an organisation's supply chain have a mutual interest in identifying what competitive factors (e.g. cost, flexibility, speed of delivery) customers value, and then in maximising the performance of the supply chain as a whole so as to deliver maximum value.

· A large component of supply chain management is the efficient management of materials.

· Materials Management involves planning, coordinating and controlling the acquisition, storage, handling and movement of raw materials that are needed for the production process.

There are 3 components to Materials Management:

1. Management of raw materials and purchased parts (including purchasing, receiving, storage and retrieval of these materials);

2. Management of finished goods (including packaging and shipping, storage and retrieval in warehouses, and distribution to the customer); and

3. Management of materials during the conversion process (i.e. handling and storage of work-in-process inventories).

have several tasks:

First , working from long-range capacity plans involving facility locations, layouts and capacities, aggregate plans are drawn up to estimate and allocate resources over the medium-term to accomplish specific tasks.

Then , production schedules are drawn up to meet the forecasted levels of demand. The workload that the specified levels of production will entail at various workstations is calculated, and action is taken as required to either augment (or reduce) resources at workstations, or to revise the schedule.

Finally , the progress of jobs is monitored using planning and control systems to ensure that the planned schedule is in fact being achieved.

· First introduced by Japanese in the 1960s and 1970s at Toyota Manufacturer.

· It is a manufacturing system whereby organizations aim to produce all parts in the right quantity and quality, just in time to meet usage requirements at the next stage of product-distribution chain.

· The JIT philosophy is concerned with recognizing and tackling the real inefficiencies in the system, not “optimizing” the status quo.

· The purchasing, or procurement function is responsible for acquiring raw materials, component parts, tools and other items required from outside suppliers.

· Critical issues to consider in procurement is whether it is better to buy-in or make items that are used in the supply chain; and whether a single supplier or multiple suppliers should be used.

· The purchasing function in any organisation acts as an interface between suppliers and the production function.

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( Module 6.1 Essential Resources )

· Yasin, M.M., Wafa, M.A. & Small, M.H. (2001) 'Just- in-time implementation in the public sector: An empirical examination’, International Journal of Operations and Production Management, 21(9), 1195-12014.

· Webster, M., Muhlemann, A.P. & Alder, C. (2000) 'Decision support for the scheduling of

subcontract manufacture', International Journal of Operations & Production Management, 20(10), 1218–1235.

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( Learning Activities )

In the module 6 discussion forum please investigate and discuss the following

What criteria are used for purchasing decisions of key components in the supply chain in your organisation (or one with which you are familiar)?

What are the critical issues in the supply chain in your organisation? For example, has the decision whether to make or buy certain components been debated recently; and do you have single or multiple competing suppliers?

How are supply chain management responsibilities allocated and viewed in your organisation? Is supply chain management perceived by senior management as part of their competitive strategy, or simply something that they delegate to people at the shop- floor level?

Please place your answers to the above questions on the module 6 discussion forum. The recommended word count is 300 - 400 words. You may like to use images and diagrams. You are also welcome to include factors that may not be explicitly stated but which you believe fit within the context of the subject and are worthy of inclusion.

Ask a senior manager in your organisation to explain whether the principle of just-in-time has been applied to supply chain management in your organisation, and if so, how. Does he or she believe that the JIT philosophy has a significant impact on the effectiveness and efficiency of the supply chain? If JIT principles have been adopted, what implementation issues arose when the systems were changed, and how were these overcome? (Consider employee issues in particular.)

Please place your answers to the above questions on the module 6 discussion forum. The recommended word count is 300 - 400 words. You may like to use images and diagrams. You are also welcome to include factors that may not be explicitly stated but which you believe fit within the context of the subject and are worthy of inclusion.

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Conclusion