L#1

Here’s a clear, structured, and complete set of notes covering your topic: Introduction to
Production and Operations Management (POMA). It includes definitions, concepts, and
summaries, ideal for study or exams.

📘 Introduction to Production and Operations

Management (POMA)

🔹 What is POMA?

 POMA stands for Production and Operations Management.

 Previously Known As:
o Production Management → Production and Operations Management →
Operations Management.
 Common Confusion:
o Not the same as Operations Research (OR) or Production Engineering.
o OR = Field of Engineers, uses mathematical modeling.
o OM = Field of Managers, uses practical/real-world scenarios.

🔹 Tentative Course Content

Units & Topics:

Unit Topics Lectures

Unit I Introduction, Productivity, Strategy, Competitiveness 5
Unit II Forecasting 3
Unit III Design of Production Systems 12
Unit IV Quality 10
Unit V Operating and Controlling the System 15

🕰️History of Management Thought

 Frederick Taylor:
o Known as the "Father of Scientific Management".
o Introduced time studies and standardized tasks.
 Frank and Lillian Gilbreth:
o Focused on motion studies.
o Introduced ergonomics and efficiency improvements.
Summary: These pioneers helped transform management into a scientific and analytical
field, laying the groundwork for modern operations management.

🔍 Difference: Operations Management vs. Operations

Research
Aspect Operations Research (OR) Operations Management (OM)
Approach Mathematical Modeling Practical/Real-world Applications
Field Engineering Management
Scope Entire system improvement Can be applied to parts of the system
Tool for Engineers Managers
Focus Quantitative analysis Case studies, scenarios, human + system focus

🎯 Why Study Operations Management?

➤ What is an Organization?

 A business entity that delivers value through goods or services.

 Can be for-profit or non-profit.

➤ Role of Operations Manager:

 Core Leadership role in any organization.

 Ensures sustainability, efficiency, and growth in operations.

➤ Key Responsibilities:

 Manages inputs: materials, labor, services, land, capital, energy.

 Oversees processes that convert inputs to outputs.
 Adds value through efficient and optimized systems.

🏗️Operations Management: Bridge Between Engineering

& Management
🧩 The Bridge Analogy:

 Two Islands:
o One is Engineering
o One is Management
 OM acts as the bridge, connecting:
o Technical precision of engineering
 o Strategic and human focus of management

🧠 Balanced Decision Making:

 Must consider both engineering tools (efficiency, design) and management

principles (strategy, leadership).
 Weakest Link Rule: The system is only as strong as its weakest link (whether in
engineering or management).

✅ Core Concepts & Definitions

Term Definition
Operations
Management of processes that transform inputs into goods/services.
Management
Production
Focused on manufacturing and physical product creation.
Management
Forecasting Predicting future demand for effective planning.
Productivity Measure of output per unit of input.
Strategy Long-term planning to achieve competitive advantage.
Competitiveness Ability of a firm to offer products/services better than rivals.
Inputs Resources like raw materials, energy, labor, etc.
Outputs Finished goods or services delivered to customers.
Enhancing inputs to make them more valuable through
Value Addition
transformation processes.

Would you like me to proceed with Unit I notes (Introduction, Productivity, Strategy, and
Competitiveness) in full detail next?

L2

Here are the clearly structured notes based on Lesson 2 of the Production and Operations
Management (MGT613) course from Virtual University of Pakistan:

Lesson 2: Introduction to Production and Operations

Management (Contd.)
🔄 Recap of Lesson 1

 Course Content: Units and lecture-wise division.

 Key Functions in an Organization: Finance, Marketing, Operations.
 Operations Management: Management of systems that create goods or services.
 Operations Function: All activities related to producing goods/services.
  Types of Systems:
o Production Systems: Focused on manufacturing.
o Service Systems: Focused on intangible value.

🏭 Manufacturing vs. Service

Manufacturing Services
Time-perishable, intangible
Transformation of raw materials into finished goods.
experiences.
Involves processes like fabrication (e.g., semiconductor,
Customer acts as a co-producer.
steel).

Service Firms: Facilitate goods distribution, support business goals, and add value to
personal lives.

📈 Production & Service Growth in Pakistan

Growth driven by:

 Private Sector
 Public Sector
 Public-Private Partnerships
 Government Projects

👨‍💼 Key Responsibilities of Operations Managers

 Forecasting
 Capacity Planning
 Scheduling
 Inventory Management
 Quality Assurance
 Employee Motivation
 Facility Location Decision

🧠 5W2H Decision Framework

 What: Resources/Amount needed

 Why: Reason for task
 When: Time to schedule
 Where: Place of execution
 How Much: Quantity needed
  How: Method/Design
 Who: Responsible person

🎯 Decision Making in OM

 Certainty vs. Uncertainty

 Tools Used:
1. Models
2. Quantitative Methods
3. Trade-off Analysis
4. Systems Approach

🧮 Applications of Models

 Easy to use, cost-effective

 Help in structured problem-solving
 Increase problem understanding
 Facilitate “what-if” analysis
 Use math power and consistent formats

📜 Historical Development of OM

 JIT (Just-In-Time)
 TQC (Total Quality Control)
 Manufacturing Strategy Paradigm
 Total Quality Management (TQM)
 Business Process Reengineering
 Supply Chain Management
 E-Commerce and Internet Tech

🌐 Current Business Trends

1. Internet and E-Commerce

2. Advanced Management Technology
3. Globalization
4. Supply Chain Management
5. Business Agility

🏢 OM as the Nucleus of Organizations

  Central function in both services and manufacturing.
 Decisions in OM affect all other business units.

🚨 Current Issues in OM (Especially in Pakistan)

 Managing post-merger operations

 Flexible supply chains for customization
 Global network of suppliers & distributors
 Supplier commoditization
 Building a “Service Factory”
 Enhancing value-added services
 Using Internet efficiently
 Delivering quality services

⚙️What is a Productive System?

 Productive System: Converts inputs into both goods and services.

 Production System: Specifically produces physical products.

🔄 Transformation Types

 Physical: Manufacturing
 Location: Transportation
 Exchange: Retailing
 Storage: Warehousing
 Physiological: Healthcare
 Informational: Telecom

📦 Goods vs. Services

Goods Services
Tangible outputs Intangible experiences
Created in factories Delivered interactively (e.g., bank teller, hairstylist)

Note: Many products are hybrid combinations of goods and services.

🌍 Service Employment Trends (Selected Countries)

Country 1980 2000
USA 67.1% 74.2%
Canada 67.2% 74.1%
Pakistan 13.3% 23.9%
China 13.1% 40.6%

📉 Stages of Economic Development in Pakistan

Stage Main Activity Tech/Structure

Pre-Industrial Agriculture, Mining Traditional, Family-based
Industrial Goods Production Machines, Hierarchies
Post-Industrial Services, Info Global, Intellectual, Digital

🔁 Operations Function in Services

 Exists in: Healthcare, Police, Restaurants, Consultancy, etc.

 Core to both goods and service industries.

💵 Operations & Marketing

 Value Addition: Finished goods value – raw material cost

 Marketing: Identifies customer needs → Communicates to operations/design
 Eliminates non-value-adding activities (e.g. excess storage)

💰 Finance Function

 Secures & allocates resources

 Interacts with Operations for:
o Budgets
o Investment analysis
o Funding needs

🧭 Historical Evolution of OM

1. Industrial Revolution (1770s)

2. Scientific Management (1911) – Mass production, Interchangeable parts
3. Human Relations (1920–60)
4. Decision Models (1960s–70s)
5. Japanese Influence – Quality & Efficiency
🍞 Supply Chain Example: Bread

 Supply Chain: Series of activities/orgs delivering goods or services.

 From wheat farm → Mill → Bakery → Market → Breakfast table.

Let me know when you're ready for notes on the next lesson or if you’d like a PDF or
flashcards made out of these.

L#3

Here's a summary of the key points from your shared content on "Competitiveness,
Strategy, and Productivity" from MGT613 - Production and Operations Management:

1. Key Definitions
 Competitiveness: The ability and willingness of a company to compete effectively
with others by fulfilling customer needs better than rivals.
 Strategy: A systematic plan of action that uses defined resources to achieve goals.
 Productivity: The ratio of output (goods/services) to input (resources like labor or
time).

2. How Organizations Compete

Businesses compete through various strategies:

 Price: Lower prices attract more customers if quality is acceptable.

 Quality: Superior materials and workmanship add value.
 Product Differentiation: Unique features, like adding a GPS system to a car.
 Flexibility: Ability to adapt to changes (e.g., product features, sales targets).
 Time: Speed of delivery or service and correction of errors.

3. Competitiveness in Practice
 Organizations must answer:
o What do customers want?
o How to deliver value to them?
 Value Formula:
o Value = Performance / Cost
 o Where Performance = Quality + Speed + Flexibility
o Or more generally: Value = (w1×Quality + w2×Speed +
w3×Flexibility) / Cost
 Organizations use Performance Measurement Models (PMM) to assign and track
scores across operational dimensions.

4. Gaining Competitive Advantage

Organizations can achieve this through:

A. Marketing Strategies

 Identifying consumer needs

 Effective pricing
 Advertising and promotion

B. Finance Strategies

 Managing sources and uses of funds

 Investments and capital structure
 Debt-equity leverage

C. Operations Strategies

 Product/service design
 Cost efficiency
 Strategic location
 Quality matching price
 Agility (quick response)
 Flexibility in production
 Inventory & supply chain management
 After-sales service

5. Why Organizations Fail

Common reasons include:

1. Focus on short-term financial gains

2. Ignoring strengths and market opportunities
3. Overlooking competitive threats
4. No clear operations strategy
5. Overemphasis on design, lack of continuous improvement
6. Neglecting investment in capital/human resources
7. Poor internal communication
8. Ignoring customer wants and CRM
6. Mission, Strategy & Tactics Framework
 Mission: Why the organization exists
 Goals: Specific objectives derived from the mission
 Strategy: Broad plans to achieve goals
 Tactics: Specific actions to implement strategies
 Operations: Daily procedures that support tactics

Example:

 Mission: Live a good life

 Goal: Successful career, good income
 Strategy: Earn a business degree
 Tactics: Choose a field with high market value
 Operations: Enroll, study, graduate, get a job

7. Strategy Examples
 Low cost (economical)
 Scale-based (critical volume)
 Specialization (focused features)
 Flexible operations (adaptability)
 High quality (superior performance)
 Service (meeting/exceeding customer expectations)

Competitive Advantage Attributes:

1. Price
2. Quality
3. Time
4. Flexibility
5. Service
6. Location

L#4

Here are short and easy notes from the Operations Strategy topic of Production and
Operations Management – MGT613:

🌟 Short & Easy Notes – Operations Strategy (MGT613)

🔶 Distinctive Competencies

These are unique strengths that give a competitive edge:

1. Price – Low cost

2. Quality – High performance or reliability
3. Time – Fast delivery or response
4. Flexibility – Ability to change product or process
5. Service – Good customer support
6. Location – Easily accessible

🔶 Operations Strategy

 A plan that supports the overall business strategy.

 Guides the operations department (like production or services).

🔶 Strategy Design Process

Steps to make an operations strategy:

1. Understand customer needs

2. Make corporate strategy
3. Make operations strategy
4. Take decisions on production, infrastructure, etc.

🔶 Organizational vs Operational Strategy

Organizational Operational
Big picture, long term Narrow focus, short term
Made by top management Made by middle management
Less detail More detail

🔶 Important Concepts

 Sub-optimization: When a department improves at the cost of the whole organization

– should be avoided.
 System Approach: Looking at the big picture.

🔶 Order Qualifiers vs Order Winners

  Order Qualifiers: Basic features to be in the competition.
 Order Winners: Features that make customers choose your service.

Example:
Bank offering 10% return (qualifier)
Bank also gives interest-free loan (winner)

🔶 Steps to Develop Service/Manufacturing Strategy

1. Segment the market

2. Identify demand & profit patterns
3. Find order qualifiers & winners
4. Turn winners into performance goals

🔶 Key External Factors

 Economy (macro & micro)

 Politics (PEST analysis)
 Legal (regulations)
 Technology
 Competition
 Market conditions

🔶 Key Internal Factors

 Human resources (skills)

 Equipment & facilities
 Finance (cash availability)
 Customers (loyalty)
 Products/services (value)
 Technology (competitive)
 Suppliers (supply chain)

🔶 Strategic Service Vision

1. Service Levels – What customer gets

2. Perception – What people think of the service
3. Delivery – How service is offered
4. Vision – Long-term plan
🔶 Operating Strategy

Covers:

 Operations
 Marketing
 HR
 Finances
 Controls

🔶 Service Delivery System

Includes:

 People, equipment, layout

 Quality control
 Capacity to serve at peak
 Differentiation
 Entry barriers

🔶 Competitive Service Strategies

Cost Leadership:

 Target low-cost customers

 Use self-service
 Reduce network costs

Differentiation:

 Be unique (brand, service, tech)

 Customize services
 Train staff well

🔶 Online Banking Criteria (Pakistan)

 Availability – 24/7 access

 Convenience – Use from anywhere
 Dependability – Correct and timely info
 Personalization – Recognizes customer
 Price – Fair fees
 Quality – Reliable service
 Reputation – Trusted bank
  Safety – Data protection
 Speed – Fast loading

🔶 Service Purchase Decisions

 Service Qualifier – Basic level required

 Service Winner – Feature that makes customer choose
 Service Loser – Bad service that turns customer away

🔶 Customer Categorization (Call Centers)

 Coding – Customer value

 Routing – Different queues
 Targeting – Offers to top customers
 Sharing – Sell data to others

🔶 Quality & Time Strategies

Quality-Based Strategy
– Focus on improving quality at the source

Time-Based Strategy
– Reduce time in 6 areas:

1. Planning time
2. Design time
3. Processing time
4. Changeover time
5. Delivery time
6. Response time

L5

Here are short and easy notes on the topic of Productivity from Production and Operations
Management (MGT613):

📌 Productivity – Short & Easy Notes

✅ What is Productivity?
  Definition: Productivity is the ratio of output to input.
 It shows how efficiently resources are used.
 Also known as efficiency.

✅ Types of Productivity Measures

Type Formula Example

Partial Output ÷ One Input Output per labor hour

Multifactor Output ÷ Multiple Inputs Output ÷ (Labor + Material + OH)

Total Output ÷ Total Inputs Output ÷ (All resources used)

✅ Productivity Growth Formula

Growth=Current Productivity−Previous Productivity /Previous Productivity

 Result is unit-less (no unit).

✅ Examples of Productivity Measures

 Labor Productivity: Units per labor hour

 Machine Productivity: Units per machine hour
 Capital Productivity: Output per Rupee invested
 Energy Productivity: Output per kilowatt-hour

✅ Solved Example: Multifactor Productivity

Given:

 Output = 7500 units at Rs.10 each = Rs.75,000

 Inputs = Labor (10k) + Material (5k) + Overhead (20k) = Rs.35,000
MFP =

7500035000=2.14\frac{75000}{35000} = 2.14

✅ Factors Affecting Productivity

1. Capital – Good machinery increases productivity

 2. Quality – Poor quality causes rework
3. Management – Good planning improves performance
4. Technology – Modern tech helps, but must be managed carefully

✅ Other Factors Affecting Productivity

 Standardization – Uniform processes reduce errors

 Internet – Increases speed and access
 Viruses/Hackers – Reduce IT productivity
 Lost Items – Time wasted finding items
 Scrap/Waste – Reduces usable output
 New Workers – Need training before productive
 Others: Safety, Layoffs, Labor Turnover, Incentives, Workspace Design

✅ Bottleneck Operation

 A slowest process that reduces total output.

 Found using Theory of Constraints (TOC).
 Must be improved to increase whole system productivity.

✅ Steps to Improve Productivity

1. Identify bottlenecks
2. Develop improvement methods
3. Set realistic goals
4. Get support from management
5. Measure and share improvements
6. Know the difference between productivity vs. efficiency

✅ Example: Time Productivity

Last Week: 400 forms / 2000 hours = 0.2

This Week: 480 forms / 2200 hours = 0.22
✅ Productivity is increasing

✅ Pakistani Industry Examples

Textile Sector (2003–04 to 2004–05)

 Mills increased by 6.77%

 Spindles increased by 5.69%
 Looms increased by 13.95%

Automobile Sector

 Car Production: +25.8%

 Motorcycle Production: +47%
 Tractors: +23.5%

✅ How Nations Can Improve Productivity

1. Buy local – Less foreign imports

2. Cut wasteful govt. regulations
3. Balance between services and manufacturing
4. Set and monitor goals
5. Use local resources wisely

✅ Summary

 Productivity helps improve efficiency, competitiveness, and profitability.

 Both companies and countries benefit from improving productivity.

Let me know if you want these in PDF, flashcards, or notes for the next topic.

L6

Got it! You’ve provided a detailed overview of Decision Making in Production and
Operations Management, including:

 The decision-making process steps

 Criteria like costs, profits, ROI, risk, demand, etc.
 Decision environments: Certainty, Risk, Uncertainty
 Decision theory elements and payoff tables
 Decision making methods under uncertainty: Maximin, Maximax, Laplace,
Minimax Regret
 Decision making under risk using Expected Monetary Value (EMV)
 Decision trees and sensitivity analysis
 An example with payoff tables and a homework question with payoff tables for
multiple decisions and states of nature.
Homework Task

You have two payoff tables and need to calculate the results for the five decision rules:

Probabilities (for first table): 0.30 0.25 0.10 0.35

Payoff Table 1 (Profit, Rs.000) S1 S2 S3 S4
d1 50 -20 75 60
d2 80 30 100 -10
d3 25 35 10 45
d4 55 65 -15 40
Probabilities (for second table): 0.40 0.15 0.10 0.35
Payoff Table 2 (Cost, Rs.000) S1 S2 S3 S4
d1 40 20 75 60
d2 30 70 90 10
d3 60 55 5 85
d4 40 100 15 35

What to calculate for each table and each decision alternative (d1 to d4):

1. Maximin — Find the minimum payoff for each alternative, then select the maximum
of these minimums.
2. Maximax — Find the maximum payoff for each alternative, then select the maximum
of these maximums.
3. Laplace — Calculate the average payoff for each alternative (equal weights).
4. Expected Monetary Value (EMV) — Calculate the weighted average payoff using
given probabilities.
5. Minimax Regret —
o Construct the regret table by subtracting each payoff from the best payoff in
that state of nature.
o Find the maximum regret per alternative.
o Choose the alternative with the minimum of these maximum regrets.

Let me do the calculations for Payoff Table 1 (Profit):

Sum
Min (for Max (for
Decisio (for Max
S1 S2 S3 S4 Maximi Maxima EMV Calculation
n Laplace Regret
n) x)
)
(50 -20
To be
- +75 0.3(50)+0.25(-
d1 50 75 60 -20 75 calculate
20 +60)=16 20)+0.1(75)+0.35(60)
d
5
d2 80 30 10 - -10 100 (80 + 30 0.3(80)+0.25(30)+0.1(100)+0.3 To be
 Sum
Min (for Max (for
Decisio (for Max
S1 S2 S3 S4 Maximi Maxima EMV Calculation
n Laplace Regret
n) x)
)
+ 100 -
calculate
0 10 10) = 5(-10)
d
200
(25 + 35
To be
+ 10 + 0.3(25)+0.25(35)+0.1(10)+0.35
d3 25 35 10 45 10 45 calculate
45) = (45)
d
115
(55 + 65
To be
- 15 + 0.3(55)+0.25(65)+0.1(-
d4 55 65 -15 40 -15 65 calculate
40) = 15)+0.35(40)
d
145

Step 1: Maximin

Pick the minimum payoff for each alternative:

 d1: min = -20

 d2: min = -10
 d3: min = 10
 d4: min = -15

Maximin choice = max of these minimums = max(-20, -10, 10, -15) = 10 → so best under
Maximin is d3

Step 2: Maximax

Pick the maximum payoff for each alternative:

 d1: max = 75
 d2: max = 100
 d3: max = 45
 d4: max = 65

Maximax choice = max(75, 100, 45, 65) = 100 → best under Maximax is d2

Step 3: Laplace (average)

Average payoff = sum of payoffs / 4 (equal weights):

 d1: 165 / 4 = 41.25

  d2: 200 / 4 = 50
 d3: 115 / 4 = 28.75
 d4: 145 / 4 = 36.25

Best under Laplace = max average = 50 → d2

Step 4: Expected Monetary Value (EMV)

Calculate:

 d1: 0.3(50) + 0.25(-20) + 0.1(75) + 0.35(60)

= 15 - 5 + 7.5 + 21
= 38.5
 d2: 0.3(80) + 0.25(30) + 0.1(100) + 0.35(-10)
= 24 + 7.5 + 10 - 3.5
= 38
 d3: 0.3(25) + 0.25(35) + 0.1(10) + 0.35(45)
= 7.5 + 8.75 + 1 + 15.75
= 33
 d4: 0.3(55) + 0.25(65) + 0.1(-15) + 0.35(40)
= 16.5 + 16.25 - 1.5 + 14
= 45.25

Best under EMV = max EMV = 45.25 → d4

Step 5: Minimax Regret

 First find the best payoff in each state (max column):

S1 S2 S3 S4
80 (d2) 65 (d4) 100 (d2) 60 (d1)

 Regret table = best payoff - actual payoff:

Decision S1 S2 S3 S4 Max Regret

d1 80-50=30 65-(-20)=85 100-75=25 60-60=0 85
d2 80-80=0 65-30=35 100-100=0 60-(-10)=70 70
d3 80-25=55 65-35=30 100-10=90 60-45=15 90
d4 80-55=25 65-65=0 100-(-15)=115 60-40=20 115

 Choose alternative with minimum max regret = min(85, 70, 90, 115) = 70 → d2

Summary Table for Payoff Table 1:

 Rule Best Decision Worst Decision
Maximin d3 d1 or d4 (lowest min)
Maximax d2 d3 (lowest max)
Laplace d2 d3 (lowest avg)
Expected Monetary Value (EMV) d4 d3 (lowest EMV)
Minimax Regret d2 d4 (highest regret)

L#7-8

Sure! Here's a very short and easy summary of the Forecasting topic you shared:

Forecasting - Simple Notes

What is Forecasting?

 Predicting future demand or events (like weather forecasting).

 Helps plan sales, production, inventory, manpower, etc.
 Not exact; requires experience and judgment.

Uses of Forecasting:

 Long-term: Planning products, facilities (strategic).

 Short-term: Scheduling, inventory, budgeting (operational).
 Used in marketing, finance, HR, operations, product design.

Types of Demand:

 Independent demand: Finished goods, influenced actively or passively.

 Dependent demand: Raw materials and components.

Key Components of Demand:

 Average demand, trends, seasonal, cyclical, random variations.

CPFR (Collaborative Planning, Forecasting, and Replenishment):

 A web-based tool to share forecasts and coordinate supply chain partners.

Characteristics of Good Forecast:

 Timely, reliable, accurate, meaningful, documented, simple.

Steps in Forecasting Process:

1. Define purpose and timing

2. Choose forecasting method
3. Collect and analyze data
 4. Prepare forecast
5. Monitor and revise forecast

Types of Forecasting:

 Qualitative: Based on opinions (judgmental, surveys, expert panels).

 Quantitative: Based on data and mathematical models.

Judgmental Forecast Methods:

 Executive opinions, sales force input, consumer surveys, Delphi method.

Time Series Analysis:

 Uses past data patterns to predict future.

Naïve Forecast:

 Simple and quick, no data analysis, low accuracy.

If you want, I can make it even simpler or add a few examples!

L9-10

Forecasting Notes – Production and Operations

Management (MGT613)

1. Time Series Components

- Trend:
Long-term upward or downward movement in data caused by factors such as population shifts,
changing incomes, and cultural changes.

- Seasonality:
Short-term, fairly regular variations related to factors like weather, holidays, and vacations.
Common in supermarkets, restaurants, theaters, theme parks.

- Cycle:
Wavelike variations lasting more than one year due to political, economic, or agricultural
conditions.

- Irregular Variations:
Caused by unusual events such as severe weather, earthquakes, strikes, or major product/service
changes. They distort data and should be removed.
- Random Variations:
Residual fluctuations after other components are accounted for, caused by chance.

2. Forecasting Techniques for Averaging

- Moving Average (MA):
Averages recent actual values and updates as new data becomes available.

- Weighted Moving Average (WMA):

Assigns greater weight to more recent data points.

- Exponential Smoothing (ES):

Applies exponentially decreasing weights to older data.

3. Simple Moving Average (SMA)

Formula:
Ft = (A_(t-1) + A_(t-2) + ... + A_(t-n)) / n

Where:
- Ft = Forecast for period t
- A_(t-i) = Actual demand at period t - i
- n = Number of periods averaged

Example:
For 3-week moving average at week 4:
F4 = (A3 + A2 + A1) / 3

4. Weighted Moving Average (WMA)

Formula:
Ft = w1 * A_(t-1) + w2 * A_(t-2) + ... + wn * A_(t-n)

Where:
- wi = Weight for period t-i, such that sum of wi = 1
- More recent data usually has higher weight.

Example:
Weights for last 3 weeks: 0.5, 0.3, 0.2
Demands: 720, 678, 650

Calculation:
F4 = 0.5(720) + 0.3(678) + 0.2(650) = 693.4

5. Exponential Smoothing (ES)

Formula:
Ft = Ft-1 + α (At-1 - Ft-1)

Where:
- Ft = Forecast for period t
- Ft-1 = Forecast for previous period
- At-1 = Actual demand for previous period
- α = Smoothing constant (0 < α < 1)

Example:
Given α = 0.5 and F1 = A1 = 820,
F2 = 820 + 0.5(775 - 820) = 797.5

6. Linear Trend Forecasting

Formula:
Ft = a + b t

Where:
- Ft = Forecast for period t
- a = Intercept (value at t=0)
- b = Slope of trend line

Calculations:
b = (n Σ(t y) - Σt Σy) / (n Σ(t^2) - (Σt)^2)

a = (Σy - b Σt) / n

Example:
Yt = 143.5 + 6.3 t

7. Simple Linear Regression Model

Formula:
Yt = a + b x

- Used for associative forecasting with predictor variables.

- a and b calculated as in linear trend.

8. Forecast Accuracy Measures

- Error:
E=A-F

- Mean Absolute Deviation (MAD):

Average of absolute errors.
- Mean Squared Error (MSE):
Average of squared errors.

- Mean Absolute Percentage Error (MAPE):

Average absolute percent error.

9. Summary of Examples
Method Formula Example Output
Simple Moving Average Ft = ΣA / n F4 = (720 + 678 + 650)/3 =
682.67
Weighted Moving Average Ft = Σwi Ai F4 = 0.5(720) + 0.3(678) +
0.2(650) = 693.4
Exponential Smoothing Ft = Ft-1 + α (At-1 - Ft-1) F2 = 820 + 0.5(775 - 820) =
797.5
Linear Trend Ft = a + b t Yt = 143.5 + 6.3 t

L11-12

Sure! Here’s a very short and simple summary of your Product & Service Design notes:

Product & Service Design

Products and services usually come together. For example, a bank gives financial services but
also uses products like checks. Designing good products and services is important to satisfy
customers, keep quality high, and control costs.

Why Design Matters:

 Good design helps attract customers and beat competitors.

 Poor design can cause bad sales or even harm users.

Key Factors in Design:

1. Cost
2. Quality
3. Speed to market
4. Customer satisfaction
5. Competitive advantage

Design Steps:

 Understand customer needs

 Improve or create products/services
 Set quality and cost goals
 Test prototypes
 Write clear specs
Reasons to Design or Redesign:

 Economic changes
 Social trends
 Laws and safety
 Competition
 Technology updates

Standardization:
Making products or services uniform helps reduce costs and improve quality but can reduce
variety for customers.

Mass Customization:
Combining standard products with some customization to meet specific customer needs.

Reliability:
Products must work well in their intended environment. A car designed for Europe may not
work well in Pakistan.

Product Life Cycle:

Products go through stages: Introduction, Growth, Maturity, Saturation, and Decline.
Companies try to keep products alive longer by improving or redesigning them.

L13

Here’s a very short and easy summary of the key points from your Product & Service
Design Strategies lesson:

Product & Service Design Strategies (Simple Summary)

 Design goal: Make customers happy, keep costs low, and match what the company
can make.
 Common design strategies:
o Design for Manufacturing (DFM): Design so it's easy to make.
o Design for Assembly (DFA): Use fewer parts for easier assembly.
o Design for Disassembly (DFD): Make it easy to take apart.
o Design for Recycling (DFR): Design so parts can be reused.
o Design for Remanufacturing: Use old parts to make new products cheaper.
 Robust Design: Products should work well in many conditions (like weather or
location differences).
 Taguchi Approach: Reduce errors and improve quality by focusing on what can be
controlled in design.
 Product Development Steps: Idea → Feasibility → Specs → Prototype → Test →
Launch → Review.
 Concurrent Engineering: Design and manufacturing teams work together early to
save time and costs.
  Computer-Aided Design (CAD): Using computers to design faster and better.
 Modular Design: Use replaceable parts to make repairs and upgrades easy.

Service Design

 Services often come with products (like oil + oil change service).
 Services are intangible and delivered instantly (like haircut).
 Service design needs to focus on facilities, processes, and skills.
 Services cannot be stored; location and timing are important.
 Services have low entry barriers, so they must be cost-effective and innovative.
 Service Design Steps: Concept → Define components → Set performance goals →
Design specs → Delivery specs.
 Service Blueprinting: Map out the steps of delivering service and find ways to avoid
problems.

Quality in Design

 Quality starts at the design stage (called Quality Function Deployment).

 Good quality increases customer satisfaction and helps business grow.

Conclusion

 Better design needs investment in Research & Development (R&D).

 Focus on small, ongoing improvements, not just big changes.
 Good design shortens product life cycles and keeps customers happy.

If you want, I can make it even simpler or focus on any part!

L14

Reliability - Summary

What is Reliability?
Reliability is the ability of a product, part, or system to perform its intended function under specified
conditions.

Failure occurs when the product or system does not perform as intended.

Normal operating conditions refer to the environment and conditions for which reliability is
specified.
Importance of Reliability
Sought by customers and internal stakeholders alike.

Critical for gaining competitive advantage.

Extends beyond safety; safety is only a small part of reliability.

Measuring Reliability
Reliability is measured in terms of probability.

If a component has reliability 0.9, it has a 90% chance of performing correctly; 10% chance of failure.

Two key types of probability measurement:

1. Probability the product functions when activated.

2. Probability the product functions for a given length of time.

Probability Rules in Reliability

Rule 1 (Series systems): For independent events that all must succeed, multiply individual
probabilities.

Example: Reliability of system = R1 × R2

Rule 2 (Redundancy or Backup): For independent events where success is if at least one event
occurs, use: R = R1 + (1 - R1) × R2

Rule 3 (Multiple events): Extends rule 2 to more than two components.

Example: Adding a backup lamp increases overall system reliability from 0.9 to 0.98.

Time-Based Reliability (Failure Rate)

Reliability also depends on time or product life.

Products have limited lives; they eventually fail.

Reliability is assessed by analyzing failure rates over time.

Bathtub Curve
Shows failure rate vs. time.

Three phases:

1. Infant Mortality: Early failures due to defects.

2. Normal Life: Random failures, lowest failure rate.

3. Wear Out: Failures due to aging/wear.

Statistical Distributions in Reliability
Exponential Distribution: Used for infant mortality and constant failure rates.

Formula for reliability at time T: R(T) = e^(-T/MTBF), where MTBF = Mean Time Between Failures.

Normal Distribution: Used for wear-out failures with known mean and standard deviation.

Calculate Z = (T - mean) / std. deviation to find probabilities from the normal table.

Example (Normal Distribution)

Mean turbine life = 6 years, Std Dev = 1 year.

Probability turbine fails before 7 years: Z = (7-6)/1 = 1.0 → Probability ≈ 0.8413.

Reliability (lasts beyond 7 years) = 1 - 0.8413 = 0.1587.

To find service life for 10% failure: Z = -1.28 → T = 6 - 1.28 = 4.72 years.

Availability
Availability = MTBF / (MTBF + MTR), where MTR = Mean Time to Repair.

Improving Reliability
1. Component design — improve parts quality.

2. Production/assembly techniques — reduce defects, foolproof processes.

3. Testing — identify faults before shipment.

4. Redundancy/backups — add backups to critical components.

5. Preventive maintenance — reduce unexpected failures.

6. User education — proper use via manuals.

7. System design — reliability at system level.

8. Research & Development — innovate for higher reliability.

Conclusion
Reliability is key to product/service quality and competitive advantage.

Requires continuous improvement, quality checks, and investment in R&D.

Focus on long-term performance and shorten product life cycles for better safety and reliability.

L15-16

Sure! Here's your Capacity Planning content formatted neatly right here:
CAPACITY PLANNING
After completing discussion on product or service design, organizations end up answering
questions relating to capacity and demand. Since we have already discussed demand
forecasting, we now focus on what capacity planning decisions are and the importance of
capacity.

Capacity decisions are important to all departments:

 An accountant collects cost accounting info to ensure correct capacity expansion

decisions.
 A financial manager performs financial analysis to justify investments for capacity
increase.
 An IT manager prepares databases to aid capacity decisions.
 An operations manager selects strategies to achieve optimum capacity levels to meet
demand.

Learning Objectives
After completing the lecture on Capacity Planning in Operations Management, students will
be able to:

 Understand, appreciate, and explain the importance of capacity planning.

 Discuss ways of defining and measuring capacity.
 Describe the factors that determine effective capacity alternatives.
 Discuss major considerations in developing capacity alternatives.

Capacity Planning
Capacity is the upper limit or ceiling on the load (demand for a product or service) that an
operating unit can handle. Operations Managers answer:

1. What kind of capacity is needed?

2. How much is needed?
3. When is it needed?

Capacity planning became very relevant after the 8th October 2005 earthquake in Pakistan,
exposing capacity limitations in food, shelter, medicines, and rescue operations.

 Irregular variations caused by unusual events like earthquakes, strikes, or weather

should be identified and removed from data.
  Forecasts help operations managers plan both the system (long term) and the use of
the system (short/intermediate term).

Planning the system involves long-term decisions on product types, facilities, location, etc.
Planning the use of the system involves workforce, inventory, scheduling, purchasing,
budgeting, etc.

Importance of Capacity Decisions

Capacity decisions:

 Impact ability to meet future demands.

 Affect operating costs; balancing overcapacity and under capacity is crucial.
 Are a major determinant of initial costs (larger units tend to cost proportionately less).
 Involve long-term commitments which are difficult and costly to reverse.
 Affect competitiveness (excessive or quickly adjustable capacity can be a barrier to
entry).
 Affect ease of management.
 Add complexity due to globalization (foreign political, economic, cultural issues).
 Impact long-range planning (capacity decisions often extend beyond 18 months).

Capacity can be measured by input units like number of beds (hospitals), man-hours
(workshops), etc.

Efficiency and Utilization

 Design capacity: Maximum output rate/service capacity.
 Effective capacity: Design capacity minus allowances (personal time, maintenance,
scrap).
 Actual output: Rate actually achieved (cannot exceed effective capacity).

Example:

 Design capacity = 50 trucks/day

 Effective capacity = 40 trucks/day
 Actual output = 36 trucks/day

Efficiency=Actual OutputEffective Capacity=3640=90%\text{Efficiency} = \frac{\text{Actual Output}}{\

text{Effective Capacity}} = \frac{36}{40} = 90\%
Utilization=Actual OutputDesign Capacity=3650=72%\text{Utilization} = \frac{\text{Actual Output}}{\
text{Design Capacity}} = \frac{36}{50} = 72\%
Determinants of Effective Capacity
1. Facilities: Size, design, transportation costs, labor/energy supply, environment
(lighting, heating).
2. Product/service factors: Uniformity increases capacity.
3. Process factors: Quantity and quality requirements; inspection and rework affect
capacity.
4. Human factors: Skill, training, motivation.
5. Operational factors: Scheduling, deliveries, inventory, quality control.
6. Supply chain factors: Supplier reliability, warehousing, distribution.
7. External factors: Regulations, safety, unions, pollution controls.

Strategy Formulation for Capacity Planning

1. Capacity strategy for long-term demand (growth and variability).
2. Facilities cost (building and operations).
3. Technological changes (rate and direction).
4. Competitor behavior.
5. Availability of capital and inputs.

Key Decisions of Capacity Planning

1. Amount of capacity needed.
2. Timing of changes.
3. Need to maintain balance.
4. Extent of flexibility of facilities.

Steps for Capacity Planning Strategy

1. Estimate future capacity requirements.
2. Evaluate existing capacity.
3. Identify alternatives.
4. Conduct financial analysis.
5. Assess key qualitative issues.
6. Select one alternative.
7. Implement chosen alternative.
8. Monitor results.

Developing Capacity Alternatives

 1. Design flexibility into systems to reduce remodeling costs.
2. Consider stage of product/service life cycle (new vs mature products).
3. Use “big picture” approach (account for interrelated system components).
4. Prepare for capacity “chunks” (capacity increases often come in large increments).

Operations managers aim to identify optimal operating level where unit cost is minimized.

Economies of Scale and Diseconomies of Scale

 Economies of scale: Increasing output lowers average unit cost (up to optimal level).
 Diseconomies of scale: Increasing output beyond optimal level increases average unit
cost due to factors like fatigue, breakdowns, loss of flexibility.

Evaluating Alternatives
 Cost curve: At low output, unit cost is high due to fixed costs spread over fewer units.
 Minimum average cost occurs at optimal output level.
 Beyond this, unit costs increase due to inefficiencies.

Key points:

 Larger plants usually have higher optimal output and lower minimum costs.
 Management considers financial resources and forecast demand.
 Facility sizes may be fixed or continuous variables.
 External conditions like economic and environmental issues influence feasibility and
costs.

If you want me to format any other section or explain something else, just say!

L17-18

Here’s a clear and organized summary of the key points from the text you provided on
Capacity Planning (contd.) and Process Selection:

Capacity Planning (Continued)

Evaluating Alternatives and Cost Curve

 At low production levels, fixed costs are spread over few units, making unit cost high.
 As output increases, unit cost decreases because fixed costs are absorbed by more
units.
  Minimum average cost is at the optimal production rate.
 Beyond optimal rate, costs rise due to factors like worker fatigue, equipment
breakdown, and reduced flexibility.
 Larger plants generally have lower minimum costs and higher optimal output rates.
 Management considers financial resources and forecasted demand when choosing
plant size.
 Alternatives must be examined considering:
1. Feasibility
2. Cost
3. Time to implement
4. Operating and maintenance costs
 Environmental and social impacts (e.g., displacement, pollution) can affect decisions.

Planning Service Capacity

 Services can’t be inventoried, so capacity planning must match timing of demand.

 Service capacity location must be close to customers.
 Demand volatility between peak and low periods affects capacity planning.

Cost-Volume Relationships

 Assumptions:
1. One product involved.
2. All produced units are sold.
3. Variable cost per unit is constant.
4. Fixed costs are constant regardless of volume.
5. Revenue per unit is constant.
6. Revenue per unit > variable cost per unit.
 Key formulas:

o Total Cost (TC) = Fixed Cost (FC) + Variable Cost per unit (VC) × Quantity
(Q)
o Total Revenue (TR) = Revenue per unit (R) × Quantity (Q)
o Profit (P) = TR - TC = Q(R - VC) - FC
o Break-even Quantity (QBEP) = FC / (R - VC)

Step Fixed Costs

 Fixed costs can increase in steps as capacity increases (e.g., buying multiple
machines).
 Multiple break-even points may exist.
 Decision on capacity alternatives depends on projected demand relative to these
break-even points.

Example

 Equipment lease = Rs. 60,000/month

 Variable cost = Rs. 200/bat
 Selling price = Rs. 2,000/bat
 Break-even quantity: 33 bats
  Profit at 100 bats: Rs. 120,000
 Quantity for Rs. 40,000 profit: 56 bats

Financial Analysis in Capacity Planning

 Tools: Cost-volume relationships, financial analysis, decision theory, waiting line

analysis.
 Cash flow: Cash in vs. cash out.
 Present value: Current value of future cash flows.

Conclusion on Capacity Planning

 Capacity planning is vital for both long-term strategic and short-term operational
decisions.
 Capacity rarely matches demand perfectly.
 Decisions should consider the whole system to avoid local optimizations that don’t
improve overall effectiveness.
 Use qualitative and quantitative analyses.
 Capacity decisions affect facilities layout and define organizational existence.

Lesson 18: Process Selection

Introduction and Meaning

 Process selection defines how an organization produces goods or services.

 Involves choosing technology, capacity, facility layout, and work design.
 Follows product/service selection.

Process Strategy Elements

1. Make or Buy Decisions – whether to produce in-house or outsource.

2. Capital Intensity – balance of labor vs. equipment.
3. Process Flexibility – adaptability to product changes, volume, or technology.

Make or Buy (Reasons)

 Available capacity
 Expertise
 Quality control
 Nature of demand (steady vs. fluctuating)
 Cost comparison
 Risk and flexibility

Types of Operations (based on volume and standardization)

1. Continuous Processing – highly uniform products (chemicals, oil).

2. Repetitive Processing – few standardized products (cars, electronics).
3. Intermittent Processing:
 oBatch processing (moderate volume, similar items)
oJob shop (custom, low volume)
4. Automation Types:
o Computer Aided Manufacturing (CAM)
o Numerically Controlled (NC) Machines
o Robots

Flexible Automation

 Manufacturing Cell: few NC machines, produce varied parts.

 Flexible Manufacturing System: handles intermittent processes, variety of products,
reduces labor costs, better quality.
 Downsides: longer planning, limited part variety.

Computer Integrated Manufacturing (CIM)

 Integration of automated processes (manufacturing cell, flexible systems).

Operations Strategy for Process Selection

 Promote managers with both technical and managerial skills.

 Incorporate flexibility at all levels for competitive advantage.
 Use automation judiciously to avoid unnecessary costs.