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All organizations including service firms such as banks, and hospitals, have a production function


OM is the set of activities that creates value in the form of goods and services by transforming inputs into outputs


Fredrick Taylor

father of scientific mgmt

Primary functions of all organizations

marketing, production/operations, and finance/accounting

operations functions in commercial bank

teller scheduling, check clearing, maintenance, collection

operations manager is involved in -

work scheduling to meet due dates, design of goods + services to satisfy customers, the quality of goods + services to satisfy customers, maintenance schedules

Scope of OM

Location of facilities, design of Goods and processes, managing quality

Henry Ford

contributed to assembly line operations

General picture of operations

Input ---> transform ----> output


output/input .... can be multiple inputs

Meaningful measures are

changes in productivity from period to period

Gantt Charts

visual devices that show the duration of activities in a prj

On a specific project...

there can be multiple critical paths, all with exactly the same duration

critical path is...

longest path

CPM networks

If a specific project has multiple critical paths, all of them will have the same duration

pessimistic time

the time an activity will take assuming very unfavorable events

Expected time calculated in PERT is

weighted average of a, m, b with m weighted 4x as heavily as a and b

Fact about PERT

The expected time estimate is calculated as t = (a+4m+b)/6

In a PERT network, non-critical activities that have little slack need to be monitored closely, why?

Because near critical paths could become critical paths with small delays in these activities

every network has at least one critical path


c) Mean absolute deivation for the forecast developed using the 3 year moving ave is 2.59 and for the 3 year weighted moving ave is 2.79. based on this info the better forecast is achieved using which one?

3 year moving average approach.

based on the comparison of MAD, the best forecast is achieved using the...?

Trend project method


are rarely perfect

forecasts are usually classified by time horizon into three categories

short range, medium range, and long range

a forecast with a time horizon of about 3 months to 3 years is typically called a

medium range forecast

forecasts used for new product planning, capital expenditures, facility location or expansion, and R&D typically utilize a

long range time horizon

forecasts are based on...

the assumption that the analysis of past demand helps predict future demand

a trend

gradual movement in time series data over time

naïve approach

time series that assumes that demand in the next period will be equal to the most recent periods demand

this time series model uses past forecasts and past demand data to generate a new forecast

exponential smoothing

the following smoothing constants would make an exponential smoothing forecast equivalent to a naïve forecast


the primary purpose of the mean absolute deviation (MAD) in forecasting is to

measure frequency accuracy

for a given product demand, the time series trend equation is 53-4x. The negative sign on the slope of the equation is an indication that...

product demand is declining

A fundamental distinction between trend projection and linear regression is that

in trend projection the independent variable is time, in linear regression the independent variable need not be time, but can be any varaible with explanatory power

The last 4 weekly values of sales were 80, 100, 105, and 90 units. The last four forecasts were 60, 80, 95 and 75 units.

these forecasts illustrate BIAS

This expresses the error as a percent of the actual values, undistorted by a single large value


trend analysis

regression with time as the independent variable, slope of the line is the trend, can forecast more then one period into the future

decision tables are used when...

future is uncertain

expected in decision tables is used when..

situation is repeated over and over


conservative or pessimistic


optimistic or desperate

minimax regret


expected value of perfect info

maximum increase in expected value if outcome is known in advance

decision trees are used when..

multiple sequential decisions must be made

first step in decision making process is

clearly define the problem

last step in decision making process is

implement the decision

an occurrence or situation over which the decision maker has no control is called a(n)...

state of nature

A tabular presentation that shows the outcome for each decision alternative under the various possible states of nature is called a...

payoff table

The decision criterion that would be used by an optimistic decision maker solving a problem under conditions of uncertainty would be the...

maximax critertion

A decision maker who uses the maximin criterion when solving a problem under conditions of uncertainty is...

a pessimist

The difference between the expected payoff under perfect information and the maximum expected payoff under risk is...

expected value of perfect info

p chart

percentage of defective items in a batch

x bar chart

measurement, range of std dev and range!

c chart

number of defects per item

control charts for variables are based on data that come from....

averages of small samples

The number of defects after a hotel room cleaning (sheets not straight, smears on mirror, missed debris on carpet) should be measured using a(n)

c chart

The number of late insurance claim payouts per 100 should be measured with a(n)

p chart

An x bar control chart was examined and no data points fell outside of the limits. Can this process be considered

no there could be a pattern, and the R chart must be checked

Statistical process control charts display...

upper and lower limits for process variables or attributes, and signal when a process is no longer in control

Jars of pickles are sampled and weighed. Sample measures are plotted on control charts. The ideal weight should be...

x bar and r charts

The usual purpose of an R chart is to signal whether there has been a ...

gain or loss in dispersion

According to the text, the most common choice of limits for control charts is usually...

+ or - std dev

p charts can have lower control limits at...


The statistical process chart used to control the number of defects per unit of output is the

c chart

The c chart signals whether there has been a

change in number of defects per unit

A manufacturer uses statistical process control to control the quality of the firms products. Samples of 50 of product A

P chart for A, C chart for B

A nationwide parcel delivery service keeps track of the number of late deliveries (more than 30 minutes past the time promised to clients) per day. WHAT CHART


acceptance sampling...

is used to determine whether to accept or reject a lot of material based on the evaluation of a sample

An acceptance sampling plans ability to discriminate between low quality lots and high quality lots is described by

an operating characteristics curve

An operating characteristics curve shows

how the probability of accepting a lot varies with the population percent defective

25) Producers risk is the probability of

rejecting a good a lot

type 1 error occurs when..

a good lot is rejected

A Type II error occurs when

a bad lot is accepted

An acceptance sampling plan is to be designed to meet the organizations targets for product quality and risk levels. Which of the following is true?

AQL, LTPD, α and β collectively determine n and c


=actual output / design capacity


= actual output / effective capacity

Utilization will always be lower than efficiency because

effective capacity is less then design capacity

Adding a complementary product to what is currently being produced is a demand management strategy used when

The existing product has seasonal or cyclical demand

break even =

total revenue = total cost

While fixed costs are ordinarily constant with respect to volume

they can "step" upward if volume increases result in additional fixed costs

these costs would be incurred even if no units were produced?

building rental costs

is it balanced when talking about transportation?

total demand = total supply

Manufacturers may want to locate close to their customers, if the transportation of finished goods is expensive or difficult


The graphic approach to location break-even analysis displays the range of volume over which each location is preferable


this is not one of the top considerations in choosing a country for a facility location -

zoning regulations

factor rating method

community attitudes, zoning restrictions, and quality of labor force are likely to be considered in this location decision methods

factor rating analysis

This method considers intangible costs related to a location decision -

On the crossover chart, where the costs of 2 or more location alternatives have been plotted, the quantity at which 2 cost curves cross is the quantity at which

total costs are equal to two alternative locations

a regional bookstore chain is about to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ this following tool analysis -

center of gravity model

this is a location analysis technique typically employed by a manufacturing organization -

transportation method

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