LOG202 Managing Operations Group-based Assignment July 2021 Presentation LOG202 Group-based Assignment GROUP-BASED ASSIGNMENT This assignment is worth 20% of the final mark for LOG202 Managing Operations. The cut-off date for this assignment is 14 October 2021, 2355hrs. This is a group-based assignment. You should form a group of 4 members from your seminar group. Each group is required to upload a single report via your respective seminar group site in Canvas. Please elect a group leader. The responsibility of the group leader is to upload the report on behalf of the group. It is important for each group member to contribute substantially to the final submitted work. All group members are equally responsible for the entire submitted assignment. If you feel that the work distribution is inequitable to either yourself or your group mates, please highlight this to your instructor as soon as possible. Your instructor will then investigate and decide on any action that needs to be taken. It is not necessary for all group members to be awarded the same mark. Note to Students: You are to include the following particulars in your submission: Course Code, Title of the GBA, SUSS PI No., Your Name, and Submission Date. Important Note: Grading of GBA Submissions Marks awarded to your assignment are based on the following guidelines: Component 1. Content Description • Demonstrates good understanding of concepts; identifies key points correctly and comprehensively; applies relevant knowledge to solve the problem or address the issue • Provides supporting reasons drawn from course materials and other credible sources, wherever relevant • Shows a good grasp of the problem/issue with critical insight • Provides a mature response with feasible recommendations 2. Quality of • Demonstrates highly original writing* Writing • Constructs sentences that are grammatically and syntactically correct, and are free from spelling mistakes • Appropriate use of specialised vocabulary and terminology related to the subject matter, wherever relevant • Provides proper in-text citation and referencing to content drawn from course materials and other credible sources that follow APA formatting and style guidelines** SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Marks 80 10 Page 2 of 5 LOG202 Group-based Assignment 3. Quality of • Presents key points, workings, numerical formulations and Presentation results in a clear, logical and succinct manner • Presents well-annotated tables and figures, wherever relevant, that follow APA formatting and style guidelines** • Provides a reference list at the end of the main report • Shows proper formatting in: o cover page, main text, tables, figures, references, appendices (if necessary), the numbering of pages o adherence to the specified word count, where applicable Total 10 100 Notes: * Reports with high Turnitin similarity percentage, especially when the matching content is not cited and referenced, can attract further penalties. ** See https://apastyle.apa.org/style-grammar-guidelines for tutorials and webinars on the APA formatting and style guidelines. See also Purdue University’s Online Writing Lab https://owl.purdue.edu/ for information on APA formatting and style guide. SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 3 of 5 LOG202 Group-based Assignment Question 1 (a) The American Express Global Business Travel (Amex-GBT) in Singapore (https://www.amexglobalbusinesstravel.com/) has been organising virtual and hybrid meeting and events. The company needs to give careful consideration to demand forecasting to be able to cater to all their clients. Table 1 shows information on actual monthly demand. Apply the single exponential smoothing method to calculate the forecast until the 12th month, and the two-month moving-average method to find the forecasts from the 3rd to the 12th month. Include the MSE, MAD, MAPE, and TS for both forecasting methods in your calculations. Table 1: Monthly Meetings/Event Demand Month Actual Meetings/Event 1 394 2 412 3 365 4 398 5 400 6 339 7 355 8 377 9 382 10 401 11 396 Assumptions • α = 0.17 • Forecast for 1st month is 344 meetings/events Based on your results, which method should the company use? Give reasons to justify your answer. (20 marks) (b) For each event, Amex-GBT prepares personalised goody bags to be mailed to the participants. Each bag has a cost of $5 and are sold at $9 for the event. After the event, the public can purchase any of the remaining goody bags at $3 each. In general, AmexGBT sells between 25 and 77 goody bags per event. What is the optimal number of goody bags that Amex-GBT should prepare using Single Period Inventory Model? Analyse whether this is the most suitable type of inventory model for the goody bags by considering the benefits and challenges for all three types of inventory models. [Note: You should not give generic discussion answers or descriptions. Your write up for Q1, excluding figures/tables/calculations, should not exceed 300 words.] (20 marks) SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 4 of 5 LOG202 Group-based Assignment Question 2 (a) Consider a service-providing or product-manufacturing company that you are familiar with. Give a brief description of this company, including the products manufactured or services offered. Suppose you are the new operations manager of this company. Demonstrate how the concepts of resource planning are applied. Provide relevant examples for all levels of planning. (Hint: follow the products and services planning framework as a guide.) (28 marks) (b) At your company’s venue, COVID-19 vaccines will be administered to the public under the following process. First, one of the 12 volunteers helps you to fill up a registration form (5 minutes), then one of the 16 healthcare professionals examines your overall health (8.5 minutes), and finally one of the 10 trained nurses administers the vaccine (2 minutes). The processes occur in series and all staff work at 90% utilisation rate. Calculate the service rate of this process and the number of patients that can be vaccinated per hour (capacity). Recommend at least two (2) short-term capacity solutions to improve any possible bottlenecks in the process to get a COVID-19 vaccine in consideration. (12 marks) [Note: You should not give generic discussion answers or descriptions. Your write up for Q2, excluding figures/tables/calculations, should not exceed 600 words.] Note: Another 10 marks are allocated to quality of writing and 10 marks to quality of presentation. ---- END OF ASSIGNMENT ---- SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 5 of 5 Course Development Team Head of Programme : Assoc Prof Tan Yan Weng Course Developer(s) : Dr Rojas Cecilia : Dr Zhao Qitong : Dr Tay Huay Ling Technical Writer : Lynn Lim, ETP Video Production : Samuel Goh, ETP © 2021 Singapore University of Social Sciences. All rights reserved. No part of this material may be reproduced in any form or by any means without permission in writing from the Educational Technology & Production, Singapore University of Social Sciences. ISBN 978-981-3152-66-3 Educational Technology & Production Singapore University of Social Sciences 463 Clementi Road Singapore 599494 How to cite this Study Guide (APA): Rojas, C., Zhao, Q., & Tay, H. L. (2021). LOG202 Managing operations (study guide). Singapore: Singapore University of Social Sciences. Release V1.8.0 Build S1.0.5, T1.5.21 Table of Contents Table of Contents Course Guide 1. Welcome.................................................................................................................. CG-2 2. Course Description and Aims............................................................................ CG-3 3. Learning Outcomes.............................................................................................. CG-5 4. Learning Material................................................................................................. CG-6 5. Assessment Overview.......................................................................................... CG-7 6. Course Schedule.................................................................................................. CG-11 7. Learning Mode.................................................................................................... CG-12 Study Unit 1: Understanding Operations and Value Chains Learning Outcomes................................................................................................. SU1-2 Overview................................................................................................................... SU1-3 Chapter 1: Operations Management and Value Chains.................................... SU1-4 Chapter 2: Measuring Performance in Operations and Value Chains........... SU1-10 Summary................................................................................................................. SU1-16 Formative Assessment.......................................................................................... SU1-17 Study Unit 2: Goods, Service and Process Design Learning Outcomes................................................................................................. SU2-2 Overview................................................................................................................... SU2-3 Chapter 3: Goods and Service Design.................................................................. SU2-4 i Table of Contents Chapter 4: Process Selection, Design and Analysis.......................................... SU2-13 Summary................................................................................................................. SU2-21 Formative Assessment.......................................................................................... SU2-22 Study Unit 3: Demand Planning and Resource Management Learning Outcomes................................................................................................. SU3-2 Overview................................................................................................................... SU3-3 Chapter 5: Forecasting and Demand Planning................................................... SU3-4 Chapter 6: Resource Management...................................................................... SU3-11 Summary................................................................................................................. SU3-18 Formative Assessment.......................................................................................... SU3-19 Study Unit 4: Capacity and Inventory Management Learning Outcomes................................................................................................. SU4-2 Overview................................................................................................................... SU4-3 Chapter 7: Capacity Management......................................................................... SU4-4 Chapter 8: Managing Inventories in Supply Chains........................................ SU4-10 Summary................................................................................................................. SU4-23 Formative Assessment.......................................................................................... SU4-24 Study Unit 5: Quality Control and Lean Operating Systems Learning Outcomes................................................................................................. SU5-2 Overview................................................................................................................... SU5-3 Chapter 9: Quality Control and Statistical Process Control.............................. SU5-4 ii Table of Contents Chapter 10: Lean Operating Systems................................................................. SU5-15 Summary................................................................................................................. SU5-22 Formative Assessment.......................................................................................... SU5-23 Study Unit 6: Operations Strategy and Technology Management Learning Outcomes................................................................................................. SU6-2 Overview................................................................................................................... SU6-3 Chapter 11: Operations Strategy............................................................................ SU6-4 Chapter 12: Technology and Operations Management................................... SU6-13 Summary................................................................................................................. SU6-20 Formative Assessment.......................................................................................... SU6-21 iii Table of Contents iv List of Tables List of Tables Table 1.1 Differences between Goods and Services................................................ SU1-5 Table 1.2 Value Chain Frameworks........................................................................... SU1-8 Table 1.3 Types of Performance Measures.............................................................. SU1-10 Table 2.1 Manufactured Goods Designing............................................................... SU2-7 Table 2.2 Service-Delivery System Design Components...................................... SU2-10 Table 2.3 Service-Encounter Design Elements....................................................... SU2-11 Table 2.4 Goods and Service Types and Characteristics....................................... SU2-14 Table 2.5 Matrices for Goods and Service Design................................................. SU2-15 Table 3.1 Basic Forecasting Concepts........................................................................ SU3-5 Table 3.2 Statistic Forecasting using Time Series Models....................................... SU3-7 Table 3.3 Resource Planning Framework............................................................... SU3-12 Table 3.4 Aggregate Planning Options................................................................... SU3-13 Table 3.5 Aggregate Planning Strategies................................................................ SU3-14 Table 4.1 Long-term Capacity Expansion Strategies............................................... SU4-8 Table 4.2 Short-term Capacity Management Strategies.......................................... SU4-9 Table 4.3 Inventory Types......................................................................................... SU4-11 Table 4.4 Inventory Costs.......................................................................................... SU4-12 Table 4.5 Inventory Characteristics.......................................................................... SU4-13 v List of Tables Table 5.1 Quality Control Practices in Manufacturing........................................... SU5-5 Table 5.2 Steps in Constructing Control Charts....................................................... SU5-8 Table 5.3 Data Points on the Control Charts.......................................................... SU5-10 Table 5.4 Basic Principles of Lean Operating Systems.......................................... SU5-16 Table 5.5 Lean Tools................................................................................................... SU5-17 Table 5.6 Similarities and Differences between Lean Production and Six Sigma............................................................................................................................. SU5-19 Table 6.1 Evaluation Attributes and Insights........................................................... SU6-5 Table 6.2 Competitive Priorities................................................................................. SU6-8 Table 6.3 Strategic Planning Levels........................................................................... SU6-9 Table 6.4 Technology in Operations........................................................................ SU6-14 Table 6.5 Manufacturing Systems............................................................................ SU6-15 Table 6.6 Benefits and Challenges of Technology.................................................. SU6-17 vi List of Figures List of Figures Figure 1.1 Value Chain versus Supply Chain.......................................................... SU1-8 vii List of Figures viii List of Lesson Recordings List of Lesson Recordings Operations Management and Value Chains............................................................. SU1-4 Measuring Performance in Operations and Value Chains................................... SU1-10 Goods and Service Design.......................................................................................... SU2-4 Process Selection, Design and Analysis.................................................................. SU2-13 Forecasting and Demand Planning............................................................................ SU3-4 Resource Management............................................................................................... SU3-11 Capacity Management................................................................................................. SU4-4 Managing Inventories in Supply Chains................................................................ SU4-10 Quality Control and Statistical Process Control (SPC)............................................ SU5-4 Lean Operating Systems............................................................................................ SU5-15 Operations Strategy...................................................................................................... SU6-4 Technology and Operations Management.............................................................. SU6-13 ix List of Lesson Recordings x Course Guide Managing Operations LOG202 Course Guide 1. Welcome Welcome to the course LOG202 Managing Operations, a 5 credit unit (CU) course. This Study Guide will be your personal learning resource to take you through the course learning journey. The guide is divided into two main sections – the Course Guide and Study Units. The Course Guide describes the structure for the entire course and provides you with an overview of the Study Units. It serves as a roadmap of the different learning components within the course. This Course Guide contains important information regarding the course learning outcomes, learning materials and resources, assessment breakdown and additional course information. CG-2 LOG202 Course Guide 2. Course Description and Aims Creating and delivering goods and services to customers require an effective system of interconnected facilities and processes, and the ability to manage them. Managing these operations can be particularly challenging when faced with volatile customer demands, changing market environments, rapid advances in technology and competition in a global context. This course provides students with an understanding of the importance of operations that delivers value to its customers. Students will examine the design of goods, services and the processes that create them; the day-to-day management of these processes; and the continual improvement of these goods, services and processes effective in a manner that matches customers’ expectations. Course Structure This course is a 5-credit unit course presented over 6 weeks. There are six Study Units in this course. The following provides an overview of each Study Unit. Study Unit 1 – Operations and Value Chains This study unit provide an overview of the main concepts related to operations, value chain and supply chain, including those related to goods and services and the concept of value. We look at the different types of performance measure and use of analytics for decision-making. Study Unit 2 – Goods, Service and Process Design This study unit focuses on the steps and elements in designing goods and services. It examines the processes used to produce goods and services as well as the approaches used to analyse and improve the different processes. CG-3 LOG202 Course Guide Study Unit 3 – Demand Planning and Resource Management This study unit looks at the importance of forecasting in the overall value chain. It provides an overview of the approaches used to forecast the demand for goods and services. As forecasting is related to usage of resources, the study unit discusses the common resource planning frameworks used in resource planning aggregation and disaggregation. Study Unit 4 – Capacity and Inventory Management This study unit covers issues related to capacity and inventory management. It looks at the concept of capacity and discusses related measurement and management approaches. The study unit outlines the characteristics of inventories and its related management approaches, including inventory analysis, different inventory systems and models. Study Unit 5 – Quality Control, SPC and Lean Operating Systems In this study unit, we describe the concepts that can be applied to improve and control quality in goods and services. These include quality control and statistical process control (SPC). The study unit presents various tools and approaches to ensure lean operations. Study Unit 6 – Technology and Operations Strategy and Management This study unit reviews how operations strategy and technology can help an organisation gain competitive advantage. It presents a useful framework for strategic development as well as highlights the benefits and challenges of using technology in operations. CG-4 LOG202 Course Guide 3. Learning Outcomes Knowledge & Understanding (Theory Component) By the end of this course, you should be able to: • Explain how operations can enhance the way an organisation creates and delivers value to its customers. • Discuss how goods, services and processes can be designed for value. • Show how operations strategy and technology can help an organisation gain a competitive advantage. Key Skills (Practical Component) By the end of this course, you should be able to: • Apply the techniques to forecast the demand for goods and services as well as to allocate resources to meet the demand. • Analyse the issues related to capacity and inventory management. • Outline the approaches that improve quality control in goods and services as well ensure that operating systems are lean. CG-5 LOG202 Course Guide 4. Learning Material The following is a list of the required learning materials to complete this course. Required Textbook(s) Collier D, & Evans J. (2019). Operations and supply chain management. Sinagpore: Cengage Learning. CG-6 LOG202 Course Guide 5. Assessment Overview The overall assessment weighting for this course is as follows: Evening Class Assessment Overall continuous Description Weight Allocation Pre-Course Quiz 01 2% Pre-Class Quiz 01 2% Pre-Class Quiz 02 2% Class Participation 6% Tutor-Marked Assignment 18% Group-Based Assignment 20% 2-hour Written Examination 50% assessment Overall examinable component Total 100% Daytime Class Assessment Overall continuous Description Pre-Course Quiz 01 assessment CG-7 Weight Allocation 2% LOG202 Course Guide Assessment Overall examinable Description Weight Allocation Pre-Course Quiz 02 2% Pre-Course Quiz 03 2% Class Participation 6% Tutor-Marked Assignment 18% Group-Based Assignment 20% 2-hour Written Examination 50% component Total 100% Full Online Classes Assessment Overall continuous Description Weight Allocation Pre-Course Quiz 2% Quiz 1 2% Quiz 2 2% Discussion 10% Participation 6% Tutor-marked Assignment 18% assessment CG-8 LOG202 Course Guide Assessment Examination Description Weight Allocation Group-based Assignment 10% Closed-book 50% Written Examination Total 100% The following section provides important information regarding Assessments. Continuous Assessment: There will be continuous assessment in the form of quizzes, class participation, one tutormarked assignment and one group-based assignment. In total, this continuous assessment will constitute 50 percent of overall student assessment for this course. The continuous assessments are compulsory and are non-substitutable. These assignments will test the ability to comprehend, apply and analyse concepts and scenarios related to operations management. It is imperative that you read through your assignment questions and submission instructions before embarking on your assignment. Examination: The final (2-hour) written exam will constitute the other 50 percent of overall student assessment and will test the ability to marketing related concepts, theories and strategies to particular situations commonly faced by operations managers. All topics covered in the course outline will be examinable. To prepare for the exam, you are advised to review Specimen or Past Year Exam Papers available online. Passing Mark: To successfully pass the course, you must obtain at least a mark of 40 percent for the overall continuous assessment and also at least a mark of 40 percent for the final exam. For CG-9 LOG202 Course Guide detailed information on the Course grading policy, please refer to The Student Handbook (‘Award of Grades’ section under Assessment and Examination Regulations). The Student Handbook is available from the Student Portal. Learning Activities: Activities for the purpose of self-learning are present in each study unit. These learning activities are meant to enable you to assess your understanding and achievement of the learning outcomes. The type of activities can be in the form of Formative Assessment, Quiz, Review Questions, Application-Based Questions or similar. You are expected to complete the suggested activities either independently and/or in groups. CG-10 LOG202 Course Guide 6. Course Schedule To help monitor your study progress, you should pay special attention to your Course Schedule. It contains study unit related activities including Assignments, Selfassessments, and Examinations. Please refer to the Course Timetable in the Student Portal for the updated Course Schedule. Note: You should always make it a point to check the Student Portal for any announcements and latest updates. CG-11 LOG202 Course Guide 7. Learning Mode The learning process for this course is structured along the following lines of learning: a. Self-study guided by the study guide units. Independent study will require at least 3 hours per week. b. Working on assignments, either individually or in groups. c. Classroom Seminar sessions (3 hours each session, 6 sessions in total). iStudyGuide You may be viewing the iStudyGuide version, which is the mobile version of the Study Guide. The iStudyGuide is developed to enhance your learning experience with interactive learning activities and engaging multimedia. Depending on the reader you are using to view the iStudyGuide, you will be able to personalise your learning with digital bookmarks, note-taking and highlight sections of the guide. Interaction with Instructor and Fellow Students Although flexible learning – learning at your own pace, space and time – is a hallmark at SUSS, you are encouraged to engage your instructor and fellow students in online discussion forums. Sharing of ideas through meaningful debates will help broaden your learning and crystallise your thinking. Academic Integrity As a student of SUSS, it is expected that you adhere to the academic standards stipulated in The Student Handbook, which contains important information regarding academic policies, academic integrity and course administration. It is necessary that you read and understand the information stipulated in the Student Handbook, prior to embarking on the course. CG-12 Study Unit Understanding Operations and Value Chains 1 LOG202 Understanding Operations and Value Chains Learning Outcomes By the end of this unit, you should be able to: 1. Explain the importance of operations management to create and deliver goods and services effectively. 2. Recognise the difference between value chain and supply chain. 3. Describe the types of performance measures for decision-making. 4. Outline the use of analytics and measurement systems in operations. SU1-2 LOG202 Understanding Operations and Value Chains Overview This study unit introduces the main concepts related to operations, value chain and supply chain, including those related to goods and services and the concept of value. We look at the different types of performance measures and use of analytics for decision-making. Chapter 1 provides students with an overview of operations management (OM). It discusses different areas where OM can be applied, the main definitions related to goods and services as well as the concept of value. The chapter introduces the value chain and related frameworks. Chapter 2 introduces different types of performance measures and use of analytics in OM. It presents the main features of measurement systems and models of organisational performance. SU1-3 LOG202 Understanding Operations and Value Chains Chapter 1: Operations Management and Value Chains Lesson Recording Operations Management and Value Chains What makes a company successful? Why is OM important? These are common questions to most professionals. Creating and delivering goods and/or services globally depend on an effective system of well-managed facilities and processes. Operations Management (OM) is a craft that entails a mix of science and art to ensure that these goods and/or services are created and delivered with success. Value chain is a network of facilities and processes concerning the flows from suppliers to the customers. The different types of flows include materials, finished goods, services, information, and finances. 1.1 Operations Management Read Collier & Evans (2019). Chapter 1, pages 2-7 Positive customer experience is directly related to the way goods and/or services are designed, created, and managed. In essence, this is what OM is about. Operation managers (who are also known as chief operating officers, hotel/restaurant managers, customer service managers, field managers, or supply chain managers) can affect the value of services provided to customers, employees, investors, and the society. SU1-4 LOG202 Understanding Operations and Value Chains Departments such as accounting, human resources, legal, marketing, and finance can apply OM concepts in the course of their respective work functions. Operations management skills include: • Process design • Inventory management • Scheduling and capacity • Planning and budgeting • Quality management 1.1.1 Goods and Services Goods are physical products that we can see, touch or consume. Goods can be durable (do not wear out for around 3 years – such as vehicles and furniture) or nondurable (no longer usable once used or last less than 3 years – such as toothpaste and clothing). A service is any activity that does not directly produce a physical good. Services are related to the transaction between a buyer (customer) and seller (supplier). Managing operations can be quite different in a goods-producing firm versus a serviceproviding firm. Thus, it is important that we understand the nature and differences between them as summarised in Table 1.1. You can refer to textbook pages 5 to 7 for more information. Table 1.1 Differences between Goods and Services Goods Services • Tangible • Intangible • Less customer participation • High customer participation • Easier to predict demand • Harder to predict demand • Can be stored and inventoried • Cannot be stored as physical • Manufacturing facilities location can be anywhere inventory • Management skills are paramount SU1-5 LOG202 Understanding Operations and Value Chains Goods Services • Protected by patents • Service facilities need to be located close to customers • Not protected by patents 1.1.2 Value and Customer Benefit Packages Innovation, quality, responsiveness, and low prices are what we want in every purchase and this affects the value that products or services have to us (the buyers). So, value can be defined as the benefits of products and/or services in relation to what we (buyers) are willing to pay for them, or: Because of this, goods-producing companies have been adding more and more services, such as financial support, shipping, installation, maintenance, and repair. As operations managers, integrating and coordinating these capabilities would be one of our main tasks. A customer benefit package (CBP) is a set of goods and services that a customer recognises, pays for, uses or experiences. Within the CBP, goods or services can be classified as primary, are the “core” offering that addresses basic needs and peripheral that is not essential to the primary goods and services, but is present to enhance the offering. A CBP can also have a variant; this is a feature that is specific to a location or a firm. Activity 1.1 Understanding Goods and Services Pick a company that is the service provider and compare it with a company that is sell/produce goods. Discuss the following questions. a. Identify three similarities between the two companies. SU1-6 LOG202 Understanding Operations and Value Chains b. Identify three differences between the two companies. c. If you are the managing director of the service providing company, what are the “primary” things that you would do to attract customers? What are the “peripheral” things? d. If you are the managing director of the company that is selling goods, what are the “primary” things that you would do to attract customers? What are the “peripheral” things? 1.2 Value Chains Read Collier & Evans (2019). Chapter 1, pages 8-16 You must understand the difference between Value Chain and Supply Chain. Value chain is broader in scope as it focuses on the facilities and processes that describe the different flows. In contrast, supply chain is the portion of the value chain that focuses on the physical movement of materials, information, and finances. This difference is illustrated in Figure 1.1. SU1-7 LOG202 Understanding Operations and Value Chains Figure 1.1 Value Chain versus Supply Chain Operations management influences the design and management of value chains. In today’s demanding and globalised world, it is becoming more and more difficult to balance cost, quality, service, and sustainability. For each good and/service within a company, there is a sequence of activities intended for a specific result. This is called a process of creation and delivery to customers. Processes can be classified as core processes, support processes, and general management processes. 1.2.1 Value Chain Frameworks There are three main value chain frameworks as summarised in Table 1.2. Table 1.2 Value Chain Frameworks Framework Description Figure reference Input-Output Inputs are transformed into value- Textbook Exhibit 1.4 added goods and services through processes supported by the company resources. SU1-8 LOG202 Understanding Operations and Value Chains Framework Description Figure reference Pre- and Post- Pre-production is concerned with Textbook Exhibit 1.7 Production gaining a customer with a team to Services design a product, consult, and provide training. Value is created through the production of products and provision of services. Post-production focuses on keeping the customer by providing different services. Hierarchical Most common are goods-producing Supply Chain companies between where the suppliers, Textbook Exhibit 1.9 relationship manufacturers, retailers and customers can be arranged in hierarchical structure. Activity 1.2 Zappos Read “Zappos Case Study” on textbook pages 25-26 and prepare the four case questions for class discussion. SU1-9 LOG202 Understanding Operations and Value Chains Chapter 2: Measuring Performance in Operations and Value Chains Lesson Recording Measuring Performance in Operations and Value Chains Read Collier & Evans (2019). Chapter 2, pages 28-39 To measure is to quantify the performance of organisations, goods and services, processes, people and other business activities. 2.1 Types of Performance Measures Organisational performance can be classified into eight main categories as summarised in Table 1.3. These assess the effectiveness of operations along the supply and value chain. Table 1.3 Types of Performance Measures Measure Financial Description Organisational- Operational-level level measures measures A top priority in for- Revenue & profit; Labour and fit organisations. Return on assets; material costs; Organisations monitor Earnings per share Cost of quality cost and adherence to Budget variance budgets. SU1-10 LOG202 Measure Customer & Market Understanding Operations and Value Chains Description Customer and market feedback show areas that need to be improved and whether changes result in improvement. Organisational- Operational-level level measures measures Customer Customer claims satisfaction; and complaints; Customer Type of retention; warranty; Market share Sales forecast accuracy Quality Measures the degree to Customer which a process meets of customer services; opportunity; Product recalls Knowledge and requirements. Goods quality relates to physical performance and ratings goods and to or errors/ courtesy of service characteristics. Service Defects/unit providers quality tangibles, relates reliability, responsiveness, assurance, and empathy. Time The speed something of and doing the variability of the process. Speed; Cycle time; Reliability Percentage of time for meeting to promised due date Flexibility The ability quickly and to adapt effectively to changing requirements. SU1-11 Design flexibility; Volume flexibility Number of engineering changes; LOG202 Measure Understanding Operations and Value Chains Description Organisational- Operational-level level measures measures It includes goods and Assembly-line service design flexibility, changeover time and volume flexibility. Innovation Innovation: & Learning create new and unique goods ability to and services that delight customers and create competitive advantages. Learning: New product development rates; patents; Employee Number of satisfaction; improvement Employee turnover creating behaviour suggestions applied; Percentage of knowledge and modifying the Number of workers trained of employees in case of any changes. Productivity Productivity: & Efficiency output of a process to ratio of input. Efficiency: provide ability goods to Labour Manufacturing productivity; yield; Equipment Order fulfilment utilisation time Environmental Toxic waste regulatory discharge rate; and services with minimum waste and maximum resources utilisation. Sustainability It triple refers bottom to line the of compliance; SU1-12 Workplace safety; LOG202 Understanding Operations and Value Chains Measure Description Organisational- Operational-level level measures measures environmental, social, and Product-related Percentage of economic sustainability. litigation; employees with Financial audits emergency preparedness training What makes a good measurement system? A good performance measurement should: • be actionable – provide a basis for decisions at the applied level, • be meaningful to the user, timely, and able to generate value to customers, • support (and not conflict with) customer requirements. Activity 1.3 Identifying Performance Measures Select a company you work at or are familiar with and review the different types of performance measures they implement. In your review you can consider the following points: a. What are the performance measures used in this company? b. What has this company done to improve its performance? 2.2 Analytics and Measurement Systems in Operations The increasing access to data and effective data analytics are helping operations managers to make better decisions. Business analytics can be used to visualise data, calculations, and benchmarks. SU1-13 LOG202 Understanding Operations and Value Chains The relationships or links between the different measures often explain the impact of (internal) operational performance on (external) results. Quantitative modelling of causeand-effect relationship between external and internal performance is called interlinking. With this, managers can make internal decisions that impact the external outcomes, for example, the effect of adding resources to reduce waiting time and improve customer satisfaction. Moreover, managers should also understand the effect of operational decisions on revenues and customer retention to organise the company resources. The value of a loyal customer (VLC) quantifies the total revenue or profit each target market customer generates over the buyer’s life cycle. where: Activity 1.4 VLC Calculation and Discussion A computer manufacturer estimates that its annual customer defection rate is 20 percent. Revenue of each computer is $1000. Customers are buying computers every two years, or 0.5 times per year. The incremental contribution to profit and overhead is 45 percent. a. What is the average value of a loyal customer over his/her average buying life? SU1-14 LOG202 Understanding Operations and Value Chains b. The customer defection rate is reduced to 10 percent by improving operations and employee service management skills. What is the average value of a loyal customer? c. Illustrate the impact of average customer defection rate and the frequency of repurchase. d. What can be done to increase the VLC from the operations management perspective? e. What the VLC number can be used for? f. What can you learn from this? Reflect 1.1 What measures do you think a company should use to evaluate goods or services? SU1-15 LOG202 Understanding Operations and Value Chains Summary • Operations management aims at managing the facilities and processes well to effectively create and deliver goods and/or services globally. It is important to understand the differences between goods and services to create the most effective operations management systems. • Value chain is a broad network of facilities and processes which involves all major functions in the organisation while supply chain is portion of the value chain. Value chains have three main frameworks which are input-output framework, pre- and post-production services framework and hierarchical supply chain framework. • Performance of an organisation can be measured by financial, customer and market, quality, time, flexibility, innovation and learning, productivity and operational efficiency, and sustainability measurements. • The interlinking models assist operations manager to make internal decisions that influence external outcomes. VLC numbers help operations manager to justify and to measure their decisions. Organisational performance models provide frameworks to design, monitor and evaluate performance. SU1-16 LOG202 Understanding Operations and Value Chains Formative Assessment 1. A service is _____. a. any activity that does not directly produce a good and is related to the buyerseller transaction. b. a task that affects the production of a good and is related to the financial transactions of the company. c. any activity that does not directly produce a good and is related to the financial transactions of the company. d. a task that directly produces a physical good and is related to the buyer-seller transaction. 2. Which of the following is NOT TRUE about a service? a. Services are intangible and hard to predict demand. b. Production of a service requires low customer participation. c. Service facilities need to be located close to customers. d. Services cannot be protected by patents. 3. Select the CORRECT formula for “value”. a. Perceived benefits / price (cost) of the customer b. % change in quantity / % change in price c. % change in price / % change in quantity d. Price (cost) of the customer / perceived benefits 4. What are the three main value chain frameworks? a. Core, support, and general management b. Input-Output, Pre/post-production services, and hierarchical supply chain c. Suppliers, transporters, and customers d. Primary, peripheral, and variant SU1-17 LOG202 5. Understanding Operations and Value Chains _____ measure refers to the ability to quickly and effectively adapt to changing requirements, including goods and service design and volume. a. Time b. Quality c. Flexibility d. Innovation 6. How should good performance measures be? a. Actionable to provide a basis for decision at applied level b. Meaningful to the user, timely, and able to generate value to customers c. Able to support customer requirements d. All of the above 7. In the Malcolm Baldrige Performance Excellence framework, there are seven categories for managing an organisation, which are leadership, strategy, customers, measurement, _____, _____, and _____. a. financial, auditing, results b. workforce, operations, results c. auditing, operations, review d. workforce, financial, results SU1-18 LOG202 Understanding Operations and Value Chains Solutions or Suggested Answers Formative Assessment 1. A service is _____. a. any activity that does not directly produce a good and is related to the buyerseller transaction. Correct. A service is any activity that does not directly produce a physical good and is related to the buyer-seller transaction. Refer to textbook page 5. b. a task that affects the production of a good and is related to the financial transactions of the company. Incorrect. A service is any activity that does not directly produce a physical good and is related to the buyer-seller transaction. Refer to textbook page 5. c. any activity that does not directly produce a good and is related to the financial transactions of the company. Incorrect. A service is any activity that does not directly produce a physical good and is related to the buyer-seller transaction. Refer to textbook page 5. d. a task that directly produces a physical good and is related to the buyer-seller transaction. Incorrect. A service is any activity that does not directly produce a physical good and is related to the buyer-seller transaction. Refer to textbook page 5. 2. Which of the following is NOT TRUE about a service? a. Services are intangible and hard to predict demand. Incorrect. Services are intangible and hard to predict demand, require high customer participation for their production, cannot be stored or protected by patent, and service facilities need to be located close to customers. Refer to textbook pages 5-7. SU1-19 LOG202 Understanding Operations and Value Chains b. Production of a service requires low customer participation. Correct. Services are intangible and hard to predict demand, require high customer participation for their production, cannot be stored or protected by patent, and service facilities need to be located close to customers. Refer to textbook pages 5-7. c. Service facilities need to be located close to customers. Incorrect. Services are intangible and hard to predict demand, require high customer participation for their production, cannot be stored or protected by patent, and service facilities need to be located close to customers. Refer to textbook pages 5-7. d. Services cannot be protected by patents. Incorrect. Services are intangible and hard to predict demand, require high customer participation for their production, cannot be stored or protected by patent, and service facilities need to be located close to customers. Refer to textbook pages 5-7. 3. Select the CORRECT formula for “value”. a. Perceived benefits / price (cost) of the customer Correct. Value is the perception of the benefits of products and/or services in relation to what buyers are willing to pay for them. Refer to textbook page 8. b. % change in quantity / % change in price Incorrect. Value is the perception of the benefits of products and/or services in relation to what buyers are willing to pay for them. Refer to textbook page 8. c. % change in price / % change in quantity SU1-20 LOG202 Understanding Operations and Value Chains Incorrect. Value is the perception of the benefits of products and/or services in relation to what buyers are willing to pay for them. Refer to textbook page 8. d. Price (cost) of the customer / perceived benefits Incorrect. Value is the perception of the benefits of products and/or services in relation to what buyers are willing to pay for them. Refer to textbook page 8. 4. What are the three main value chain frameworks? a. Core, support, and general management Incorrect. Core, support, and general management are the key processes in business. The three main value chain frameworks are Input-Output, Pre/ post-production services, and hierarchical supply chain. Refer to SU1 Table 1.2. b. Input-Output, Pre/post-production services, and hierarchical supply chain Correct. The three main value chain frameworks are Input-Output, Pre/ post-production services, and hierarchical supply chain. Refer to SU1 Table 1.2. c. Suppliers, transporters, and customers Incorrect. The three main value chain frameworks are Input-Output, Pre/ post-production services, and hierarchical supply chain. Refer to SU1 Table 1.2. d. Primary, peripheral, and variant Incorrect. Primary, peripheral, and variant are the classification of goods and services within the customer benefit package. The three main value chain frameworks are Input-Output, Pre/post-production services, and hierarchical supply chain. Refer to SU1 Table 1.2. SU1-21 LOG202 5. Understanding Operations and Value Chains _____ measure refers to the ability to quickly and effectively adapt to changing requirements, including goods and service design and volume. a. Time Incorrect. Flexibility measure refers to the ability to quickly and effectively adapt to changing requirements, including goods and service design and volume. Refer to SU1 Table 1.3 and textbook pages 31-32. b. Quality Incorrect. Flexibility measure refers to the ability to quickly and effectively adapt to changing requirements, including goods and service design and volume. Refer to SU1 Table 1.3 and textbook pages 31-32. c. Flexibility Correct. Flexibility measure refers to the ability to quickly and effectively adapt to changing requirements, including goods and service design and volume. Refer to SU1 Table 1.3 and textbook pages 31-32. d. Innovation Incorrect. Flexibility measure refers to the ability to quickly and effectively adapt to changing requirements, including goods and service design and volume. Refer to SU1 Table 1.3 and textbook pages 31-32. 6. How should good performance measures be? a. Actionable to provide a basis for decision at applied level Incorrect. Good performance measurements should be actionable – provide a basis for decisions at the applied level, meaningful to the user, timely, and able to generate value to customers, and supportive of (and not in conflict with) customer requirements. Refer to textbook page 39. b. Meaningful to the user, timely, and able to generate value to customers Incorrect. Good performance measurements should be actionable – provide a basis for decisions at the applied level, meaningful to the user, timely, and SU1-22 LOG202 Understanding Operations and Value Chains able to generate value to customers, and supportive of (and not in conflict with) customer requirements. Refer to textbook page 39. c. Able to support customer requirements Incorrect. Good performance measurements should be actionable – provide a basis for decisions at the applied level, meaningful to the user, timely, and able to generate value to customers, and supportive of (and not in conflict with) customer requirements. Refer to textbook page 39. d. All of the above Correct. Good performance measurements should be actionable – provide a basis for decisions at the applied level, meaningful to the user, timely, and able to generate value to customers, and supportive of (and not in conflict with) customer requirements. Refer to textbook page 39. 7. In the Malcolm Baldrige Performance Excellence framework, there are seven categories for managing an organisation, which are leadership, strategy, customers, measurement, _____, _____, and _____. a. financial, auditing, results Incorrect. In the Malcolm Baldrige Performance Excellence framework, there are seven categories for managing an organisation, which are leadership, strategy, customers, measurement, workforce, operations, and results. Refer to textbook pages 40-41. b. workforce, operations, results Correct. In the Malcolm Baldrige Performance Excellence framework, there are seven categories for managing an organisation, which are leadership, strategy, customers, measurement, workforce, operations, and results. Refer to textbook pages 40-41. c. auditing, operations, review SU1-23 LOG202 Understanding Operations and Value Chains Incorrect. In the Malcolm Baldrige Performance Excellence framework, there are seven categories for managing an organisation, which are leadership, strategy, customers, measurement, workforce, operations, and results. Refer to textbook pages 40-41. d. workforce, financial, results Incorrect. In the Malcolm Baldrige Performance Excellence framework, there are seven categories for managing an organisation, which are leadership, strategy, customers, measurement, workforce, operations, and results. Refer to textbook pages 40-41. SU1-24 Study Unit 2 Goods, Service and Process Design LOG202 Goods, Service and Process Design Learning Outcomes By the end of this unit, you should be able to: 1. Discuss the steps involved in designing goods and services. 2. Inspect the elements in designing goods and services. 3. Examine the processes used to produce goods and services. 4. Relate how process designs can be analysed and improved to maximise performance. SU2-2 LOG202 Goods, Service and Process Design Overview This study unit focuses on the steps and elements in designing goods and services. It examines the processes used to produce goods and services as well as the approaches used to analyse and improve the different processes. Chapter 3 discusses the steps and elements in designing goods and services. Chapter 4 presents the different types of processes and how they can be analysed, improved, and designed in order to maximise performance. SU2-3 LOG202 Goods, Service and Process Design Chapter 3: Goods and Service Design Lesson Recording Goods and Service Design What do goods or services offer? How to sell or supply them in the market? These are two pertinent OM questions to most companies. The profit, growth direction, and success of the company will be determined by the approaches in addressing these questions. Therefore, decisions related to products design, value chain design, and the processes used to make and deliver the products are critical. In today’s world, customer benefit packages (CBP) are not limited to the goods design and production, they require a high level of coordination throughout the value chains, from suppliers to sales, marketing to finance, and all parties should be involved in the development of new ideas. 3.1 Steps in Designing Goods and Services Read Collier & Evans (2019). Chapter 5, pages 84-88 3.1.1 Designing Goods and Services The six steps in developing goods and services are shown in textbook exhibit 5.1 and summarised as follows: SU2-4 LOG202 Goods, Service and Process Design • Step 1 and Step 2 involve providing input data and information such as strategic mission, vision, market and competitive analyses of the goods and services for designing the customer benefit package (CBP). • Step 3 involves decisions and configurations of the CBP based on customer needs and target markets. Essentially, decisions and choices revolve around a strong understanding about customer needs and target markets as well as CBP attributes such as time, place, information, entertainment, exchange, and form. • Step 4 focuses on detailed design and implementation of the CBP that can be different for services and goods. The design of goods is focused on physical characteristics and the manufacturing process. The design of services is focused on the service delivery system and the service encounter. This step also includes prototype testing. Prototype testing constructs a model to test product’s performance and consumers’ reaction under actual operating conditions. • Step 5 involves the introduction of the final bundle of goods and services − the customer benefit package to the customer through advertising and marketing efforts. For manufactured goods, it includes the manufacturing and shipping process. For services, it may include the hiring and training of the staff as well as building of sites to facilitate service provisions. • Step 6 entails marketplace evaluation of the goods and services to evaluate how well the goods and services are selling. Continual evaluation is done through assessment of the market share and the customers’ reactions to the goods or services. 3.1.2 Customer-Focused Design Customer requirements indicate customers’ wants and needs. Voice of the customers are customer requirements expressed in their own words. Customer-Focused design converts the voice of the customer to detailed goods/service design and delivery features. Quality function deployment (QFD) is an approach that incorporates voice of the customer requirements into decisions such as design, creation, and marketing for goods SU2-5 LOG202 Goods, Service and Process Design and services. The matrix-based process is illustrated in textbook exhibit 5.2. This matrix is often called the House of Quality, because of its shape. The QFD helps to: 1. clarify the design and evaluate the trade-offs in design decisions by identifying the inter-relationships between any pair of technique features; 2. identify marketing plan with selling points; and 3. prioritise features which need be emphasised in subsequent design and production activities. Activity 2.1 Design Goods and Services Samsung aims to produce a new phone type. In your group, identify and discuss the steps to design this new phone. Consider the following points in your review and discussions. a. What are the differences between the steps in designing a new phone and a new service? b. Which steps the customers are involved in? Identify the importance of the customers to the design of the product. c. What are the detailed steps? d. Using the House of Quality to build a better phone type, you can choose two competitors. 3.2 Elements in Designing Goods and Services SU2-6 LOG202 Goods, Service and Process Design 3.2.1 Designing Manufactured Goods Read Collier & Evans (2019). Chapter 5, pages 89-94 For manufactured goods, design activities include the process to determine the technical specifications and the coordination to guarantee that the design can be produced. Different approaches to facilitate the design activities are summarised in Table 2.1. Table 2.1 Manufactured Goods Designing Approaches Descriptions Examples Design for Tolerance (and Tolerance design sets Textbook Solved Problems Taguchi Loss Function) an acceptable tolerance 5.1 and 5.2 range. Wide tolerances can reduce cost but may result in weak product performance; narrow tolerances can improve a product but increase production costs. Taguchi Loss Function measures the loss from the deviation by a quadratic function as shown in textbook equation 5.1. SU2-7 LOG202 Goods, Service and Process Design Approaches Descriptions Examples Design for Reliability Reliability is the Textbook Solved Problem probability the goods 5.3 or services perform their function for a given period of time under specific operating conditions, which can be used to evaluate the proposed design and possible further improvement. Textbook exhibits 5.7 and 5.8 show a parallel system and a structure system, and their reliabilities can be calculated using textbook equations 5.2 and 5.3 separately. Design for Manufacturability (DfM) DfM is the process to Cadillac design bumper Assembly a product at the highest quality level for efficient production, which can be achieved by product simplification. Product process simplification could efficiency, improve accuracy, SU2-8 Seville Rear- LOG202 Goods, Service and Process Design Approaches Descriptions Examples resilience and customer satisfaction by simplifying designs and reducing complexity and costs. Design for Sustainability/ DfE is to take Environment (DfE) the environment matters Energy Start Dish-washers into considerations when design goods, and services processes. The designed products should be easily repaired, refurbished, recycled and reused. 3.2.2 Service-Delivery System and Service-Encounter Design Read Collier & Evans (2019). Chapter 5, pages 95-99 Service designs include service-delivery system design and service-encounter design. The service-delivery system design components are summarised in Table 2.2. A poor decision on any of these factors will reduce the efficiency and effectiveness of service system and put the service at a disadvantage in the market. SU2-9 LOG202 Goods, Service and Process Design Table 2.2 Service-Delivery System Design Components Components Descriptions Facility Location and Location influences customers’ travel time and is a significant Layout competitive priority in a service business. Layout affects process flow, costs and customer satisfactions. Servicescape Servicescape is all the physical evidences customers used to build the impression of the service and it provides the behavioural setting for service encounters. It can be simple or complex. A servicescape has three dimensions. These are: ambient conditions, spatial layout and functionality, and signs, symbols and artefacts. Service Process and This is to generate efficient and effective sequences of the Job Design activities to meet both internal and external requirements. Technology and Information Support Technology and accurate timely information ensure the services speed, accuracy, customisation, and flexibility. Systems On the other hand, service-encounter design focuses on the interactions between the services providers and the customer. The primary elements of the service-encounter design that need to be considered are presented in Table 2.3. These elements support the performance of the service and ensure the customer’s satisfaction. SU2-10 LOG202 Goods, Service and Process Design Table 2.3 Service-Encounter Design Elements Elements Descriptions Customer-Contact Based on the percentage of physical or virtual presence time Behaviour and Skills customer spends in the system to get the service, we have high-contact systems and low-contact systems. Customercontact requirements are used to measure current service quality and customers’ expectations. Service-Provider Companies should select the customer-contact employees, Selection, train them well and empower them to meet customer Development, and expectations. and Recognition and reward compensation system can help to Empowerment Recognition Reward attract, keep and inspire employees. Service Guarantees and When service upset occurs, companies should be able to Recovery provide a service guarantee to promise to compensate the customer and a service recovery to correct the upset and satisfy the customer. Activity 2.2 Elements in Design Choose either a goods manufacturing company or a service company to discuss the following considerations when producing goods or providing services: a. What are the basic elements to consider? SU2-11 LOG202 Goods, Service and Process Design b. What are the similarities in the elements to be considered when producing goods and providing services? c. What are the differences in the elements to be considered when designing goods versus designing services? SU2-12 LOG202 Goods, Service and Process Design Chapter 4: Process Selection, Design and Analysis Lesson Recording Process Selection, Design and Analysis In a value chain, decisions revolve around how to choose the proper processes and ensure these processes work together effectively and efficiently. Process design not only influences the cost of operations and level of customer service, but also environmental sustainability – a new but important element for companies to consider. 4.1 Processes to Produce Goods and Services Read Collier & Evans (2019). Chapter 7, pages 136-143 4.1.1 Process Choice Decisions Goods and services are generally produced in response to the customer’s orders or in the anticipation of customer’s orders using demand forecast. Goods and services can be broadly categorised into three major types: custom, option-oriented, and standard. The characteristics of each type are summarised in Table 2.4. SU2-13 LOG202 Goods, Service and Process Design Table 2.4 Goods and Service Types and Characteristics Type Characteristics Custom (Make-to- • Small quantities order) • Meet certain customers’ requirements • Long waiting time due to design, production and delivery Option (Assemble-to- • Standard parts, no unique technical specifications order) • Limited available sets to choose Standard (Make-to- • Fixed design, no alternatives to choose stock) • Forecast customer needs • Stock in inventory and less probability to stock-out There are four major types of processes used to produce goods and services: (1) projects, (2) job shop processes, (3) flow shop processes, and (4) continuous flow processes. The characteristics and examples of these process types are summarised in textbook exhibit 7.1. Relevant examples are also shown in the same exhibit. A product can be said to have changed or matured when its life cycle is completed. A product life cycle generally consists of four phases: Introduction, Growth, Maturity, and Decline and Turnaround. When the product life cycle is completed, usually the process (design and choice) and value chains to create the product need to be reviewed. Activity 2.3 Product Life Cycle (PLC) and Process Design Select a product that you are familiar with, and examine how the processes that are used to make the product might differ when the product is in the different phases of the product life cycle – from introduction, growth, maturity, and decline and turnaround SU2-14 LOG202 Goods, Service and Process Design phases. You may make use of the following table to provide your rationales for the probable process designs and choices in each phase. Phases in PLC Process Design Rationale Introduction Growth Maturity Decline and Turnaround 4.1.2 The Product-Process and Service-Positioning Matrix The product-process matrix and the service-positioning matrix are two approaches used for understanding the relationships between product characteristics of goods and services and process choices decisions. Table 2.5 provides the summarised descriptions of these two approaches and indicates the relevant sections in textbook that you should refer to for deeper understanding of the uses, key themes, and differences between the two matrices. Table 2.5 Matrices for Goods and Service Design Matrix Description Figure Reference Product-process Matrix This matrix depicts the arrangement Textbook Exhibit of type of the process in vertical axis 7.2 with the characteristics of the goods in horizontal axis. Most appropriate match is along the diagonal. SU2-15 LOG202 Goods, Service and Process Design Matrix Description Figure Reference A company can stand out from its competitors by positioning strategy along the diagonal. Service-positioning Matrix This matrix helps to determine Textbook Exhibit the 7.3 meet service system that technical and requirements in customers’ behavioural service-encounter level. The horizontal axis is serviceencounter activity sequence which depends on the degree of customer discretion and the degree of repeatability. The vertical axis indicates the number of pathways built into the service system design. Most appropriate match is along the diagonal. Activity 2.4 Aligning Product and Service Characteristics with Process Choice Select a product or service that you are familiar with; consider how the two approaches, the product-process matrix and/or service-positioning matrix can be used to align the product/service characteristics with the process choice. SU2-16 LOG202 Goods, Service and Process Design Prepare your discussion by highlighting no more than 3 main characteristics of the selected product/service. 4.2 Process Design, Analysis and Improvement 4.2.1 Process Design Read Collier & Evans (2019). Chapter 7, pages 144-147 Designing a goods-producing or service-providing process entails six major activities: 1. Define the objective 2. Create a detailed process or a value stream map to show current process 3. Evaluate alternative process designs 4. Identify and define suitable performance measures 5. Select proper equipment and technology 6. Develop an implementation plan for the new or revised process design A process map (flowchart) shows the sequence of fundamental process activities to deliver the desired outcome or output. It is usually used as the basic map to understand how current process operates so as to identify improvements for future redesign. The value stream refers to all value-added activities in designing, producing, and delivering goods and services to customers. A value stream map (VSM) shows a process flow that is similar to an ordinary process map, but highlights value-added versus nonvalue-added activities and includes the costs related to these two types of work activities. SU2-17 LOG202 Goods, Service and Process Design An example of the process map and value stream map is shown in textbook Exhibit 7.6 and Exhibit 7.7. These exhibits illustrate the order posting and fulfilment process in a restaurant using a process map and a value stream map respectively. Non-value-added activities increase costs and are likely to intensify customer frustration. Therefore, the operations managers should eliminate non-value-added activities using the process map and value stream map. 4.2.2 Process Analysis and Improvement Read Collier & Evans (2019). Chapter 7, pages 149-153 Existing processes can be redesigned to improve the performance incrementally, or reengineered that involve rethinking the process and redesigning it fundamentally so as to achieve big improvements. To improve the existing design, improvement factors are considered based on the process map and value stream map. These include but are not limited to examining the logical sequence of the steps; possibility to add, eliminate, or combine some steps; the point in the process where performance should be measured; and the impact of the process on environment. Moreover, strategies to improve the process design include increasing revenue, increasing agility, increasing product, decreasing costs, decreasing flow time, and decreasing carbon consumptions. One or more strategies can be adopted at the same time. To reengineer the process, more basic questions about the business process should be addressed. These questions help to uncover outdated/inaccurate assumptions and facilitate radical redesign that involves discarding existing procedures and reinventing the processes to achieve massive leaps in performance. All the process stakeholders and functional areas should participate and contribute to the reengineering efforts. SU2-18 LOG202 Goods, Service and Process Design 4.2.3 Process Design and Resource Utilisation Resource utilisation evaluates the proportion of time a workstation or individual is busy over the long run. For a feasible process design, the utilisation cannot exceed 100%, otherwise, the work will pile up before the workstation. There are two ways to calculate resource utilisation: In these equations, the measurement base such as the time and unit should be the same in the numerator and denominator. If any 3 of the 4 variables in the second equation are known, the fourth variable can be derived as shown in textbook solved problem 7.2. The equation is useful in providing insights and evaluating alternative process designs. Textbook Exhibit 7.8 presents an interesting example that provides an analysis of the utilisation of restaurant order posting and fulfilment process. Notice that resource utilisation is evaluated and contrasted in 5 different work activities that are carried out in the process. Based on this information, a simplified flowchart can be drawn as in textbook 7.11. Other concepts related to process design include: Throughput is the average number of entities completed in per unit time from a process. It can be measurable in different units based on the context. Bottleneck is the weakness in the process that limits the entire process throughput. Identifying and eliminating the bottlenecks will improve the process design by increasing process speed, reducing waiting and unnecessary work-in-process inventory, and using the resources more efficiently. Flow time (cycle time) indicates the average time it takes to complete one cycle of a process. It depends on the actual time to perform the task and the number of entities which are work-in-progress. SU2-19 LOG202 Goods, Service and Process Design Little’s Law explains the relationship among three variables − flow time (T), throughput (R) and work-in-progress (WIP): It is based on the relationship among the simple averages of the three variables and provides a simple way to evaluate average process performance. If any two of the three variables are known, the third variable can be computed using the above formula. For more insight, review textbook solved problem 7.3. As Little’s Law is based on simple averages of all variables, it provides a good baseline for understanding process performance on an aggregate basis and can be applied to many different contexts across manufacturing and service operations. Activity 2.5 The University of Audubon Rare Book Library Process Read “The University of Audubon Rare Book Library Process Case Study” on textbook pages 156-157 and be ready to discuss the theoretical questions in class. SU2-20 LOG202 Goods, Service and Process Design Summary • There are six steps in designing goods and services, from input information, through prototype testing, all the way to marketplace evaluation. Input information is also used to create a customer benefit package (CBP). Customer focus design involves the Voice of the Customer and Quality function deployment (QFD) approach. • Design approaches for manufactured goods include: Design for Tolerance (and Taguchi Loss Function); Design for Reliability; Design for Manufacturability (DfM); and Design for Sustainability/Environment (DfE). Service designs include servicedelivery system design and service-encounter design. • Goods and services are generally produced in response to the customer orders or in the anticipation using demand forecast. The major types of processes used to produce goods and services are: (1) projects, (2) job shop processes, (3) flow shop processes and (4) continuous flow processes. The product-process matrix and the service-positioning matrix are used to understand the relationships between product characteristics for the goods and services in relation to process choices decisions. • To improve the design, a deep understanding of the existing processes and improvement factors are needed. The possibility to add, eliminate or combine some steps, where performance measurements should be taken in the process, and the impact of the process on environment should be considered. Process design can be maximised by improving resource utilisation and as illustrated through Little’s Law. SU2-21 LOG202 Goods, Service and Process Design Formative Assessment 1. How many steps are involved in the design process of goods and services? a. Ten b. Six c. Two d. There is no specific number; it depends on the goods or services. 2. Time, place, information, entertainment, exchange, and form are the main factors that customers care about in the _____ and are considered in the _____ step of service design. a. financial department, 5th. b. customer benefit package, 5th. c. financial department, 3rd. d. Customer benefit package, 3rd. 3. Under the Quality Function Deployment (QFD) approach, the “voice of the customer” is integrated into all the decisions to guide the design, creation and marketing for goods and services. True or False? a. True b. False 4. Service design requires careful consideration of two main features _____ and _____. a. information support system, guarantees b. spatial layout, contact skills c. service process, job design d. delivery system, encounter 5. What are the principal processes used to produce goods and services? SU2-22 LOG202 Goods, Service and Process Design a. Design, manufacture, transport, and sell b. Factory, supplier, marketing, and customer c. Project, job shop, flow shop, and continuous flow d. Job scope, client contact, development, and review 6. A matrix that helps to determine the service system that meets customers’ technical and behavioural requirements in service-encounter level is known as _____. a. Service-introduction matrix b. Service-set-up matrix c. Service-development matrix d. Service-positioning matrix 7. For a feasible process design, the utilisation cannot exceed ___%. Otherwise, the work will pile up before the workstation. a. 100 b. 85 c. 60 d. 40 8. Based on Little’s Law, the relationship between flowtime (T), throughput (R) and work-in-progress (WIP) is _______. a. WIP = R / T b. WIP = T / R c. WIP = R * T d. WIP = T * R SU2-23 LOG202 Goods, Service and Process Design Solutions or Suggested Answers Formative Assessment 1. How many steps are involved in the design process of goods and services? a. Ten Incorrect. The design processes of goods and services are quite similar and in six structured steps shown in textbook Exhibit 5.1. b. Six Correct. The design processes of goods and services are quite similar and in six structured steps shown in textbook Exhibit 5.1. c. Two Incorrect. The design processes of goods and services are quite similar and in six structured steps shown in textbook Exhibit 5.1. d. There is no specific number; it depends on the goods or services. Incorrect. The design processes of goods and services are quite similar and in six structured steps shown in textbook Exhibit 5.1. 2. Time, place, information, entertainment, exchange, and form are the main factors that customers care about in the _____ and are considered in the _____ step of service design. a. financial department, 5th. Incorrect. Step 3 chooses customer benefit package (CBP) design and configuration based on customer needs and target markets. Customers usually care about the CBP attributes such as time, place, information, entertainment, exchange, and form. Refer to textbook pages 84-85. b. customer benefit package, 5th. SU2-24 LOG202 Goods, Service and Process Design Incorrect. Step 3 chooses customer benefit package (CBP) design and configuration based on customer needs and target markets. Customers usually care about the CBP attributes such as time, place, information, entertainment, exchange, and form. Refer to textbook pages 84-85. c. financial department, 3rd. Incorrect. Step 3 chooses customer benefit package (CBP) design and configuration based on customer needs and target markets. Customers usually care about the CBP attributes such as time, place, information, entertainment, exchange, and form. Refer to textbook pages 84-85. d. Customer benefit package, 3rd. Correct. Step 3 chooses customer benefit package (CBP) design and configuration based on customer needs and target markets. Customers usually care about the CBP attributes such as time, place, information, entertainment, exchange, and form. Refer to textbook pages 84-85. 3. Under the Quality Function Deployment (QFD) approach, the “voice of the customer” is integrated into all the decisions to guide the design, creation and marketing for goods and services. True or False? a. True Correct. Under the Quality Function Deployment (QFD) approach, the “voice of the customer” is integrated into all the decisions to guide the design, creation and marketing for goods and services. Refer to textbook page 87. b. False Incorrect. Under the Quality Function Deployment (QFD) approach, the “voice of the customer” is integrated into all the decisions to guide the design, creation and marketing for goods and services. Refer to textbook page 87. 4. Service design requires careful consideration of two main features _____ and _____. SU2-25 LOG202 Goods, Service and Process Design a. information support system, guarantees Incorrect. Services require a delivery system (facilities, servicescape, process and job design, technology and information) and involve an encounter (interaction between provider and consumer) that should be carefully designed. Refer to textbook pages 95 and 97. b. spatial layout, contact skills Incorrect. Services require a delivery system (facilities, servicescape, process and job design, technology and information) and involve an encounter (interaction between provider and consumer) that should be carefully designed. Refer to textbook pages 95 and 97. c. service process, job design Incorrect. Services require a delivery system (facilities, servicescape, process and job design, technology and information) and involve an encounter (interaction between provider and consumer) that should be carefully designed. Refer to textbook pages 95 and 97. d. delivery system, encounter Correct. Services require a delivery system (facilities, servicescape, process and job design, technology and information) and involve an encounter (interaction between provider and consumer) that should be carefully designed. Refer to textbook pages 95 and 97. 5. What are the principal processes used to produce goods and services? a. Design, manufacture, transport, and sell Incorrect. For the processes, the concepts are quite similar, and we categorise them as projects, job shop processes, flow shop processes, and continuous flow processes. Their characteristics and examples are summarised in textbook Exhibit 7.1. b. Factory, supplier, marketing, and customer SU2-26 LOG202 Goods, Service and Process Design Incorrect. For the processes, the concepts are quite similar, and we categorise them as projects, job shop processes, flow shop processes, and continuous flow processes. Their characteristics and examples are summarised in textbook Exhibit 7.1. c. Project, job shop, flow shop, and continuous flow Correct. For the processes, the concepts are quite similar, and we categorise them as projects, job shop processes, flow shop processes, and continuous flow processes. Their characteristics and examples are summarised in textbook Exhibit 7.1. d. Job scope, client contact, development, and review Incorrect. For the processes, the concepts are quite similar, and we categorise them as projects, job shop processes, flow shop processes, and continuous flow processes. Their characteristics and examples are summarised in textbook Exhibit 7.1. 6. A matrix that helps to determine the service system that meets customers’ technical and behavioural requirements in service-encounter level is known as _____. a. Service-introduction matrix Incorrect. A matrix that helps to determine the service system that meets customers’ technical and behavioural requirements in service-encounter level is known as service-positioning matrix. Refer to textbook pages 141-142. b. Service-set-up matrix Incorrect. A matrix that helps to determine the service system that meets customers’ technical and behavioural requirements in service-encounter level is known as service-positioning matrix. Refer to textbook pages 141-142. c. Service-development matrix SU2-27 LOG202 Goods, Service and Process Design Incorrect. A matrix that helps to determine the service system that meets customers’ technical and behavioural requirements in service-encounter level is known as service-positioning matrix. Refer to textbook pages 141-142. d. Service-positioning matrix Correct. A matrix that helps to determine the service system that meets customers’ technical and behavioural requirements in service-encounter level is known as service-positioning matrix. Refer to textbook pages 141-142. 7. For a feasible process design, the utilisation cannot exceed ___%. Otherwise, the work will pile up before the workstation. a. 100 Correct. For a feasible process design, the utilisation cannot exceed 100%, otherwise, the work will pile up before the workstation. Refer to textbook page 150. b. 85 Incorrect. For a feasible process design, the utilisation cannot exceed 100%, otherwise, the work will pile up before the workstation. Refer to textbook page 150. c. 60 Incorrect. For a feasible process design, the utilisation cannot exceed 100%, otherwise, the work will pile up before the workstation. Refer to textbook page 150. d. 40 Incorrect. For a feasible process design, the utilisation cannot exceed 100%, otherwise, the work will pile up before the workstation. Refer to textbook page 150. SU2-28 LOG202 8. Goods, Service and Process Design Based on Little’s Law, the relationship between flowtime (T), throughput (R) and work-in-progress (WIP) is _______. a. WIP = R / T Incorrect. Work-In-Progress is the result of throughput by flowtime. Refer to textbook page 152. b. WIP = T / R Incorrect. Work-In-Progress is the result of throughput by flowtime. Refer to textbook page 152. c. WIP = R * T Correct. Work-In-Progress is the result of throughput by flowtime. Refer to textbook page 152. d. WIP = T * R Incorrect. Work-In-Progress is the result of throughput by flowtime. Refer to textbook page 152. SU2-29 LOG202 Goods, Service and Process Design SU2-30 Study Unit Demand Planning and Resource Management 3 LOG202 Demand Planning and Resource Management Learning Outcomes By the end of this unit, you should be able to: 1. Show the importance of forecasting to the value chain. 2. Apply approaches such as moving average, exponential smoothing and regression to forecast the demand for goods and services. 3. Indicate the resource planning framework for goods and services. 4. Demonstrate options for aggregate planning and ways to disaggregate aggregate plans. SU3-2 LOG202 Demand Planning and Resource Management Overview This study unit looks at the importance of forecasting in the overall value chain. It provides an overview of the approaches used to forecast the demand for goods and services. As forecasting is related to usage of resources, the study unit discusses the common resource planning frameworks used in resource planning aggregation and disaggregation. Chapter 5 looks at the importance of forecasting in the overall value chain and focuses on the techniques that can be applied to forecast demand for goods and services. Chapter 6 discusses various resource management frameworks as well as aggregate planning and disaggregation in manufacturing. SU3-3 LOG202 Demand Planning and Resource Management Chapter 5: Forecasting and Demand Planning Lesson Recording Forecasting and Demand Planning Forecasting is important to many operating systems. Having good forecasts can help in operations analyses and managerial decisions. In contrast, a bad forecast is likely to result in inappropriate inventory and staff-hiring strategies, culminating in poor customer service and customer complaints. Many companies combine forecasting, value chain, and capacity management considerations to make operational decisions. Today, with the growth of data access and internet of things, forecasting can be integrated with data analysis to improve goods production, services provision and reduce costs. 5.1 Forecasting in Value Chain Read Collier & Evans (2019). Chapter 9, pages 182-188 5.1.1 The Importance of Forecasting Forecasting exists in all levels of organisational decision-making. In the long run, forecasting should be made about total sales dollars for financial size planning and facilities location decisions. At lower organisation levels, forecasting about product sale SU3-4 LOG202 Demand Planning and Resource Management volumes can help to determine the production plans. Finally, each individual facility needs forecasts to decide the raw materials and production schedule. Long- and short-term forecasting are similarly pertinent to service providers. Accurate forecasts are needed throughout the value chain and are useful in all areas of an organisation. Generally, forecasts can be used to gain customers, create value, and keep the customer(s). The detailed forecast information needed for each purpose is summarised in textbook exhibit 9.1. 5.1.2 Basic Concepts in Forecasting The basic concepts in forecasting are independent of the type of forecasting model. They provide a foundation for users to decide on the forecasting models that can be applicable in differential contexts. The basic forecasting concepts are summarised as Table 3.1. Table 3.1 Basic Forecasting Concepts Concepts Descriptions Planning Horizon It is a length of time that forecast is based on. It can be in long-range (1-10 years), intermediate-range (3-12 months) and short-range (up to 3 months). Time bucket is the time-period measure unit in forecast. Data Pattern in Time A trend shows the pattern of growth or decline in a set of Series observations over one or several time periods (time series). It can be linear or nonlinear as in textbook exhibit 9.2. Other data patterns include: seasonal patterns, cyclical patterns, random variation, and irregular variation. SU3-5 LOG202 Demand Planning and Resource Management Concepts Descriptions Errors and Accuracy All forecasts have errors. Forecast error is the difference between the observed value (At) and forecast value (Ft). There are three forecast error metrics: Mean Square Error Mean Absolute Deviation Mean Absolute Percentage Error Forecast should be monitored to determine whether modifying the model might result in advantages. Tracking signal (TS) provides a method to do it by quantifying bias as follows: An adequately performed forecast should yield a TS of between ±4. For TS values outside this range, model should be reevaluated. Activity 3.1 The Importance of Forecasting Consider National University Hospital (NUH), Singapore University of Social Sciences (SUSS) and Zara and discuss the following: a. What does forecasting mean in these companies? SU3-6 LOG202 Demand Planning and Resource Management b. Forecasts from gaining a customer, value creation, and keeping the customer c. What information are required to do demand forecasting for these companies? 5.2 Forecast Approaches 5.2.1 Statistical Forecasting Models Statistical forecasting assumes that the future will be an extrapolation of the past. Statistical methods can generally be categorised as time-series methods and regression methods. The choice of the technique to be used depends on the forecast variable and the time horizon. Read Collier & Evans (2019). Chapter 9, pages 188-192 The basic and common statistical forecasting models are introduced in this section. Table 3.2 provides an overview of the two basic time-series forecast models. Table 3.2 Statistic Forecasting using Time Series Models Model Description Formula Simple It is an average of Best for short period Moving the most recent k planning and stable Average observations in a demand. time series. SU3-7 Notes LOG202 Demand Planning and Resource Management Model Description Formula Single It uses a weighted The choice of α Exponential average of past values is between 0 Smoothing values to forecast and 1. the value of next Notes If the time series is period. volatile and random, we prefer a small α value. Possibilities to lag or overshoot the actual values. 5.2.2 Using Regression for Forecasting Read Collier & Evans (2019). Chapter 9, pages 192-195 Regression analysis builds a statistical model that defines a relationship between one single dependent variable and one or more independent variables, all of which are numerical. Simple linear regression model: The formula above uses the least squares method to derive the best value of the intercept ‘a’ and the slope ‘b’. SU3-8 LOG202 Demand Planning and Resource Management In Excel, there is a simple tool to find the best fitting regression model for a time series as shown in textbook solved problem 9.1. Multiple linear regression model: A linear regression model with more than one independent variable is a multiple linear regression model. Multiple regression method allows for other potential casual variables besides time to be incorporated in the forecast model. 5.2.3 Judgemental Forecasting Read Collier & Evans (2019). Chapter 9, page 196 Judgemental forecasting depends on opinions from experts in developing forecasts. The reasons to use judgemental forecasting are as follows: 1. No historical data available. 2. Other factors such as global trends, interest rate, inflation, technology, etc. will also influence the prediction. Judgemental forecasting includes grassroots forecasting which involves asking people who are close to the customers about their purchasing plans, and the Delphi method summarises individual experts’ forecasting and opinions together to reach one final prediction. In practice, managers use a lot of judgemental and quantitative forecasting techniques, for example, they will start with a statistical forecast and adjust it based on other factors, or they will develop independent statistical and judgemental and combine these together. SU3-9 LOG202 Demand Planning and Resource Management To develop a practical forecast, we should first understand its purpose. The choice of forecasting method depends on a lot of factors such as the presence of trends or seasonality, the data available, the forecast time horizon and the experience of the forecaster. Activity 3.2 Forecasting Help Desk Demand by Day Read “Forecasting Help Desk Demand by Day” case study on textbook pages 200-201 and prepare the four case questions for class discussion. SU3-10 LOG202 Demand Planning and Resource Management Chapter 6: Resource Management Lesson Recording Resource Management Almost all industries may face a problem with limited resources. Therefore, both service providers and goods manufactures must carefully manage the available resources, especially when there are changing demands. Resource management involves planning, executing, and controlling all the resources to produce goods or provide services in a value chain. Resources include physical materials, equipment, facilities, and intellectual assets such as information, knowledge and skills, and people. The primary objectives of resource management include: maximise profits and customer satisfaction; minimise costs; and maximise benefits to their stakeholders. 6.1 Frameworks for Resource Planning 6.1.1 Resource Planning Framework Read Collier & Evans (2019). Chapter 13, pages 275-278 A generic resource planning framework for goods and services is shown in textbook exhibit 13.1. The framework has three levels and as summarised in Table 3.3. SU3-11 LOG202 Demand Planning and Resource Management Table 3.3 Resource Planning Framework Level Function Description 1 Aggregate It develops a long-term output and total Planning resource plan in aggregate units of measure. It helps to define budget allocations and resources requirements. It is driven by demand forecasts. 2 Disaggregation It converts aggregate plans into short-term more detailed operational plans and provides bases for schedules and detailed resources needs in specific time periods. 3 Execution It focuses on executing the detailed plan at Level 2 to generate detailed resource schedules and job sequences. It includes the movement of work from one workstation to another, staff assignment, job priority determination, equipment scheduling, and processes control. However, in most service providing organisations, there are not as many intermediate levels of planning as there are in manufacturing. The levels of planning in most service providing organisations are illustrated in textbook exhibit 13.2. Notice that the disaggregation level is combined with execution level around the front office staff and resource schedules, job sequence, and service-encounter execution. The main reasons of integration include: (1) many services are instantaneous and continuous and cannot be divided; (2) services cannot be inventoried to buffer the demand and supply uncertainty, so they must have sufficient capacity. For service providers, shortterm demand forecasting and resource scheduling are critical. SU3-12 LOG202 Demand Planning and Resource Management 6.2 Planning Aggregation and Disaggregation 6.2.1 Aggregate Planning Read Collier & Evans (2019). Chapter 13, pages 279-281 The options to develop an aggregate plan when facing a fluctuating demand are summarised in Table 3.4. The choice of strategy is based on the corporate policies, practical limitations and costs. The implications on revenue and cost are illustrated in textbook exhibit 13.3. Table 3.4 Aggregate Planning Options Options Descriptions Demand Demand management are important for aggregate plan Management and capacity utilisation. Marketing strategies can be used to influence demand and help to create more feasible aggregate plans. Production-Rate Planned overtime can increase the output rate without Changes changing resources. Similarly, hours can be reduced during slow periods by planned undertime. SU3-13 LOG202 Options Demand Planning and Resource Management Descriptions Overtime pay reduction or inactivity can affect employee morale. Sub-contracting can also be used during peak periods. Workforce Changes It is accomplished by hiring and layoffs. Hiring results in higher personnel costs. Layoffs may cause low employee morale and additional unemployment insurance costs. Inventory Changes It is built up during slack periods for peak periods during demand uncertainty. However, it will increase holding costs and occupy warehouse spaces. Facilities, Equipment, They represent the long-term capital investment. and Transport Changing them will involve capital costs except renting. There are several aggregate planning strategies, two of the most common ag...
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