1. Course Review – Information Mgmt

2. For Friday
Final Project Deliverable and Peer Evaluations Due in Recitation This Friday, April 30th

3. MUEN E050 Final Exam Final Exam this Saturday, May 1st
7:30 PM – 10:00 PM
MUEN E050

4. Review Outline Defining Operations Forecasting Supply Chain Management
Productivity
Quality
Timeliness
Flexibility
Innovation

5. How do Firms Add Value? Greater Flexibility Greater Productivity
Greater variety
Customization for customer needs / desires
Useful Innovation
Features, technology
Better performance
New capabilities
Often unrecognized
Greater Productivity
Lower costs and expenses
Lower prices for the customer
Higher Quality
Better performance
Greater durability, reliability, aesthetics, ...
Better Timeliness
Faster response and turnaround
On-time delivery, meet promises

6. Key Point
Usable information must be captured and organized in a way that managers can understand how much value has been added.

7. Forecasts are usually wrong Forecasts should contain error measure
Forecasting Basics
Forecasts are usually wrong
Forecasts should contain error measure
Aggregate forecasts are more accurate
The longer the horizon, the lower the accuracy

8. Qualitative - Subjective
Forecasting Basics
Qualitative - Subjective
Expertise Based
The “Sage”
Sales Force
Customer Surveys

9. Quantitative – Objective
Forecasting Basics
Quantitative – Objective
Causal Models
Time Series Models

10. Forecasting - Causal Models
Use when historical data are available and when the relationship between the dependent (Y) and independent variable(s) (X) can be identified
Causal methods are good at predicting turning points in demand and for longer range forecasting
Principal Tool: Regression Analysis

11. Forecasting - Time Series Models
Prediction based exclusively on previously observed values
General Idea: Detect Patterns!
Short Term Demand Prediction
Prevalent Tool In Operations
Understand the players

12. Random Trend Seasonality Cyclic Time Series Patterns No Pattern
Linear (default) or Nonlinear
Seasonality
Repetition at Fixed Intervals
Cyclic
Long Term Economy
Understand the players

13. What is a Supply Chain?
A supply chain consists of all stages involved, directly or indirectly, in fulfilling customer requests
The entire process from point of origin (raw materials) to
point of consumption (final products bought by customers)
A network (interdependent system) of facilities including
materials supply from suppliers
transformation of materials to (inventories of) semi-finished and finished products
distribution of finished products to customers

14. Material/Product Flow
A Typical Supply Chain
Information Flow
Supplier
Manufacturer
Distributor
Retailer
Customer
Material/Product Flow
Value-Added Services
Funds Flow

15. Now, What is a Supply Chain
SYST 4050 Slides
Flow of products and services from
Suppliers
Raw materials manufacturers
Intermediate products manufacturers
End product manufacturers
Distributors and wholesalers
Retailers
Customer
Connected through transportation, information, and exchanges of funds
Supplier
Manufacturer
Distributor
Retailer
Customer
Chapter 1

16. Every facility that impacts costs need to be considered
Key Observations
Every facility that impacts costs need to be considered
Suppliers’ suppliers
Customers’ customers
Efficiency and cost-effectiveness throughout the system is required
System level approach

17. Conflicting Objectives
SYST 4050 Slides
Manufacturer
Distributor
Retailer
Customer
Large production
batches
Low inventory
Few DCs
Few stores
Low inventory
Little variety
Close to DCs
Convenience
Short lead time
Large variety of
products
Large shipments
Chapter 1

18. Contemporary Supply Chains
Holy grail for SCM has been high speed and low cost
For success, supply chains must also be:
Agile
Adaptable
Aligned

19. Agility Objectives Methods
Repond to short-term changes in demand or supply quickly; handle external disruptions smoothly
Methods
Promote flow of information
Develop collaborative relationships
Design for postponement
Build inventory buffers of inexpensive components
Have a dependable logistics system or partner
Draw up contingency plans; train crisis mgmt teams

20. Adaptability Objectives Methods
Adjust supply chain’s design to meet structural shifts in markets; modify supply network to strategies, products, technologies
Methods
Monitor world for new bases and markets
Use intermediaries for suppliers & logistics
Evaluate needs of end customer
Create flexible product designs
Identify technology and product life cycles

21. Alignment Objective Methods Create incentives for better performance
Exchange information and knowledge freely with vendors and customers
Lay down roles, tasks, and responsibilities for suppliers and customers
Equitably share risks, costs, and gains of improvement initiatives

22. Supply Chain Management Lessons
Effective SCM is a major driver of corporate (and national) competitiveness
Supply chains are complex networks that must be managed carefully for success
Supply chains must be an integral part of an effective operations strategy
Arms-length relationships up & down the chain are becoming more collaborative
Fundamental question:
How can we create value for customers with our supply chain structures?

23. Competing with Productivity
Inputs: labor, materials, capital, …
Outputs: goods, services

24. Factor Productivity Measures
Single Factor Productivity (SFP)
Multi-Factor Productivity (MFP)
Also, Total Factor Productivity (TFP)

25. Single Factor Productivity
Measures increase in productivity in relation to a single factor of production
Labor, materials, capital, …
Productivity = Output / Single Input
Example:
Output Labor
Period units hrs
Period hrs
Productivity
10.0 units / hour
10.6 units / hour

26. Single Factor Limitations
Problem: too easy to substitute factors
Company purchases casting and machines them
Decides to purchase pre-machined parts
Lays off skilled workers, sells machines
Output remains constant, labor reduced
Labor productivity up 5% (!)
BUT: pre-machined parts cost 20% more
SO: material productivity declines by 20% (!!)

27. Multi-Factor Productivity
Measures increased in productivity from all relevant factors of production
Productivity (MFP) = all outputs / all factor inputs
Example:
product sales + internal services
MFP Index =
labor + material + services + depreciation + investment
MFP Index
4.94% Increase

28. Multifactor Limitations
Issues affecting MFP measurement
Inflation, currency exchange gains (losses)
Depreciation, inventory valuation
Product mix changes, choice of base period, output measures ...
Theoretically interesting
Difficult in practice…

29. How to Improve Productivity?
Specialization
Better Work Practices and Automation
Learning
Economies of Scale

30. Specialization Improvement in a worker’s dexterity
Ability to do a task, resulting from a worker’s concentration on one or a few tasks.
Saving in time typically lost in changing from one task (or group of tasks) to another.
When workers do not specialize, time is lost from physically relocating to the new task and from adapting, or orienting, oneself to the new task.
Concentration on a few tasks
The Candy Factory
Increases the likelihood of discovering easier and better methods
Adam Smith, Wealth of Nations, 1776

31. Better Work Practices and Automation
Work smarter, not harder
Scientific Management
Early 20th Century
Reaction to management problems of the industrial revolution
Organized approach to improving labor productivity
Standard methods, standard times
“Time and motion” studies
Championed by Fredrick Taylor, Frank and Lillian Gilbreth, others

32. Take-Aways Productivity improvement is a central concern of operations
Many ways to drive productivity
Productivity improvement is a major driver of local and national wealth
Various forms of measurement exist
Single factor, total factor, …
Measuring productivity in a firm
Effective, accurate, simple
Productivity is a critical component of value
Key to improving standards of living
A stern taskmaster

33. The Value Equation

34. Why Quality is Critical
Quality: Quality is the single most important thing you can work on to improve the effectiveness of your company. It's as simple as that. Things just cascade when you get control of your quality.
John Young, CEO Hewlett Packard

35. Eight Dimensions of Quality
1. Performance
The primary operating characteristics of the product or service.
2. Features
The characteristics that supplement the basic functioning of the product or service.
3. Reliability
Probability of the product or service failing within a specified period of time.
4. Conformance
The degree to which a product or service meets acknowledged standards
David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review, Nov-Dec 1987

36. Eight Dimensions of Quality
5. Durability
A measure of product life (both technical and economic).
6. Serviceability
The speed, courtesy, competence, and ease of repair or recovery.
7. Aesthetics
How a product or service looks, feels, sounds, tastes, or smells.
8. Perceived Quality
Various tangible and intangible aspects of the product from which quality is inferred.
David Garvin, “Competing on the Eight Dimensions of Quality,” Harvard Business Review, Nov-Dec 1987

37. Quality Costs
Prevention costs: process/product design, training, vendor relations;
Appraisal costs: quality audits, statistical quality control;
Correction costs (internal failure): yield losses, rework charges;
Recovery costs (external failure): returns, repairs, lost business.

38. What is Six Sigma?
A measure of quality that strives for near perfection.
Disciplined, data-driven approach to eliminating defects
Scope
From manufacturing to transactions
From products to services
Constantly striving for improvement
Or else, loose ground to your competitors

39. Benefits of Six Sigma When Properly Applied General Electric
Reduce costs
Increase revenues
Develop your work force
Provide a common corporate language and methodology
General Electric
Estimates benefits of ~$10 billion during first five years of implementation

40. Timeliness
Sources of competitive advantage
Lead time strategies
Lean operations / JIT

41. Examples of Time Competition
Overnight package delivery
Web-based information retrieval
Online shopping, banking, and ecommerce
Self-checkout at grocery
Airline check-in
Lift ticket scanners (ski resorts)
Fast food, ready-to-heat meals
Fashion industry
Your examples…

42. Lead Time & Time Competition
Speed often is measured as:
Quickness—measured by the mean
Reliability—measured in terms of range and shape of the lead time distribution
Lead time
Important determinate of “speed”
Lead time means several things
Important to define exactly

43. Lead Time Strategies Engineer to Order Make to Order Assemble to Order
Designed to customer specification
Make to Order
Standard design, produced only upon order
Assemble to Order
Subassemblies produced, assembled upon order
Make to Stock
Finished product made prior to order

44. Just-in-Time JIT Operations Goal of Lean Systems: SIMPLIFY!
Produce only what is needed only when it is needed!
Goal of Lean Systems: SIMPLIFY!
Reduce inventories;
Reduce setup times;
Reduce information flows;
Fewer, more reliable suppliers;
Design products for manufacturability
Reduce WASTE of all types!
Russell & Taylor, Operations Management 3/e, Prentice-Hall, 2000

45. Unnecessary processes Inventory Motion and activity Defects
Sources of Waste
Overproduction
Waiting time
Transportation
Unnecessary processes
Inventory
Motion and activity
Defects
Russell & Taylor, Operations Management 3/e, Prentice-Hall, 2000

46. Reduce Inventory Produce in small lots
Eliminate space to store inventory
Don’t overproduce to increase utilization and efficiency
Better planning & forecasting
Produce to actual demand
Improve quality
SHOW AMAZON.COM VIDEO

47. Lead time design opportunities Apply lean operations principles
Take Aways
Time
Powerful competitive force
Often difficult to duplicate
Lead time design opportunities
Apply lean operations principles
Reduce and eliminate waste
Focus on value-adding processes
Move from push to pull

48. Operations Flexibility
Types of Flexibility
Mass Customization
Pitfalls of Flexibility
Driving Flexibility

49. Operations Flexibility
Flex’i*bil’i*ty: capable and adaptable to change.
Perspective of the producer: Flexibility
Perspective of the customer: Responsiveness

50. Like Quality, flexibility is not one-dimensional
Types of Flexibility
Like Quality, flexibility is not one-dimensional
1. Mix Flexibility
2. Changeover Flexibility
3. Modification Flexibility
4. Volume Flexibility
5. Rerouting/Program Flexibility
6. Resource Flexibility

51. Mass Customization
Delivering unique services in large quantities
Manufacturing unique products in large quantities
Offering customized services & products at (near) commodity prices
Customization varies from cosmetic to structural

52. Pitfalls of Flexibility
Focus vs. flexibility
Specialists vs. generalists
Cost/flexibility trade-offs
Flexibility for whom and what?
When does the market reward flexibility?
Customization/responsiveness squeeze

53. Flexibility has multiple dimensions
Take-Aways
Flexibility has multiple dimensions
Must strategically understand which are most important, and those that are less so
Flexibility involves process design, product design, sourcing design
Processes carefully married w/ products
To provide appropriate flexibility
Product / process matrix can help

54. Innovation
Product vs. Process Innovation
Managing for Innovation
Theories of Innovation
Patterns of Innovation
Technological Forecasting

55. Managing for Innovation – Necessary Conditions
Innovative People
Motivated to challenge constraints
Socioeconomic Incentives
Potential for wealth, fame, honor
Diversity and Tolerance
Penalties for challenging status quo not excessive
Moykr, The Lever of Riches, 1990.

56. Barriers to Innovation
Intrinsic Barriers
Uncertainty
Fear of failure
Requires array of talents
Managerial Barriers
Emphasis on maintaining order and discipline
Risk aversion
Reward systems which discourage uncertainty
Competition for resources
Institutional Barriers
Treat to careers and status
Territorial competition
Hard work!

57. Take-Aways Innovation Technology
Promote necessary conditions, mitigate barriers
Paradigms are powerful barriers
We are in the middle of a tech revolution
Technology
Technological forecasting is difficult if not impossible
S-Curve analysis helpful
Beware disruptive innovation

58. What is The Internet? Internet is network on which the “web” is built
A series of tubes
Scalable and distributed

59. How does the web work? Distributed Scalable No central traffic control
Multiple paths
Links can be removed

60. Usefulness of Web? Communicating Researching Sharing Selling
Integrating with Online Communities …
The web is always evolving

61. Social Networking Fun Your Web presence Job searching
Business Web Presence
Is it Free?

62. How Businesses use the Web
Communication
Webinars
Banking
Convincing
Business Communities
Hire employees ……

63. Intranets Within the boundaries of an organization
You have used? Registration?
Leeds School? Meeting minutes, announcements, bylaws, lists, calendar, etc.)
Companies? Benefits enrollment, performance reporting, etc.

64. Extranets Suppliers with purchasing and supply chain
Customers with customer relationship management (Amazon)

65. Dangers of the Web Incorrect information Inconsistent information
In state of flux
Many authors, few editors
Security and privacy

66. Identity Theft Definition Prevention How does it affect businesses?
Free Credit check

67. Business Dangers of the Web
Corporate espionage
Government espionage
Customer Privacy
…..

68. Security measures
Unless some restrictions are introduced, internet communication is accessible to all!
45.7 million credit card numbers stolen at TJX
Security measures
Encryption
TOM -> RAD (T=R, O=A, M=D)
Firewall
Fence around an organization
Intrusion Protection system
Traffic monitoring
Avoiding flooding (denial of service)

69. Passwords
jill01
Jjch55!!232
admin838

70. Biometrics Fingerprint verification Hand geometry Retinal scanning
Iris scanning
Signature verification

71. Why e-Commerce? Selling goods and services online But why?
Reduced costs and increased revenues
Low cost?
Low risk?
Open 24/7
Increased market size
(the world?)

72. Prerequisites to e-Commerce
Many online businesses fail
Before launch, need to think about:
Business model
Financial plan
Operations plan
Marketing plan
Internationalization plan

73. Types of e-commerce Business to Consumer (B-C)
Amazon.com
Business to Business (B-B)
Salesforce.com
Consumer to Consumer (C-C)
eBay.com

74. Starting an e-commerce business
Part I
Idea
Name = Location
Purchasing your domain
Part II
Building your site
Hosting your site
Marketing your site
1- Not all businesses start out to make money.
2- Real Estate .com vs .net vs .tv
1b- SEO

75. Your Idea Is it possible? Has it been done before? What are the costs?
Does it lend itself to an e-commerce format?

76. Naming Your Store Domain names Your unique identity on the web
Choose wisely
Choose Spain -
Google –
Yahoo –
Amazon
Go Daddy
First Bank –

77. Buying a Domain GoDaddy.com networksolutions.com
smallbusiness.yahoo.com
Who is Search

78. Hosting Your Store Standard hosting Merchant account
A place to put your website
Need to consider advertising, space, reliability, bandwidth, etc.
Merchant account
Hosting + other essential services

79. Creating an Online Catalog
Lack of physical interaction
Need precise and detailed description
Name, description, price, color, weight, etc.
Accurate picture (or even video) are essential
Amazon’s “look inside” feature

80. Importance of Building Trust
Need to reduce FUDs
Fears
Privacy policy, shipping and return policies
Uncertainties
Contacts, customer service, accurate information
Doubts
Feedback, customer reviews, third-party reviews

81. Sell Something! Allow customers to find products in your catalog
Browse and search
Use a shopping cart to keep track of products
Checkout of your store

82. Marketing your Store
Google ads
Blogs
YouTube
SEO
Offline Marketing

83. Getting Paid Consider currencies and methods
Euro vs. Dollar vs. Pound
Credit cards vs. merchant services vs. checks and money orders vs. bank accounts
Each method has advantages & disadvantages

84. Delivering Products / Services
Use a reputable shipping carrier
UPS, DHL, FedEx
Cost, reliability, availability
Order tracking
Define a shipping policy
Who pays?
What options are going to be offered?
Will you offer gift packaging?
Will special handling costs need to be included?
Will you ship internationally?

85. Customer Service Bad customer service = bad online business
Shopzilla, Bizrate, eBay Ratings
No face-to-face contact
Telephone
Mail
FAQs

86. Conclusions
An online business may be the easiest kind of business to start
Your challenge: if you want to go into business, you may want to start here