OPERATIONSbANDbSUPPLYbCHAINbMANAGEMENT
1
, S1:bWhatbisboperationsbmanagement
Def:
- operations:bopus:bwhichbmeansbwork
- Managementb=bManub=bhand
- Handlingbdirectingbactivitiesbrelatedbtobwork
- Allbbusinessbsellbsomething:boutput
- Tobproducebandboutputbbusinessbneedbresourcesbtobproducebthatbsomethingb:banbinput
- Everythingbinbthebmiddlebofbinputbandboutputbisboperationsbandbeverythingbthebentirebsystembin
reality
- Operationsbmanagement:bbusinessbfunctionbinbabdioramabthatbmanagesbthebprocessbof
transformingbinputsbintoboutputs
- Operations:b inputb —>b convertsb to—>b process—>b convertsb tob —>b output
2
, S2:bForecasting
Recap
Forecastingbbackground
bDemandbforecastingb:
- OperationsbManagementbisbaboutbthebmanagementbofbprocessesbthatbtransformsbinputsbto
outputs
- Thisbtransformationbprocessbisbalmostbneverbinstantaneous,bsobthebdemandbforbsomebpointbin
timebneedsbtobbebpredictedbsobthebmatchingblevelbofbinputsbcanbbeblinedbup
- Demandbforecastingbisbabpredictionbofbprobablebdemandbforbabproductborbabservicebonbthebbasis
ofbthebpastbeventsbandbprevailingbtrendsbinbthebpresent
Forecastsbgonebwrong
- Ciscob[...]breportedbmorebthanb$3.4bbillionbinbone-timebcharges,bincludingbab$2.2bbillionbwrite-
bdownbforbexcessbinventory.bThebinventorybcharge,bprimarilybreflectingbabhugebstorebofbcomp
onentsbCiscobaccumulatedbinbresponsebtobabpartsbshortageblastbyear.
- InbJuneb2008,bduebtobanbindustry-widebcapacitybconstraintbforbcompactbandbhybridbcars,bGM
estimatedbvehiclebshortagesbcostbthebautobindustryb40,000bsales.bWSJb7/2/2008
- Inb2020,bduebtobinabilitybtobmeetbdemand,bPelotonbcommittedb$820bmillionbtobincreasebcapacity.
Demandbplummeted,bresultingbinbhighbinventory,blowbturnovers,blayoffbofb2800bemployees,b$439b
millionbloss,bandbcuttingbforecastbbyb$1bbillionbFrontbOfficebSportsb02/13/2022
- Reducedbsharedbforecastbestimatesbofbcarbmanufacturersbtobchipbprovidersbresultedbinbshortage,
costingbthebUSbEconomyb$240bbillionbandbEuropeanbcarbmanufacturersb€100bbillionbCBSb01/28/2
022;bThebBrusselbTimesb11/19/2022
Whybforecast?bDoesbitbhelp?
- Inbabmanufacturingbindustry?
- Inbabservicebindustry?
Differentbtypesbofbforecastsb:bQualitativebvsbQuantitative
3
, CausalbForecastingbRoadm
apbforbnextblecture
Forecastingbmethodsb
Timebseriesbforecast
- Definition: Forecast based on previously observed values (time series) of the variable to be
b b b b b b b b b b b b b
forecasted
- Assumption:bPastbhistorybisbbestbpredictorbofbthebfuture
Forecastingbdemand
Notations
- Demandb(A)bobservedbinbperiodbtb
- At
- Ab =b150,bmeans,bthebobservedbdemandbinbperiodb3bwasb150b3
- Forecastb(madebinbperiodbt)bofbdemandbforbperiodbt+1,bi.e.bforecastbofbnextbperiod’sbdemandbF
t+1
- Fb =b200,bmeans,bthebforecastbforbperiodb4bwasb200.bThisbforecastbwasbmadebinbperiodb3b4
-
Basicbtimebseries
- Demandb=bMeanb+bRandombFluctuation
- Notes:
(1) FluctuationbCanbbebPositiveborbNegative
(2) AveragebFluctuationb=b0
- ChallengebisbtobEstimatebthebmeanblevelbofbdemandbinbthebnextbperiod.
Howbwouldbyoubdobthis?
4
1
, S1:bWhatbisboperationsbmanagement
Def:
- operations:bopus:bwhichbmeansbwork
- Managementb=bManub=bhand
- Handlingbdirectingbactivitiesbrelatedbtobwork
- Allbbusinessbsellbsomething:boutput
- Tobproducebandboutputbbusinessbneedbresourcesbtobproducebthatbsomethingb:banbinput
- Everythingbinbthebmiddlebofbinputbandboutputbisboperationsbandbeverythingbthebentirebsystembin
reality
- Operationsbmanagement:bbusinessbfunctionbinbabdioramabthatbmanagesbthebprocessbof
transformingbinputsbintoboutputs
- Operations:b inputb —>b convertsb to—>b process—>b convertsb tob —>b output
2
, S2:bForecasting
Recap
Forecastingbbackground
bDemandbforecastingb:
- OperationsbManagementbisbaboutbthebmanagementbofbprocessesbthatbtransformsbinputsbto
outputs
- Thisbtransformationbprocessbisbalmostbneverbinstantaneous,bsobthebdemandbforbsomebpointbin
timebneedsbtobbebpredictedbsobthebmatchingblevelbofbinputsbcanbbeblinedbup
- Demandbforecastingbisbabpredictionbofbprobablebdemandbforbabproductborbabservicebonbthebbasis
ofbthebpastbeventsbandbprevailingbtrendsbinbthebpresent
Forecastsbgonebwrong
- Ciscob[...]breportedbmorebthanb$3.4bbillionbinbone-timebcharges,bincludingbab$2.2bbillionbwrite-
bdownbforbexcessbinventory.bThebinventorybcharge,bprimarilybreflectingbabhugebstorebofbcomp
onentsbCiscobaccumulatedbinbresponsebtobabpartsbshortageblastbyear.
- InbJuneb2008,bduebtobanbindustry-widebcapacitybconstraintbforbcompactbandbhybridbcars,bGM
estimatedbvehiclebshortagesbcostbthebautobindustryb40,000bsales.bWSJb7/2/2008
- Inb2020,bduebtobinabilitybtobmeetbdemand,bPelotonbcommittedb$820bmillionbtobincreasebcapacity.
Demandbplummeted,bresultingbinbhighbinventory,blowbturnovers,blayoffbofb2800bemployees,b$439b
millionbloss,bandbcuttingbforecastbbyb$1bbillionbFrontbOfficebSportsb02/13/2022
- Reducedbsharedbforecastbestimatesbofbcarbmanufacturersbtobchipbprovidersbresultedbinbshortage,
costingbthebUSbEconomyb$240bbillionbandbEuropeanbcarbmanufacturersb€100bbillionbCBSb01/28/2
022;bThebBrusselbTimesb11/19/2022
Whybforecast?bDoesbitbhelp?
- Inbabmanufacturingbindustry?
- Inbabservicebindustry?
Differentbtypesbofbforecastsb:bQualitativebvsbQuantitative
3
, CausalbForecastingbRoadm
apbforbnextblecture
Forecastingbmethodsb
Timebseriesbforecast
- Definition: Forecast based on previously observed values (time series) of the variable to be
b b b b b b b b b b b b b
forecasted
- Assumption:bPastbhistorybisbbestbpredictorbofbthebfuture
Forecastingbdemand
Notations
- Demandb(A)bobservedbinbperiodbtb
- At
- Ab =b150,bmeans,bthebobservedbdemandbinbperiodb3bwasb150b3
- Forecastb(madebinbperiodbt)bofbdemandbforbperiodbt+1,bi.e.bforecastbofbnextbperiod’sbdemandbF
t+1
- Fb =b200,bmeans,bthebforecastbforbperiodb4bwasb200.bThisbforecastbwasbmadebinbperiodb3b4
-
Basicbtimebseries
- Demandb=bMeanb+bRandombFluctuation
- Notes:
(1) FluctuationbCanbbebPositiveborbNegative
(2) AveragebFluctuationb=b0
- ChallengebisbtobEstimatebthebmeanblevelbofbdemandbinbthebnextbperiod.
Howbwouldbyoubdobthis?
4
