3. 1-3
ModelsModels
A model is an abstraction of reality.
– Physical
– Schematic
– Mathematical
What are the pros and cons of models?
Tradeoffs
4. 1-4
Models Are BeneficialModels Are Beneficial
Easy to use, less expensive
Require users to organize
Increase understanding of the problem
Enable “what if” questions
Consistent tool for evaluation and
standardized format
Power of mathematics
5. 1-5
Limitations of ModelsLimitations of Models
Quantitative information may be emphasized
over qualitative
Models may be incorrectly applied and
results misinterpreted
Nonqualified users may not comprehend the
rules on how to use the model
Use of models does not guarantee good
decisions
7. 1-7
Analysis of Trade-OffsAnalysis of Trade-Offs
Decision on the amount of inventory to stock
Increased cost of holding inventory
Vs.
Level of customer service
9. 1-9
Pareto PhenomenonPareto Phenomenon
• A few factors account for a high
percentage of the occurrence of some
event(s).
• 80/20 Rule - 80% of problems are caused
by 20% of the activities.
How do we identify the vital few?
13. 1-13
Historical Evolution of OperationsHistorical Evolution of Operations
ManagementManagement
Industrial revolution (1770’s)
Scientific management (1911)
Mass production
Interchangeable parts
Division of labor
Human relations movement (1920-60)
Decision models (1915, 1960-70’s)
Influence of Japanese manufacturers
Table 1.7
14. 1-14
Trends in BusinessTrends in Business
Major trends
The Internet, e-commerce, e-business
Management technology
Globalization
Management of supply chains
Outsourcing
Agility
Ethical behavior
15. 1-15
Management TechnologyManagement Technology
Technology: The application of scientific
discoveries to the development and
improvement of goods and services
Product and service technology
Process technology
Information technology
17. 1-17
Stage of Production Value
Added
Value of
Product
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
A Supply Chain for BreadA Supply Chain for Bread
18. 1-18
Other Important TrendsOther Important Trends
Ethical behavior
Operations strategy
Working with fewer resources
Revenue management
Process analysis and improvement
Increased regulation and product liability
Lean production