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Quantitative Decision Making:Current Issue/Event Article and SummaryThe current event must relate to my class.During weeks 2, 3, and 4, one of the course requirements is that you find and summarize a current issue/event. Your source must be from a reputable source (e.g., peer-reviewed journal, respected business or industry journal, valid company web site, etc.). Find article about some current issue/event (article and/or event must be within the last 2 years) related to one or more of the topics covered that week, or as indicated in this assignment.Submit to Discussion Board(2-3 sentences) Write a brief summary, and explain how it relates to the course content. Try to relate it to some of your work, education, or personal experiences.(1 question) Write a discussion question, as if you were going to use this article as the basis for a class discussion. The discussion should be open-ended and require thought and/or research to answer (not a yes/no, or just a factual response question from the article).At least 250 words.Citation. Include the proper citation in APA format. See the APA Style GuideLinks to an external site. produced by the UNH Writing Center.If the article is in PDF or other downloadable format (rather than directly viewable on a web page), attach the file to your post.ParametersTopics for Week 2: Topics covered in Chapters 1, 2, 11, 3, 4You must make your post to the discussion board before you will be able to see anyone elses post. This is by design!Once you have made your post, browse through some of the other posts. You can respond to a few as well.Real World Case That My professor mentioned in class:https://www.bloomberg.com/news/articles/2017-12-19/robots-are-making-your-sushi-and-that-s-good-for-the-economyhttps://www.bloomberg.com/news/features/2018-03-02/china-is-turning-ethiopia-into-a-giant-fast-fashion-factoryhttps://www.bloomberg.com/news/features/2018-04-09/yes-these-chickens-are-on-the-blockchainhttps://freakonomics.com/podcast/project-management/ ch01_operations_productivity.pptx ch02_strategy_global_rbg.pptx ch11_supplychain_rbg.pptx ch03_project_management_rbg.pptx Unformatted Attachment Preview CH01: Operations & Productivity ADMN580 QUANTITATIVE DECISION MAKING CH01: PRODUCTIVITY Roger Grinde ADMN580: Quantitative Decision Making 1 CH01: Operations & Productivity LOOKING AHEAD Check Access to eText & MyOMLab SCHEDULE Review Schedule / Canvas Assignments Read Chapter 02: Operations Strategy ADMN580: Quantitative Decision Making 2 CH01: Operations & Productivity AGENDA Introduce Operations Management (OM) Compare/Contrast Goods & Services Conduct Productivity Analysis Review Trends & Challenges Discuss Ethics in Operations ADMN580: Quantitative Decision Making 3 CH01: Operations & Productivity OPERATIONS MANAGEMENT ADMN580: Quantitative Decision Making 4 CH01: Operations & Productivity OM IS IMPORTANT, and FUN! Real Bottom Line Impact Challenging Problems Creative Solutions Teamwork Value ADMN580: Quantitative Decision Making 5 CH01: Operations & Productivity What is Operations Management (OM)? The Textbook Definition Activities that relate to the creation of goods and services through the transformation of inputs to outputs. ADMN580: Quantitative Decision Making 6 CH01: Operations & Productivity OPS MGT – Visual Definition People Equipment Facilities Materials Land Energy Processes 1 3 5 2 ADMN580: Quantitative Decision Making 4 Goods Services 7 CH01: Operations & Productivity THE “BIG THREE” KEY FUNCTIONS • Track financials • Pay the bills • Collect the money Material & Service Inputs Sales Revenues Support Functions Operations • Manage resources • Optimize processes • Produce value • • • • Information Systems Human Resources Engineering Etc. (goods / services) Marketing/Sales • Manage demand • Generate sales • Take orders CUSTOMERS SUPPLIERS Finance/Accounting Product & Service Outputs ADMN580: Quantitative Decision Making 8 CH01: Operations & Productivity OPERATIONS FUNCTIONS Figure 1.1 ADMN580: Quantitative Decision Making 9 CH01: Operations & Productivity OPERATIONS FUNCTIONS Figure 1.1 ADMN580: Quantitative Decision Making 10 CH01: Operations & Productivity OPERATIONS FUNCTIONS Figure 1.1 ADMN580: Quantitative Decision Making 11 CH01: Operations & Productivity OPS HAS BOTTOM LINE IMPACT You are leading a new tech start-up that makes virtual reality goggles. You need to double the dollar contribution to cover your fixed equipment costs and achieve a profit. Which of the following helps you the most? 1) Increase SALES REVENUE by 50\% 2) Cut FINANCE costs in half 3) Reduce OPERATIONS cost by 20\% ADMN580: Quantitative Decision Making 12 CH01: Operations & Productivity OPERATIONS FUNCTIONS BASELINE ASSUMPTIONS COGS (as \% Sales) 80\% Tax on Profit 25\% CONTRIBUTION DRIVERS Increase in Sales Revenue Reduction in Finance Costs Reduction in Production Costs CURRENT Sales Revenue $ 100,000 Cost of goods $ (80,000) Gross margin $ 20,000 Finance costs Pretax Profit Taxes Contribution $ $ $ $ (6,000) 14,000 (3,500) 10,500 SCENARIO ONE 50\% 0\% 0\% MARKETING $ 150,000 $ (120,000) $ $ $ $ $ 30,000 (6,000) 24,000 (6,000) 18,000 SCENARIO TWO 0\% 50\% 0\% FINANCE $ 100,000 SCENARIO THREE 0\% 0\% 20\% OPERATIONS $ 100,000 $ (80,000) $ (64,000) $ 20,000 $ 36,000 $ $ $ $ (3,000) 17,000 (4,250) 12,750 $ $ $ $ (6,000) 30,000 (7,500) 22,500 Table 1.1: FISHER TECHNOLOGIES P&L STATEMENT ADMN580: Quantitative Decision Making 13 CH01: Operations & Productivity OM MISSION $ ADD VALUE EFFICIENTLY ADMN580: Quantitative Decision Making 14 CH01: Operations & Productivity OM MISSION Think of a recent job. How did you “add value”? $ ADD VALUE ▪ Increase customer value at each stage of the process ▪ The “value added” is the net increase from input to output EFFICIENTLY ▪ Meet customer requirements for quality, cost, delivery, etc ▪ While minimizing waste (cost) and optimizing value Think of a recent job. Any obvious process inefficiencies? OM is where a company really makes (or loses) money. ADMN580: Quantitative Decision Making 15 CH01: Operations & Productivity OPS HALL OF FAME Eli Whitney (Standardized Parts) Frederick W. Taylor (Scientific Management) Henry Ford (Assembly Lines) Frank & Lillian Gilbreth (Work Measurement) W. Edwards Deming (Quality Control) Taiichi Ohno (Lean / JIT) breakthrough ideas in ops have resulted in worldwide improvements (ultimately resulting in better quality of life overall) Do you agree? ADMN580: Quantitative Decision Making 16 CH01: Operations & Productivity KEY DECISION AREAS IN OM $ ADMN580: Quantitative Decision Making ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ DESIGN of goods and services Measuring and Managing QUALITY PROCESS and CAPACITY Strategies We will touch on many of these in this course LOCATION Strategy LAYOUT Strategy HUMAN RESOURCES and JOB DESIGN SUPPLY CHAIN MANAGEMENT INVENTORY MANAGEMENT SCHEDULING See Table 1.2 MAINTENANCE FORECASTING PROJECT MANAGEMENT 17 CH01: Operations & Productivity VALUE TO STAKEHOLDERS EVOLUTION OF OPERATIONS MGT Advancements in OM Deliver Value to All Stakeholders • Shareholders • Employees • Customers • Suppliers • Community • Environment TIME ADMN580: Quantitative Decision Making 18 CH01: Operations & Productivity GOODS AND SERVICES What sectors have you worked in? Goods / Services / Hybrid GOODS Tangible, physical product Can keep in inventory Limited customer contact SERVICES WHICH ONE . . . • is physically tangible? Intangible services • can you hold in inventory? • Requires more customer contact? Consumed when produced • Requires shorter response times? High customer interaction • Is easier to track quality metrics? Longer response time Shorter response time Easier to track quality More difficult quality metrics ADMN580: Quantitative Decision Making See more detail and examples in Table 1.3 19 CH01: Operations & Productivity Think about a past job and your “process” jot down the following and think through the operations Inputs / Outputs / Customers / Feedback Mechanism Understanding how your “operations machine” works will result in greater success! ADMN580: Quantitative Decision Making 20 CH01: Operations & Productivity PRODUCTIVITY ADMN580: Quantitative Decision Making 21 CH01: Operations & Productivity Productivity measures how efficiently inputs are converted into outputs OUTPUT INPUT Productivity is the ratio of outputs (goods and services) divided by the inputs (such as labor, capital, and management) ADMN580: Quantitative Decision Making 22 CH01: Operations & Productivity PRODUCTIVITY AT STARBUCKS Why is improving PROCESS IMPROVEMENT productivity SAVINGS a “game of seconds” at Starbucks? Stop requiring signatures on 08 sec per credit card purchases under $25 transaction Change the size of the ice scoop 14 sec per drink New espresso machines 12 sec per shot Ops improvements have helped Starbucks increase yearly revenue per outlet by $250,000 to $1,000,000 in seven years. Productivity has improved by 27\% (about 4.5\% per year) ADMN580: Quantitative Decision Making read more about this in chapter one 23 CH01: Operations & Productivity PRODUCTIVITY FORMULAS PRODUCTIVITY Units Produced Inputs Used SINGLE-FACTOR PRODUCTIVITY Units Produced A Single Input MULTIFACTOR PRODUCTIVITY Units Produced Labor + Material + Energy + Capital + Misc. ADMN580: Quantitative Decision Making 24 CH01: Operations & Productivity LET’S BUILD A PRODUCTIVITY MODEL Download CAR MODEL template ADMN580: Quantitative Decision Making 25 CH01: Operations & Productivity BUILD A PRODUCTIVITY MODEL CAR MODEL YEAR ONE YEAR TWO YEAR THREE 2.1 2.4 2.7 Employees 115,000 113,000 112,000 Sales ($ millions) $38,000 $41,000 $49,000 Cost of Sales ($ millions) $32,000 $33,000 $39,000 Unit car sales (millions) Build an excel model to calculate • Partial Productivity of unit car sales by employee • Total Cost Productivity for each year include year-over-year Percent Change 𝑛𝑒𝑤 − 𝑜𝑙𝑑 ∆𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = 𝑜𝑙𝑑 ADMN580: Quantitative Decision Making 26 CH01: Operations & Productivity BUILD A PRODUCTIVITY MODEL CAR MODEL ∆𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = (21.24 − 18.26) 18.26 YEAR ONE 2.1 115,000 $38,000 $32,000 YEAR TWO 2.4 113,000 $41,000 $33,000 YEAR THREE 2.7 112,000 $49,000 $39,000 Unit Car Sales/Employee Year-to-Year Improvement 18.26 N/A 21.24 16.3\% 24.11 13.5\% Total Cost Productivity Year-to-Year Improvement 1.19 N/A 1.24 4.6\% 1.26 1.1\% Unit car sales (millions) Employees Sales ($ millions) Cost of Sales ($ millions) 𝑆𝑎𝑙𝑒𝑠Τ𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑒 = (2.1 ∗ 1,000,000)/(115,000) ADMN580: Quantitative Decision Making 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = $38,000/$32,000 27 CH01: Operations & Productivity ANALYZE THE RESULTS Which metric is better in this case? Partial Productivity or Total Productivity Why? ADMN580: Quantitative Decision Making 28 CH01: Operations & Productivity ANALYZE THE RESULTS Which metric is better in this case? Actually, it depends . . . Productivity measures must be compared to something, i.e. another year, a different company, a different product. Raw productivity calculations do not tell the whole story. ADMN580: Quantitative Decision Making 29 CH01: Operations & Productivity NEXT STEPS AS OPS MANAGERS Our company has achieved partial productivity improvements in cars produced per employee What changes could we implement Partial Cars Produced to continue improving this Productivity = Employees “Partial metric? (cars per employee) Productivity” output input Think of an equation as test equipment that we can use to model scenarios. ADMN580: Quantitative Decision Making 30 CH01: Operations & Productivity NEXT STEPS AS OPS MANAGERS Your operational improvements will continue to increase cars produced per employee How do your decisions impact • Other Organizational Metrics? • Other Qualitative Factors? • Your Company Stakeholders? • • • • • • Shareholders Employees Customers Suppliers Community Environment Go beyond the quantitative analysis and think like an ops manager! ADMN580: Quantitative Decision Making 31 CH01: Operations & Productivity PRODUCTIVITY METRICS CHALLENGES Quality may change while the quantity of inputs and outputs remains constant External Elements may cause an increase or decrease in productivity Precise Units of measure may be lacking Productivity is not a “perfect metric” … but it is better than nothing! ADMN580: Quantitative Decision Making 32 CH01: Operations & Productivity “PRODUCTIVITY VARIABLES” 10\% LABOR 38\% CAPITAL 52\% MANAGEMENT smart application of knowledge and technology read more about these in chapter one ADMN580: Quantitative Decision Making 33 CH01: Operations & Productivity TEXTBOOK TIPS (eText or Hard Copy) 1. 2. 3. 4. (On Paper) Outline Major Topics Skim Chapter for main ideas Read for detail. Add key ideas to notes. Review outline and summarize main ideas in words: written, oral. 5. Review “Rapid Review” (end of chapter) 6. Next day. Review notes and re-skim chapter (REINFORCEMENT LEARNING) ADMN580: Quantitative Decision Making 34 CH01: Operations & Productivity OUR NEXT TOPIC WILL BE . . . OPERATIONS STRATEGY ADMN580: Quantitative Decision Making 37 CH01: Operations & Productivity CHECK THE SCHEDULE Any questions on the required readings & deliverables? ADMN580: Quantitative Decision Making 38 CH01: Operations & Productivity ADMN580: Quantitative Decision Making 39 CH02: OPS STRATEGY, GLOBAL ADMN580 QUANTITATIVE DECISION MAKING CH02: OPERATIONS STRATEGY, GLOBALIZATION Roger Grinde ADMN580: Quantitative Decision Making 1 CH02: OPS STRATEGY, GLOBAL OPERATIONS STRATEGY How do we make sure tactical decisions support our top-level strategy? ADMN580: Quantitative Decision Making 2 CH02: OPS STRATEGY, GLOBAL THE CHALLENGE OF MAKING DECISIONS MANAGING OPERATIONS In both business and in life We make bad judgment calls because of inherent biases in the human mind. Anchoring (or focalism) is the idea that your mind can be swayed by totally irrelevant information when you’re making a decision. I’m asking $5,000 for this classic Buick Century, but for you I can do $4,300. . . .the actual average retail is $2,500. We can use data and analysis as an antidote to the warping that naturally goes on when we are making intuitive judgments. The story of how two Israeli psychologists Amos Tversky and Danny Kahneman redefined how the human mind actually works – establishing a cognitive basis for common human errors that arise from heuristics and biases http://freakonomics.com/podcast/men-started-thinking-revolution/ ADMN580: Quantitative Decision Making 3 CH02: OPS STRATEGY, GLOBAL STRATEGIC DECISIONS Business organizations are a collection of individuals constantly making decisions of varying importance. (or waiting for decisions to be made for them) STRATEGIC DECISIONS TACTICAL DECISIONS Broad in Scope Longer-term All Encompassing Narrow in Scope Shorter-term “Lower Level” Issues (What product should we launch next, in what markets?) (Who will cover second shift next week?) As you progress in your career – try to be one of the decision makers! ADMN580: Quantitative Decision Making 4 CH02: OPS STRATEGY, GLOBAL COMPARE OPTIONS & MAKE A DECISION You are tasked with helping National Architects Incorporated select an outsourced IT provider. ADMN580: Quantitative Decision Making 5 CH02: OPS STRATEGY, GLOBAL USE A “WEIGHTED DECISION MATRIX” Also known as the FACTOR-RATING METHOD • Quantitative approach to evaluating multiple options • Helps drive team consensus around key decisions Decision Matrix Worksheet Simple Tool, Surprisingly Effective. Gets people talking. ADMN580: Quantitative Decision Making 6 OPERATIONS: Decision Matrix example problem You are tasked with helping National Architects Inc. select an outsourced IT provider. Your supplier management team conducted a Request for Proposal (RFP) and received the following results. Which supplier do you recommend? REALITY CHECK Multiply each factor score by their weight. # FACTOR (CRITERION) 1 Can reduce operating costs 2 Can reduce capital investment 3 Skilled personnel 4 Can improve quality 5 Access to technology not in company 6 Can create additional capacity 7 Aligns with policy/ philosophy/ culture WEIGHT OUTSOURCING PROVIDERS BIM (US) SPC (India) TELCO (Israel) 0.2 3 x 0.2 = 0.6 3 x 0.2 = 0.6 5 x 0.2 = 1.0 0.2 4 x 0.2 = 0.8 3 x 0.2 = 0.6 3 x 0.2 = 0.6 0.2 0.1 5 x 0.2 = 1.0 4 x 0.2 = 0.8 3 x 0.2 = 0.6 4 x 0.1 = 0.4 5 x 0.1 = 0.5 2 x 0.1 = 0.2 0.1 5 x 0.1 = 0.5 3 x 0.1 = 0.3 5 x 0.1 = 0.5 0.1 4 x 0.1 = 0.4 2 x 0.1 = 0.2 4 x 0.1 = 0.4 0.1 2 x 0.1 = 0.2 3 x 0.1 = 0.3 5 x 0.1 = 0.5 3.3 3.8 3.9 Then sum the column for a total weighted score. Scores 2\% of each What would you Repeat are for within each column and other. compare thedo results. Whorecommend? do you pick? 7 Decision Matrix Practices Assume your team plans to take a “group gap year”. Use a decision matrix to reach a consensus on how to spend your time away from UNH. Download DECISION MATRIX template ❑ Brainstorm decision criteria - reflecting your team’s goals (list at least five) ❑ Review the criteria list and weight the importance of each (on a scale of 1 to 10) ❑ Brainstorm gap year options - where to go? / what to do? (be specific - list five) ❑ Review options and score each based on how well each would fulfil the required decision criteria (1 “not at all” thru 10 “completely”) ❑ Once all options are scored, multiply the option score by the associated criteria weight and sum the product to get a weighted score for each option ❑ Discuss results as a team and select an option for your gap year experience. Report back to the class and comment on how the decision process worked. How will your team spend your gap year? How strong is the consensus? 9 CH02: OPS STRATEGY, GLOBAL BALANCED SCORECARD (BSC) CUSTOMER INNOVATION (Learning & Growth) An approach to creating a Strategy Focused Organization (complements what is covered in CHAPTER TWO) FINANCIAL ADMN580: Quantitative Decision Making INTERNAL PROCESSES 10 CH02: OPS STRATEGY, GLOBAL BSC: QUICK VIDEO OVERVIEW Four Minute Video: https://www.youtube.com/watch?v=M_IlOlywryw Go to CANVAS and watch the video. ADMN580: Quantitative Decision Making 12 CH02: OPS STRATEGY, GLOBAL STRATEGY FOCUSED Developed by by Drs. Robert Kaplan (Harvard Business School) and David Norton Implementing a BALANCED SCORECARD BALANCED SCORECARD High Performance helps create a Strategy-Focused Organization by providing a framework for aligning the organization and human capital components needed to achieve Think about your own business startup idea. As we discuss BSC connect the approach to how you might run your own business. ADMN580: Quantitative Decision Making Copyright © 2005 by the Balanced Scorecard Institute. All rights reserved. 13 CH02: OPS STRATEGY, GLOBAL MISSION (Why We Exist) VISION (What We Want to Be) VALUES & PRINCIPLES (What’s Important to Us) STRATEGY (How We Want to Get There) SCORECARD (How We Measure Progress) IMPLEMENTATION PLANS (What We Need to Do) PERSONAL PLANS (What I Need to Do) ADMN580: Quantitative Decision Making 14 CH02: OPS STRATEGY, GLOBAL BSC METRICS How do we generate value for our stakeholders? FINANCIAL How do we create value? What benefit do we provide? CUSTOMER STRATEGY INNOVATION (Learning & Growth) How will we sustain our ability to change and improve? INTERNAL PROCESS To satisfy customers at what business processes must we excel? ADMN580: Quantitative Decision Making 15 CH02: OPS STRATEGY, GLOBAL PROCESS Step One: Step Nine: Evaluate the Results Assess Corporate Priorities Step Two: Develop Business Strategy Step Three: Step Eight: Decompose Strategy into Objectives Roll-out the Scorecard Step Four: Step Seven: Categorize/Map the Strategy & Objectives Systematize the Scorecard ADMN580: Quantitative Decision Making We will focus on the first two steps. Step Six: Step Five: Identify Enabling Initiatives Define Performance Measures 16 CH02: OPS STRATEGY, GLOBAL 1) ASSESS PRIORITIES Environmental Scanning Monitoring the business environment for • trends • threats • opportunities Mission / Vision / Values Statement that defines • what is our business • who are our clients • how our values define our business Core Competencies Unique strengths that that help us win in the market • workforce • facilities • know-how • systems/technology Business Strategy Defines the longrange plan for the company ADMN580: Quantitative Decision Making 17 CH02: OPS STRATEGY, GLOBAL ENVIRONMENTAL SCANNING Porter’s Five Forces Model NEW ENTRANTS THE INDUSTRY SUBSTITUTES OUR COMPANY FIVE FORCES TRADITIONAL COMPETITORS SUPPLIERS ADMN580: Quantitative Decision Making CUSTOMERS 18 CH02: OPS STRATEGY, GLOBAL ENVIRONMENTAL SCANNING Porter’s Five Forces Model NEW ENTRANTS • • • • Combimix HB Fuller Sika Product Technologies SUPPLIERS DRYTEK SUBSTITUTES • • • • • Manual Labor (Concrete) Raised Floors Liquid Solutions (Epoxy) Backer Board Low Alkali Concrete FIVE FORCES • Contract Manufacturer • Key Raw Materials • Lafarge • Kerneos • Elotex • Bags • Logistics Providers ADMN580: Quantitative Decision Making THE INDUSTRY Self-leveling Cement Flooring Products & Accessories (Americas) • • • • • • • • • • • Traditional Competitors Ardex Mapei ProSpec (Old Castle) CMP Dayton Superior Laticrete Maxxon USG Raeco Hacker Dependable CUSTOMERS • Di ... 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