Welcome to ISQS 3344
Introduction to Production and
Operations Management
Spring 2014
Lab Section 001
Tuesday 8:00-9:20 a.m., Room BA 011
About Your Instructor
• Instructor:
Dr. James R. Burns, Professor of Operations
Management and Information Technology
• Office: BA E306
• Phone: 806.834.1547
• Email: Jim.Burns@ttu.edu
• Office Hours:
By appointment
• My Website: http://burns.ba.ttu.edu
The Syllabus
• The class will be broken up into teams of 3 or 4
people for group work.
– Will have six teams of four and two teams of three
each
• Each group will make two presentations and turn
in two project papers – electronic copy and hard
copy.
• More instructions can be found at the websites:
http://burns.ba.ttu.edu/isqs3344.htm
Lab Grading
• Possible 400 points
•
•
•
150 Two group presentations (75 points each)
150 Two group papers (75 points each)
40 Grade assigned to each group member by
fellow members
•
60
Attendance grade (attendance is
mandatory)
My Responsibilities
• This is a lab class, not a teaching class;
therefore, there will be NO exams in this
class!
• I will help you with questions about
presentations and papers
• Grade presentations and papers
• I will help you with your homework
Will you have to say anything out loud in this
class?
• Becoming effective in communication both
speaking and writing should be one outcome
from a college education.
• Being an articulate speaker is always useful in
the world of work, no matter what vocation
you choose.
• Yes, you are going to have to speak
out loud in this class.
Does anybody really care
if you, the student, come late or leave
early?
•
•
•
•
Absolutely
We need to start on time
Work until the material is over
Sixty (60) points to lose—attendance is kept
up with.
How will YOU know what is important in
this class?
• I will tell you what you need to know so that
you can do well in this class.
• I want you to DO WELL in this class!
What if YOU have a question?
• Email me
– Jim.burns@ttu.edu
• All communication through Email
• Speak to me before/after class
What Employers Want—You should
have seen this last Thurs in lecture
•
•
•
•
•
•
•
•
•
•
•
•
Excellent written and verbal communication skills
Possess entrepreneurial spirit
Strong problem-solving and analytical skills
Proven track record of success
Strong work ethic
Demonstrated leadership
Competitive attitude
Goal-oriented and results-driven
Internship experience in related fields
Must thrive in a team environment and work well with others
Ability to work independently in a fast-paced environment
Strong educational background
Lab Instructions, Part 1
Lab Portion of ISQS 3344
• Why a lab?? – most people learn by doing
• Skills/competencies
– Standup presentation
• Able to think on your feet (in front of people)
– Ability to work in teams
– Problem-solving
– Logic
– Cross functional thinking
– Professional writing
More Competencies/Skills
• Project management
• Quantitative skills
Uses of your Project
• Put it in your portfolio for examination by future
employers—that is what architecture students
do….
• Learn how to create business plans
– Used to garner funds for new company startup
– Take it to banks, (to get startup capital)
• Investors
• Venture capital
• Your project can become your business plan (you
can start your own company—use an incubator)
Part 1 Goals:
• Outline corporate business strategy
1. Begins with mission statement
2. Customer benefit package
•
•
•
•
•
Identify company
Define your product (cannot be a service)
Identify your market space, your market niche
Forecast production requirements (demand)
Discuss production capacity strategy
Part 1, #1 – Mission Statement
•
•
•
•
Part of your business plan
What type of business or class of products?
Who your customers will be (demographics)
Future path of the organization (values)
– Green
– Made in America
• Products in the pipeline
– Your product trajectory
What it takes to make an A
*Be SURE you do all of what is required
*Read each chapter before lecture
*Take notes using the power point slides in the
back of the book
*Attend every focus group
*Go over all notes every lecture day
*Lab….visit your lab instructor at least twice in
his/her office for help on the project Parts 1 and 2
*Review homework prior to Quantitative Review
Day and ask instructor to clear up any questions
Part 1, #2: Customer Benefit Package
CBP
• Concept development
– Where did your idea came from(investors want to know)
• Detailed description of the product (diagrams, pictures,
etc.)
• Define CBP –attach CBP diagram
• Break-even timeline (details later)—how long does it
take to get to breakeven– initially costs exceed
revenues, but over time accumulated revenues catch
up and eventually exceed accumulated costs—say in 18
to 24 months, hopefully
#3 Strategy Development
• Environmental scanning – market niche
• Customer and market requirements for your
product
– What does it take to get you into the market?
– Features that are Order winners – like kicking your
foot under the tailgate of the Ford Escape
• Competitors and other threats—who are they
and how to overcome
#5 – Product Design
• Preliminary design and testing – stages
• Final Design – raw materials and equipment
required to manufacture
#6 -- Forecasting
• We always forecast demand—so we can plan to
have enough capacity to accommodate demand
• Past 5 years data from this company
• Attach linear regression formula and graph
• Attach table of next 5 years forecast for company
selected
• Pick and defend a % of their forecasted sales for
your 1st 5 years sales
• Attach table of your 5 year forecast
Demand
Demand
Forms of Forecast Movement
Random
movement
Time
(b) Cycle
Demand
Demand
Time
(a) Trend
Time
(c) Seasonal pattern
Time
(d) Trend with seasonal pattern
Copyright 2011 John Wiley & Sons, Inc.
12-25
Smoothing Effects
150 –
5-month
125 –
Orders
100 –
75 –
3-month
50 –
Actual
25 –
0–
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
June
|
July
|
Aug
|
Sept
|
Oct
|
Nov
Month
Copyright 2011 John Wiley & Sons, Inc.
12-26
Linear trend line y = 35.2 + 1.72x
Forecast for period 13
y = 35.2 + 1.72(13) = 57.56 units
70 –
Actual
Demand
60 –
50 –
Linear trend line
40 –
30 –
20 –
|
1
|
2
|
3
|
4
|
5
|
|
6
7
Period
|
8
|
9
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10
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11
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12
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13
10 –
Copyright 2011 John Wiley & Sons, Inc.
12-27
#7 cont. Checking Forecasts
• Select POTENTIAL (example only – hasn’t
happened yet) sales for next 5 years
• Attach (Include) Calculation of MAD and
Tracking Signal
• Explain meaning of results
• Discuss relevancy of seasonality
– Think “Seadoo” and “Skidoo”
• Attach 1st year as a seasonal forecast if
appropriate
Mean Absolute Deviation (MAD)
 Dt - Ft 
MAD =
n
where
t = period number
Dt = demand in period t
Ft = forecast for period t
n = total number of periods
 = absolute value
Copyright 2011 John Wiley & Sons, Inc.
12-29
# 8 - Break Even Analysis
• Describe breakeven analysis
• Attach (include) fixed cost (annualized for 5
years), variable costs, and sales price per unit
• Attach (include) breakeven analysis
calculated in units
• Attach (include) breakeven timeline based on
your forecast
Process Selection With
Break-Even Analysis
Total cost = fixed cost + total variable cost
TC = cf + vcv
Total revenue = volume x price
TR = vp
Profit = total revenue - total cost
Z = TR – TC = vp - (cf + vcv)
cf = fixed cost
V = volume (i.e., number of units produced and sold)
cv = variable cost per unit
p = price per unit
Copyright 2011 John Wiley & Sons, Inc.
6-31
Process Selection With
Break-Even Analysis
TR = TC
vp = cf + vcv
vp - vcv = cf
v(p - cv) = cf
cf
v= p-c
v
Solving for Break-Even Point (Volume)
Copyright 2011 John Wiley & Sons, Inc.
6-32
Break-Even Analysis
Fixed cost = cf = $2,000
Variable cost = cv = $50 per unit
Price = p = $100 per unit
Break-even point is
cf
2000
v= p-c =
= 40 units
v
100 - 50
Copyright 2011 John Wiley & Sons, Inc.
6-33
Break-Even Analysis: Graph
Dollars
Total
cost
line
$3,000 —
$2,000 —
$1,000 —
Total
revenue
line
40
Break-even point
Copyright 2011 John Wiley & Sons, Inc.
Units
6-34
#9 - Production Capacity
• Discuss production capacity for next 5 years in
comparison to demand forecast
• Defend amount of safety capacity
• Describe expansion plans if necessary
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Thursday
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Course Name: ISQS 3344 702
Thursday 11AM Big Class Spring 14
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