Welcome to ISQS 3344

Introduction to Production and Operations Management

Spring 2014

Lab Section 001Tuesday 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 careif 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 strategy1. Begins with mission statement2. 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

Copyright 2011 John Wiley & Sons, Inc.

Forms of Forecast Movement

12-25

Time(a) Trend

Time(d) Trend with seasonal pattern

Time(c) Seasonal pattern

Time(b) Cycle

Dem

and

Dem

and

Dem

and

Dem

and

Random movement

Copyright 2011 John Wiley & Sons, Inc.

Smoothing Effects

12-26

150 –

125 –

100 –

75 –

50 –

25 –

0 –| | | | | | | | | | |

Jan Feb Mar Apr May June July Aug Sept Oct Nov

Actual

Ord

ers

Month

5-month

3-month

Copyright 2011 John Wiley & Sons, Inc.

12-27

Linear trend line y = 35.2 + 1.72xForecast for period 13 y = 35.2 + 1.72(13) = 57.56 units

70 –

60 –

50 –

40 –

30 –

20 –

10 –

| | | | | | | | | | | | |1 2 3 4 5 6 7 8 9 10 11 12 13

Actual

Dem

and

Period

Linear trend line

#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

Copyright 2011 John Wiley & Sons, Inc.

Mean Absolute Deviation (MAD)

12-29

where t = period number

Dt = demand in period t Ft = forecast for period t

n = total number of periods = absolute value

S Dt - Ft nMAD =

# 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

Copyright 2011 John Wiley & Sons, Inc.

Process Selection With Break-Even Analysis

6-31

Total cost = fixed cost + total variable costTC = cf + vcv

Total revenue = volume x priceTR = vp

Profit = total revenue - total costZ = TR – TC = vp - (cf + vcv)

cf = fixed costV = volume (i.e., number of units produced and sold)cv = variable cost per unitp = price per unit

Copyright 2011 John Wiley & Sons, Inc.

Process Selection With Break-Even Analysis

6-32

Solving for Break-Even Point (Volume)

TR = TCvp = cf + vcv

vp - vcv = cf

v(p - cv) = cf

v =

cf

p - cv

Copyright 2011 John Wiley & Sons, Inc.

Break-Even Analysis

6-33

Fixed cost = cf = $2,000Variable cost = cv = $50 per unit

Price = p = $100 per unit

Break-even point is

v = = = 40 unitscf

p - cv

2000

100 - 50

Copyright 2011 John Wiley & Sons, Inc.

Break-Even Analysis: Graph

6-34

Total cost line

Total revenue line

Break-even point40 Units

$3,000 —

$2,000 —

$1,000 —

Dollars

#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

http://www.myomlab.com/ThursdayCourse ID: flamm18723Course Name: ISQS 3344 702Thursday 11AM Big Class Spring 14

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