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MGT613 - Production / Operations Management - Lecture Handout 18

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Process Selection plays an important part in over all design of production and operations management systems. Process Selection allows an organization to offer a safe and reliable product and service through pragmatic design and effective capacity planning. With the help of process selection we can understand the different types of processing including manual, rigid, and flexible as well as various automated approaches to processing. Process selection allows an operations
manager to better understand the need for management of technology. Together with capacity planning it helps an organization to develop different approaches to meet the irregular demand pattern of the customers.

Introduction and Meaning

Process Selection refers to the way an organization chooses to produce its good or services. It takes into account selection of technology, capacity planning, layout of facilities, and design of work systems. Process selection is a natural extension after selection of new products and services.

An organizations process strategy would include

  1. Make or Buy Decisions. The extent to which an organization will produce goods or provide in house as opposed to relying on an outside organization to produce or provide them.
  2. Capital Intensity. The mix of equipment and labor will be used by the government.
  3. Process Flexibility: The degree to which the system can be adjusted to changes in processing requirements due to such factors as changes in product or service design, changes in volume processed, and changes in technology.

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MGT613 - Production / Operations Management - Lecture Handout 08

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Roadmap to the Lecture

  • Discuss the requirements of a good forecast.
  • Steps in making a forecast.
  • Fundamental types of forecast.
  • Finer classification of forecast
  • Discuss characteristics of Judgmental Forecasts.
  • Delphi Method.
  • Time Series Analysis.
  • Naïve Forecast.

Requirements of a Good Forecast

  • Timely. The forecast should be timely. Indicating that forecasting horizon should provide enough time to implement possible changes. Capacity cannot be expanded instantly it requires some time to plan, coordinate and increase the required resources.
  • Reliable. Forecasts should be reliable meaning that it should work consistently. A forecast that is partially correct will succeed at sometime and sometime fail making the end users question the purpose and intent of forecasting.
  • Accuracy. Forecasts should be accurate. In fact it should carry the degree of accuracy, so the users are aware of the limitations of the forecast. This will also help the end users to plan for possible errors and provide a basis for comparing the forecast with other alternative forecasts.
  • Meaningful Forecast should be expressed in meaningful units. Financial Planners will use Rupees to show how much capital would be required; Mechanical Project Schedulers would require Forecasts to carry the type of machines and crafts of technicians required.
  • Written/Documented. The forecasts should be presented in writing. A documented forecast always provides a chance to measure the variance between estimate and actual result at a later stage.
  • Simple to understand and use meaning that Forecasts should not be dependant upon usage of sophisticated computer techniques or task specific highly qualified technical personnel. A failure or limitation on the part of this can lead to an incorrect decision and less acceptance amongst end users Steps in the Forecasting Process
  • Determine the purpose of the forecast meaning what is the purpose and when will it be required. This will provide the level of detail for resources required man, machine, time and capital.
  • Establish a time horizon. We already know that as time increases the accuracy of the Forecast decreases
  • Select a forecasting technique whether qualitative or quantitative
  • Gather and analyze the appropriate data. It goes without saying that before a forecast can be delivered data is required. The closer the real life data more realistic would be the forecast. This may be the time when you would like to identify the important assumptions and suppositions.
  • Prepare the forecast.
  • Monitor the forecast. A forecast has to be closely monitored to determine whether it is fulfilling its basic purpose. This helps in re-examining the method, assumptions and validity of the data and preparing a revised forecast.

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