Introduction to Operation Management, scope, types and characteristics, productivity, factors affecting productivity.

Introduction to Operation Management, scope, types and characteristics, productivity, factors affecting productivity.

1. PRODUCTION AND OPERATIONS MANAGEMENT Dr.Deepak KB ME Department VCET, Puttur 29-05-2024 DKB ME, VCET 1

2. Module-1 Introduction , Production of Goods Versus Providing Services, the operation management function, The Scope of Operations Management, Types and Characteristics of Manufacturing and Service Systems, Productivity, its improvement and factors affecting productivity and topic related numerical. Operations Decision Making : Characteristics of Decisions, Framework for Decision Making, Decision Methodology, decision making environments, Economic Models and Statistical Models. Breakeven- analysis and trade-offs. (Topic related numerical ) Module-2 Forecasting: Introduction, Features Common to All Forecasts, Elements of a Good Forecast, Steps in the Forecasting Process, Approaches to Forecasting, choosing a Forecasting Technique, Accuracy and Control of Forecasts, Using Forecast Information, Operations Strategy and related numerical on various approaches. Product and Service Design: Introduction, Sources of Ideas for New or Redesigned Products and Services, Legal, Ethical, and Environmental Issues, Designing for Manufacturing, and services. 29-05-2024 DKB ME, VCET 2

3. Module - 3 Capacity & Location Planning: Introduction, Importance of Capacity Decisions, Defining and Measuring Capacity, Determinants of Effective Capacity, Determining Capacity Requirements, Developing Capacity Strategies, Evaluating Alternatives, Planning Service Capacity and related numerical. Location Planning and Analysis: The Need for Location Decisions, The Nature of Location Decisions, General Procedure for Making Location Decisions, Identifying a Country, Region, Community, site and related numerical. Facility Layout: Designing Product Layouts: Line Balancing, Designing Process Layouts. Module-4 Aggregate Planning: Introduction, The Purpose and Scope of Aggregate Planning, Basic Strategies for Meeting Uneven Demand, Techniques for Aggregate Planning, Aggregate Planning in Services, Disaggregating the Aggregate Plan and related numerical on the techniques. Master Scheduling: The Master Scheduling Process, Planning Horizons, Master Scheduling Format, Available-to-Promise Quantities and related numerical 29-05-2024 DKB ME, VCET 3

4. Module-5 MRP and ERP: Introduction, MRP Inputs, processing, outputs, MRP in Services, Benefits and Requirements of MRP, numerical, Capacity Requirements Planning, MRP II and ERP. Purchasing and Supply Chain Management (SCM): Introduction, Importance of purchasing and SCM, the procurement process, Concept of tenders, Approaches to SCM, Vendor development. 29-05-2024 DKB ME, VCET 4

5. At the end of the course the student will be able to: Apply the necessary tools for decision making in operations management. Examine various approaches for forecasting the sales demand for an organization . List various capacity and location plans to determine the suitable capacity required for meeting the fore cast demand of an organization. Analyse the aggregate plan and master production schedule for an organization, given its periodic demand. Apply MRP, purchasing and SCM techniques into practice. 29-05-2024 DKB ME, VCET 5

6. Assessment Details (both CIE and SEE) The weightage of Continuous Internal Evaluation (CIE) is 50% and for Semester End Exam (SEE) is 50%. The minimum passing mark for the CIE is 40% of the maximum marks ( 20 marks out of 50 ). A student shall be deemed to have satisfied the academic requirements and earned the credits allotted to each subject/ course if the student secures not less than 35% ( 18 Marks out of 50 )in the semester-end examination(SEE) A minimum of 40% ( 40 marks out of 100) in the sum total of the CIE (Continuous Internal Evaluation) and SEE (Semester End Examination) taken together 29-05-2024 DKB ME, VCET 6

7. Continuous Internal Evaluation: Three Unit Tests each of 20 Marks (duration 01 hour ) Two assignments each of 10 Marks Group discussion/Seminar/quiz any one of three suitably planned to attain the COs and POs for 20 Theory SEE will be conducted by University as per the scheduled timetable, with common question papers for the subject ( duration 03 hours) The question paper will have ten questions. Each question is set for 20 marks. There will be 2 questions from each module . Each of the two questions under a module (with a maximum of 3 sub-questions), should have a mix of topics under that module. The students have to answer 5 full questions, selecting one full question from each module 29-05-2024 DKB ME, VCET 7

8. Sl. No. Author/s Title Publisher Edition & Year 1. William J stevenson Production and Operations management Tata McGraw Hill. 13th edition, 2018 2. Joseph G. Monks Operations Management Tata McGraw Hill. 2 nd Edition, 2020 3 . B. Mahadevan Operations Management: Theory and Practice Pearson 3 rd Edition, 2015   4. Gregory Frazier and Norman Gaither Operations Management: Concepts, Techniques & Applications Cengage Learning India   9 th edition, 2015 29-05-2024 DKB ME, VCET 8

9. The Tortoise And The Hare 29-05-2024 DKB ME, VCET 9

10. Once upon a time a tortoise and a hare had an argument about who was faster. I’m the fastest runner. That’s not true. The fastest runner is me! 29-05-2024 DKB ME, VCET 10

11. Ok, let’s have a race. Fine! They decided to settle the argument with a race. They agreed on a route and started off the race. 29-05-2024 DKB ME, VCET 11

12. The hare shot ahead and ran briskly for some time. Then seeing that he was far ahead of the tortoise, he thought he'd sit under a tree for some time and relax before continuing the race. Poor guy! Even if I take a nap, he could not catch up with me. 29-05-2024 DKB ME, VCET 12

13. He sat under the tree and soon fell asleep. 29-05-2024 DKB ME, VCET 13

14. The tortoise plodding on overtook him and soon finished the race, emerging as the undisputed champ. 29-05-2024 DKB ME, VCET 14

15. The hare woke up and realized that he'd lost the race. 29-05-2024 DKB ME, VCET 15

16. The moral of the story is that slow and steady wins the race . This is the version of the story that we've all grown up with. 29-05-2024 DKB ME, VCET 16

17. The story continues … 29-05-2024 DKB ME, VCET 17

18. The hare was disappointed at losing the race and he did some soul-searching. He realized that he'd lost the race only because he had been overconfident , careless and lax . If he had not taken things for granted, there's no way the tortoise could have beaten him. Why did I lose the race? 29-05-2024 DKB ME, VCET 18

19. Can we have another race? Ok. So he challenged the tortoise to another race. The tortoise agreed. 29-05-2024 DKB ME, VCET 19

20. This time, the hare went all out and ran without stopping from start to finish. He won by several miles. 29-05-2024 DKB ME, VCET 20

21. The moral of the story? Fast and consistent will always beat the slow and steady . If you have two people in your organization, one slow, methodical and reliable, and the other fast and still reliable at what he does, the fast and reliable chap will consistently climb the organizational ladder faster than the slow, methodical chap. It's good to be slow and steady; but it's better to be fast and reliable . 29-05-2024 DKB ME, VCET 21

22. But the story doesn't end here … 29-05-2024 DKB ME, VCET 22

23. The tortoise did some thinking this time, and realized that there's no way he can beat the hare in a race the way it was currently formatted. How can I can win the hare? 29-05-2024 DKB ME, VCET 23

24. He thought for a while, and then challenged the hare to another race, but on a slightly different route. The hare agreed. Sure! Can we have another race? This time we’ll go through a different route. 29-05-2024 DKB ME, VCET 24

25. They started off. In keeping with his self-made commitment to be consistently fast, the hare took off and ran at top speed until he came to a broad river. The finishing line was a couple of kilometers on the other side of the river. Goal 29-05-2024 DKB ME, VCET 25

26. The hare sat there wondering what to do. In the meantime the tortoise trundled along, got into the river, swam to the opposite bank, continued walking and finished the race. What should I do? 29-05-2024 DKB ME, VCET 26

27. The moral of the story? First identify your core competency and then change the playing field to suit your core competency . In an organization, if you are a good speaker, make sure you create opportunities to give presentations that enable the senior management to notice you. If your strength is analysis, make sure you do some sort of research, make a report and send it upstairs. Working to your strengths will not only get you noticed, but will also create opportunities for growth and advancement . 29-05-2024 DKB ME, VCET 27

28. The story still hasn't ended … 29-05-2024 DKB ME, VCET 28

29. The hare and the tortoise, by this time, had become pretty good friends and they did some thinking together. Both realized that the last race could have been run much better. 29-05-2024 DKB ME, VCET 29

30. So they decided to do the last race again, but to run as a team this time. Hi, buddy. How about doing our last race again? Great! I think we could do it much better, if we two help each other. Hi, buddy. How about doing our last race again? 29-05-2024 DKB ME, VCET 30

31. They started off, and this time the hare carried the tortoise till the riverbank. 29-05-2024 DKB ME, VCET 31

32. There, the tortoise took over and swam across with the hare on his back. 29-05-2024 DKB ME, VCET 32

33. On the opposite bank, the hare again carried the tortoise and they reached the finishing line together. They both felt a greater sense of satisfaction than they'd felt earlier. 29-05-2024 DKB ME, VCET 33

34. The moral of the story? It's good to be individually brilliant and to have strong core competencies; but unless you're able to work in a team and harness each other's core competencies, you'll always perform below par because there will always be situations at which you'll do poorly and someone else does well. Teamwork is mainly about situational leadership, letting the person with the relevant core competency for a situation take leadership . 29-05-2024 DKB ME, VCET 34

35. There are more lessons to be learnt from this story. Note that neither the hare nor the tortoise gave up after failures. The hare decided to work harder and put in more effort after his failure. The tortoise changed his strategy because he was already working as hard as he could. In life, when faced with failure, sometimes it is appropriate to work harder and put in more effort. Sometimes it is appropriate to change strategy and try something different. And sometimes it is appropriate to do both . The hare and the tortoise also learnt another vital lesson. When we stop competing against a rival and instead start competing against the situation, we perform far better. 29-05-2024 DKB ME, VCET 35

36. Production and Operation Management The main objective of a business is to produce goods and services to meet the needs of customers . “Good” = economic unit that is produced . It is tangible. “Service” = economic activity that is performed . It is intangible. Examples of goods and services are found all around you. Production management is the field of study that deals with planning, organizing, controlling and directing the production activities of the organization . Operation management is the field of study that deals with supervision, design and planning of business operations. The main objective of operation management is to enhance the quality of business operations . Operation management is focused more on processes and how they can be optimized so that there is minimum wastage of available resources. 29-05-2024 DKB ME, VCET 36

37. Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level. The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to services management, then the corresponding set of management activities is called as operations management. 29-05-2024 DKB ME, VCET 37

38. Module-1 Introduction , Production of Goods Versus Providing Services, the operation management function, The Scope of Operations Management, Types and Characteristics of Manufacturing and Service Systems , Productivity, its improvement and factors affecting productivity and topic related numerical. Operations Decision Making : Characteristics of Decisions, Framework for Decision Making, Decision Methodology, decision making environments, Economic Models and Statistical Models. Breakeven- analysis and trade-offs. (Topic related numerical) 29-05-2024 DKB ME, VCET 38

39. Introduction Operations is that part of a business organization that is responsible for producing goods and/or services. The ideal situation for a business organization is to achieve an economic match of supply and demand . The key functions on the supply side are operations and supply chains , and sales and marketing on the demand side. The three basic functions of business organizations 29-05-2024 DKB ME, VCET 39

40. Operations and supply chains are inherently linked, and no business organization could exist without both . A supply chain is the sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service. 29-05-2024 DKB ME, VCET 40

41. The creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labor, and information are used to create goods or services using one or more transformation processes (e.g., storing, transporting, repairing). To ensure that the desired outputs are obtained, an organization takes measurements at various points in the transformation process ( feedback) and then compares them with previously established standards to determine whether corrective action is needed ( control ). 29-05-2024 DKB ME, VCET 41

42. I t is important to note that goods and services often occur jointly . T here are relatively few pure goods or pure services, companies usually sell product packages, which are a combination of goods and services. 29-05-2024 DKB ME, VCET 42

43. The essence of the operations function is to add value during the transformation process. Value-added is the term used to describe the difference between the cost of inputs and the value or price of outputs . In nonprofit organizations, the value of outputs (e.g., highway construction, police and fire protection) is their value to society ; the greater the value-added, the greater the effectiveness of these operations. In for profit organizations, the value of outputs is measured by the prices that customers are willing to pay for those goods or services. Firms use the money generated by value-added for research and development, investment in new facilities and equipment, worker salaries, and profits. Consequently , the greater the value added , the greater the amount of funds available for these purposes 29-05-2024 DKB ME, VCET 43

44. Production of Goods versus Providing Services Although goods and services often go hand in hand, there are some very basic differences between the two, differences that impact the management of the goods portion versus management of the service portion. There are also many similarities between the two. Production of goods results in a tangible output, such as an automobile, eyeglasses, a golf ball, a refrigerator—anything that we can see or touch. It may take place in a factory, but it can occur elsewhere . For example, farming and restaurants produce non-manufactured goods . Delivery of service, on the other hand, generally implies an act. A physician’s examination, TV and auto repair, lawn care, and the projection of a film in a theater are examples of services. The majority of service jobs fall into these categories: 29-05-2024 DKB ME, VCET 44

45. Professional services (e.g., financial, health care, legal ). Mass services (e.g., utilities, Internet, communications). Service shops (e.g., tailoring, appliance repair, car wash, auto repair/maintenance). Personal care (e.g., beauty salon, spa, barbershop). Government (e.g., Medicare, mail, social services, police, fire ). Education (e.g., schools, universities). Food service (e.g., catering). Services within organizations (e.g., payroll, accounting, maintenance, IT, HR, janitorial). Retailing and wholesaling. Shipping and delivery (e.g., truck, railroad, boat, air). Residential services (e.g., lawn care, painting, general repair, remodeling , interior design). Transportation (e.g., mass transit, taxi, airlines, ambulance). Travel and hospitality (e.g., travel bureaus, hotels, resorts). Miscellaneous services (e.g., copy service, temporary help). 29-05-2024 DKB ME, VCET 45

46. Manufacturing and service are often different in terms of what is done but quite similar in terms of how it is done . Consider these points of comparison: Degree of customer contact Labour content of jobs Uniformity of inputs Measurement of productivity Quality assurance Inventory Wages Ability to patent 29-05-2024 DKB ME, VCET 46

47. The Operation Management Function Business organizations have three basic functional areas, finance , marketing, and operations . It doesn’t matter whether the business is a retail store, a hospital, a manufacturing firm, a car wash, or some other type of business; all business organizations have these three basic functions. 29-05-2024 DKB ME, VCET 47

48. Finance is responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations. Marketing is responsible for assessing consumer wants and needs, and selling and promoting the organization’s goods or services . Operations is responsible for producing the goods or providing the services offered by the organization. Working together successfully means that all members of the organization understand not only their own role, but they also understand the roles of others . In practice, there is significant interfacing and collaboration among the various functional areas, involving exchange of information and cooperative decision making. 29-05-2024 DKB ME, VCET 48

49. Finance and operation s management personnel cooperate by exchanging information and expertise in such activities as the following: Budgeting Economic analysis of investment proposals Provision of funds Marketing’s focus is on selling and/or promoting the goods or services of an organization. Marketing is also responsible for assessing customer wants and needs, and for communicating those to operations people (short term) and to design people (long term). Marketing , design, and production must work closely together to successfully implement design changes and to develop and produce new products. Finance people should be included in these exchanges. Thus , marketing, operations, and finance must interface on product and process design, forecasting, setting realistic schedules, quality and quantity decisions, and keeping each other informed on the other’s strengths and weaknesses. 29-05-2024 DKB ME, VCET 49

50. 29-05-2024 DKB ME, VCET 50

51. The Scope of Operations Management The scope of operations management ranges across the organization . Operations management people are involved in product and service design, process selection, selection and management of technology, design of work systems, location planning, facilities planning, and quality improvement of the organization’s products or services. The operations function includes many interrelated activities , such as forecasting, capacity planning, scheduling, managing inventories, assuring quality, motivating employees, deciding where to locate facility. We can use an airline company and automobile factory to illustrate a service organization’s operations system. 29-05-2024 DKB ME, VCET 51

52. Operations Management Includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities 29-05-2024 DKB ME, VCET 52

53. Forecasting - It is used to determine how to allocate the budgets and resource s for an upcoming period of time. Forecast the quantities of product/service requirement. Capacity Planning - It is the process of determining the production capacity needed by an organization to meet changing demands for its products. It is the maximum amount of work that an organization is capable of completing in a given period. Scheduling - The purpose of scheduling is to minimize the production time and costs . It aims to maximize the efficiency of the operation and reduce costs, by telling a production facility when to make, with which staff, and on which equipment. Managing inventories - Successful inventory management involves creating a purchase plan that will ensure that items are available when they are needed (but that neither too much nor too little is purchased) and keeping track of existing inventory and its use. Assuring Quality - Quality management is concerned with controlling activities with the aim of ensuring that products and services are fit for their purpose and meet the specifications. 29-05-2024 DKB ME, VCET 53

54. Motivating Employees – Effectiveness of job design, rewards, employee participation, training. Deciding where to locate facilities - Facility location is the process of identifying the best geographic location for a service or production facility . Factors affecting facility location - Proximity to source of supply: Reduce transportation costs. Proximity to customers: High population areas, near to distribution facility . Proximity to labor: Local wage rates, attitude toward unions, availability of skilled workers. 29-05-2024 DKB ME, VCET 54

55. Example: Airline Company Forecasting : Weather , landing conditions, seat demands for flights. Capacity Planning: How many number of planes in each route? Scheduling: Scheduling of planes for flights and for routine maintenance, scheduling of pilots and flights attendants. Managing Inventories: Food plates, blankets, magazines Quality: Quality of the services, Safety. Facility Location: Tickets and check-in counters. 29-05-2024 DKB ME, VCET 55

56. Example: Automobile Factory Forecasting: Demands for cars. Capacity Planning: Number of shifts, level of workforce. Scheduling: Scheduling of various types of cars, Scheduling of workforce. Managing Inventory: Raw materials, man-power, office supplies, various component, parts. Quality: Quality of products, services. Facility location: Near to rail yard, skilled work force, etc.. 29-05-2024 DKB ME, VCET 56

57. Types and Characteristics of Manufacturing and Service Systems Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems. 29-05-2024 DKB ME, VCET 57

58. Job-Shop Production High variety of products and low volume . Use of general purpose machines and facilities. Highly skilled operators who can take up each job as a challenge because of uniqueness. Large inventory of materials, tools, parts. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities . Examples of companies that would use the job shop manufacturing method are: a paint shop, a machine tool shop, a commercial printing shop, a machining center, and other factories that create customized products in small batches and offer customization. 29-05-2024 DKB ME, VCET 58

59. Advantages Because of general purpose machines and facilities variety of products can be produced. Operators will become more skilled and competent, as each job gives them learning opportunities. Full potential of operators can be utilized. Opportunity exists for creative methods and innovative ideas. Limitations Higher cost due to frequent set up changes . Higher level of inventory at all levels and hence higher inventory cost. Production planning is complicated. Larger space requirement. 29-05-2024 DKB ME, VCET 59

60. Batch Production Batch production is a method of manufacturing where the products are made as specified groups or amounts, within a time frame .  Shorter production runs. Plant and machinery are f lexible . Plant and machinery set up is used for the production of item in a batch and change of set up is required for processing the next batch. Manufacturing lead-time and cost are lower as compared to job order production . Examples: Soap, Food products such as meals, baked goods, and the like, Clothing in different sizes and designs, Sporting goods, Electrical goods, Newspapers , magazines, and books. 29-05-2024 DKB ME, VCET 60

61. Advantages 1. Better utilization of plant and machinery. 2. Promotes functional specialization. 3. Cost per unit is lower as compared to job order production. 4. Lower investment in plant and machinery. 5. Flexibility to accommodate and process number of products. 6. Job satisfaction exists for operators. Limitations Material handling is complex because of irregular and longer flows. Production planning and control is complex. Work in process inventory is higher compared to continuous production. Higher set up costs due to frequent changes in set up. 29-05-2024 DKB ME, VCET 61

62. Mass Production Standardization of product and process sequence. Dedicated special purpose machines having higher production capacities and output rates. Large volume of products. Shorter cycle time of production. Lower in process inventory. Perfectly balanced production lines. Flow of materials, components and parts is continuous and without any back tracking. Production planning and control is easy. Material handling can be completely automatic 29-05-2024 DKB ME, VCET 62

63. Advantages 1. Higher rate of production with reduced cycle time. 2. Higher capacity utilization due to line balancing. 3. Less skilled operators are required. 4. Low process inventory. 5. Manufacturing cost per unit is low. Limitations 1. Breakdown of one machine will stop an entire production line. 2. Line layout needs major change with the changes in the product design. 3. High investment in production facilities. 4. The cycle time is determined by the slowest operation. 29-05-2024 DKB ME, VCET 63

64. Continuous Production Mass production is the manufacturing of large quantities of standardized products, often using assembly lines or automation technology. Dedicated plant and equipment with zero flexibility. Material handling is fully automated. Process follows a predetermined sequence of operations. Component materials cannot be readily identified with final product. Planning and scheduling is a routine action. 29-05-2024 DKB ME, VCET 64

65. Advantages 1. Standardization of product and process sequence. 2. Higher rate of production with reduced cycle time. 3. Higher capacity utilization due to line balancing. 4. Manpower is not required for material handling as it is completely automatic. 5. Person with limited skills can be used on the production line. 6. Unit cost is lower due to high volume of production. Limitations 1. Flexibility to accommodate and process number of products does not exist. 2. Very high investment for setting flow lines. 3. Product differentiation is limited. 29-05-2024 DKB ME, VCET 65

66. Productivity One of the primary responsibilities of a manager is to achieve productive use of an organization’s resources. The term used to describe this is productivity. Productivity is an index that measures output (goods and services) relative to the input (labor, materials, energy, and other resources) used to produce it . Productivity is an indicator of how quickly someone achieves a task . Although productivity is important for all business organizations, it is particularly important for organizations that use a strategy of low cost , because the higher the productivity , the lower the cost of the output . 29-05-2024 DKB ME, VCET 66

67. A productivity ratio can be computed for a single operation, a department, an organization, planning workforce requirements, scheduling equipment, financial analysis, and other important tasks. For nonprofit organizations, higher productivity means lower costs; For profit-based organizations, productivity is an important factor in determining how competitive a company is. 29-05-2024 DKB ME, VCET 67

68. Productivity growth is the increase in productivity from one period to the next relative to the productivity in the preceding period. For example, if productivity increased from 80 to 84, the growth rate would be ? Productivity growth is a key factor in a country’s rate of inflation and the standard of living of its people. Productivity increases add value to the economy while keeping inflation in check. 29-05-2024 DKB ME, VCET 68

69. Computing Productivity (Types) Productivity measures can be – Single input (partial productivity) More than one input (multifactor productivity) All inputs (total productivity). Table   below lists some examples of productivity measures . The choice of productivity measure depends primarily on the purpose of the measurement. If the purpose is to track improvements in labor productivity, then labor becomes the obvious input measure. 29-05-2024 DKB ME, VCET 69

70. Partial measures are often of greatest use in operations management. The units of output used in productivity measures depend on the type of job performed. The following are examples of labor productivity: Yards of carpet installed = Yards of carpet installed per labour hour Labour hours Number of motel rooms cleaned = Number of motel rooms cleaned Number of workers per worker 29-05-2024 DKB ME, VCET 70

71. Partial productivity measures examples: Labor productivity Units of output per labor hour Units of output per shift Value-added per labor hour Dollar value of output per labor hour Machine productivity Units of output per machine hour Dollar value of output per machine hour Capital productivity Units of output per dollar input Dollar value of output per dollar input Energy productivity Units of output per kilowatt-hour Dollar value of output per kilowatt-hour 29-05-2024 DKB ME, VCET 71

72. Determine the productivity, if four workers installed 720 square yards of carpeting in eight hours. Determine the productivity, if a machine produced 70 pieces in two hours. However, two pieces were unusable . A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in one-half hour with four workers. What is labor productivity? A wrapping-paper company produced 2,000 rolls of paper one day. Labor cost was Rs. 160 , material cost was Rs. 50 , and overhead was Rs. 320 . Determine the multifactor productivity. Compute the multifactor productivity measure for an eight-hour day in which the usable output was 300 units, produced by three workers who used 600 Kg of materials. Workers have an hourly wage of Rs. 20 , and material cost is Rs. 1 per Kg. Overhead is 1.5 times labor cost. Determine the multifactor productivity for the combined input of labor and machine time using the following data: Output: 7,040 units Input: Labor: Rs.1,000 ; Materials: Rs. 520; Overhead: Rs. 2,000 29-05-2024 DKB ME, VCET 72

73. Compute the multifactor productivity measure for each of the weeks shown for production of chocolate bars. What do the productivity figures suggest ? Compute the multifactor productivity. Assume 40-hour weeks and an hourly wage of Rs 100. Overhead is 1.5 times weekly labour cost. Material cost is Rs. 5 per kg Week Output Workers Material (kg) 1 30,000 6 450 2 33,600 7 470 3 32,200 7 460 4 35,400 8 480 A catering company prepared and served 300 meals at an anniversary celebration last week using eight workers. The week before, six workers prepared and served 240 meals at a wedding reception. a . For which event was the labor productivity higher? Explain. b . What are some possible reasons for the productivity differences? 29-05-2024 DKB ME, VCET 73

74. Productivity measures are useful on a number of levels. To track performance of an organization over time. Allows managers to monitor performance and to decide where improvements are needed. It serves as scorecards o f the effective use of resources. To judge the performance of an entire industry or the productivity of a country as a whole. Business leaders are concerned with productivity as it relates to competitivenes s. It helps in deciding wage and price increases. 29-05-2024 DKB ME, VCET 74

75. Dutch Tomato Growers’ Productivity Advantage Tomato growers in the Netherlands have a huge productivity advantage over their competitors in Italy and Greece. Although those countries are sun drenched while the Netherlands are anything but, computerized, climate-controlled greenhouses , and a “soil” spun from basalt and chalk that resembles cotton candy, allows for precise control of humidity and nutrition, and enables growers to produce their crops year around. Growers in Italy and Greece generally grow their crops outdoors or in unheated greenhouses, and can only manage two crops a year. Dutch growers are able to achieve yields that are about ten times per square yard of those of Italian and Greek growers. And the Dutch have a supply chain advantage : an integrated Dutch trading company works closely with supermarket chains in Europe and suppliers around the world, so farmers are able to sell their output in high volume, rather than locally the way many farmers in other countries do. That enables Dutch growers to more closely match supply with supermarket demand . Finally , the Dutch tomato has been engineered to achieve a firmness that allows growers to harvest and ship tomatoes at their peak, while the “outdoor” farmers typically need to harvest their tomatoes before they are fully ripe to allow for firmness during shipping. 29-05-2024 DKB ME, VCET 75

76. Factors affecting Productivity Numerous factors affect productivity. Generally , they are methods, capital, quality, technology , and management. A commonly held misconception is that workers are the main determinant of productivity . Without careful planning , technology can actually reduce productivity, especially if it leads to inflexibility , high costs, or mismatched operations. Other factors that affect productivity include the following: Standardizing the processes Safety Use of the Internet A shortage of technology-savvy workers Skilled workers Design of the workspace Reward productivity increases Layoffs New workers Searching for lost or misplaced items 29-05-2024 DKB ME, VCET 76

77. Improving Productivity Develop productivity measures for all operations. Look at the system as a whole in deciding which operations are most critical . It is overall productivity that is important. Develop methods for achieving productivity improvements. Establish reasonable goals for improvement. Make it clear that management supports and encourages productivity improvement. Consider incentives to reward workers for contributions. Measure improvements and publicize them. 29-05-2024 DKB ME, VCET 77

78. Operations Decision Making : Characteristics of Decisions, Framework for Decision Making , Decision Methodology , decision making environments, Economic Models and Statistical Models. Breakeven- analysis and trade-offs . (Topic related numerical) 29-05-2024 DKB ME, VCET 78

79. 29-05-2024 DKB ME, VCET 79

80. Most operations decisions involve many alternatives that can have quite different impacts on costs or profits. Typical operations decisions include: What: What resources are needed, and in what amounts ? When : When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered ? Where: Where will the work be done? How: How will be product or service be designed? How will the work be done? How will resources be allocated? Who: Who will do the work? 29-05-2024 DKB ME, VCET 80

81. Introduction Thousand of business decisions are made everyday . Not all the decisions will make or break the organization. But each one adds a measure of success or failure to the operations. Hence decision making essentially involves choosing a particular course of action, after considering the possible alternatives . When trying to make a good decision, a person must weigh the positives and negatives of each option, and consider all the alternatives . For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation . A decision is a process that takes place prior to the actual performance of a course of action that has been chosen.  The most important work that top management does in any organization is decision-making. Decision have to be taken regularly in Operations, marketing, R&D, maintenance, transportation, finance, human resources etc… 29-05-2024 DKB ME, VCET 81

82. Characteristics of Decisions Operations decision range from simple judgments to complex analyses, which also involves judgment . Judgment typically incorporates basic knowledge, experience, and common sense. They enable to blend objectives and sub-objective data to arrive at a choice. The appropriateness depends on : The significant or long lasting decisions, The time availability and the cost of analysis, and The degree of complexity of the decision. 29-05-2024 DKB ME, VCET 82

83. Business decision-makers have always had to work with incomplete and uncertain data. 29-05-2024 DKB ME, VCET 83

84. Decision-making  is a managerial function of making an informed choice. Here are the 13 key features/characteristics of  decision-making mentioned below : Goal-Oriented Continuous Process Making of Choice Integral to Management Complexity in Organizations Rational Process Problem-Solving Evaluation of Alternatives Resource Utilization Management Function Pervasive in Nature Dynamic Process Impact on Organization’s Future 29-05-2024 DKB ME, VCET 84

85. Decision Methodology Decision making using scientific and analytical methods involve a systematic step-by-step procedure as follows : Defining the problem. Establish the decision criteria. Formulation of a model. Generating alternatives . Evaluation of the alternatives. Implementation and monitoring 29-05-2024 DKB ME, VCET 85

86. 29-05-2024 DKB ME, VCET 86

87. Decision Making Environments Decision making is identifying and choosing alternatives . The best alternative is chosen that best fits with our goals, objectives, desires, values, and so on. The decision maker is unsure of what situation will occur in the future and moreover, he has no control over what will happen at the time the decision is made. The decision-making environment is often characterized by three states: certainty , Uncertainty and Risk. 29-05-2024 DKB ME, VCET 87

88. Decision making under Certainty A decision made in safe conditions , certainty , is a condition for which you know which state of nature will occur in the future . Only one condition or a variation of conditions is possible which have no effect on the consequences of a certain alternative. So , the decision is not influenced by uncontrolled factors. Certainty is a theoretical and rarely a practical possibility . Very few well-structured and well-programmed decisions and very few decision-makers can be totally sure of the consequences that will really happen. However , a decision maker can choose a model as if it occurred in safe conditions only if he believes that his modeling with probabilities would not add anything new to the problem analysis . When it is known for certain which of the possible future conditions will actually happen, the decision is usually relatively straight forward. 29-05-2024 DKB ME, VCET 88

89. Decision making under Uncertainty In very few decision-making situations is perfect information - all the needed facts - available. Most decisions are made in the face of . In decision making under pure uncertainty, the decision maker has absolutely no knowledge , not even about the likelihood of occurrence for any state of nature. In such situations, the decision maker's behavior is purely based on his/her attitude toward the unknown . Some of these behaviors are optimistic and some pessimistic or something between. Uncertainty means that it is impossible to assess the likelihood of various possible future events . A decision made in conditions of uncertainty has more than one state of nature but the decision maker cannot determine the probabilities of the occurrence of each state. 29-05-2024 DKB ME, VCET 89

90. In conditions of complete uncertainty not only the consequences of the decision can be predicted but we will have very little confidence in any possible situation or in the possibility of their occurrence. Also, the decision structure will be poor and the information will be limited or doubtful. Conditions of complete uncertainty are also very rare . In practice, complete security/uncertainty extremes are unlikely to occur . Four possible decision criteria are Maximin , Maximax , Laplace, and Minimax regret. These approaches can be defined as follows: Maximin : Determine the worst possible pay-off for each alternative, and choose the alternative that has the “best worst.” The Maximin approach is essentially a pessimistic one because it takes into account only the worst possible outcome for each alternative. The actual outcome may not be as bad as that, but this approach establishes a “guaranteed minimum.” Maximax : Determine the best possible pay-off , and choose the alternative with that pay-off. The Maximax approach is an optimistic , “go for it” strategy; it does not take into account any pay-off other than the best. 29-05-2024 DKB ME, VCET 90

91. Laplace: Determine the average pay-off for each alternative, and choose the alternative with the best average . The Laplace approach treats the states of nature as equally likely. Minimax regret : Determine the worst regret for each alternative, and choose the alternative with the “best worst.” This approach seeks to minimize the difference between the pay-off that is realized and the best pay-off for each state of nature. Problem: Referring to the pay-off table, determine which alternative would be chosen under each of these strategies :( a) Maximin , (b) Maximax , and (c) Laplace. 29-05-2024 DKB ME, VCET 91

92. Using Maximin , the worst pay-offs for the alternatives are: Small facility: Rs.10 million Medium facility: 7 million Large facility: –4 million Hence, since Rs.10 million is the best, choose to build the small facility using the maximum strategy. Using Maximax , the best pay-offs are: Small facility: Rs.10 million Medium facility: 12 million Large facility: 16 million For the Laplace criterion, first find the row totals, and then divide each of those amounts by the number of states of nature (three in this case). Thus, we have: 29-05-2024 DKB ME, VCET 92

93. Determine which alternative would be chosen using a Minimax regret approach to the capacity-planning programme. SOLUTION: The first step in this approach is to prepare a table of opportunity losses, or regrets. To do this, subtract every pay-off in each column from the best pay-off in that column. For instance, in the first column, the best pay-off is 10, so each of the three numbers in that column must be subtracted from 10. Going down the column, the regrets will be 10 – 10 = 0, 10 – 7 = 3, and 10 – (– 4) = 14. In the second column, the best pay-off is 12. Subtracting each pay-off from 12 yields 2, 0, and 10. In the third column, 16 is the best pay-off. The regrets are 6, 4, and 0. These results are summarized in a regret table: 29-05-2024 DKB ME, VCET 93

94. Decision making under Risk Whenever the decision maker has some knowledge regarding the states of nature, he/she may be able to assign subjective probability estimates for the occurrence of each state. In such cases, the problem is classified as decision making under risk. Probability enters into the process by playing the role of a substitute for certainty - a substitute for complete knowledge. Risk means that certain parameters have probabilistic outcomes. Managers usually make some kind of assessment regarding the possible consequences even when the decision situations are very unclear. We are able to make reliable predictions using certain probabilities, we can say that decision-making is done under risk conditions and probability theory takes special importance . A widely used approach under such circumstances is the expected monetary value criterion. 29-05-2024 DKB ME, VCET 94

95. Determine the expected pay-off of each alternative, and choose the alternative that has the best-expected pay-off. Using the expected monetary value criterion, identify the best alternative for the previous pay-off table for these probabilities: low = 0.30, moderate = 0.50, and high = 0.20. Find the expected value of each alternative by multiplying the probability of occurrence. For each state of nature by the pay-off for that state of nature and summing them: EVsmall = 0.30 (Rs.10) + 0.50 (Rs.10) + 0.20 (Rs.10) = Rs.10 EVmedium = 0.30 (Rs.7) + 0.50 (Rs.12) + 0.20 (Rs.12) = Rs.10.5 EVlarge = 0.30 (–4) + 0.50 (Rs.2) + 0.20 (Rs.16) = Rs. 3 Hence, choose the medium facility because it has the highest expected value. 29-05-2024 DKB ME, VCET 95

96. Framework for Decision Making 29-05-2024 DKB ME, VCET 96

97. Complete Certainty Methods Under complete certainty conditions, all relevant information about the decision variables and outcomes is known or assumed to be known. Following are some of the methods used: Algebra : This basic mathematical logic is very useful for both certainty and uncertainty analysis. With valid assumptions, algebra provides deterministic solutions such as break-even analysis and benefit cost analysis. Calculus : The branch of mathematics provides a useful tool for determining optimal value where functions such as inventory costs, are to be maximized or minimized. Mathematical programming: Programming techniques have found extensive applications in making a product mix decisions ; minimizing transportation costs, planning and scheduling production and other areas 29-05-2024 DKB ME, VCET 97

98. Risk and Uncertainty Methods In risk and uncertainty situations, information about the decision variables or the outcomes is probabilistic . Following are some of the useful approaches: Statistical analysis: Objective and subjective probabilities with the use of probability and probability distribution, Estimation and tests of hypothesis, Bayesian statistics, Decision theory, Correlation and regression technique for forecasting demand and Analysis of variance are some of the techniques used for decision-making. Queuing theory: The analysis of queues in terms of waiting-time length and mean waiting time is useful in analysing service systems, maintenance activities, and shop floor control activities . Simulation: Simulation duplicates the essence of an activity. Computer simulations are valuable tools for the analysis of investment outcomes, production processes, scheduling and maintenance activities. 29-05-2024 DKB ME, VCET 98

99. Heuristic methods: Heuristic methods involve set of rules , which facilitate solutions of scheduling, layout and distribution problems when applied in a consistent manner. Network analysis techniques: Network approaches include decision trees, CPM and PERT methods. They are helpful in identifying alternative course of action and controlling the project activities. Utility theory: Utility theory or preference theory allows decision-makers to incorporate their own experience and values into a relatively formalized decision structure. 29-05-2024 DKB ME, VCET 99

100. Extreme Uncertainty Methods Under extreme uncertainty, no information is available to assess the likelihood of alternative outcomes. Following are some of strategies to solve this: Game theory : Game theory helps decision-makers to choose course of action when there is no information about what conditions will prevail. Coin flip : Flipping a coin is sometimes used in situation where the decision-makers are wholly indifferent. 29-05-2024 DKB ME, VCET 100

101. Economic Models Mathematical and analytical models which address issues of costs, revenues, profits and losses are economic models. Decisions on these issues are fundamental to the survival and continuation of any business. The most important economic models widely used in several business areas are ( 1) Break even analysis ( 2) Statistical analysis and ( 3) Decision Tree Analysis. 29-05-2024 DKB ME, VCET 101

102. Break even analysis The fundamental objective of any business is to maximize profit and minimize losses. Profit mainly depends upon production costs, sales revenues and volume of output. Break-even Analysis is a graphical and algebraic representation of the relationships among these three variables. It is an extensively used model for decision making by many organizations. Break- even Analysis is also known as cost-volume-profit model . Total production costs are generally divided into two categories - Fixed costs and variable costs. Sales revenue depends upon the volume of output and price per unit of output, whereas volume of output depends upon the sales demand . 29-05-2024 DKB ME, VCET 102

103. Fixed Costs : These costs remain fixed or constant irrespective of the volume of production . They remain the same whether the production is small, large or NIL. Eg : Costs on land and building, salaries to top management, insurance, depreciation, taxes on property , equipment etc… Variable Costs : These costs vary with the volume of production . Higher the production, higher will be the variable costs. In other words, variables costs are the function of volume of output. Variable costs become zero when production is stopped. Variable costs are also known as prime costs . Eg : Cost of raw materials, labour, transportation of finished goods, packing cost etc… Total cost: It is the final cost involved in the manufacture of a product . It is nothing but the sum of fixed costs and variable costs 29-05-2024 DKB ME, VCET 103

104. Sales Revenue : It is the income which comes into the organization through the sales of the products. Sales Revenue = Total cost + Profit Break-even chart which is basically the representation of Total cost and sales revenue lines drawn on the graph of volume of output on the x-axis and cost or Income on the Y-axis. 29-05-2024 DKB ME, VCET 104

105. Break - Even point From the fig, the point at which the sales Revenue line and total cost line intersect is known as Break-even point. In other words, the Break-even point is that junction where income and costs are exactly in balance . Thus , there is neither profit nor loss for the corresponding volume of output known as Break - even production. The Break-even point divides the profit and loss regions . 29-05-2024 DKB ME, VCET 105

106. Assumptions in Break-even Analysis The following assumptions are made while plotting a break-even chart : 1)Selling price per unit of output will remain constant throughout the volume of output. 2)There is a linear relationship between sales volume and costs i.e., there are no whole-sale rates. 3)Costs can be divided into two categories - Fixed costs and variable costs. 4)Production and sales quantities are equal i.e., there is no inventory. 5)No other factor will influence the cost except the quantity of output. 29-05-2024 DKB ME, VCET 106

107. Contribution : It is the difference between sales revenue and variable costs for any given volume of output i.e., Contribution = Sales Revenue - Variable costs. At any given volume of output, if contribution is greater than the fixed costs, profit will result. 29-05-2024 DKB ME, VCET 107

108. Margin of safety : Margin of safety is the horizontal distance between the Break-even point and the actual output being produced. That is, it is the difference between actual output and break-even output. A large margin of safety indicates that the business can earn profit even if there is a great reduction in output. If the margin of safety is relatively small, then it indicates that the profit will be considerably small even if there is a small drop in output. Margin of safety expressed as a percentage is, 29-05-2024 DKB ME, VCET 108

109. Angle of Incidence( θ ): The angle between the sales revenue line and the total cost line is called as angle of incidence. A large angle of incidence indicates large profit and extremely favorable business positions. The Management always aims to widen the angle of incidence to improve the rate of profitability. Generally , lower the level of Break - even point on the chart, higher will be the angle of incidence, at given costs and revenues. 29-05-2024 DKB ME, VCET 109

110. Profit volume (P/V) Ratio : Profit volume ratio measures the profitability in relation to sales. The P/V ratio is the ratio of contribution to total sales revenue (or turnover ). So it is a measure to compare profitability of different products. Higher the P/V ratio, more profitable will be the product Mathematically, 29-05-2024 DKB ME, VCET 110

111. Calculation of Break-even point (analytically) Let F= Fixed Costs Q =Quantity of output produced and sold s =Selling price per unit of output, v =Variable price per unit of output sQ = S =Sales revenue (income) for quantity Q vQ = V =Variable costs for quantity Q Total costs =Fixed costs + Variable costs =F + vQ 29-05-2024 DKB ME, VCET 111

112. Uses of Break-Even Analysis Break-even chart helps the management to know at a glance the profits at different levels of output. Break-even Analysis is useful in determining the minimum output necessary to break-even and go after profit. The effects of altering selling price or the effects of controlling costs on the profits earned can be quickly understood by looking at the chart. It helps comparing the profitability of two or more proposals . It helps in fixing the selling price in order to attain expected profit. It helps in computing the output required to maintain a particular level of profit. It helps in taking decisions regarding production, plant locations, make or buy components etc. 29-05-2024 DKB ME, VCET 112

113. Limitations of Break-Even Analysis The major assumption of B.E Analysis is that the whole of the production output is sold , which may not be so in reality. B.E Analysis assumes that all costs can easily be classified as Fixed costs or Variable costs for the whole range of production costs. Break - even analysis assumes that profits depend only on selling price and sales volume ignoring the fact that they are also affected by technological changes, price-volume discounts, improved management, improvement in quality, versatility etc. It is suitable only when the firm produces only one type of product . 29-05-2024 DKB ME, VCET 113

114. Graphical Linear Programming Linear programming is a widely used mathematical modeling technique to determine the optimum allocation of scarce resources among competing demands. Resources typically include raw materials, manpower, machinery, time, money and space. The technique is very powerful and found especially useful because of its application to many different types of real business problems in areas like finance, production, sales and distribution, personnel, marketing and many more areas of management. In linear programming model have a proportionate relationship. For example , an increase in manpower resource will result in an increase in work output. 29-05-2024 DKB ME, VCET 114

115. Formulation Of Linear Programming Formulation of linear programming is the representation of problem situation in a mathematical form . It involves well defined decision variables, with an objective function and set of constraints. Objective function: The objective of the problem is identified and converted into a suitable objective function . The objective function represents the aim or goal of the system (i.e., decision variables) which has to be determined from the problem. Constraints: When the availability of resources are in surplus, there will be no problem in making decisions. But in real life , organizations normally have scarce resources within which the job has to be performed in the most effective way. Therefore, problem situations are within confined limits in which the optimal solution to the problem must be found. 29-05-2024 DKB ME, VCET 115

116. Non-negativity constraint: Negative values of physical quantities are impossible, like producing negative number of chairs, tables, etc., so it is necessary to include the element of non-negativity as a constraint 29-05-2024 DKB ME, VCET 116

117. A furniture company produces inexpensive tables and chairs. The production process for each is similar in that both require a certain number of hours of carpentry work and a certain number of labour hours in the painting department. Each table takes 4 hours of carpentry and 2 hours in the painting department. Each chair requires 3 hours of carpentry and 1 hour in the painting department. During the current production period, 240 hours of carpentry time are available and 100 hours in painting is available. Each table sold yields a profit of Rs7; each chair produced is sold for a Rs5 profit. Find the best combination of tables and chairs to manufacture in order to reach the maximum profit . 29-05-2024 DKB ME, VCET 117

118. The decision variables can be defined as : X = number of tables to be produced Y = number of chairs to be produced. Now linear programming (LP) problem can be formulated in terms of X and Y and Profit (P). Maximize P = 7X + 5Y (Objective function) subject to 4X + 3Y ≤ 240 (hours of carpentry constraint) 2X + Y ≤ 100 (hours of painting constraint) X ≥ 0, Y ≥ 0 (Non-negativity constraint). Therefore the mathematical formulation of the LPP is: Maximize: P = 7X + 5Y Subject to: 4X + 3Y ≤ 240 2X + Y ≤ 100 X ≥ 0 , Y ≥ 0 To find the optimal solution to this LP using the graphical method we first identify the region of feasible solutions and the corner points of the of the feasible region. The graph for this example is plotted in the next slide. 29-05-2024 DKB ME, VCET 118

119. Objective function: P = 7X + 5Y 1) 4X + 3Y ≤ 240 If X=0; then 3Y=240; Y=80 Then the first point of the line will be (0,80) If Y=0; then 4X=240; X=60 Then the second point of the line will be (60,0) 2) 2X + Y ≤ 100 If X=0; then Y=100 Then the first point of the line will be (0,100) If Y=0; then 2X=100; X=50 Then the second point of the line will be (50,0) 29-05-2024 DKB ME, VCET 119

120. In this example the corner points are (0,0), (50,0),(30,40) and (0,80). Testing these corner points on P = 7X + 5Y gives Because the point (30,40) produces the highest profit we conclude that producing 30 tables and 40 chairs will yield a maximum profit of Rs 410 29-05-2024 DKB ME, VCET 120

121. A company manufactures two products X and Y, which requires the following resources. The resources are the capacities of machines M1, M2 and M3. The available capacities are 50, 25 and 15 hours respectively. Product X requires, 2hrs of m/c M1, 1hr of m/c M2 and 1 hr of m/c M3. Product Y requires 2 hrs of m/c M1, 2 hrs of m/c M2 and 1 hr of m/c M3. The profit contribution of the products X and Y are Rs.5/- and Rs 4/- respectively. Resources X Y M1 2 2 50 M2 1 2 25 M3 1 1 15 Profit 5 4 29-05-2024 DKB ME, VCET 121

122. Trade off Operation Managers often encounter operational decisions that exhibit trade-off decisions. Trade off means that  something must be given up in order to make the best decision . This is because each choice will meet some of the goals, but not all of them . In simple terms, a tradeoff is where one thing increases , and another must decrease . For example, Inventory Turnover Decision (Amount of inventory to stock) the decision maker must take into account the trade-off between the increased level of customer service that the additional inventory would yield and the increased costs required to stock that inventory. Decision makers sometimes deal with these decisions by listing the advantages and disadvantages —the pros and cons—of a course of action to better understand the consequences of the decisions they must make. In some instances, decision makers add weights to the items on their list that reflect the relative importance of various factors. This can help them “net out” the potential impacts of the trade-offs on their decision. 29-05-2024 DKB ME, VCET 122

123. Model A model is an abstraction of reality, a simplified representation of something. For example, a child’s toy car is a model of a real automobile. It has many of the same visual features (shape, relative proportions, and wheels) that make it suitable for the child’s learning and playing. But the toy does not have a real  engine,  it cannot transport people, and it does not weigh 2,000 Kgs . Types of Models Models are sometimes classified as physical, schematic, or mathematical. Physical models  look like their real-life counterparts. Examples include miniature cars, trucks, airplanes, toy animals and trains, and scale-model buildings. The advantage of these models is their visual correspondence with reality . Schematic models  are more abstract than their physical counterparts; that is, they have less resemblance to the physical reality. Examples include graphs and charts, blueprints, pictures, and drawings. The advantage of schematic models is that they are often relatively simple to construct and change . Moreover, they have some degree of visual correspondence. 29-05-2024 DKB ME, VCET 123

124. Mathematical models  are the most abstract : They do not look at all like their real- life counterparts. Examples include numbers, formulas, and symbols. These models are usually the easiest to manipulate, and they are important forms of inputs for computers and calculators . Benefits of Using Models 1 .   Are generally easy to use and less expensive than dealing directly with the actual situation. 2.  Require users to organize and sometimes quantify information and, in the process, often indicate areas where additional inf ormation is needed. 3.  Increase understanding of the problem. 4.  Enable managers to analyze what-if questions. 5.  Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem. 6.  Enable users to bring the power of mathematics t o bear on a problem. 29-05-2024 DKB ME, VCET 124

125. Decision Tree Analysis Decision tree analysis is a technique used for taking long-term capacity planning decisions. A decision tree is basically a diagram used to structure and analyze a decision problem. A decision tree is a type of flowchart you can use to visualize a decision-making process. Decision trees help you map out different courses of action and their potential outcomes. It is a systematic and sequential laying out of decision points, alternatives, and chance events. Decision tree analysis is a comparative study of different possibilities occurring due to decisions taken, and arriving at the best possible alternative purely depending on the probability of occurrence of each outcome and the probable profit or loss of such a outcome . A decision tree is a schematic representation of the alternatives available to a decision maker and their possible consequences. The term gets its name from the treelike appearance of the diagram. 29-05-2024 DKB ME, VCET 125

126. In health care the array of treatment options and medical costs makes tools such as decision trees particularly valuable in diagnosing and prescribing treatment plans. For example, if a 20-year-old and a 50-year-old both are brought into an emergency room complaining of chest pains, the attending physician, after asking each some questions on family history, patient history, general health, and recent events and activities, will use a decision tree to sort through the options to arrive at the appropriate decision for each patient. 29-05-2024 DKB ME, VCET 126

127. Decision tree is composed of a number of nodes that have branches emanating from them. Square nodes denote decision points, and circular nodes denote chance events . Read the tree from left to right . Branches leaving square nodes represent alternatives ; branches leaving circular nodes represent chance events (i.e., the possible states of nature). 29-05-2024 DKB ME, VCET 127

128. 29-05-2024 DKB ME, VCET 128