MAN 3504 Exam 3 Study Guide Professor Sidney Anderson 1 Chapter 14 Forecasting You only need to know up to the moving average in the slides 1 Forecasting A planning tool that helps management in its attempts to cope with the uncertainty of the future relying mainly on data from the past and present and analysis of trends 2 Cardinal Rule Forecast is always incorrect 3 Resource utilization i Capacity Utilization Optimize capacity ii Lower Inventories Less tied up in Inventory allows it to be spent elsewhere iii iv v Enhanced customer service You can better plan for your employees vi Increased Process efficiency Increased flexibility You have a better idea of when customers will be there purchase In essence more money available for the company 4 Planning horizon is the amount of time an organization will look into the future when preparing a strategic plan 5 Aggregate planning an operational activity that does an aggregate plan for the production process in advance of 2 to 18 months to give an idea to management as to what quantity of materials and other resources are to be procured and when so that the total cost of operations of the organization is kept to the minimum over that period 6 Trend is the underlying pattern of growth or decline in a time series i Example of Linear and Nonlinear Trend Patterns 7 Seasonal Patterns Are characterized by repeatable periods of ups and downs over short periods of 1 time 2 i 8 Cyclical cycle Patterns Are regular patterns in a data series that take place over long periods of times 9 Cycles 10 Irregular Random Variation 11 Forecast Error is the difference between the observed value of the time series and the forecast 12 Moving Average Forecast i ii Obtain the 3 Period Moving average by taking the desired 3 data points get the average that average becomes your next day forecast 13 Weighted Moving Average a forecast technique that uses a weighted average of past time series values to forecast the value of the time series in the next period The forecast smoothes out the irregular fluctuations in the time series 14 Do not need to know about exponential smoothing because we did not cover it in class Chapter 11 Managing Capacity Demand 15 Strategies for matching capacity and demand for services 16 Managing Demand Capacity Yield Management i Managing Demand 1 Partitioning demand 2 Developing complementary services 3 Establishing price incentives 4 Developing Reservation systems 5 Promoting off peak demand Increasing Customer participation 1 2 Sharing capacity 3 Scheduling work shifts 4 Cross Training employees ii Managing Capacity 3 5 Creating adjustable capacity 6 Using Part time employees 17 Customer Induced Variability Strategies for managing variability i Arrival Customer arrivals are independent decisions not evenly spaced 1 Accommodation Provide generous staffing 2 Reduction require reservations ii Capability Level of knowledge and skills vary resulting in some hand holding 1 Accommodation adapt to customer skill levels 2 Reduction Target customers based on capability iii Request Uneven service times result from unique demands 1 Accommodation Cross train employees 2 Reduction limit service breadth iv Effort level of commitment to coproduction or self service varies 1 Accommodation Do work for customers 2 Reduction Reward increased effort v Subjective preference personal preferences introduce unpredictability 1 Accommodation Diagnose expectations and adapt 2 Reduction Persuade customers to adjust expectations 18 Ideal Characteristics for Yield Management i Relatively fixed capacity ii Ability to Segment markets iii Perishable Inventory iv Product sold in Advance v Fluctuating demand vi Low Marginal sales cost and high capacity change cost Chapter 12 Managing Waiting Lines Read through material and have a general understanding of it Do not memorize the definitions Do not worry about calculations in PowerPoint We did not cover any in class 19 Queuing Systems i A queue is a line of waiting customers who require service from one or more servers ii The queue need not to be a physical line of individuals in front of a server example being placed on hold by a telephone operator iii Servers typically are considered to be individual stations where customer receive service iv In any service system a queue forms whenever current demand exceeds the existing capacity to serve Such a situation is bound to occur in any system for which arrivals at varying times and service times also vary v Waiting Realities Inevitability of waiting waiting results from variations in arrival rates and service rates 1 2 Economics of waiting high utilization purchased at the price of customer waiting vi Maister s two laws of service 1 First law deals with the customer s expectation versus perceptions If customer s receive better service than he or she expects then the customer departs a happy satisfied person He she will then tell his friends the positive experience but he she will also share the bad experience and hurt the service 4 2 Second law that it is hard to play catch up ball The first impressions formed during wit time may impact perceptions for rest of the service Therefore customer wait time should be well managed vii The Old Empty Feeling 1 People dislike waiting time because it seems a Uncomfortable insulting powerless lasts forever 2 So fill the wait time with positive ways to keep customers busy a Mirrors furnishings and music TV reading material coffee and cookies viii A foot in the door entertainment 1 Convey to the customer that the service has begun because they can tolerate the wait much longer than if service has not even started a Ex Handing them menus while they are waiting in the line b Ex Asking them to fill in their medical history ix The Light at the end of the tunnel 1 Anxiety of waiting in a line with unknown wait time is not good Therefore tell the customers how long the wait time will be to allow the customer to decide whether to wait or not If the customer has to wait then a simple explanation and apology for the delay will go a long way in establishing goodwill 2 x Excuse me but I was next 1 First come first served FCFC should be the primary rule used for service 2 Use ticketing system to determine the priority instead of physical line The number being served can be displayed so that customer will know how long the wait time is It will allow customers to wander around and possibly make some impulse buying 3 4 Such a system will work well if there