SCM 352

Decision making under risk

- Each possible state of nature has an assumed probability - States of nature are mutually exclusive and collectively exhaustive - Probabilities must sum to 1 - Determine the expected monetary value (EMV) for each alternative

Decision making under certainty

- Is the cost of perfect information worth it? - Determine the expected value of perfect information (EVPI)

What are the 3 basic functions of a firm?

- Marketing - Finance - Operations

Associative Forecasting

- Used when changes in one or more independent variables can be used to predict the changes in the dependent variable - If there is only one independent variable we can use linear regression

What is a qualitative forecasting model and when should it be used?

- Used when situation is vague and little data exist - Involves intuition, experience

6 steps in the decision process

1. Clearly define the problems and the factors that influence it 2. Develop specific and measurable objectives 3. Develop a model 4. Evaluate each alternative solution 5. Select the best alternative 6. Implement the decision and set a timetable for completion

6 reasons to globalize

1. Improve supply chain 2. Reduce costs 3. Improve operations 4. Understand markets 5. Improve products 6. Attract and retain global talent

Identify the 10 strategic operations management decisions

1.) Design of goods and services 2.) Managing quality 3.) Process and capacity design 4.) Location strategy 5.) Layout strategy 6.) Human resources and job design 7.) Supply-chain management 8.) Inventory, material requirements planning, and JIT 9.) Intermediate and short-term scheduling 10.) Maintenance

Decision making under uncertainty

1.) Maximax - Find the alternative that maximizes the maximum outcome for every alternative - Highest possible gain - This is viewed as an optimistic approach 2.) Maximin - Find the alternative that maximizes the minimum outcome for every alternative - Least possible loss - This is viewed as a pessimistic approach 3.) Equally likely - Assumes each state of nature is equally likely to occur - Find the alternative with the highest average outcome - Pick the outcome with the maximum number

How is the expected monetary value (EMV) calculated? What does it mean?

EMV = (Payoff of 1st state of nature) x (Probability of 1st state of nature) + (Payoff of 2nd state of nature) x (Probability of 2nd state of nature)........... Means alternative i

What is the expected value of perfect information (EVPI)?

EVPI = Expected value w/ perfect info - Maximum EMV

What is the expected value with perfect information (EVwPI)?

EVwPI = (Best outcome or consequence for 1st state of nature) x (Probability of 1st state of nature)

Distinction between goods and services

Goods: tangible, physical objects Services: intanglible

Sustainability

Means meeting the needs of the present without compromising the ability of future generations to meet their needs

Difference between production and productivity

Production: the creation of goods and services (measure of outputs only) Productivity: Measure of process improvement (represents output relative to input)

Time Series Forecasting

Utilizes a set of evenly spaced numerical data - Obtained by observing response variable at regular time periods Forecast is based only on past values, no other variables used - Assumes that factors influencing past and present will continue influence in future

What is a decision tree?

a graphic display of the decision process that indicates: - decision alternatives - states of nature and their respective probabilities - payoffs for each combination of decision alternative and state of nature

What is forecasting

a process of predicting a future event

Operations Management

the set of activities that create value (in the form of goods and services) by transforming inputs into outputs