CHAPTER 4 DECISION MAKING IN OPERATIONS MANAGEMENT

GE’s Appliance Park : DM & PS 현재의 상황 GE’s five-factory complex located near Louisville Innovative appliances and manufacturing technology → Outdated factory(40년) : Loss of $47million(1992) New energy standard for washing machines(1994) 대안(option) 노후 시설에 대한 조사 비용 : $70million GE’s washers 외주 : slashing 1,500 job & endangering long-range prospects for Appliance Park 의사결정사항 Evaluate impact of their various options on five factory Separate the symptoms of problems from their causes

THE NATURE OF MANAGEMENT MANAGEMENT is the process of directing resources and organizing activities designed to achieve corporate/organization objectives. Top management must wear bifocals, i.e., it must effectively manage the present while getting ready for what the future might bring.

THE FIVE FUNCTIONS OF MANAGEMENT Planning Organizing Controlling Analyzing Directing-Implementing Deciding what to do Understanding data Developing structures & Assigning resources to them Carrying out decisions Measuring the result & Comparing The results

THE FIVE FUNCTIONS OF MANAGEMENT Planning What : Establish the goal & objective When : Establish the time period(예:1994) Who : Determine plan’ scope(예:Washing machine operation) How : Identify the action and their sequences(예 : restore vs. close) Performance measure(예: Cost, M/S, Profit, Productivity) Analyzing : correction & elimination(예:PC hard-disk조립) Organization : developing structures(design sequence of task & allocate resource) Directing/Implementing : action(Communicate the goal & Commit resources-예:장비노후에 투자) Controlling : measure,Feedback - Linkage b/w plan & action

THE MANAGER AS A PROBLEM SOLVER SYMPTOMS indicate that something is wrong.(thermometer., GE’s M/S, too little) PROBLEMS are a perceived gap between a present situation and some desired situation. A Classification Scheme for Problems Structured vs. ill-structured Desired State Unknown Known Ill-structured problem Semi-structured problem Unknown Present State Semi-structured problem Well-structured problem Known

PROBLEM, CAUSE & SOLUTION Strategic versus Operational Orientation(time) Urgency of a Problem(crises vs.opportunity) Activity Focus(행위의 유형:trade-off 평가) Queuing(Service Center) Allocation(Job) Inventory(재고유지비) Sequencing(Job & Machine) Cause Anything that creates or contributes to a gap b/w current and desired future situation( A source of observed symptoms) Solution A set of actions designed to close the gap b/w the current and desired future situations by changing the conditions Routing(Machine & site) Replacement(tool 교체) Competition(pricing or bidding) Search(sampling & inspection)

A MANAGERIAL APPROACH TO PROBLEMS The three choices Solve the problem : Optimum solution Resolve the problem : Effective solution Dissolve the problem : Eliminate condition A Five-Stage Problem Solving Process Problem Statement/ Diagnosis Size-Up/ Description Prescription/Alternatives Analysis Implementation

PROBLEM-SOLVING PROCESS Size-up/Description : gathering information 불분명한 문제 규명, 올바른 문제 파악, 해결되어야 할 문제 파악, 새로운 문제 발견 Tool : Observation, Participation, Questionnaires. Interview, Written document, Process mapping, Check sheet, Benchmarking Problem Statement/Diagnostics-critical agreement Identify controllable vs. Uncontrollable variables, Constraints & desired outcomes Analysis : 현재상황 개발, tool: 모형 Prescription/Alternatives : 대안제시 및 평가 Implementation : 해결책 선정 후 실행-작업자 영향고려

TOTAL COST ANALYSIS Total Cost = Quantitative + Qualitative, cost-benefit 분석 Quantitative Costs Variable, Fixed, Semi-variable Relevant and irrelevant – sunk cost, level of capacity utilization. Opportunity : best alternative use of resource Qualitative Costs Reputation, goodwill Personal view and bias TRADE-OFF ANALYSIS Identifying the indifference point

DEMING CYCLE (PDCA) The Deming Cycle is a four-step process:(GE) Never-Ending Improvement Act A Plan P Check C Do D The Deming Cycle is a four-step process:(GE) PLAN - Identify a problem worthy of study and then identify actions to close the gap. DO - Implement the plan of action.(pilot project) CHECK - See how well it worked.(variable & performance) ACT - evaluate results and either continue the process or institutionalize the improvements.

CAUSE-AND-EFFECT DIAGRAMS A problem solving tool that visually represents relationships between symptoms and their root causes Cause Cause Cause Problems Cause Cause Causes Effects

CAUSE-AND-EFFECT DIAGRAMS Types of C&E diagram-nature of the problem & the process The dispersion analysis : cause of dispersion or variation The process classification : tracing through the activities in the production process Constructing a C&E Diagram(GE) the Problem to Examine → Major Categories of Causes →more Specific Causes → Circle likely Cause →verify the Causes(Deming’s PDCA cycle) Benefits of Cause-and –Effect Diagrams Education, discussion, dada-collection, any OM problem

PARETO ANALYSIS A problem solving tool that sets management priorities based on the assumption that 80% of any operational problem results from 20% of the operational factors. 100 most important factor 80 60 40 least important 20

PARETO ANALYSIS Procedure Benefits of Pareto Analysis Identify categories about which to collect information Decide on the time period to cover Calculate total frequencies of variations by category for the time period Sort the Categories in descending order Identify the vital few Categories that account for most of the variation Adjust the categories for any qualitative factors Present the data graphically, if appropriate Benefits of Pareto Analysis Vital few activities Best opportunities for improving operation

CHECK SHEETS A tool used to collect data and classify the observations into categories. Types of check sheets Attribute check sheet category such as a pass or fail rating for product quality. Variable check sheets : continuous data → discrete categories Location check sheets : location of events Begin with decision about its purpose → choose → categories of event to track → consult the workers → designate an appropriate time period

MODEL BUILDING A model is an abstract representation of reality that simplifies actual events and situations. Models are designed to answer: What : identify important element How : Relationships Why : Reason Under what conditions : specify condition Types of model Physical Model - Iconic model , Analog model Mathematical model – descriptive model, normative model(optimization model) 모형화 과정 단순화 및 추상화, 모형의 타당성 검토, 결과의 예측, 평가, 수정.

TYPES OF DECISION MAKING Decision Making under Certainty : 대안을 선택한 경우 어떤 결과가 발생할 지를 의사결정자가 확실히 앎 선형 계획법, 목표 계획법, PERT/CPM Decision Making under Risk 미래에 전개될 수 있는 상화에 대해서 각 상황의 발생가능성을 확률로 나타냄 위험에 대한 의사결정자의 태도(위험선호형, 위험회피형, 위험중립형) 의사결정나무, 확률적 선형 계획법, 확률적 재고 모형, 시뮬레이션 모형 Decision Making under Uncertainty 발생 가능한 여러 가지 상황 추정, 각 대안과 상황에 따른 의사결정 결과 추정할 수 있으나 상황의 발생 확률을 예측할 수 없슴 최대최소값, 최대최대값, 최소최대기회손실, 라프라스 기준 등 Decision Making under Conflict 각 결과는 다른 사람, 경쟁상대의 행동에 따라 달라짐 게임 이론