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MGT603_Assess3 Written Report Page 1 of 7

ASSESSMENT 3 BRIEF

Subject Code and Title MGT603: Systems Thinking

Assessment Written Report

Individual/Group Individual

Length Up to 2000 words

Learning Outcomes c) Analyse, select and apply systems modelling tools in
integrating, optimising and enhancing business processes
within contemporary organisations.

d) Synthesise technological and non-technological
solutions to business problems that promote integration
and that optimise whole-of-enterprise operations

Submission By 11:55pm AEST/AEDT Friday of Module 6.2 (week 12)

For intensive class:

By 11:55pm AEST/AEDT Friday of Module 6.2 (week 6)

Weighting 40%

Total Marks 40 marks

Context:

There are two approaches towards improving systems, short-term approaches that normally
addresses the symptoms and rarely help understand and address the cause of the problem, and
long-term approaches, which allow managers to address the real cause(s) of the problem. In this
assessment, students will try to solve a practical problem by using Systems Thinking tools called
System Archetypes combined with value stream mapping.

Instructions:

Assessment 3 is about uncovering the complexities in operations management generally,
identifying key themes, intended and unintended consequences and proposing a holistic solution
to the problem using a Systems Thinking lens.

The following scenario study provides you with a brief overview of a hypothetical problem. Be
aware that the scenario provided may not cover every detail that you will need to address in the
Written Report, in which case, you will need to conduct additional research, including further
research on how emergency departments function in any hospital.

MGT603_Assess 3 Written Report Page 2 of 7

Scenario

Overview:

Consider yourself as part of a team responsible for managing the operations of an emergency
department of a public hospital. The emergency department has received feedback from patients
suggesting that the patient wait times need to be improved. The value stream map of the current
operations is shown in the attached diagram.

The Value Stream Map is can be Found via the Assessment Link.

You have been tasked with improving patient turnaround time by reducing the current time to
half. To complete the task you are required to identify the various System Archetypes that affect
the operations of the hospital and the emergency department itself and based on the archetypes,
develop a future State Value Stream Map of the emergency department.

It is recommended that you identify and critically analyse intended and unintended
consequences, recommending holistic solutions that will optimise the operations of the
emergency department without compromising the performance of other functions of the
hospital.

Suggested format: Your Written Report should include the following sections and sub-sections.

Cover Page (Subject Name & Code, Assessment No., Student Name and Surname, Student
Number, Lecturer, Year and Trimester)

Executive Summary

Table of Contents

1. Introduction/Background

2. Main Discussion

2.1. Identification and analysis of the System Archetypes that may impede
performance

2.2. Analysis of the current State Value Stream Map of the emergency
department based on System Archetypes

2.3. Recommended new State Value Stream Map with desired reduction in
patient turnaround time

2.4. Discussion on Intended and unintended consequences of the modified
system

3. Conclusion
4. Recommendations
5. References
6. Appendices (Appendix A, Appendix B, …)

MGT603_Assess 3 Written Report Page 3 of 7

Submission Instructions:

This Written Report is to be written according to academic writing guidelines and must be
submitted in compliance with the following;

1. You should make significant references to the subject material and substantial
wider reading. A minimum five (5) academic (books & peer-reviewed journal
articles) & two (2) other sources (newspaper article, trade publications, websites,
etc.) must be used. These should be referenced in the APA style, both in-text and in
a reference list. References to ‘Wikipedia’ or similar unsubstantiated sources will
not be accepted.

2. The assignment is to include in-text citations and a reference list following the latest
APA referencing style. The APA referencing guide can be located in the Academic
Writing Guide at http://library.think.edu.au/ld.php?content_id=1882254

3. Submit Written Report (with references) via the Assessment link in the main
navigation menu in MGT603 Systems thinking on the Student Portal. The Learning
Facilitator will provide feedback via Grade Centre in the Student Portal. Feedback
can be viewed in My Grades.

Students should use the brief to guide what to include in the assessment and the following
rubric to inform the standard required.

http://library.think.edu.au/ld.php?content_id=1882254

MGT603_Assess 3 Written Report

Learning Rubric: MGT603 Systems Thinking Assessment 3 Written Report

Assessment
Attributes

Fail
(Unacceptable)

Pass
(Functional)

Credit
(Proficient)

Distinction
(Advanced)

High Distinction
(Exceptional)

Understanding of
research principles
and methods
applicable to MBA

The focus for the research
question(s) or basis for the
project is unclear.

The focus for the research
question(s) or basis for
project is adequately
clear.

The focus for the
research question(s) or
basis for project is
clear.

The focus for the
research question(s) or
basis for project is very
clear.

The focus for the
research question(s)
or basis for project is
exceptionally clear.

Percentage for this
criterion

20%

The rationale for the research
methodology is inappropriate
for the research
question/project.

The rationale for the
research methodology is
appropriate for the
research question/project.

The rationale for the
research methodology
is stated and
appropriate for the
research
question/project.

The rationale for the
research methodology is
compared with
alternatives and the
chosen method is
appropriate for the
research
question/project.

The rationale for the
research methodology
is critically compared
and evaluated against
alternatives and the
chosen method is
appropriate for the
research
question/project.

Knowledge and
understanding
(technical and
theoretical
knowledge).

Understands
theoretical models
and concepts and
tools and techniques
of systems thinking
and their applications
to operations

Limited understanding of
required concepts and
knowledge

Key components of the
assignment are not
addressed.

No discussion on systems
principles and tools such as
system dynamic, system
archetypes, causal loop
diagrams. Lack of
understanding and
application of value stream

Knowledge or
understanding of the field
or discipline.

Resembles a recall or
summary of key ideas.

Often confuses assertion
of personal opinion with
information substantiated
by evidence from the
research/course materials
on systems principles and
tools such as system
dynamic, system

Thorough knowledge
or understanding of the
field or discipline/s.
Supports personal
opinion and
information
substantiated by
evidence from the
research/course
materials.

Demonstrates a
capacity to explain and
apply relevant concepts
of systems principles

Highly developed
understanding of the
field or discipline/s.

Discriminates between
assertion of personal
opinion and information
substantiated by robust
evidence from the
research/course
materials and extended
reading.

Well demonstrated
capacity to explain and

A sophisticated
understanding of the
field or discipline/s.

Systematically and
critically discriminates
between assertion of
personal opinion and
information
substantiated by
robust evidence from
the research/course

MGT603_Assess 3 Written Report

management
practices

Percentage for this
criterion

30%

mapping to operations
management decision making

archetypes, causal loop
diagrams. Lack of clear
understanding and
application of value
stream mapping to
operations management
decision making

and tools such as
system dynamic,
system archetypes,
causal loop diagrams.
Demonstrates
understanding and
application of value
stream mapping

apply relevant concepts
of systems principles
and tools such as system
dynamic, system
archetypes, causal loop
diagrams. Demonstrates
good understanding and
application of value
stream mapping

materials and
extended reading.

Mastery of concepts
and application to
new
situations/further
Learning of systems
principles and tools
such as system
dynamic, system
archetypes, causal
loop diagrams.
Demonstrates
excellent
understanding and
application of value
stream mapping

Effective Written
Communication

Percentage for this
criterion

15%

Difficult to understand for
audience, no logical/clear
structure, poor flow of ideas,
argument lacks supporting
evidence.

Audience cannot follow the
line of reasoning.

Information, arguments
and evidence are
presented in a way that is
not always clear and
logical.

Line of reasoning is often
difficult to follow.

Information,
arguments and
evidence are well
presented, mostly clear
flow of ideas and
arguments.

Line of reasoning is
easy to follow.

Information, arguments
and evidence are very
well presented; the
presentation is logical,
clear and well supported
by evidence.

Demonstrates cultural
sensitivity.

Expertly presented;
the presentation is
logical, persuasive,
and well supported by
evidence,
demonstrating a clear
flow of ideas and
arguments.

Engages and sustains
audience’s interest in

MGT603_Assess 3 Written Report

the topic,

demonstrates high
levels of cultural
sensitivity

Effective use of
diverse presentation
aids, including
graphics and multi-
media.

Analysis and
application with
synthesis of new
knowledge

Percentage for this
criterion

25%

Limited synthesis and
analysis.

Limited
application/recommendations
based upon analysis.

Demonstrated analysis
and synthesis of new
knowledge with
application.

Shows the ability to
interpret relevant
information and literature.

Well-developed
analysis and synthesis
with application of
recommendations
linked to
analysis/synthesis.

Thoroughly developed
and creative analysis
and synthesis with
application of pretested
models and / or
independently
developed models and
justified
recommendations linked
to analysis/synthesis.

Highly sophisticated
and creative analysis,
synthesis of new with
existing knowledge.

Strong application by
way of pretested
models and / or
independently
developed models.
Recommendations
are clearly justified
based on the
analysis/synthesis.
Applying knowledge
to new
situations/other
cases.

MGT603_Assess 3 Written Report

Correct citation of
key resources and
evidence

Percentage for this
criterion

10%

Demonstrates inconsistent
use of resources to support
and develop ideas.

Demonstrates use of
credible and relevant
resources to support and
develop ideas, but these
are not always explicit or
well developed.

Demonstrates use of
high quality, credible
and relevant resources
to support and develop
ideas.

Demonstrates use of
good quality, credible
and relevant resources
to support and develop
statements. Shows
evidence of wide scope
for sourcing evidence.

Demonstrates use of
high-quality, credible
and relevant
resources to support
and develop
statements. Shows
evidence of wide
scope for sourcing
evidence.

Value Stream Map – Emergency

Room

Wait

Out Patient

Registration
Taken to ER

Room

Nurse
Examines

Patient

Doctor
Examines

Patient

Nurse brings
Medical
Supplies

Doctor Treats
Patient

Patient Goes
Home

Patient
Hospital
Records

Attending
Nurse

Attending
Physician

Material Flow

Information Flow

Go to
Waiting

Area

Wait Wait Wait Wait

Insurance
Company

Departing
Instructions

Wait

Available Room

Patient history
Vital Statistics

Treatment
Information

Diagnosis &
Supply Needs

Treatment
Information

Insurance Info
Nature of Injury

Patient history

Patient Info

Patient ready
for Treatment

Patient history
Vital Statistics

Diagnosis &
Departing Inst.

Departing
Instructions

Source: http://image.slidesharecdn.com/12may1345deanblisstrackarev1-1324465696655-phpapp01-111221051739-phpapp01/95/lean-what-is-
it-and-how-does-it-work-22-728 ?cb=1324445291

http://image.slidesharecdn.com/12may1345deanblisstrackarev1-1324465696655-phpapp01-111221051739-phpapp01/95/lean-what-is-it-and-how-does-it-work-22-728 ?cb=1324445291

Assessment 3 Guidelines

Executive Summary

In this section, you will need to provide a summarized version of your MGT603 Assessment 3 report in maximum 200 words.

Mainly this section of the assessment report is written after you have developed, written and completed your MGT603 Assessment 3 task.

NO REFERENCES in this section as this is the summarized version of your assessment report from your perspective and in your own words.

Please also keep in mind that in academia we mainly practice writing in the third person. For instance, instead of referring to yourself as I, me, my, and myself, it is highly advised to refer to yourself as “The author”, “The writer”, or “The researcher”.

(
5
)

Table of Contents

· Insert the Table of Contents in this section.

· Simply Table of Contents is the list of all the numbered sections and sub-sections of the assessment/report with page numbers.

· You can use Microsoft Word to insert the Table of Contents (TOC) automatically by defining “headings”.

· Table of Contents is not included in the word count.

For Example the Table of Content (TOC) for MGT603 Assessment 3 should look like as follows:

Table of Contents

Executive Summary 1
Introduction/Background 3
Main Discussion 3
Identification and analysis of those System Archetypes that may impede performance 3
Analysis of the current State VSM of the emergency department based on System Archetypes 3
Recommend new State VSM with desired reduction in patient turnaround time 3
Discussion on intended and unintended consequences of the modified system 4
Conclusion 4
Recommendations 4
References 5
Appendices (if any) 5
Appendix A 5
Appendix B 5

1.
Introduction/Background

In this section introduce your assessment/report to the reader. Think of the purpose and objectives of your assessment and ask this question from yourself that why this assessment task is important? Overall, the Introduction section is about “What the assessment is going to be about?”

IMPORTANT NOTE:
Please keep in mind that MGT603 Assessment 3 is based on a “hypothetical problem” for a “hypothetical public hospital”.

Please make sure to highlight all the references for all the used information where required and necessary.

2.
Main Discussion

2.1.
Identification and analysis of those System Archetypes that may impede performance

In this section, you ONLY need to focus on those system archetypes which you believe they may impede the performance of the emergency department of this public hospital in its current situation. For this you will need to focus on the provided State Value Stream Map (VSM).

Please make sure to highlight all the references for all the used information where required and necessary.

2.2.
Analysis of the current State VSM of the emergency department based on System Archetypes

In this section, you will need to simply discuss and analyse what the current State VSM of the emergency department is indicating/showing based on the System Archetypes that you have already learnt in this subject. You will need to review your lecture notes about the System Archetypes.

Please keep in mind that you ONLY need to focus on those system archetypes which can help and support you to analyse the current state VSM.

Please make sure to highlight all the references for all the used information where required and necessary.

2.3.
Recommend new State VSM with desired reduction in patient turnaround time

Based on the above-mentioned discussions in sub-sections 2.1 and 2.2, in this section, you require to recommend your newly proposed State VSM which supports the emergency department of this public hospital with desired reduction in patient turnaround time.

IMPORTANT NOTE:
You will require to draw the newly proposed VSM (hand written or by your laptop and any application) and insert it here in this section as a “Figure”. Please keep in mind

that you will need to first introduce your new State VSM and then number and label (e.g. Figure 1: New Proposed State VSM ) them appropriately. Finally, you will need to explain and discuss the Figure in-detail and in-depth.

Please make sure to highlight all the references for all the used information where required and necessary.

2.4.
Discussion on intended and unintended consequences of the modified system

Based on the above-mentioned discussions and analysis
, highlight and discuss any intended or unintended consequences of the newly proposed State VSM on the emergency department.

Please make sure to highlight all the references for all the used information where required and necessary.

3.
Conclusion

The conclusion section is where you will need to wrap up your discussions in a clear and simple way. Please keep in mind that the “Conclusion” section is not a summary of the main points covered in your assessment but a synthesis of the main points.
In this section, you restate your aims/objectives and summarize the main findings and evidence for your reader. You can use academic phrases such as:

· This assessment concludes ….

· In summary, this assessment argued that ….

· In conclusion, it would appear that ….

· Results provide a basis for … and etc.

Overall, the Conclusions section reminds the reader what the paper has been about.

4.
Recommendations

In this section, you will need to recommend holistic solutions (2-3 recommendations) that will optimise the operations of the emergency department without compromising the performance of other functions of the hospital.

Please make sure to highlight all the references for all the used information where required and necessary.

5.
References

This is a research assignment and as such you are required to read and research widely.

A minimum of 7 references are required which
minimum 5 needs to be academic related references
(e.g. journal articles, books chapters, university resources, conference papers) and minimum 2 other references
(e.g. newspaper articles, industry reports, and etc.). Please make sure to list the used references in your report, alphabetically.

Make sure to use more recent references (from the last five years). It is essential that you use appropriate APA style (APA 6th Edition) for citing and referencing research.

References are not included in the word count.

6.
Appendices (if any)

IMPORTANT NOTE:

Please ONLY highlight anything which is EXTRA/ADDITIONAL to your assessment report in this section. Any important and necessary information, visuals (e.g. New proposed VSM) and Tables require being inserted WITHIN the document/report.

6.1.
Appendix A

6.2.
Appendix B

IMPORTANT NOTES:

· Please submit ONE WORD DOCUMENT ( OR x) via the MGT603 Assessment 3 Section found in the Main navigation menu of the MGT603 Blackboard Site.

· MGT603 Assessment 3 is an “individual” assessment and should be submitted by 11:55 PM AEST/AEDT Friday of Module 6.2 (Week 12).

· This Assessment should be Maximum 2000 Words and is 40% of the final mark.

· The Cover Page, Executive Summary, Table of Contents, References and Appendices are not included in the word count.

· All Figures/Tables require being labelled and numbered appropriately.

· All Figures/Tables require being initially highlighted and introduced and then discussed in-detail and in-depth.

· The sources for the used information within the Figures/Tables require being clearly highlighted.

· Please make sure to review the MGT603 Assessment 3 Brief and the Marking Rubric and be in touch with your Lecturers if any further clarification is required.

(
8/1/2020
)

Welcome to

MGT603/MGMT6003

Systems Thinking

(
8/1/2020
)Module 5

(
Strategic

Planning

Operations

Methods
)

(
8/1/2020
)Module 5 Will Help in Achieving:

Analyse, select t and apply systems modelling tools in integrating, optimising and enhancing business operations within contemporary organisations.

· Synthesise technological and non- technological solutions to business problems that promote integration and that optimise whole-of-enterprise operations

(
8/1/2020
)Key Concepts in Module 5.1

· Qualitative forecasting methods

· Quantitative forecasting using patterns of demand

· Long-range quantitative forecasting methods

· Short-range quantitative forecasting methods

· Selecting a forecasting method

(
8/1/2020
)Forecast is a prediction of future events, used for planning purposes.

Forecasts of future demand are needed at all levels of “Organizational Decision Making”

· Operations managers need reliable estimates of the demand for goods and services.

· Operations managers need estimates of the resources necessary to produce those goods and services and the time required to do so.

(
8/1/2020
)“Forecasting Demand for Services” is just as important as

“Forecasting Demand for Manufacturing Products”, especially when heavy capital investment is needed to provide those services.

For Example:

“How could airlines plan their purchases of aeroplanes without forecasts of demand for air travel”?

(
8/1/2020
)

· (
8/1/2020
)Quantitative (Statistical)

· Qualitative (Judgmental)

(
8/1/2020
)Quantitative Forecasting Methods Uses “Historical” data

and is based on assumptions that current trends will continue into the future.

This type of forecasting is based on the observation of a pattern in levels of demand “over time”. This pattern is known as a

“time series”.

(
8/1/2020
)There are 5 basic patterns of time series:

· Historical—this illustrates
an average level of demand
.

· Trend—a trend is
represented by an upward or downward slope
.

· Cyclical—
business cycles often span 4 to 8 years
, while life cycles vary widely in duration. It is difficult to quantitatively address this component because a sufficient data history is rarely available.

· Seasonal—this
usually repeats annually, but could be based on a day, week or month.

· Random—the magnitude of this component means it
cannot be precisely forecast at a given time
. However, the significance of the random factor’s size can be observed, and it may be possible to predict the bounds of the random factor, which can help to determine the reliability of a forecast.

(
8/1/2020
)

Any forecast based on a pattern of demand relies on that pattern continuing in the future.

When using such forecasts it is important to identify the conditions that existed when the data were collected, and compare these against the conditions that now exist and those that are likely to exist in the future.

There are 2 factors that cause changes in the patterns

of demand for a particular product or service over time:

External Factors Internal Factors

(
8/1/2020
)Those factors that management cannot directly control.

Some economic factors, such as a booming economy, may influence demand, but their influence may not be equal for all products and services.

Other factors may positively affect one product while reducing the demand for another.

Those factors that are easier for management to control.

Examples include advertising and promotions to encourage customers to make purchases during off-peak demand periods, and developing products that have different seasonal peak demands in order to level production resource requirements.

(
8/1/2020
)Long-Range Quantitative Forecasting:

· Involves timeframes for more than one year.

· Statistical techniques are necessary to quantify probable future demand.

· Three methods are used to conduct long-range forecasts:

1. Simple Leaner regression Analysis

· Enables estimation of statistical relationships between variables.

· It is a causal method that relates a dependent variable to one or more independent variables by linear equation.

· The independent variables might be the external or internal variables that are assumed to affect demand.

2. Multiple Regression Analysis

· Reflects the relationship between a dependent variable and two or more independent variable.

3. Coefficient of correlation

· Is the statistical means of quantifying the relative importance of the relationship between two variables.

(
8/1/2020
)Short-Range Quantitative Forecasting:

· Operations Managers also need to make short-term forecasts. For example, number of workers to schedule next week OR the amount of inventory to order for next month.

· These events are not so much affected by trend patterns and cycles as by random or short-term factors.

· Common methods in this regard are as follows:

1. Simple Moving Average

2. Weighted-moving Average

3. Exponential Smoothing Method

4. Adjusted Exponential Smoothing

(
8/1/2020
)Qualitative Forecasting:

· When historical data is not available or current trends are likely to change. For example, if we need to forecast the length of time before a current technology becomes obsolete, we may base such a forecast on the opinions and expertise of people who are knowledgeable about changing technology.

· Qualitative forecasting methods may also be used in combination with quantitative methods to adjust quantitative forecasts when their record of accomplishment is poor, when the decision maker has important contextual knowledge or to compensate for specific events.

· Different methods are available such as:

1. Market Research

2. Surveys

3. Opinions

4. Delphi method

(
8/1/2020
)Qualitative

Quantitative Forecasting Method?

(
8/1/2020
)Forecasting Method Selection:

· Cost and accuracy—a trade-off is sometimes necessary between these two factors.

· Data available—this will determine which type of qualitative or quantitative forecasting method should be used.

· Time span—long-range forecasts have different factors to short-range forecasts.

· Nature of products and services—different forecasting methods are appropriate for different products and services.

· Impulse response and noise dampening— the performance of the selected model must be continuously tracked because forecasting models differ in their impulse response and noise dampening capabilities.

Gaither and Frazier (2002, p. 92–95)

(
8/1/2020
)Short-term Forecasts: Quantitative
time series methods are commonly used in the short-term as it is inexpensive
to generate large numbers of forecasts, and good quality results (minimal errors) can be obtained. Causal models are not used as extensively for short-term forecasts. Whilst they are more accurate than simple time series forecasts, they take more time to develop, they are less likely to be understood and used, and they require more training. Qualitative judgment methods are rarely used. They are too costly to apply to thousands of routine short-term forecasts.

Medium-term Forecasts: Quantitative time series methods should not be used for medium-term forecasts, as it is unlikely that existing patterns will continue very far into the future.
Causal models are most often used in the medium-term, as they are better at identifying turning points in trends. Qualitative judgment methods can also identify turning points and can be used when historical data are not available.

Long-term Forecasts: For long-term forecasts, aggregate demand for a product family expressed in homogeneous units, such as dollars of sales or tonnes of steel is more appropriate than forecasts for individual products or services.
Causal models (adjusted for judgment) and judgment methods are preferred for long-term forecasting.

(
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) (
8/1/2020
)

(
Module

5.1

Essential

Resources
)

(
8/1/2020
)

· Min, H. and Wen-Bin, V.Y. (2008). Collaborative Planning, Forecasting and Replenishment: Demand Planning in Supply Chain

Management.
International Journal of Information Technology and Management, 7(1), 4-20.

· Acar, Y. & Gardner, E.S. (2012). Forecasting method selection in a global supply chain.
International Journal of Forecasting, 28, 842-848.

· Weatherford, L.R. & Kimes, S.E. (2003). A comparison of forecasting methods for hotel revenue management.
International Journal of Forecasting, 19, 401-405.

· Rai. B. (2016). Introduction to forecasting –With Examples. YouTube. Retrieved

from https:

//w

.youtube.com/watch?v=98K7AG3

2qv8&feature=youtu.be

(
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) (
8/1/2020
)

(
Learning

Activities
)

(
8/1/2020
)Learning Activity 5.1

Please answer the following questions and discuss in the module 5 discussion forum.

1. Investigate the types of qualitative forecasting techniques used in your organisation. How do senior managers identify the appropriate forecasting technique to use in different circumstances? Do you think these techniques are used appropriately in your organisation.

2. Visit the website of the government statistician in your country to examine and discuss the past year’s breakdown (by month) of economic indicators. For example, Australian economic indicators can be found under Key Products on the Australian Bureau of Statistics website:

Australian Bureau of Statistics. (2018). Australian Bureau of Statistics. General site. Retrieved from

http://www.abs.gov.au

Comparative international statistics are provided with Australian economic indicators are also available from the OECD and ILO websites

Please place your answers to the above questions on the module 5 discussion forum. The recommended word count is 300 – 400 words. You may like to use images and diagrams. You are also welcome to include factors that may not be explicitly stated but which you believe fit within the context of the subject and are worthy of inclusion.

(
8/1/2020
) (
8/1/2020
)

Week 9

Conclusion

(
8/8/2020
)

Welcome to

MGT603

Systems Thinking

Dr. Arezou PourMirza Subject Coordinator & Lecturer

(
8/8/2020
)Module 5

(
Strategic

Planning

Operations

Methods
)

(
8/8/2020
)Module 5 Will Help in Achieving:

· Analyse, select and apply systems modelling tools in integrating, optimising and enhancing business operations within contemporary organisations.

· Synthesise technological and non- technological solutions to business problems that promote integration and that optimise whole-of-enterprise operations.

(
8/8/2020
)Key Concepts in Module 5.2

· Production Capacity

· Capacity Planning Strategy

· Capacity Planning Decisions

(
8/8/2020
)

Capacity Planning is a crucial element of operations

strategy because it has major
cost
and
operational implications
.

(
8/8/2020
)Capacity Decisions are:

· Made when there is uncertainty about future demand.

· Depend on the growth (or decline) of demand for products/services.

· Aimed at using an organization’s resources to maximize long-term profit while meeting cash-flow requirements.

The cost of potential excess capacity must be balanced against the cost of potential lost sales due to too little capacity.

Excess capacity costs money, especially for capital-intensive organisations (e.g. paper mills, utilities and steel mills). However, too little capacity can result in the inability to meet customer demand, particularly in service industries. Tight capacity does allow for higher equipment utilisation and a better return on investment.

(
8/8/2020
)Four activities that are relevant to Capacity Planning Decisions:

· Estimating the capacities of the present facilities.

· Forecasting the long-range future capacity needs for all products and services.

· Identifying and analysing sources of capacity to meet future capacity needs.

· Selecting from the alternative sources of capacity.

Gaither and Frazier (2002, p.165)

Production Capacity is “the maximum production rate of an organisation”.

However, organisations rarely operate at maximum rates of production, even when there are strong reasons for doing so.

(
8/8/2020
)Capacity is measured in different ways,

depending on the nature of the goods/services and other operational factors.

Two useful concepts are:

·
Theoretical Capacity
—the maximum output capability possible, allowing no adjustments for preventive maintenance, unplanned downtime, shutdowns and so on.

·
Demonstrated Capacity
—the proven capacity calculated from actual output performance data. Demonstrated capacity is generally less than theoretical capacity. It takes into account the production losses due to machine breakdowns, rework, sick time and so on.

(
8/8/2020
)Some measures of capacity:

Capacity can be expressed in terms of “outputs” or “inputs”. It is important to note that no single capacity measure is universally applicable.

Commonly used methods include:

· Output measures

· Input measures

· Average utilisation rate

· Peak capacity

· Effective capacity

· Bottlenecks

(
8/8/2020
)For Capacity Planning Strategy:

· Assessing existing capacity

· Forecasting future capacity requirements

· Choosing between alternative ways to build capacity

· Evaluating the financial options

(
8/8/2020
)

In developing a long-range capacity plan, an “organisation must make a basic economic trade-off” “between the cost of capacity and the opportunity cost of not having adequate capacity”.

·
Capacity Cost:
initial investment in facilities and the annual cost of operating and maintaining those facilities.

·
Opportunity Cost:
The cost of not having sufficient capacity. It incurs from lost sales and reduced market share.

(
8/8/2020
)

Capacity Strategy: how much ‘capacity cushion’ is best for various processes.

=> Capacity Cushion is when we subtract demand from effective capacity.

Conditions leading to large capacity cushions include:

· where the
demand is uncertain
, or
where product mix changes
.

· where
finished goods inventory cannot be stored
.

· where
customer service is important
.

· where
capacity comes in large increments
.

· where
supply of material or human resources is uncertain
.

(
8/8/2020
)Economies of Scale means that “for any given production facility

there will be a level of outputs that result in the
least average unit cost
”. This level of output is called the
facility’s “best operating level”
.

As the best operating level is approached for a particular facility, economies of scale are achieved.

(
8/8/2020
)When Economies of Scale Occur:

· Fixed costs are spread further—as the facility utilisation rate increases, the average unit cost drops because fixed costs are spread over more units. Increments of capacity are often rather large.

· Purchased materials may be cheaper—higher volumes give the purchaser more bargaining power and the opportunity for quantity discounts.

· Process advantages may develop—as volume increases, processes shift toward a line flow. High volume may justify investment in more efficient technology. Benefits of dedicated resources include reduced inventory, reduced set-up costs, enhanced learning effects and process improvements.

(
8/8/2020
)Economies of Scope result when the
value chains
of
two

separate products or services share activities
, such as the same distribution channels or the same manufacturing facilities.

Gaither and Frazier (2002, p.173) define economies of scope as “… the ability to produce many product models in one highly flexible production facility more cheaply than in separate production facilities.”

If a particular product is not being produced at a high enough level to reach economies of scale in distribution, another product could be made to share the same distribution channel.

(
8/8/2020
)

Capacity Cushions, Resource Flexibility, Surplus Inventory and Longer Lead Times all serve as
buffers against uncertainty
. In turn, an organisation’s competitive priorities will demand certain capacity decisions be made; and a change in one area may affect decisions in the other areas.

For Example:

· Where a competitive priority is fast delivery, this requires large capacity cushions.

· Where quality management is a priority, uncertainty will be reduced and capacity may be affected.

· Where schedules are predictable, uncertainty will again be reduced and a smaller cushion may be allowed.

· Where capital expenditure is high, there will be pressure for high utilisation, and a lower capacity cushion.

· Where a capacity decision is made to build another facility, a suitable location will need to be found.

(
8/8/2020
)The following 4 step procedure can help managers make capacity planning decisions:

Step 1. Estimate capacity requirements—Begin with a long-range forecast of demand, productivity, competition and technological change, then convert demand into comparable units of capacity.

Step 2. Identify gaps—A ‘gap’ is the difference between projected demand and current capacity. It will be important to use the correct capacity measure, which is determined by what is critical to the bottleneck operation. Capacity can be expanded only if the bottleneck is one of the expanded operations. Otherwise, expansion just increases idle time.

Step 3. Develop options—The base case is to do nothing. Beyond that, options include varying the timing and size of capacity additions/closings. You could consider an expansionist strategy, a ‘wait-and-see’ strategy, or try expanding at a different location. You could also consider short-term options, e.g. overtime, temporary workers or subcontracting.

Step 4. Evaluate the options—Qualitative judgments include how each option fits with overall capacity planning strategy, and how it can affect uncertainties in demand, competitive reaction, technological change and cost. Possible quantitative judgment aids include net present value of after-tax cash flows, computer simulation, waiting line analysis and linear programming.

(
8/8/2020
) (
8/8/2020
)

(
Module

5.2

Essential

Resources
)

· (
8/8/2020
)Ashayeri, J. & Selen, W. (2018). An application of a unified capacity planning system.
International Journal of operations & Production Management, 25(9), 917 – 937.

· Klassen, K.J and Rohleder, T.R. (2002). Demand and capacity management decisions in services: how they impact on one another.
International Journal of Operations and Production Management, 22(5/6), 527- 49.

· Poles, R. (2013) System Dynamics modelling of a production and inventory system for remanufacturing to evaluate system improvement

strategies.
International Journal of Production Economics
, 144, 189-199.

· VanBerkel, P.T. and Blake, J.T. (2007). A comprehensive simulation for wait time reduction and capacity planning applied in general surgery.
Health care Management Science, 10, 373-385.

(
8/8/2020
) (
8/8/2020
)

(
Learning

Activities
)

(
8/8/2020
)Learning Activity 5.2

(
Select

process

that

you

are

familiar
with
and

determine
the
following:
The

average

utilisation

r
a
te
Peak

capacity
Eff
ect
i
ve

capacity
The

bottleneck.
Please

place
your

answers

the

above

questions

on the

module
5

discussion
forum.

The

recommended

word
count

300

–

400
words.

You

may
li
ke
to

use

images

and

diagrams.

You

are
also

welcome

include

factors
that

may
not

explicitly

s
t
a
te
d

but

which

you

believe fit

within

the
context

of the

subject

and

are
worthy
of

inclusion.
)

(
8/8/2020
)Learning Activity 5.3

Service layouts present special problems. Please view the following website to examine how Space Syntax approaches layout design.

Space Syntax. (2018). Space Syntax: Connect. Retrieved from https://spacesyntax.com/ Please discuss the different factors considered in service layouts?

(
8/8/2020
) (
8/8/2020
)

Week 10

Conclusion

(
8/15/2020
)

Welcome to

MGT603/MGMT6003
Systems Thinking

Dr. Arezou PourMirza Subject Coordinator & Lecturer

(
8/15/2020
)Module 6

(
Strategic

System

Intervention
)

(
8/15/2020
)Module 6 Will Help in Achieving:

· Critically evaluate the paradigm of Systems Thinking conceptualisation and its application to contemporary business issues.

· Analyse, select and apply systems modelling tools in integrating, optimising and enhancing business processes within contemporary organisations.

· Synthesise technological and non- technological solutions to business problems that promote integration and that optimise whole-of-enterprise operations

(
8/15/2020
)Key Concepts in Module 6.1

· Supply Chain Management

· Purchasing

· Just-in-time manufacturing and service delivery

· Material requirements planning

(
8/15/2020
)Supply Chain Management (SCM) is
equivalent to inter-

company operations management
in that it
involves cooperation and close coordination of various operations of suppliers and the receiving organisation
.

A prime objective is a speedy flow of materials along the supply chain, and to this end,

‘just-in-time’ principles

have been widely adopted.

(
8/15/2020
)

Is the next step after First forecasting demand and planning capacity, and then making facility location and layout decisions.

All in all,

· The ability to plan capacity strategically is central to the long-term efficiency and effectiveness of the supply chain.

· Likewise, location and layout decisions will affect logistical efficiency that is achievable in the supply chain.

(
8/15/2020
)A key objective of Supply Chain Management (SCM) is to
align

an organisation’s functions with those of its suppliers
in order
to match the flow of materials, services and information with customer demand
.

All members of an organisation’s supply chain have a mutual interest in identifying what competitive factors (e.g. cost, flexibility, speed of delivery) customers value, and then in maximising the performance of the supply chain as a whole so as to deliver maximum value.

(
8/15/2020
)Materials Management

· A large component of supply chain management is the efficient management of materials.

· Materials Management involves planning, coordinating and controlling the acquisition, storage, handling and movement of raw materials that are needed for the production process.

There are 3 components to Materials Management:

1. Management of raw materials and purchased parts (including purchasing, receiving, storage and retrieval of these materials);

2. Management of finished goods (including packaging and shipping, storage and retrieval in warehouses, and distribution to the customer); and

3. Management of materials during the conversion process (i.e. handling and storage of work-in-process inventories).

(
8/15/2020
)Planning Activities for large manufacturing organizations

have several tasks:

First
, working from long-range capacity plans involving facility locations, layouts and capacities, aggregate plans are drawn up to estimate and allocate resources over the medium-term to accomplish specific tasks.

Then
, production schedules are drawn up to meet the forecasted levels of demand. The workload that the specified levels of production will entail at various workstations is calculated, and action is taken as required to either augment (or reduce) resources at workstations, or to revise the schedule.

Finally
, the progress of jobs is monitored using planning and control systems to ensure that the planned schedule is in fact being achieved.

(
8/15/2020
)Just in Time (JIT)

· First introduced by Japanese in the 1960s and 1970s at Toyota Manufacturer.

· It is a manufacturing system whereby organizations aim to produce all parts in the right quantity and quality, just in time to meet usage requirements at the next stage of product-distribution chain.

· The JIT philosophy is concerned with recognizing and tackling the real inefficiencies in the system, not “optimizing” the status quo.

(
8/15/2020
)Procurement is the logical starting point for discussing SCM.

· The purchasing, or procurement function is responsible for acquiring raw materials, component parts, tools and other items required from outside suppliers.

· Critical issues to consider in procurement is whether it is better to buy-in or make items that are used in the supply chain; and whether a single supplier or multiple suppliers should be used.

· The purchasing function in any organisation acts as an interface between suppliers and the production function.

(
8/15/2020
) (
8/15/2020
)

(
Module

6.1

Essential

Resources
)

(
8/15/2020
)Cucchiella, F. & Gastaldi, M. (2006) ‘Risk management in supply chain: a real option approach’, Journal of Manufacturing Technology Management, 17(6), 700 – 720.

· Yasin, M.M., Wafa, M.A. & Small, M.H. (2001) ‘Just- in-time implementation in the public sector: An empirical examination’, International Journal of Operations and Production Management, 21(9), 1195-12014.

· Webster, M., Muhlemann, A.P. & Alder, C. (2000) ‘Decision support for the scheduling of

subcontract manufacture’, International Journal of Operations & Production Management, 20(10), 1218–1235.

(
8/15/2020
) (
8/15/2020
)

(
Learning

Activities
)

(
8/15/2020
)Learning Activity 6.1

In the module 6 discussion forum please investigate and discuss the following

What criteria are used for purchasing decisions of key components in the supply chain in your organisation (or one with which you are familiar)?

What are the critical issues in the supply chain in your organisation? For example, has the decision whether to make or buy certain components been debated recently; and do you have single or multiple competing suppliers?

How are supply chain management responsibilities allocated and viewed in your organisation? Is supply chain management perceived by senior management as part of their competitive strategy, or simply something that they delegate to people at the shop- floor level?

Please place your answers to the above questions on the module 6 discussion forum. The recommended word count is 300 – 400 words. You may like to use images and diagrams. You are also welcome to include factors that may not be explicitly stated but which you believe fit within the context of the subject and are worthy of inclusion.

(
8/15/2020
)Learning Activity 6.2

Ask a senior manager in your organisation to explain whether the principle of just-in-time has been applied to supply chain management in your organisation, and if so, how. Does he or she believe that the JIT philosophy has a significant impact on the effectiveness and efficiency of the supply chain? If JIT principles have been adopted, what implementation issues arose when the systems were changed, and how were these overcome? (Consider employee issues in particular.)

(
8/15/2020
) (
8/15/2020
)

(
8/15/2020
)

Week 11

Conclusion

Module 5

Forecasting

Introduction:

Forecasts of future demand are needed at all levels of organisational decision-making. Operations managers need reliable estimates of the demand for goods and services, as well as estimates of the resources necessary to produce those goods and services and the time required to do so. Forecasting demand for services is just as important as forecasting demand for manufacturing products, especially when heavy capital investment is needed to provide those services. For example, how could airlines plan their purchases of aeroplanes without forecasts of demand for air travel?

Forecasting methods can be classified as either quantitative (statistical) or qualitative (judgmental).

Quantitative forecasting methods

Quantitative forecasting uses historical data and is based on the assumption that current trends will continue into the future. For example, if we need to forecast weekly sales of a product where it is reasonable to assume that recent trends will continue into the future, a quantitative technique should be used. This type of forecasting is based on the observation of a pattern in levels of demand over time. This pattern is known as a time series. There are five basic patterns of time series:

· Historical—this illustrates an average level of demand.

· Trend—a trend is represented by an upward or downward slope.

· Cyclical—business cycles often span four-to-eight years, while life cycles vary widely in duration. It is difficult to quantitatively address this component because a sufficient data history is rarely available.

· Seasonal—this usually repeats annually, but could be based on a day, week or month.

· Random—the magnitude of this component means it cannot be precisely forecast at a given time. However, the significance of the random factor’s size can be observed, and it may be possible to predict the bounds of the random factor, which can help to determine the reliability of a forecast.

Any forecast based on a pattern of demand relies on that pattern continuing in the future. When using such forecasts it is important to identify the conditions that existed when the data were collected, and compare these against the conditions that now exist and those that are likely to exist in the future. The factors that cause changes in the patterns of demand for a particular product or service over time can be divided into two categories—external and internal:

· External factors are the ones management cannot directly control. Some economic factors, such as a booming economy, may influence demand, but their influence may not be equal for all products and services. Other factors may positively affect one product while reducing the demand for another. When interpreting statistical indicators it is useful to be able to distinguish between leading, coincident and lagging indicators; and

· Internal factors are easier for management to control. Examples include advertising and promotions to encourage customers to make purchases during off-peak demand periods, and developing products that have different seasonal peak demands in order to level production resource requirements.

The timing of demand is important for the efficient use of resources and production capacity. In terms of services, schedules of available capacity should ideally be matched to demand for services. When demand exceeds capacity, the lead-time to access a service lengthens until customers complain.

Long-range quantitative forecasting

For long-range forecasts (involving timeframes of more than one year), it is not sufficient to simply observe patterns of behaviour and analyse their likely causes. In this case, statistical techniques are necessary to quantify probable future demand. Three methods are commonly used to conduct long-range forecasts – simple linear regression analysis, multiple regression analysis and the coefficient of correlation. Linear regression analysis enables estimation of statistical relationships between variables. It is a causal method that relates a dependant variable to one or more independent variables by linear equation. The independent variables might be the external or internal variables that are assumed to affect demand. Multiple regression analysis is a more powerful extension of linear regression and reflects the relationship between a dependant variable and two or more independent variables. The coefficient of correlation is the statistical means of quantifying the relative importance of the relationship between two variables.

Short-range quantitative forecasting

Operations managers also need to make short-term forecasts, such as the number of workers to schedule next week, or the amount of inventory to order for next month. These are affected not so much by trend patterns and cycles as by random or short-term factors. Different methods of forecasting are therefore required. Common methods in this regard include the simple moving average and weighted-moving average methods, the exponential smoothing method and the adjusted exponential smoothing. The simple moving average method involves finding an average of the data from a few recent periods, and using the average as your forecast for the next period. The exponential smoothing method involves taking the forecast from the previous period and finding how much it varies from reality, and then multiplying this error by a ‘smoothing constant’. The result is then added to the actual amount for the previous period to create the forecast.

Qualitative forecasting methods

However, if historical data is not available or current trends are likely to change, qualitative forecasting based on judgment and opinion may be used. For example, if we need to forecast the length of time before a current technology becomes obsolete, we may base such a forecast on the opinions and expertise of people who are knowledgeable about changing technology. Such techniques include market research, surveys, opinions and the Dephi method. Qualitative forecasting methods may also be used in combination with quantitative methods to adjust quantitative forecasts when their record of accomplishment is poor, when the decision maker has important contextual knowledge or to compensate for specific events.

Selecting a forecasting method

It is important to select the forecasting method carefully, and to control the method you choose. Failure to do so can produce ineffective forecasting systems, Gaither and Frazier (2002: 92–95) suggest the following factors are imperative in the selection of a forecasting method:

· Cost and accuracy—a trade-off is sometimes necessary between these two factors.

· Data available—this will determine which type of qualitative or quantitative forecasting method should be used.

· Time span—long-range forecasts have different factors to short-range forecasts.

· Nature of products and services—different forecasting methods are appropriate for different products and services.

· Impulse response and noise dampening—the performance of the selected model must be continuously tracked because forecasting models differ in their impulse response and noise dampening capabilities.

For deciding when to use quantitative methods and when to use qualitative methods, the following guidelines are helpful:

· Short-term forecasts – Quantitative time series methods are commonly used in the short-term as it is inexpensive to generate large numbers of forecasts, and good quality results (minimal errors) can be obtained. Causal models are not used as extensively for short-term forecasts. Whilst they are more accurate than simple time series forecasts, they take more time to develop, they are less likely to be understood and used, and they require more training. Qualitative judgment methods are rarely used. They are too costly to apply to thousands of routine short-term forecasts.

· Medium-term forecasts – Quantitative time series methods should not be used for medium-term forecasts, as it is unlikely that existing patterns will continue very far into the future. Causal models are most often used in the medium-term, as they are better at identifying turning points in trends. Qualitative judgment methods can also identify turning points and can be used when historical data are not available.

· Long-term forecasts – For long-term forecasts, aggregate demand for a product family expressed in homogeneous units, such as dollars of sales or tonnes of steel is more appropriate than forecasts for individual products or services. Causal models (adjusted for judgment) and judgment methods are preferred for long-term forecasting.

Essential Resources:

Min, H. & Wen-Bin, V.Y. (2008).

Collaborative Planning, Forecasting and Replenishment: Demand Planning in Supply Chain Management.

International Journal of Information Technology and Management, 7(1), 4-20.

This article looks at forecasting from a whole of supply chain perspective.

Acar, Y. & Gardner, E.S. (2012).

Forecasting method selection in a global supply chain.

International Journal of Forecasting, 28, 842-848.

This article examines appropriate forecasting methods from a global supply chain perspective.

Weatherford, L.R. & Kimes, S.E. (2003).

A comparison of forecasting methods for hotel revenue management.

International Journal of Forecasting, 19, 401-405.

This article compares a number of forecasting methods in the hotel industry.

Rai. B. (2016). Introduction to forecasting –With Examples. YouTube. Retrieved from

This quite substantial video will provide you with a thorough understanding of forecasting including types of forecasting techniques and forecasting accuracy.

Capacity Planning

Introduction:

Capacity planning is a crucial element of operations strategy because it has major cost and operational implications. However, capacity decisions are made when there is uncertainty about future demand. Capacity decisions depend on the growth (or decline) of demand for products and services, characterised by the product life cycle.

Capacity decisions are aimed at using an organisation’s resources to maximise long-term profit while meeting cash-flow requirements. The cost of potential excess capacity must be balanced against the cost of potential lost sales due to too little capacity. Excess capacity costs money, especially for capital-intensive organisations such as paper mills, utilities and steel mills. However, too little capacity can result in the inability to meet customer demand, particularly in service industries. Tight capacity does allow for higher equipment utilisation and a better return on investment.

Gaither and Frazier (2002: 165) have identified four activities that are relevant to capacity-planning decisions:

· Estimating the capacities of the present facilities

· Forecasting the long-range future capacity needs for all products and services

· Identifying and analysing sources of capacity to meet future capacity needs

· Selecting from the alternative sources of capacity.

These activities and the important issues attached to them will be discussed in the remainder of this module.

Production capacity

Gaither and Frazier (2002: 165) define production capacity as ‘the maximum production rate of an organisation’. However, organisations rarely operate at maximum rates of production, even when there are strong reasons for doing so. Capacity is measured in different ways, depending on the nature of the goods or services and other operational factors. Two useful concepts are:

· Theoretical capacity—the maximum output capability possible, allowing no adjustments for preventive maintenance, unplanned downtime, shutdowns and so on; and

· Demonstrated capacity—the proven capacity calculated from actual output performance data. Demonstrated capacity is generally less than theoretical capacity when production losses due to machine breakdowns, rework, sick time and so on are taken into account.

Some measures of capacity

Capacity can be expressed in terms of outputs or inputs. It is important to note that no single capacity measure is universally applicable. Commonly used methods include:

· Output measures—these are the usual choice for line flow processes and are best when there is a low amount of customisation. Product mix becomes an issue when the output is not uniform in work content.

· Input measures—these are used for flexible flow processes, i.e. when there is a high amount of customisation. In this situation, output is not a measure of the amount of work each unit demands, so a measure of total units produced is meaningless.

· Average utilisation rate – a measure of the average output rate against maximum capacity.

· Peak capacity—when we call for peak capacity we are really calling for extraordinary effort under ideal conditions, which are not sustainable. When capacity is measured relative to equipment alone, the appropriate measure is the nameplate-rated capacity, engineering design.

· Effective capacity—this is the capacity that can be economically sustainable under normal conditions. The effective capacities of multiple operations within the same facility are different.

· Bottlenecks—A bottleneck is ‘… an operation that has the lowest effective capacity of any operation in the process and thus limits the system’s output’ (Krajewski & Ritzman, 2002: 328). Expansion of a facility’s capacity occurs only when bottleneck capacity is increased. Flexible flow processes may have floating bottlenecks due to widely varying workloads on different operations at different times.

Capacity planning strategy

Creating effective capacity-planning strategies involves the following:

· Assessing existing capacity

· Forecasting future capacity requirements

· Choosing between alternative ways to build capacity

· Evaluating the financial options

In developing a long-range capacity plan, an organisation must make a basic economic trade-off between the cost of capacity and the opportunity cost of not having adequate capacity. Capacity cost includes both the initial investment in facilities and the annual cost of operating and maintaining those facilities. The cost of not having sufficient capacity is the opportunity cost incurred from lost sales and reduced market share. Capacity strategy is therefore concerned with how much ‘capacity cushion’ is best for various processes. Conditions leading to large capacity cushions include:

· where the demand is variable or uncertain, or where product mix changes

· where finished goods inventory cannot be stored

· where customer service is important

· where capacity comes in large increments

· where supply of material or human resources is uncertain.

The concept of economies of scale is central to capacity planning. According to this concept, for any given production facility there will be a level of outputs that result in the least average unit cost. This level of output is called the facility’s ‘best operating level’. As the best operating level is approached for a particular facility, economies of scale are achieved. Arguments based on economies of scale are often used to justify large facilities. When economies of scale occur:

· Purchased materials may be cheaper—higher volumes give the purchaser more bargaining power and the opportunity for quantity discounts.

There are disadvantages, however, to large facilities, or diseconomies of scale. A larger workforce requires more supervisors and managers, leading to a higher bureaucracy. Large facilities can also lead to the following diseconomies:

· Excessive size can bring complexity, loss of focus and inefficiencies, which raise the average unit cost.

· Large facilities are characterised by loss of agility, less innovation, risk avoidance and excessive analysis and planning at the expense of action.

Economies of scope result when the value chains of two separate products or services share activities, such as the same distribution channels or the same manufacturing facilities. For example, if a particular product is not being produced at a high enough level to reach economies of scale in distribution, another product could be made to share the same distribution channel. Gaither & Frazier (p. 173) define economies of scope as: ‘ … the ability to produce many product models in one highly flexible production facility more cheaply than in separate production facilities.’

Capacity planning decisions

Capacity cushions, resource flexibility, surplus inventory and longer lead times all serve as buffers against uncertainty. In turn, an organisation’s competitive priorities will demand certain capacity decisions be made; and a change in one area may affect decisions in the other areas. For example:

· Where a competitive priority is fast delivery, this requires large capacity cushions.

· Where quality management is a priority, uncertainty will be reduced and capacity may be affected.

· Where schedules are predictable, uncertainty will again be reduced and a smaller cushion may be allowed.

· Where capital expenditure is high, there will be pressure for high utilisation, and a lower capacity cushion.

· Where a capacity decision is made to build another facility, a suitable location will need to be found.

The following four-step procedure can help managers make capacity planning decisions:

· Step 1. Estimate capacity requirements—Begin with a long-range forecast of demand, productivity, competition and technological change (remembering that long-range forecast errors will be large), then convert demand into comparable units of capacity.

· Step 2. Identify gaps—A ‘gap’ is the difference between projected demand and current capacity. It will be important to use the correct capacity measure, which is determined by what is critical to the bottleneck operation. Capacity can be expanded only if the bottleneck is one of the expanded operations. Otherwise, expansion just increases idle time. Multiple operations and inputs add complexity because floating bottlenecks could change the dimensions of the capacity measure.

· Step 3. Develop options—The base case is to do nothing. Beyond that, options include varying the timing and size of capacity additions/closings. You could consider an expansionist strategy, a ‘wait-and-see’ strategy, or try expanding at a different location. You could also consider short-term options, e.g. overtime, temporary workers or subcontracting.

· Step 4. Evaluate the options—Qualitative judgments include how each option fits with overall capacity planning strategy, and how it can affect uncertainties in demand, competitive reaction, technological change and cost. Possible quantitative judgment aids include net present value of after-tax cash flows, computer simulation, waiting line analysis and linear programming.

Decision tree analysis techniques can assist decision makers in selecting from several capacity alternatives with uncertain future outcomes. They are valuable for capacity planning decisions when demand is uncertain and when sequential decisions are involved.

Essential Resources:

Ashayeri, J. & Selen, W. (2018).

An application of a unified capacity planning system.

International Journal of operations & Production Management, 25(9), 917–937.

This article examines a unified approach for effective capacity management and finds that this approach not only reduced the number of capacity problems but also enhanced organisational capabilities.

Klassen, K.J & Rohleder, T.R. (2002).

Demand and capacity management decisions in services: how they impact on one another.

International Journal of Operations and Production Management, 22(5/6), 527 –549.

This article’s findings are based on modelling the impact of automation, customer participation, cross-training employees, informing customers about the operation and other factors, showing that demand and capacity decisions do indeed impact on each other, sometimes in ways that are not initially obvious

Poles, R. (2013). System Dynamics modelling of a production and inventory system for remanufacturing to evaluate system improvement strategies.

International Journal of Production Economics

, 144(1), 189 –199.

This article uses a systems dynamics approach to suggest improvements in a reverse supply situation. At the end of the useful life of products, a reverse supply process is activated by some organisations in which unwanted materials and products are recovered from end users to recapture some of their value.

VanBerkel, P.T. & Blake, J.T. (2007).

A comprehensive simulation for wait time reduction and capacity planning applied in general surgery.

Health care Management Science, 10(4), 373–385.

This paper describes the use of operational research techniques to analyse the wait list for a hospital general surgery unit.

Module 6

Materials and Inventory Management

Introduction:

Supply chain management (SCM) is equivalent to inter-company operations management in that it involves cooperation and close coordination of various operations of suppliers and the receiving organisation. A prime objective is a speedy flow of materials along the supply chain, and to this end, ‘just-in-time’ principles have been widely adopted.

Supply chain management is a logical next step after first forecasting demand and planning capacity, and then making facility location and layout decisions. The ability to plan capacity strategically is central to the long-term efficiency and effectiveness of the supply chain. The cost of excess capacity must be balanced against the cost of potential lost sales due to having too little capacity. Likewise, location and layout decisions will affect logistical efficiency that is achievable in the supply chain. A key objective of supply chain management is to align an organisation’s functions with those of its suppliers in order to match the flow of materials, services and information with customer demand. All members of an organisation’s supply chain have a mutual interest in identifying what competitive factors (e.g. cost, flexibility, speed of delivery) customers value, and then in maximising the performance of the supply chain as a whole so as to deliver maximum value.

A large component of supply chain management is the efficient management of materials. This involves planning, coordinating and controlling the acquisition, storage, handling and movement of raw materials that are needed for the production process. There are three components to materials management:

· The management of raw materials and purchased parts (including purchasing, receiving, storage and retrieval of these materials);

· The management of finished goods (including packaging and shipping, storage and retrieval in warehouses, and distribution to the customer); and

· The management of materials during the conversion process (i.e. handling and storage of work-in-process inventories).

We will discuss methods of planning and scheduling future production levels over a time horizon of several months to one year. These methods will be applied to large manufacturing organisations, but they are also useful for both smaller organisations and service organisations.

For large manufacturing organisations in particular, there are several tasks contained within planning activities. First, working from long-range capacity plans involving facility locations, layouts and capacities, aggregate plans are drawn up to estimate and allocate resources over the medium-term to accomplish specific tasks. Then, production schedules are drawn up to meet the forecasted levels of demand. The workload that the specified levels of production will entail at various workstations is calculated, and action is taken as required to either augment (or reduce) resources at workstations, or to revise the schedule. Finally, the progress of jobs is monitored using planning and control systems to ensure that the planned schedule is in fact being achieved.

Some decades ago, the Japanese recognised that all stocks and work-in-progress represented waste, i.e. non-productive resources and introduced a manufacturing system whereby organisations aim to produce all parts in the right quantity and quality, just in time to meet usage requirements at the next stage of the production–distribution chain. This principle of manufacturing efficiency (fast throughput of materials) underpinning assembly line and repetitive batch production techniques has spread worldwide. The Just in Time (JIT) philosophy is concerned with recognising and tackling the real inefficiencies in the system, not ‘optimising’ the status quo. In repetitive, batch production environments in the past, there has been an emphasis (perhaps even an over-emphasis) on maintaining enough work-in-progress (WIP) to prevent operators and machines from falling idle. Cost accounting practices have stressed the need for high utilisation of the available direct labour hours and high (productive) utilisation of capital equipment. The overall effect of this thinking has been that items have been spending most of their manufacturing time in queues, or in stores, and the general workflow has been intermittent and lumpy.

The logical starting point for discussing supply chain management is the sourcing of raw materials and purchased parts. Critical issues to consider include whether it is better to buy-in or make items that are used in the supply chain; and whether a single supplier or multiple suppliers should be used. The purchasing, or procurement, function is responsible for acquiring raw materials, component parts, tools and other items required from outside suppliers. The purchasing function in any organisation acts as an interface between suppliers and the production function. Since materials are one of the largest sources of cash outlay in any manufacturing organisation, their acquisition requires careful management.

Essential Resources:

Cucchiella, F. & Gastaldi, M. (2006).

Risk management in supply chain: a real option approach.

Journal of Manufacturing Technology Management, 17(6), 700 –720.

Please read this article to gain a better understanding of individualising a framework for the management of risk.

Yasin, M.M., Wafa, M.A. & Small, M.H. (2001).

Just-in-time implementation in the public sector: An empirical examination.

International Journal of Operations and Production Management, 21(9), 1195 –1204.

This article explores the adoption of JIT in the US public sector and examines the relationships between modification efforts and any problems encountered.

Webster, M., Muhlemann, A.P. & Alder, C. (2000).

Decision support for the scheduling of subcontract manufacture.

International Journal of Operations & Production Management, 20(10), 1218 –1235.

This article presents work that addresses the issue of decision support for operational management and will help you understand the motivations and implications of decisions on the operational environment.

Leverage Points for System Intervention

Introduction:

We conclude this module, and this course, by considering how we can go about changing the structure of systems to produce more of what we want and less of that which is undesirable. The ‘trick’ is to look for leverage points – places in the system where small change could lead to a large shift in behaviour. In considering how to influence the behaviour of a system, Meadows (2008) has identified twelve leverage points ranging from ‘shallow’—places where interventions are relatively easy to implement yet bring about little change to the overall functioning of the system—to ‘deep’ leverage points that might be more difficult to alter but potentially result in transformational change:

12. Numbers – Constants and parameters (like subsidies, taxes, standards, minimum wage levels, investments, etc.) define the rate at which things happen in the system. Parameters are points of lowest leverage effects. Though they are the most clearly perceived among all leverages, they rarely change behaviours and therefore have little long-term effect. In operations management a parameter such as the production rate is easy to change but may not bring significant improvement as it is limited by the capacity of the plant. Another intervention might be to fir existing staff and hire new employees. This will not result in significant long-term improvement, however, if production technology is outdated.

11. Buffer Sizes – Another common leverage point is to stabilise a system by increasing the capacity of a buffer. A buffer’s ability to stabilise a system is important when the stock amount is much higher than the potential amount of inflows or outflows; ie: big buffers make the system more stable, small buffers make it more subject to change. A good example of a buffer is the money you keep in the bank – it helps you manage exceptional expenses. This has been a traditional business intervention, where in order to meet unexpected customer needs, businesses maintain inventory. However, building and maintaining inventory involves significant cost and storage.

10. Material Flows Structure – This represent the structure of the system itself, how material stocks move through the system itself. In order to improve product flow, for example, in modern manufacturing setups cellular layout is considered better than functional layouts. Real leverage in physical layout can occur during its design, where options can be properly evaluated in order to choose the optimal one. Once a structure is in place, it is hard to change and the leverage is in understanding its limitations and bottlenecks, using it with maximum efficiency and refraining from fluctuations or expansions that strain its capacity.

9. Delays – they determine how much time passes between the moment a change is made on the system and the moment when the effect of the change happens. Long delays make things challenging, so being able to shorten this time is beneficial. Changing delays can have a big impact but, similar to material flows structure, they are very hard to change. For example, if there are constant power shortages, then a new power plant needs to be constructed, which will take time. Delays in feedback loops are critical determinants of system behaviour. They are common causes of oscillations. If you are trying to adjust a stock level, for example, but receive only delayed information about what state the stock is in, you will either overshoot or undershoot your goal. In supply chain management this results in what is called the Bullwhip effect, where delays in communication of customer demands upstream can create havoc for all players in the supply chain and result in inventory build-up from distributor up to the manufacturer. The same is true if information is timely but your response isn’t.

8. Negative Feedback Loops – A negative feedback loop is a self-correcting logic composed of three elements: a goal a monitoring element and a response mechanism. It is a mechanism that tries to keep a specific measurement around a specific goal. For example a thermostat has a goal temperature and it turns heating on to keep that temperature. Societal feedback loops are often harder to discern. For example, a law that grants more protection for whistle blowers is something that makes the feedback loop that controls the neutrality of a democracy stronger.

7. Positive Feedback Loops – Positive feedback loops are similar to negative feedback loops, but instead of keeping a variable stable around a goal, they aim to reinforce it – the more it works, the more it gains power, driving system behaviour in one direction. For example giving bonuses for every sale is an incentive to sell more (even if we know that it damages the system as a whole more than the benefits of it), or the more you have in the bank the more interest you earn. Positive feedback loops are usually perceived as positive, but since they keep growing they can build up and damage the system in the long run if they aren’t controlled in some other way

6. Information Flows Structure – Information flow creates new positive or negative feedback loops. Missing information flows are among the most common causes of system malfunction. For example, if you place an energy counter in clear view then you and your family are more aware of how much is being consumed and the effect is, generally, that you will consume less. This creates a new negative feedback loop without changing any other parameter in the system. It is cheaper and easier to change information flows than it is to change structure.

5. Rules – The rules of a system define its scope, boundaries and degrees of freedom. Incentives, punishments and constraints are all system rules and are strong leverage points. If you want to understand the deepest malfunctions of a system pay attention to the rules and to those who have power over them. A classic example is the recent Royal Commission on banks where it was found that the way in which bank executives twisted bank policies and procedures encouraged erratic behaviour and greed and led to serious and significant financial bungling.

4. Self-organisation – Self-organisation describes a system’s ability to change itself by creating new structures, adding new negative and positive feedback loops, promoting new information flows, or making new rules. This generally results from technological advancements or social revolution. Structural transformation of the system is usually due to new elements appearing (eg. computerisation). Disruptive innovations are a significant trigger for this variable. These are innovative products and services that create a new market and value network and eventually disrupt an existing market and value network, displacing established market-leading firms, products, and alliances. Not all innovations are disruptive, even if they are revolutionary. For example, the first automobiles in the late 19th century were not a disruptive innovation, because early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles. The market for transportation essentially remained intact until the debut of the lower-priced Ford Model T in 1908. The mass-production of automobiles was a disruptive innovation, because it changed the transportation market.

3. Goals – Goals have the power to transform and define each and every leverage point above. If you’re creating a system, like an organization, it’s relatively easy to see the goals because usually there’s someone to set them, and if there isn’t, then the organization is likely to have a problem. Leaders, managers, heads of state, have the power to modify or set new goals.

2. Context Paradigms – A paradigm is an idea, a shared unstated assumption, or a system of thought that is the foundation of complex social and business structures. Paradigms are the sources of systems. From them, from shared social agreements about the nature of reality come system goals and information flows, feedbacks, stocks, flows, and everything else about systems. Paradigms are very hard to change and can generally only be done by pointing out anomalies and failures. Intervention at the paradigm level will totally transform a system.

1.Transcending Paradigms – This involves realising that no paradigm is ‘true’ – every one (including the one that shapes our own worldview) involves a limited understanding of the operation of world that is far beyond human comprehension. It is also involves understanding that to think in paradigms is itself a paradigm. Transcending paradigms may go beyond challenging fundamental assumptions, into the realm of changing the values and priorities that lead to the assumptions, and being able to choose among value sets at will.

Meadows’ leverage points can be aggregated into four broad types of system characteristics that interventions can target (from shallowest to deepest) – parameters, feedbacks, design and intent, as outlined below:

Source: Abson, D.J., Fischer, J., Leventon, J., Newig, J., Schomerus, T., Vilsmaier, U., von Wehrden, H., Abernethy, P., Ives, C.D., Jager, N.W. and Lang, D.J. (2017). Leverage points for sustainability transformation, Ambio, 46, pp.30 – 39 at page 32.

Essential Resources:

Hidbrand, S. & Bodhanya, S. (2015).

Guidance on applying the Viable system model.

Kybernetes. 44(2), 186 –201.

This article helps student understand the constituent elements and essential characteristics of a complex entity using Stafford Beer’s Viable System Model (VSM) and then explains how the model as a diagnostic tool to assess the organization’s viability as per VSM

Panagiotakopoulos, P. Espinosa, A, & Walker, J. (2016).

Sustainability management: insights from the viable System Model.

Journal of Cleaner production, 113, 792 –806.

This article explains the use of Viable System Model in managing sustainability in organization. The author explains the application of the model using a case study of operations of an organisation from the perspective of sustainability.

Pfifner, M. (2000).

Five experiences with the viable system model.

Kybernetes, 39(9/10), 1615 –1626.

This article documents five practical applications of the Viable System Model to see organization from no-reductionist and holistic perspective of systems thinking. This article also discusses the importance of information sharing in developing effective supply chains.

Azadeh, A., Darivandi, K. & Fathi, E. (2012).

Diagnosing, Simulating and Improving Business Process using Cybenetic Laws and the Viable System Model: The Case of a purchasing process.

Systems Research and Behavioural Science, 29, 66–86.

This article discusses the application of the Viable System Model in improving business process with some practical examples.

Bellinger, G. (2012). EaBT/Leverage Points. YouTube. Retrieved from

This video succinctly explains the systemic leverages where interventions create the changes sought to be achieved.

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Assessment 3 Guidelines

1. Introduction/Background

2. Main Discussion

2.1. Identification and analysis of those System Archetypes that may impede performance

2.2. Analysis of the current State VSM of the emergency department based on System Archetypes

2.3. Recommend new State VSM with desired reduction in patient turnaround time

2.4. Discussion on intended and unintended consequences of the modified system

3. Conclusion

4. Recommendations

5. References

6. Appendices (if any)

6.1. Appendix A

6.2. Appendix B

Welcome to

MGT603/MGMT6003

( 8/1/2020 )Module 5

( 8/1/2020 )Module 5 Will Help in Achieving:

Week 9

Welcome to

( 8/8/2020 )Module 5 Will Help in Achieving:

( 8/8/2020 )Learning Activity 5.2

( 8/8/2020 )Learning Activity 5.3

Week 10

( 8/15/2020 )Module 6 Will Help in Achieving:

( 8/15/2020 )Just in Time (JIT)

( 8/15/2020 )Learning Activity 6.2

Week 11

Introduction:

Leverage Points for System Intervention

Calculate the price of your order

1.
Introduction/Background

2.
Main Discussion

2.1.
Identification and analysis of those System Archetypes that may impede performance

2.2.
Analysis of the current State VSM of the emergency department based on System Archetypes

2.3.
Recommend new State VSM with desired reduction in patient turnaround time

2.4.
Discussion on intended and unintended consequences of the modified system

3.
Conclusion

4.
Recommendations

5.
References

6.
Appendices (if any)

6.1.
Appendix A

6.2.
Appendix B

(
8/1/2020
)Module 5

(
8/1/2020
)Module 5 Will Help in Achieving:

(
8/8/2020
)Module 5 Will Help in Achieving:

(
8/8/2020
)Learning Activity 5.2

(
8/8/2020
)Learning Activity 5.3

(
8/15/2020
)Module 6 Will Help in Achieving:

(
8/15/2020
)Just in Time (JIT)

(
8/15/2020
)Learning Activity 6.2