Decision Making Tools - completed

Decision Making Tools - completed - DSC 335 Operations...

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1 DSC 335 DSC 335 Operations Management Instructor: Zhibin Yang Assistant Professor Decision Sciences Department
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2 DSC 335 Review q What’s Operations Management? q Process view q Supply chain view q Manufacturing vs. service processes q Operation strategy q Competitive priorities
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3 DSC 335 Announcements q Course packet will be available by tomorrow q Groups q Computer lab policy
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4 DSC 335 DSC 335 Roadmap Operations Strategy Process Management Process strategy/analysis Capacity analysis/planning Quality management Lean systems Supply Chain Mgmt. Supply chain dynamics Inventory management Case: Kristen’s Cookie Case: Blanchard Littlefield Game 1 Littlefield Game 2 Case: A Pain in Chain Beer game Decision Making Tools
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5 DSC 335 Decision Making Tools
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6 DSC 335 How do you make decisions?
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7 DSC 335 How do you make decisions? q Brainstorming q “pro” and “con” q Relying on expert opinions q Tossing a coin In operations management, we make decisions using analytical (mathematical) tools.
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8 DSC 335 Challenges in Decision Making q You are thinking of dating someone q You have to decide whom to date, or whether or not date that particular one q Is it an easy decision? q Your criterion may vary q Looking, charm, academic performance, etc. q Second, you are not sure the outcome q Will he/she like you as much as you like him/her?
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9 DSC 335 Challenges in Decision Making for OM q Multiple criteria for your decision q Examples: cost, quality, delivery speed, etc. q Uncertainty in your decision’s outcome q Examples: Economic condition, Weather condition, Price of raw materials in the spot market q Interdependency between sequential decisions q Making two or more decisions in a sequence q Your choice for a decision is contingent on your choice for preceding decisions
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10 DSC 335 Outline q Decision making under certainty q Single criterion: Break-even analysis q Multiple criterion: Preference matrix q Making a single decision under uncertainty q When the probabilities of the possible outcomes are unknown q When the probabilities of the possible outcomes are known q Making sequential decisions under uncertainty q Decision tree
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11 DSC 335 Break-even Analysis q Break-even analysis is used to evaluate a new production or service process q Note q There is a single criterion – the cost (or profit) q The outcome is (assumed to be) certain
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12 DSC 335 Two Costs of Installing a New Process q Fixed cost , F : the portion of cost that does not change in the volume of output q Fixed cost = 0, if you choose to do nothing (i.e. zero output) q Fixed cost = F>0, if you choose to produce of any output greater than zero. q Examples of fixed cost q Time and costs paid for installing and fine-tuning a production line q Costs paid for buying machines and hiring workers for operating the production line
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13 DSC 335 (cont’d) variable cost q Variable cost : the portion of cost that increases (linearly) in the volume of output q Let c be the cost for a unit of product or service
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Decision Making Tools - completed - DSC 335 Operations...

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