Question

I WANT YOU TO POST MOST COMMONLY USED QUESTİONS AND ITS SOLUTIONS WHİCH ARE FORECASTİNG, CAPACITY PLANNING AND DECISION THEORY. PLEASE DO IT:D

Answer 1

I presume via the examples you wish to learn about Forecasting ,Capacity planning and decision theory.

If you wish to learn in depth suggest to refer text book chapters on these topics from any OM book.

Let me provide you the insights:

What is Forecasting?

• Process of predicting a future event

• Underlying basis of all business decisions

– Production

– Inventory

– Personnel

– Facilities

Short-range forecast

– Up to 1 year, generally less than 3 months

– Purchasing, job scheduling, workforce levels, job assignments, production levels

Medium-range forecast

– 3 months to 3 years

– Sales and production planning, budgeting

Long-range forecast

– 3+ years horizon

– New product planning, facility location, research and development

Key features

• Medium/long range forecasts deal with more comprehensive issues and support management decisions regarding planning and products, plants and processes
• Short-term forecasting usually employs different methodologies than longer-term forecasting
• Short-term forecasts tend to be more accurate than longer-term forecasts

Types of forecasts are: Economic, technological and Demand.

Example – Shown is a 3-month moving average example forecast which is a quantitative time series model.

What is Capacity Planning?

Capacity is defined as the throughput, or the number of units a facility can hold, receive, store, or produce in a period of time.

• Design capacity is the maximum theoretical output of a system

– Normally expressed as a rate

• Effective capacity is the capacity a firm expects to achieve given current operating constraints

‒ Often lower than design capacity

• Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products

A firm does both short and long term capacity planning to be efficient.

Example

• Suppose a firm's addition of a third shift to its current two-shift plan doesn’t produce enough output, and subcontracting arrangements cannot be made, one feasible alternative is to add capital equipment and modify the layout of the plant (long-term actions).
• It may even be desirable to add additional plant space or to construct a new facility (long-term alternatives).

What is Decision theory

• This is basically empowering the management with structural decision making thought and mathematical concepts such that they can formulate rules that may lead to a most beneficial course of action for the organization.

Example

It is characterized by:

• List of alternatives
• Set of future conditions
• Payoff alternatives

1. Decision tress are also used to decide which route or path should be taken by the management. It is a schematic representation of the available alternatives and their outcomes.
2. Take an example of a Insurance company which wants to do away with old legacy policy administration system and migrate to new technology systems based on Cloud , AI , newer tech. Applications etc...this would needs in-depth analysis of organizational , technical and competitive / market factors and finally a decision can be made.

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