Public Enterprise Management Ch11. Production Management & MIS — JIT·SCM·PERT/CPM·TQM

Business Management Ch 11. Operations Management (OM) & Management Information Systems (MIS) Key Summary

1. Management Science and Forecasting Techniques

(1) Linear Programming

A mathematical model to find the optimal solution when objectives (profit maximization, cost minimization) and resource constraints are given (devised by Dantzig).

Decision-Making Techniques: MAXIMAX (maximizing the maximum / optimistic), MAXIMIN (maximizing the minimum / pessimistic), MINIMAX (minimizing the maximum regret), Laplace (equal probabilities), Hurwicz (compromise).

(2) Project Management Techniques (PERT / CPM)

A network technique for managing the schedules of large-scale projects. The Critical Path is core (the longest path = the minimum completion time of the project).

PERT: Uses the three-point estimation method (optimistic, pessimistic, most likely) when completion times are uncertain.
CPM: Used when completion times are certain. (Focuses on the trade-off between cost and time)

(3) Demand Forecasting Techniques

Technique Type	Description	Example
Qualitative Techniques	Relies on subjective judgment	Delphi method (expert consensus), executive judgment method, panel survey
Causal Techniques	Analyzes causal relationships between variables	Regression analysis, econometric models
Time-Series Techniques	Extension of past data patterns	Simple moving average (stable), weighted moving average (recent data weighted), exponential smoothing (recent errors reflected)

2. Understanding Production/Operations Management Systems

(1) Process Layout vs. Product Layout

구분	Process Layout	Product Layout
Characteristics	Equipment grouped by similar functions (hospitals, high-variety low-volume)	Equipment arranged in the sequence of product production (automobile lines, low-variety high-volume)
Advantages	Low equipment investment, high flexibility, robust against breakdowns	High output rate, low unit cost, low inventory/material handling costs
Disadvantages	High production cost per unit, inefficient transportation, complex control	Lack of flexibility, entire halt if one machine breaks, worker alienation

(2) Product-Process Matrix (Hayes & Wheelwright)

Job Shop: High-variety low-volume production, maximum flexibility (printing shop) — Process Layout
Batch: Moderate variety (heavy equipment, bakery)
Line Layout: Low-variety high-volume production (automobile assembly) — Product Layout
Continuous: Maximization of standardization (oil refining, chemicals, sugar refining)

3. Quality Management (TQM & Six Sigma)

(1) Total Quality Management (TQM)

While traditional organizations aimed at ‘profit maximization,’ TQM emphasizes ‘customer satisfaction,’ continuous improvement, and company-wide participation.

Deming’s PDCA Cycle: Plan → Do → Check → Act
Quality Costs:
- Control Costs: Prevention costs (preventing in advance) / Appraisal costs (inspection)
- Failure Costs: Internal failure (before delivery to customer) / External failure (returns and compensation after delivery to customer. Most critical)

(2) Six Sigma

A statistical quality management technique aiming for perfection, allowing only 3.4 defects per million (3.4 PPM).

DMAIC Process: Define → Measure → Analyze → Improve → Control
Organizational Structure: Champion → Master Black Belt → Black Belt (full-time) → Green Belt (in-process)

(3) Statistical Quality Control (Control Charts)

Variables Control Charts: X-bar chart (central tendency), R-chart (dispersion) — continuous data (length, weight)
Attributes Control Charts: p-chart (defect rate), c-chart (number of defects) — discrete data (pass/fail, count)

4. Inventory Management and Supply Chain Management (SCM)

(1) Economic Order Quantity (EOQ)

The order size per batch where the sum of inventory holding costs and ordering costs (setup costs) among inventory-related costs is minimized.

(2) JIT (Just in Time) / Toyota Production System / Lean System

“Produce what is needed, when it is needed, and in the amount needed.” Waste elimination is the core philosophy.

Characteristics: Zero inventory orientation, pull system (kanban method), small lot sizes, workload leveling (heijunka), cellular layout, poka-yoke (mistake-proofing).

(3) Supply Chain Management (SCM)

Integrated management of logistics, information, and funds across the entire chain from material suppliers to final customers.

Bullwhip Effect: A phenomenon where demand fluctuations are amplified as they move from downstream (customers) to upstream (suppliers). Causes: Lack of information sharing, long lead times, batch ordering, etc. Solutions: Shortening lead times, sharing information between partners (EDI, POS), direct shipping.

Postponement Strategy (Late Customization Strategy): Keeping products unfinished until the end, and performing final custom assembly at the point when customer requirements are finalized (e.g., Benetton dyeing).

5. Management Information Systems (MIS) Key Memorization Notes

Information Systems by Organizational Hierarchy
Management Hierarchy	System Name	Description
Top Management	EIS (Executive Information System)	Strategic planning establishment (unstructured decision-making)
Middle Management	DSS (Decision Support System)	Support for ad-hoc/non-routine decision-making, alternative simulation
Operational Management	IRS (Information Reporting System)	Regular reporting, routine control management (narrow sense of the core MIS)
Frontline Employees	TPS (Transaction Processing System)	Processing lowest-level structured transaction data (barcodes, check-in)

Enterprise-Linked Information Systems

ERP (Enterprise Resource Planning): Integration of company-wide business processes (integrated database for finance, HR, production).
CRM (Customer Relationship Management): Customer data collection and selective marketing to maximize lifetime customer value.
SCM (Supply Chain Management): Optimization of material and information procurement.
KMS (Knowledge Management System): Digitizing and sharing tacit/explicit knowledge within the company.