Public Enterprise Management Ch15. Production management — process design, inventory management, ...

1. Production System Types

Production Method Classification

Type	Content	Example
Project Production	One-time, large-scale	Ship and bridge construction
Job Shop	Small-batch diverse products, made-to-order	Custom manufacturing
Batch Production	Lot-unit	Printing, clothing
Line Production	Mass standardization	Automobiles, beverages
Continuous Production	24-hour flow	Oil refining, chemicals

Facility Layout

• Product Layout: Repeated production of identical products, high efficiency
• Process Layout: Concentration of equipment with similar functions, high flexibility
• Fixed Position Layout: Large-scale products, materials and labor move to the product

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2. Demand Forecasting

Qualitative Methods

• Delphi Method: Iterative collection of expert opinions
• Market Research: Consumer surveys
• Executive Judgment: Intuition of internal experts

Quantitative Methods

Method	Content
Moving Average Method	Forecast using the average of the recent $n$ periods
Exponential Smoothing	Emphasize recent data using weights ($\alpha$ adjustment)
Regression Analysis	Forecast demand ($y$) using independent variables ($x$)
Time Series Decomposition	Decompose into trend, seasonal, cyclical, and irregular components

MAD (Mean Absolute Deviation): Metric measuring the magnitude of forecast error = $\Sigma |\text{Actual} - \text{Forecast}| / n$

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3. Scheduling: PERT/CPM

PERT (Program Evaluation and Review Technique): High-uncertainty projects — calculate expected time using optimistic, most likely, and pessimistic estimates.

CPM (Critical Path Method): Deterministic time estimates — identify the longest path (critical path).

Critical Path: The path that determines the minimum time required to complete a project. → Delay of an activity on the critical path = Delay of the entire project.

Slack: Late start − Early start. Slack of the critical path = 0.

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4. Inventory Management

Inventory Types

• Raw materials inventory / Work-in-Process (WIP) inventory / Finished goods inventory
• Safety Stock: Buffer inventory against demand uncertainty

EOQ (Economic Order Quantity)

EOQ Formula: $\text{EOQ} = \sqrt{2DS/H}$

• $D$: Annual demand
• $S$: Ordering cost per order
• $H$: Annual holding cost per unit

Assumptions: Constant demand, immediate delivery upon order, no shortages allowed.

Reorder Point (ROP) = Daily demand × Lead time

JIT (Just-In-Time) / Lean Production

Produce and procure only the necessary quantity at the necessary time — minimize inventory.

Kanban: A card system that visually controls the flow of parts.

7 Wastes of Lean Production Overproduction / Waiting / Transportation / Overprocessing / Inventory / Motion / Defects

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5. Quality Management

TQM (Total Quality Management)

A management philosophy where the entire organization participates in continuous improvement.

Core Principles of TQM: Customer focus / Continuous improvement / Total employee involvement / Process focus

PDCA Cycle (Deming Cycle)

Plan $\rightarrow$ Do $\rightarrow$ Check $\rightarrow$ Act $\rightarrow$ Repeat

Six Sigma

A quality innovation methodology aiming to reduce the defect rate to 3.4 or fewer per million opportunities.

DMAIC: Define $\rightarrow$ Measure $\rightarrow$ Analyze $\rightarrow$ Improve $\rightarrow$ Control

ISO 9000 Series

International quality management system standards. ISO 9001: Quality management system certification criteria.

Cost of Quality (PAF Model)

Cost Type	Content
Prevention Costs	Defect prevention activities (training, design reviews)
Appraisal Costs	Inspection, testing, auditing
Internal Failure Costs	Defects found before shipment (rework, scrapping)
External Failure Costs	Defects found after shipment (returns, warranty service, liability)

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6. Supply Chain Management (SCM)

Integrated management of the flow of goods, information, and funds from raw material procurement to the final customer.

Bullwhip Effect: A phenomenon where consumer demand variability is amplified as it moves upstream in the supply chain. → Solutions: Information sharing, shortening order cycles, VMI (Vendor-Managed Inventory).

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Core Summary (Frequently Tested Keywords)

Keyword	Related Theory
PERT/CPM	Project schedule management
EOQ Formula	Economic order quantity $\sqrt{2DS/H}$
JIT/Kanban	Lean production, inventory minimization
PDCA	Deming cycle
DMAIC	Six Sigma improvement methodology
Bullwhip Effect	SCM demand distortion
PAF Model	Four types of quality costs