170 Financial Management Information Systems & PackagesBefore embarking on this process, work with the staff todevelop the best guesses possible about future market con-ditions, market s
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by the motives The idea is to determine which method bestproduces the results The following are required:
❍ Cost of the asset
❍ Estimation of the asset’s postuseful life salvage value
❍ IRS guidelines on the asset’s useful life (found in IRSpublication number 534)
❍ IRS guidelines on MACRS
The spreadsheet is used to compute projections for tain elements of the income statement and income taxreturn Based on these projections, the appropriate depreci-ation method can be determined The projections shouldinclude:
cer-❍ Depreciation expense
❍ Income before taxes
❍ Income tax
❍ Net income
PLANNING AND FORECASTING
Once you enter the realm of the future for the businessthrough forecasting and planning, the power of a spread-sheet or integrated program can really pay off Performingrepeated what-if calculations is the essence of forecasting—and the electronic worksheet’s specialty Possible planningand forecasting questions include:
❍ What will the projected profit and cash flows be,based on current operational plans?
❍ If the financial manager proceeds with present plans,how will it affect the company’s current and fixedassets?
❍ What levels of expenditures are needed to increasecurrent and fixed assets?
❍ What will be the additional cash requirements of thebusiness if present plans are followed?
❍ What is the break-even point?
❍ In what areas is the firm strong and how can suchstrengths be maximized?
❍ Where is the company weak and what can be done toimprove?
❍ What are what-if scenarios and their impact on profit,break-even point, cash flow, assets required, return
on assets, funding required, working capital, etc.?
In performing ratio analysis, you scrutinize historicaldata to gain insight on things that have already occurred Inforecasting and planning, however, you are creating a pic-ture of future events if present plans are followed; you pre-dict how future financial statements will appear
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Before embarking on this process, work with the staff todevelop the best guesses possible about future market con-ditions, market share, net sales, and so forth These predic-tions are combined with present conditions to create amodel on the spreadsheet for future company performance.The methods are rather straightforward and easy to master.For example, one part of the spreadsheet would multiplycurrent net sales by the estimated percentage of marketsales increase (or decrease) to arrive at next year’s projectednet sales Running the program again at this point wouldyield projected net sales for year 2 of the forecast (or per-haps the formula could be set up to automatically provideprojected net sales in year 5 immediately, etc.); changes inthe firm’s market share would also be programmed in ifthey were anticipated
SHORT-TERM DECISIONS
The short-term decisions that businesses make are usuallymore or less involved with working capital The types ofissues addressed include:
❍ What is a safe minimum cash balance for the firm?
❍ How much does the cash flow fluctuate seasonally?
❍ When do these seasonal fluctuations occur?
❍ What are the temporary seasonal working capitalborrowing requirements versus borrowing for morepermanent items?
❍ How much should your company borrow to increaseinventory?
❍ When is the best time for this borrowing to occur?
❍ When is the best time to pay it back?
❍ What is the cost of capital?
❍ What would be the effect on revenues and profit of achange in the firm’s credit terms?
❍ What is the amount lost if the company does not availitself of all discounts offered by suppliers for expedi-tious payment?
The following financial ratios are useful in determiningthe status of the firm and in rating the financial manager’sworking capital decisions:
❍ Current ratio
❍ Quick ratio
❍ Net working capital
❍ Accounts receivable turnover
❍ Inventory turnover
❍ Sales to working capital
❍ Sales to fixed assets
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The computations of these ratios are easily set up andperformed on a spreadsheet program A spreadsheet canalso be used to generate a cash budget for determining therequirements, timing, and character of cash sought; and foranalyzing the effects of credit terms as a component of themarketing mix through analysis of the following factors:
❍ Present sales
❍ Change in sales attributable to changes in credit terms
❍ Gross margin
❍ Potential effect on bad debts
❍ Credit terms on increase in sales
❍ Cost of short-term borrowing
Spreadsheets are also ideal for calculating interestreceived or extended in any of various credit situations,such as past due accounts receivable and missed discounts
LONG-TERM ASSET DECISIONS
Long-term asset decisions by their very nature are tered less frequently than the types of working capital deci-sions previously discussed Issues include:
encoun-❍ Does this particular fixed-asset purchase decisionmake sense and seem appropriate?
❍ Which of several proposals seem the most geous?
advanta-❍ Should the firm buy this item at all, or would it bebetter to make it?
❍ Based on several proposals, which should be the ority purchase if funds are limited?
pri-Spreadsheet programs can be very helpful in answeringthese types of questions One of their most useful abilities
in this particular area is that of calculating present values(or the time value of money) They all have the net presentvalue (NPV) function built in for convenience and effi-ciency By calculating the NPV of two or more long-termfixed-asset options, the more advantageous option becomesevident: the highest NPV is the most profitable Thus, use of
a spreadsheet program for calculating NPV can make asset decision making a more straightforward and less diffi-cult process
fixed-LONG-TERM FINANCING DECISIONS
The third major financial decision type is that of long-termfinancing The types of issues addressed include:
❍ The lease or buy decision
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❍ Debt versus equity as a means of raising capital
❍ Safe debt limitations and sources of financingThe lease-or-buy decision can involve production equip-ment, motor vehicles, buildings, office equipment, comput-ers, and tools
A spreadsheet can be used to determine the net cash flow associated with leasing versus buying a given item.This can help in making the best decision, since the lowerpresent value of net cash outflow of the two given options isthe cheaper one When deciding on the use of debt versusequity financing, the financial manager can set up formulas
out-in the spreadsheet to show the effects of each option on thefollowing:
POPULAR BUDGETING AND PLANNING SOFTWARE
In recent years, the focus has been on moving away fromspreadsheets to enterprise budgeting applications in order
to make the planning and budgeting process more efficientand the data more reliable However the underlying pro-cess remains fundamentally unchanged; it is still about cap-turing and consolidating line item expenses Some popularprograms are described briefly:
Adaytum Planning
Adaytum Planning by Adaytum Software (www.adaytum.com; 800-262-4445) is a multiuser budgeting, planning, andforecasting system It gives you the flexibility to:
❍ Update hierarchies directly from the general ledger(GL)
❍ Combine top-down planning with bottom-up geting
bud-❍ Make last-minute changes to model structure
❍ Empower end users to do ad hoc modeling withoutinformation system (IS) support
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Budget Maestro Version 5.8
Centage’s Budget Maestro (www.centage.com) is probablythe best answer to distributed budgeting, strategic plan-ning, and financial control Budget Maestro shortens yourbudgeting cycle and puts you in control of the process Itsinformation-driven environment guides you through bud-geting, planning, modeling, forecasting, resource manage-ment, consolidation, analysis, and reporting CFOs andbudget managers can plan, analyze, and manage in waysnever before possible Look at a user’s screen and makechanges directly without ever being there Deliver budgetmodels and deploy reconfigured software updates to manyusers at once Plus manage budgetary information, evenenterprise-wide information systems, with a single consis-tent interface
Budget Maestro is designed to put CFOs and financialmanagers in control of all aspects of managing budgets, cre-ating financial models, and building and deploying financialplans It allows business managers unparalleled flexibility inanalyzing cash flow and business performance throughoutthe enterprise Budget Maestro significantly shortens yourbudgeting and planning cycles It eliminates rekeying andformatting of data It increases your data accuracy andintegrity It allows time for managing and analyzing yourbusiness It is an excellent tool that provides you the ability
to perform:
❍ Budgeting
❍ Forecasting; rolling forecasts
❍ Planning
❍ What-if scenario building
❍ Payroll and benefits management
❍ Extensive drill-down reporting
❍ Income statement, balance sheet, and statement ofcash flows
As an alternative to spreadsheets, Budget Maestro mates many of the complex and repetitive tasks in the bud-geting process while eliminating the need for creatingcomplicated formulas and manual consolidation of multi-ple worksheets Budget Maestro offers three editions:
auto-1 Desktop Edition: A single user license that is ideal for
the CEO, CFO, or controller of small to midsize nizations that have a centralized budgeting and plan-ning process
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2 Small Business Edition: Supports up to three users
operating in a collaborative environment to generatebudgets, forecasts, and financial reports
3 Enterprise Edition: An enterprise-wide application for
use by finance executives and departmental/linemanagers to foster a more collaborative and partici-patory planning environment
Microsoft Business Solutions
for Analytics—Forecaster
This is a Web-based budgeting and planning solution fromFRx Software (www.frxsoftware.com/) Many organiza-tions find it difficult to perform the ongoing budgeting andplanning processes necessary to keep business performance
on target Financial surprises are met with panic, and moreoften than not, companies are forced to make sacrifices inplaces they cannot afford The result is a direct, negativeimpact on their strategic objectives But it is not for lack oftrying Finance departments simply do not have the time ittakes to combine multiple spreadsheets submitted fromacross the company (let alone the resources to make sure allline managers understand the importance of the budgetingand planning process, and of submitting well-plannedinformation on time!) Forecaster puts the systems and pro-cesses in place to help you immediately realize the benefits
of an effective budgeting and planning process, and tomake it an ongoing part of your business strategy
Host Budget Version 3.2
Host Budget (www.hostanalytics.com) is an integratedbudgeting and planning software program that providesstreamlined budgeting, forecasting, reporting, and analysis.Modules are used to automatically manage, consolidate,and change information for planning and replanning Thesebudgeting, forecasting, and planning modules include:
❍ Integration with Host’s Performance MeasurementScorecard
❍ Selling and General & Administrative (SG&A) get module
Bud-❍ Human Resources Budget module
❍ Sales and Operation Planning (S&OP) module
❍ Sales Forecasting module
❍ Capital Expenditure Budget module and othersHost Budget is architected for the Web so that the indi-viduals involved in budgeting and planning can use all ofthe features All that is needed by the user is a Web browser
to access and update the application Microsoft Excelspreadsheets can be used online or live to the database forqueries and updates Or if users prefer to work disconnectedc11.fm Page 174 Thursday, July 28, 2005 3:39 PM
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from the central database, they can work off-line and easilyupload the Excel file later or submit it via e-mail
Because of the streamlined effects of Host Budget on anorganization’s budgeting process, budgets and forecasts can
be refined on an ongoing basis Managers can consider whathas happened so far and can regularly look into the futureaided by actual versus budgeted information along withcurrent forecast projections in their effort to meet financialgoals Executive managers can create top-down budgetsand push down the budget to lower levels of the organiza-tion Line managers and department heads can create bud-gets from the bottom up and submit budgets for approval.Continuous rolling forecasts can easily be created withHost Forecaster, and bidirectional data integration allowsthe detailed budgets to be loaded to or from other applica-tions Based on best practices, Host Forecaster provides arich set of tools to facilitate sales forecasting using standardmethods including:
❍ Statistical forecasting
❍ Top-down forecasting allocated to the stock-keepingunit (SKU) level based on prior year history, currentestimate, average sales for last two years, and otherfactors
❍ Bottom-up forecasting for product introductions anddiscontinued products
❍ Ability to smooth forecasts to eliminate the impact ofinfrequent sales events
SRC Systems
SRC BUDGETING
Balancing flexibility and control, sophistication and ease ofuse, SRC Budgeting (www.srcsoftware.com) provides thetools you need to create and execute detailed budgets,transforming strategic goals into operational plans SRCBudgeting not only simplifies the budgeting process butalso streamlines the sharing of data with key managers Theresults are greater accuracy, enhanced accountability, andincreased ownership by business units—all while dramati-cally reducing the time required for the planning process.The benefits are:
❍ Increasing collaboration while streamlining the get process
bud-❍ Modeling budgets to fit your business
❍ Aligning budgets with strategic plans and forecasts
❍ Creating flexible and sophisticated budgets
SRC SALES PLANNING
With SRC Sales Planning, all deals can be tracked—not justthe hot ones—and sales managers can adjust focus, training,c11.fm Page 175 Thursday, July 28, 2005 3:39 PM
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and incentives to increase sales Greater visibility into howleads play out at various points in the sales pipelineimproves management decision-making ability Under-stand which leads are working and which ones are not.Understand which products and services are in demand,identify and investigate changes and fluctuations, and takeappropriate action—whether it means realigning the salesforce or adjusting production and distribution
The benefits are:
❍ Creating a robust sales forecast
❍ Making more accurate and timely planning decisions
❍ Aligning sales, supply chain, and operations
SRC FORECASTING
This system allows you to create timely, high-level, sionally independent rolling forecasts driven by the strate-gic plan and translated into operational targets SRCForecasting streamlines and speeds the forecasting cycle,leverages a sophisticated and customizable modeling pro-cess, and helps ensure organizational alignment The bene-fits are:
dimen-❍ Streamlining financial forecasting
❍ Customizing and modeling forecasts for accurateplanning
❍ Aligning forecasts with detailed budgets
ProPlans
ProPlans creates your financial plan automatically and rately—and slices months from your annual planning andreporting process You just enter your forecast data andassumptions into easy-to-follow, comprehensive data entryscreens, and ProPlans automatically creates the detailedfinancials you need to run your business for the next year—your income statement, balance sheet, cash flow statement,receipts and disbursements cash flow statements, and ratioreports (Template)
accu-Profit Planner
Profit Planner provides titles and amounts for revenues, cost
of sales, expenses, assets, liabilities, and equity in a use Lotus 1-2-3 template Financial tables are automaticallygenerated on screen It presents results in 13 different tableformats, including a pro forma earnings statement, balancesheet, and cash flow statements Profit Planner even com-pares your earnings statement, balance sheet, and ratiosagainst industry averages so that you’re not working in avacuum (Template)
ready-to-Up Your Cash Flow
The program generates cash flow and profit and loss casts; detailed sales by product/product line and payroll byc11.fm Page 176 Thursday, July 28, 2005 3:39 PM
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employee forecasts; monthly balance sheets; bar graphs;ratio and break-even analyses; and more (Stand-alone)
Cash Collector
Cash Collector assists you in reviewing and aging ables You always know who owes what; nothing fallsthrough the cracks What happens when collection action isrequired? Simply click through menu-driven screens toautomatically generate letters and other professionallywritten collection documents (all included) that are proven
receiv-to pull in the payments (Stand-alone)
Cash Flow Analysis
This software provides projections of cash inflow and cashoutflow You input data into eight categories: sales, cost ofsales, general and administrative expense, long-term debt,other cash receipts, inventory build-up/reduction, capitalexpenditures (acquisition of long-term assets such as storefurniture), and income tax The program allows changes inassumptions and scenarios and provides a complete array
of reports (Stand-alone)
CapPLANS
CapPLANS evaluates profitability based on net presetvalue (NPV), internal rate of return (IRR), and payoutperiod Choose among five depreciation methods, includ-ing the modified accelerated cost recovery system(MACRS) Run up to four sensitivity analyses Project prof-itability over a 15-year horizon In addition to a completereport of your analysis, CapPLANS generates a concisefour-page executive summary—great for expeditingapproval Add ready-made graphs to illustrate profitabilityclearly, at a glance (Template)
Project Evaluation Toolkit
This program calculates the dollar value of your projectbased on six valuation methods, including discounted cashflow and impact on the corporate balance sheet Assessintangibles such as impact on corporate strategy, investors,
or labor relations Use scenario planning to show the effects
of changing start dates, sales forecasts, and other criticalvariables (Template)
@Risk
How will a new competitor affect your market share? @Riskcalculates the likelihood of changes and events that affectyour bottom line First use @Risk’s familiar @functions todefine the risk in your worksheet Then let @Risk run thou-sands of what-if tests using one of two proven statisticalsampling techniques—Monte Carlo or Latin Hypercube.You get a clear, colorful graph that tells you the likelihood
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if your risk is acceptable or if you need to make a gency plan (Add-in)
contin-What’s Best!
If you have limited resources—for example, people, tory, materials, time, or cash—then What’s Best! can tell youhow to allocate these resources in order to maximize orminimize a given objective, such as profit or cost What’sBest! uses a proven method—linear programming (LP)— tohelp you achieve your goals This product can solve a vari-ety of business problems that cut across every industry atevery level of decision making (Stand-alone)
inven-Inventory Analyst
Inventory Analyst tells precisely how much inventory toorder and when to order it Choose from four carefullyexplained ordering methods: economic order quantity(EOQ), fixed-order quantity, fixed-month requirements,and level load by workdays Inventory Analyst ensures thatyou’ll always have enough stock to get you through yourordering period
Just load up to 48 months worth of inventory history,and Inventory Analyst makes the forecast based on one ofthree forecasting methods: time series, exponential smooth-ing, or moving averages It explains which method is bestfor you Inventory Analyst will adjust your forecast for sea-sonality (Template)
THE LATEST GENERATION OF BUDGETING AND PLANNING (B&P) SOFTWARE
The new budgeting and planning (B&P) software sents a giant step forward for accountants Finance manag-ers can use these robust, Web-enabled programs to scan awide range of data, radically speed up the planning pro-cess, and identify managers who have failed to submit bud-gets More often known as active financial planningsoftware, this software includes applications and the newlevel of functionality that combine budgeting, forecastinganalytics, business intelligence, and collaboration Exhibit11.10 lists popular B&P software
repre-Budget Express
Budget Express “understands” the structure of financialworksheets and concepts such as months, quarters, years,totals, and subtotals, speeding up budget and forecast prep-aration The program creates column headers for months,automatically totals columns and rows, and calculates quar-terly and yearly summaries And for sophisticated what-ifanalyses, just specify your goal and Budget Express dis-plays your current and target values as you make changes.(Add-in)
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MODELS OF THE MANUFACTURING INFORMATION SYSTEM
Manufacturing is a broad and complicated subject Withdifferent products manufactured, the processes and opera-tions may be totally different The mission of a manufactur-ing information system is to apply computer technology toimprove the process and the efficiency of a manufacturingsystem so that the quality of products is better and the costs
to manufacture them are lower In other words, a turing system takes material, equipment, data, manage-ment, and information systems technology as the input, anduses manufacturing and information processes to generatebetter final products as output (see Exhibit 12.1)
manufac-Manufacturing consists of many different disciplinaryareas, including product engineering, facility design andscheduling, fabrication, and quality control management.Each of them can be dramatically improved by using infor-mation systems
Product Engineering
Product engineering is the starting point of the ing process It is the step in which the design and technicalspecifications for the product are finalized Product design
manufactur-Exhibit 12.1 MANUFACTURING INFORMATION SYSTEM MODEL
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and engineering are becoming more computerized throughcomputer software packages such as computer-aided design(CAD) and computer-aided manufacturing (CAM) WithCAD, product designers use technologies to design a proto-type of the product, test this product, and modify thedesign on the computer before it goes into production.The initial design can be input to the CAD system in var-ious ways, including drawing sketches on a digital tablet, orusing a digital camera or a scanner to digitize photographs
or graphics into the system After the product is digitized,the design can be simulated and tested under real-worldconditions predefined by the designer As changes are sug-gested, the original design can be modified—similar to edit-ing a letter on a word processing package In addition,artificial intelligence (AI) has been used in CAD systems.Artificial intelligence agents can help human designers makechanges, formulate suggestions, or do tests based on differ-ent circumstances
After the product has been designed, another importantissue is how to produce the product efficiently and effec-tively The design of products for easy and cheap assembly
is critical, since assembly often accounts for over half of thetotal manufacturing costs For example, by reducing thenumber of components by 30%, a manufacturer can drasti-cally cut manual assembly times and manufacturing costs.Large corporations such as IBM, GM, Ford, HP, and GEhave sophisticated product designs that reflect how a prod-uct should be functioning as well as how it can be manufac-tured efficiently and economically
Facility Design and Scheduling
After the product is designed, the facility or equipment used
to produce the product should be arranged This decisionmay be as simple as changing several tools or as complex asredesigning the entire plant Some computer software pack-ages can arrange the plant layout based on the productioninformation of the designed product Many of the proposedlayout algorithms use an improvement approach, a construc-tion approach, or a simulation approach
usu-CONSTRUCTION APPROACH
This approach builds one or more layout solutions fromscratch with or without a user’s initial suggestions The bestone will then be selected
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SIMULATION APPROACH
Monte Carlo simulation has been used to solve facility out problems This approach simulates the real productionenvironment based on the assumptions provided by thedesigner This process requires a lot of computer resourcesand time to generate good results
lay-Fabrication
Fabrication or manufacturing is the process of making newproducts from raw materials There are two types of produc-tion methods: job-shop production and process production
JOB-SHOP PRODUCTION
Each work order is considered a job Raw materials required
to process the work order are routed to work centersaccording to the production steps required The job shop ismore flexible in terms of the products that can be produced.Therefore, a variety of products can be produced at thesame time Today, many computer software packages are able
to generate a job-shop schedule using mathematical gramming or artificial intelligence technologies
pro-PROCESS (FLOW-SHOP) PRODUCTION
One or a few products travel through a set of fabricationactivities specially arranged for the particular products Inthis approach, we have repetitive manufacturing (e.g., anautomobile assembly line) and process industries such asoil refineries in which no significant stoppage in the flow ofmaterials is evidenced, and flow rate becomes the criticaldecision The layout of the assembly line and the flow ratecan be determined by expert systems with the rule baseretrieved from many manufacturing experts
Quality Control Management
Quality control relates to activities that ensure the finalproduct is of satisfactory quality The quality control func-tion is concerned with detecting existing quality deficien-cies and preventing future product quality problems If thequantity produced is small and the final product is expen-sive, all products are inspected for quality control How-ever, if a large quantity of the units is produced and theyare inexpensive (such as pencils and diskettes), a statisticalsample will be used to determine if the quality of this lot ofproducts is acceptable Total quality management (TQM) is
a quality revolution taking place in recent years It consists
of these principles:
❍ Customer focused: All efforts should be based on
cus-tomers, including external customers and internalcustomers such as an accounting department withinthe company
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❍ Continuous improvement: TQM does not believe
qual-ity can be attained completely Qualqual-ity can always beimproved
❍ Everything TQM: TQM includes everything the
com-pany produces—a product, a service, or how a tomer service call is answered
cus-❍ Accurate measurement: TQM uses statistical techniques
to measure every critical variable available and pares against benchmarks to identify problems
com-❍ Empowerment of employee: TQM involves everyone in
the company to improve quality Teamwork is heavilyemphasized in the TQM process
TQM represents a counterpoint to the traditional agement theories that emphasize cost reduction more thananything else The American auto industry represents aclassic case of what can go wrong when attention is focused
man-on trying to keep the cost down to improve productivitywithout good quality management As a matter of fact, pro-ductivity goes down when defects, recalls, and expensiverepairs of defective products are factored in
MANUFACTURING INTELLIGENCE
Expert Systems in Manufacturing
Expert systems identify, analyze, and solve (including nations) manufacturing problems, and they help implementthe solutions Expert systems (see Exhibit 12.2) use a rulebase to generate decision suggestions Users can input factsand preconditions so that the rules will be triggered to pro-vide results Expert systems have been applied in manyaspects of manufacturing Much factory work has shifted toknowledge work such as planning, designing, and qualityassurance Previously, the emphasis was on labor worksuch as machining, assembling, and handling As a matter
expla-of fact, knowledge work accounts for about two-thirds expla-oftotal manufacturing costs
Inference Engine
Work Location
Trang 17An expert system is a computer system including puter hardware and software, which can perform reasoningusing a knowledge base Expert systems are made up of auser’s interface, a knowledge base, and an inference engine.The user’s interface has the function of providing end userswith proper interactive channels so that users can interactwith the system A knowledge base contains a set of rules orcases to provide an expert system with necessary informa-tion to conduct reasoning An inference engine (processingsystem) is the brain of an expert system It receives therequest from the user interface and conducts reasoning inthe knowledge base The inference engine asks for addi-tional information and makes assumptions Different rules
com-or cases can be triggered to conclude a solution After eral questioning/answering sessions, a conclusion or sug-gestion can be generated and provided to the end userthrough the user interface The inference engine may alsodetermine the degree to which a recommendation is quali-fied, or for multiple solutions, the ranking of those solutions
sev-Expert System Knowledge Bases
An expert system contains the subject knowledge of thehuman experts, called the knowledge base The knowledgebase consists of two types of knowledge representations:inductive knowledge (case based) and deductive knowl-edge (rule based) Expert systems are discussed in detail inChapter 15
Benefits and Limitations of Expert Systems
The technology of expert systems has been successfullyapplied in thousands of organizations worldwide to prob-lems ranging from cancer research to the analysis of com-puter configurations Some reasons that expert systemshave become so popular are discussed below:
❍ Improved quality: Expert systems (ESs) provide advice
or suggestions based on preprogrammed logisticsthat are consistent and accurate This reduces possi-ble mistakes caused by human errors
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❍ Obtaining of scarce expertise: The scarcity of experience
becomes evident in situations where there are notenough experts for a task, where the expert is about
to retire or leave the job, or where expertise is requiredover a broad geographic location
❍ Operation in hazardous environment: An ES, such as a
robot with AI, can reduce human interaction withhazardous materials
❍ Provision of training: An ES can be a very good
sub-A robot is a device that mimics human actions and appears
to function with some degree of intelligence Robots arecommonly used in manufacturing and in other situationswhere it would be unsafe or unhealthy for a human to per-form the same task
Neural Networks in Manufacturing
The human brain’s powerful thinking, reasoning, creating,remembering, and problem-solving capabilities have inspiredmany scientists to attempt computer modeling of its opera-tion Some researchers have sought to create a computermodel that matches the functionality of the brain in a veryfundamental manner; the result has been neural computing.The neuron is the fundamental cellular unit of the ner-vous system and the brain Each neuron functions as a sim-ple microprocessing unit that receives and combines signalsfrom many other neurons through input processes calleddendrites If the combined signal is strong enough, it acti-vates the firing of the neuron, which produces an outputsignal; the path of the output signal is along a component of
a cell called the axon This simple transfer of information ischemical in nature but has electrical side effects that we canmeasure The brain consists of hundreds of billions of neu-rons loosely interconnected The axon (output path) of aneuron splits up and connects to dendrites (input path) ofother neurons through a junction referred to as a synapse.The transmission across this junction is chemical in natureand the amount of signal transferred depends on the amountc12.fm Page 186 Tuesday, July 19, 2005 10:55 AM
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of chemical (neurotransmitters) released by the axon andreceived by the dendrites This synaptic efficiency is what ismodified when the brain learns The synapse, combinedwith the processing of information in the neuron, forms thebasic memory mechanism of the brain
In an artificial neural network, the unit analogous to thebiological neuron is referred to as a processing element Aprocessing element has many input paths and combines—usually by a simple summation—the values of these inputpaths The result is an internal activity level for the process-ing element The combined input is then modified by atransfer function, which can be a threshold function Thisthreshold function only passes information along if thecombined activity level reaches a certain point, or it can be acontinuous function of the combined input The outputpath of a processing element can be connected to inputpaths of other processing elements through connectionweights that correspond to the synaptic strength of neuralconnections Since each connection has a correspondingweight, the signals on the input lines to a processing ele-ment are modified by these weights prior to being summed.Thus, the summation function is a weighted summation
A neural network consists of many processing elementsjoined together in the manner just described Processing ele-ments are usually organized into groups called layers orslabs A typical network consists of a sequence of layers orslabs with full or random connections between successivelayers There are typically two layers with connections tothe outside world: an input buffer where data is presented
to the network and an output buffer that holds the response
of the network to a given input Layers distinct from theinput and output buffers are called hidden layers Applica-tions of neural networks are language processing (text andspeech), image processing, character recognition (handwrit-ing recognition and pattern recognition), and financial andeconomic modeling
PRODUCTION PLANNING
AND CONTROL
Production Planning
Planning encompasses defining the organization’s objectives
or goals and establishing an overall strategy for achievingthese goals Planning can be classified into several categories:
❍ Strategic versus operational: Plans that apply to the
entire organization to establish the organizationaloverall objectives are called strategic plans Plans thatspecify the detailed process of how the strategic plancan be achieved are called operational plans
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