Production
The creation of goods and services
Operations Management (OM)
Activities that relate to the creation of goods and services through the transformation of inputs to outputs.
Management Process
The application of planning, organizing, staffing, leading, and controlling to achieve objectives
Services
Economic activities that typically produce an intangible product (such as education, entertainment, lodging, gov't, financial, & health services). Almost all services and almost all goods are a mixture of a service and a tangible product.
Service Sector
The segment of the economy that includes trade, financial, lodging, education, legal, medical, and other professional occupations. Services now constitute the largest economic sector in postindustrial societies. The huge productivity increases in agricult
Productivity
The ratio of outputs (goods and services) divided by one or more inputs (such as labor, capital, or management).
Single-factor Productivity
Indicates the ratio of one resource (input) to the goods and services produced (outputs).
Multifactor Productivity (total factor productivity)
Indicates the ratio of many or all resources (inputs) to the goods and services produced (outputs).
Productivity Variables
The three factors critical to productivity improvement are labor (10%), capital (38%), and management (52%).
Knowledge Society
A society in which much of the labor force has migrated from manual work to work based on knowledge.
Maquiladoras
Mexican factories located along the U.S. - Mexico border that receive preferential tariff treatment.
World Trade Organization (WTO)
An international organization that promotes world trade by lowering barriers to the free flow of goods across borders.
NAFTA
A free trade agreement between Canada, Mexico, and the U.S.
European Union (EU)
A European trade group that has 27 member states.
Mission
The purpose or rationale for an organization's existence.
Strategy
How an organization expects to achieve its missions and goals.
Competitive Advantage
The creation of a unique advantage over competitors.
Differentiation
Distinguishing the offerings of an organization in a way that the customers perceive as adding additional value.
Experience Differentiation
Engaging the customer with a product through imaginative use of the five sense, so the customer "experiences" the product
Low-cost leadership
Achieving maximum value, as perceived by the customer.
Response
A set of values related to rapid, flexible, and reliable performance.
Operations Decisions
The strategic decisions of OM are good and service design, quality, process and capacity design, location selection, layout design, human resources and job design, supply-chain management, inventory, scheduling, and maintenance.
Resources View
A view in which managers evaluate the resources at their disposal and manage or alter them to achieve competitive advantage
Value-chain Analysis
A way to identify the elements in the product/service chain that uniquely add value
Five forces Analysis
A way to analyze the five forces in the competitive environment. The potential competing forces in Porter's five-forces model are (1) immediate rivals, (2) potential entrants, (3) customers, (4) suppliers, (5) substitute products
Company Strategy - Introduction
Best period to increase market share, R&D engineering is critical. OM strategy: Product design and development critical, frequent product and process design changes, short production runs, high production costs, limited models, attention to quality.
Company Strategy - Growth
Practical to change price or quality image, strengthen niche. OM strategy: forecast critical, product and process reliability, competitive product improvements and option, increase capacity, shift toward product focus, enhance distribution.
Company Strategy - Maturity
Poor time to change image or price or quality, competitive costs become critical, defend market position. OM strategy: standardization, less rapid product changes (more minor changes), optimum capacity, increasing stability of process, long production run
Company Strategy - Decline
Cost control critical. OM Strategy: little product differentiation, cost minimization, overcapacity in the industry, prune line to eliminate items not returning good margin, reduce capacity.
SWOT Analysis
A method of determining internal strengths and weaknesses and external opportunities and threats.
Key Success Factors (KSF)
Activities or factors that are key to achieving competitive advantage.
Core Competencies
A set of skills, talents, and activities that a firm does particularly well
Activity Map
A graphical link of competitive advantages, KSFs, and supporting activities.
International Business
A firm that engages in cross-border transactions.
Multinational Corporation (MNC)
A firm that has extensive involvement in international business, owning or controlling facilities in more than one country.
Multidomestic Strategy
A strategy in which operating decisions are decentralized to each country to enhance local responsiveness
Global Strategy
A strategy in which operating decisions are centralized and headquarters coordinates the standardization and learning between facilities
Transnational Strategy
A strategy that combines the benefits of global-scale efficiencies with the benefits of local responsiveness. These firms transgress national boundaries.
Forecasting
The art and science of predicting future events
Economic Forecasts
Planing indicators that are valuable in helping organizations prepare medium to long-range forecasts
Technological Forecasts
Long term forecasts concerned with the rates of technological progress
Demand Forecasts
Projections of a company's sales for each time period in the planning horizon
Quantitative Forecasts
Forecasts that employ mathematical modeling to forecast demand
Jury of Executive Opinion
Takes the opinion of a small group of high level managers and results in a group estimate of demand
Delphi Method
Uses an interactive group process that allows experts to make forecasts
Sales Force Composite
Based on salespersons' estimates of expected sales
Consumer Market Survey
Solicits input from customers or potential customers regarding future purchasing plans
Time Series
Uses a series of past data points to make a forecast
Naive Approach
Assumes that demand in the next period is equal to demand in the most recent period
Moving Averages
Uses an average of the n most recent periods of data to forecast the next period
Moving Average
(Sigma) Demand in previous n periods/n
Weighted Moving Average
(Sigma)(weight for period n)(Demand in period n)/(sigma) Weights
Exponential smoothing
A weighted moving average forecasting technique in which data points are weighted by an exponential function
Smoothing Constant
The weighting factor, (alpha), used in an exponential smoothing forecast, a number between 0 and 1
Mean Absolute Deviation (MAD)
A measure of the overall forecast error for a model
Mean Squared Error (MSE)
The average of the squared differences between the forecast and observed values
Mean Absolute Percent Error (MAPE)
The average of the absolute differences between the forecast and actual values, expressed as a percentage of actual values
Trend Projection
A time-series forecasting method that fits a trend line to a series of historical data points and then projects the line into the future for forecasts
Seasonal Variations
Regular upward or downward movements in a time series that tie to recurring events
Cycles
Patterns in the data that occur every several years
Linear-regression analysis
A straight-line mathematical model to describe the functional relationships between independent and dependent variables
Standard Error of the Estimate
A measure of variability around the regression line
Coefficient of Correlation
A measure of the strength of the relationship between two variables
Coefficient of determination
A measure of the amount of variation in the dependent variable about its mean that is explained by the regression equation
Multiple Regression
An associative forecasting method with >1 independent variable
Tracking Signal
A measurement of how well the forecast is predicting actual values
Bias
A forecast that is consistently higher or lower than actual values of a time series
Adaptive Smoothing
An approach to exponential smoothing forecast in which the smoothing constant is automatically changed to keep errors to a minimum
Focus Forecasting
Forecasting that tries a variety of computer models and selects the best one for a particular application
Quality
The ability of a product or service to meet customer needs
Cost of Quality (COQ)
The cost of doing things wrong; that is, the price of non-conformance
ISO 9000
A set of quality standards developed by the International Organization for Standardization (ISO)
ISO 14000
A series of environmental management standards established by the ISO
Total Quality Management (TQM)
Management of an entire organization so that it excels in all aspects of products and services that are important to the customer
7 Concepts of TQM
(1) Continuous improvement
(2) Six Sigma
(3) Employee Empowerment
(4) Benchmarking
(5) JIT
(6) Taguchi Concepts
(7) Knowledge of TQM tools
PDCA
A continuous improvement model that involves four stages: plan, do, check, and act
Six Sigma
A program to save time, improve quality, and lower costs
Employee Empowerment
Enlarging employee jobs so that the added responsibility and authority is moved to the lowest level possible in the organization
Quality Circle
A group of employees meeting regularly with a facilitator to solve work-related problems in their work area
Benchmarking
Selecting a demonstrated standard of performance that represents the very best performance for a process or an activity
Quality Robust
Products that are consistently built to meet customer needs, in spite of adverse conditions in the production process
Quality Loss Function (QLF)
A mathematical function that identifies all costs connected with poor quality and shows how these costs increase as product quality moves from what the customer wants
Target-oriented quality
A philosophy of continuous improvement to bring the product exactly on target
Cause-and-effect Diagram
A schematic technique used to discover possible locations of quality problems (also called Ishikawa diagram/fish-bone)
Pareto Chart
A graphic that identifies the few critical items as opposed to many less important ones
Flowchart
A block diagram that graphically describes a process or system
Statistical Process Control (SPC)
A process used to monitor standards, make measurements, and take corrective action as a product or service is being produced
Control Chart
A graphic presentation of process data over time, with predetermined control limits
Inspection
A means of ensuring that an operation is producing at the quality level expected
Source Inspection
Controlling or monitoring at the point of production or purchase: at the source
Poka-yoke
Literally translated to "foolproof"; a device or technique that ensures the production of a good unit every time
Attribute Inspection
An inspection that classifies items as being either good or defective
Variable Inspection
Classification of inspected items as falling on a continuum scale, such as dimension, size, or strength
Service Recovery
Training and empowering frontline workers to solve a problem immediately
Core Competencies
A set of skills, talents, and activities that a firm does particularly well.