SPC
Statistical process control - A process used to monitor standards by taking measurements and corrective action as a product or service is being produced.
Acceptance sampling is __
used to determine acceptance or rejection of material evaluated by a sample.
control chart
A graphical presentation of process data over time which is used to separate both natural and assignable causes.
common v special causes of variation
Also known as natural and assignable causes, natural or common causes are those that cannot be controlled
A process is said to be operating in __
statistical control when the only source of variation if common (natural) causes.
continue on page 219
continue on page 219
What's the American Society for Quality's definition of quality?
The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs.
ISO 9000
A set of quality standards recognized internationally developed by the International Organization for Standardization (ISO).
ISO 14000
ISO 14000 is a series of environmental management standards that contain five core elements.
TQM
Total quality management - management of an entire organization so that it excels in all aspects of products and services that are important to the customer. The textbook uses seven concepts for an effective TQM program: (1) continuous improvement, (2) Si
PDCA
Walter Shewhart's model of plan-do-check-act that is used for continuous improvement.
Six Sigma
In a statistical sense, Six Sigma describes a process, product, or service with an extremely high capability (99.9997% accuracy). The other definition of Six Sigma refers to a program designed to reduce defects to help lower costs, save time, and improve
JIT is related to quality in three ways: __
JIT cuts the costs of quality; JIT improves quality; better quality means less inventory and a better, easier-to-employ JIT system
Taguchi Concepts
Genichi Taguchi has provided us with three concepts aimed at improving both products and process quality: quality robustness, quality loss function, and target-oriented quality.
What are the several tools of TQM?
Check sheets, scatter diagrams, cause-and-effect diagrams, pareto charts, flow charts, histograms, and statistical process controls.
Organizations Have 3 Basic Functions
Marketing
Operations
Finance
What is Operations?
The part of a business organization that is responsible for producing goods or services
Influences all of the rest of the organization
The actual doing part of the business process
What is Operations Management?
The management of systems or processes that create goods and/or provide services
Operations Management affects:
Companies' ability to compete
Why study OM?
Every aspect of business affects or is affected by operations
There is a significant amount of interaction and collaboration amongst the functional areas
The Operations Function
The creation of goods and services through the transformation of inputs into outputs
Feedback
measurements taken at various points in the transformation process
Control
The comparison of feedback against previously established standards to determine if corrective action is needed.
Value Added
value/price of output - cost of input
Processes (Managing to Meet Demand)
Operations & Supply Chains vs Sales and marketing
Supply ? Demand is wastefully costly
Supply < Demand causes Opportunity Loss/Customer Dissatisfaction
Supply = Demand is Ideal
Processes (Variation)
Variations can be disruptive to operations and processes.
They may result in additional costs, delays and shortages, poor quality, and inefficient work systems.
Manufacturing
goods-oriented (tangible things)
physical items that include raw materials, parts, subassemblies, and final products.
Automobile
Computer
Oven
Shampoo
Service
act-oriented
activities that provide some combination of time, location, form or psychological value.
Air travel
Education
Haircut
Legal counsel
Goods-service Continuum
Products are typically neither purely service- or purely goods-based.
Products Package
combinations of goods and services
Key Differences
Scope of Operations Management
The operations function includes many interrelated activities such as:
Forecasting (we won't cover, but important)
Capacity planning
Facilities and layout
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facil
Role of the Operations Manager
The Operations Function consists of all activities directly related to producing goods or providing services.
A primary role of the operations manager is to guide the system by decision making.
-System Design Decisions
-System Operation Decisions
System Design Decisions
-Capacity
-Facility location
-Facility layout
-Product and service planning
These are typically strategic decisions
-usually require long-term commitment of resources
-determine parameters of system operation
System Operation Decisions
These are generally tactical decisions
-Management of personnel
-Inventory management and control
-Scheduling
-Project management
-Quality assurance
Decision Making
Most operations decisions involve many alternatives that may have different impacts on costs or profits
Typical operations decisions include:
What: What resources are needed, and in what amounts?
When: When will each resource be needed? When should the wo
Modeling is a key tool used by decision makers
...
Model
an abstraction of reality; a simplified representation of something
Types of Models
Physical Models
-Look like their real-life counterparts
Schematic Models
-Graphs, Charts, Blueprints, Drawings, etc.
Mathematical Models
Common Features of Models
simplifications of real-life phenomena
Focus on the most important aspects of the real-life system & omit unimportant details
Benefits of Models
Models are generally easier to use and less expensive than dealing with the real system
Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem
Require users to organize and sometimes quantify information
Increa
Limitations of Models
Important variables may be missed
Quantitative information may be emphasized over qualitative
Models may be incorrectly applied and results misinterpreted
Nonqualified users may use the model incorrectly
Quantitative Methods
A decision making approach that seeks to obtain a mathematically optimal solution
-Linear programming
-Queuing techniques
-Inventory models
-Project models
-Forecasting techniques
-Statistical models
Historical Evolution of OM
Industrial Revolution
Scientific Management
Decision Models and Management Science
Influence of Japanese Manufacturers
Pre-Industrial Revolution
Craft production - highly skilled workers use simple, flexible tools to produce small quantities of customized goods
Industrial Revolution
The Industrial Revolution (late 18th century)
-Began in England in the 1770s
-Division of labor - Adam Smith, 1776
-Application of the steam engine, 1780s
-Cotton Gin and Interchangeable parts - Eli Whitney, 1792
Substituting machine power for human power
Scientific Management (Early 20th century)
Science of Management" based on observation, measurement, analysis and improvement of work methods, and economic incentives
Management is responsible for:
-planning, carefully selecting and training workers
-finding the best way to perform each job
Empha
Decision Models & Management Science (Mid 20th century)
OR applications in warfare - Operations Research (OR) Groups
Mathematical model for inventory management (F.W. Harris, 1915)
Statistical procedures for sampling and quality control (Dodge, Romig & Shewart , 1930s)
Statistical sampling theory (Tippett, 193
Influence of Japanese Manufacturers
Late 20th century
Refined and developed management practices that increased productivity
-Credited for the "quality revolution"
-continual improvement
-employee empowerment
-Lean Operations / Just-in-Time production
Key Issues for Operations Managers Today
Economic conditions
Innovating
Quality problems
Management technology
The Internet, e-commerce, e-business
Supply chain management
Risk management
Revenue management
Competing in a global economy
Globalization, Outsourcing
Environmental concerns
Ethical b
Customization
requires more resources and effort than more standardized products and services
Theory X
Workers do not like work and must be induced to do it
Theory Y
Workers enjoy work and are committed to doing it
Components of the Supply Chain
Forecasting, purchasing, inventory management, information management, quality assurance, scheduling, production, distribution, delivery, and customer service
Doesn't include marketing or finance because those are the two other functions of an organizatio
Ethics
a standard behavior that guides how we should act in various situations
Business Sustainability
refers to economic, environmental, and social sustainability
Division of Labor
allows employers to employ less-skilled workers than would have been needed in craft production
Which of the following are reasons organizations fail?
Not investing enough in necessary capital or human resources
Underestimating the importance of internal communication and cooperation between functional areas
Putting too much emphasis on short term financial performance
Not focusing enough on process des
Three separate, but related concepts that are vitally important to business organizations:
Competitiveness
Productivity
Strategy
Competitiveness
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
Organizations compete over:
-Price (Cost)
-Quality
-Response-time
-Variety (Flexibility)
Operations' Influence on Competitiveness
Quality Based Strategies
may be apart of another strategy
3 Basic Business Strategies
Low cost, responsiveness, differentiation
Planning and Decision Making
Start at the top with a mission (vision)
Order Qualifiers
Characteristics that customers perceive as minimum standards of acceptability for a product or service to be considered as a potential for purchase
Order Winners
Characteristics of an organization's goods or services that cause it to be perceived as better than the competition
Price, delivery reliability, delivery speed and quality
can be qualifiers or order winners
and may change over time.
Mission
The reason for an organization's existence that serves as the basis for organizational goals
Mission statement
-States the purpose of the organization
-Answer the question: "What business are we in?
Supply Chain Strategy
should align with overall business strategy
Example Strategies an Organization Might Choose From
Low Price
Specialization
-narrow product lines or limited services
Variety
-e.g., customization
Newness
-innovation to create new products or services
Service
-various aspects of service (e.g., helpful, reliable, etc.)
Sustainability
-environmentally frie
Goals
Provide detail and the scope of the mission
Goals can be viewed as organizational destinations
The basis for organizational strategies
Strategy
A plan for achieving organizational goals
Serves as a roadmap for reaching the organizational destinations
Strategy Formulation
1. Core Competencies
2. Environmental Scanning (SWOT)
3. Order Qualifiers & Order Winners
Core Competencies
The special attributes or abilities that give an
organization a competitive edge
To be effective core competencies and strategies need to be aligned
Environmental Scanning - SWOT
Environmental Scanning is necessary to identify:
Internal Factors (Strengths and Weaknesses)
External Factors (Opportunities and Threats)
Key Internal Factors
Human Resources
Skills of workforce, expertise, experience, loyalty to the organization
Facilities and equipment
Capacities, locations, age, maintenance costs
Financial resources
Cash flow, access to additional funding, debt, cost of capital
Customers
Loy
Key External Factors
Economic conditions
Health and directions of the economy, inflation, deflation, interest rates, taxes, tariffs.
Political conditions
Attitude towards business, political stability, wars
Legal environment
Antitrust laws, regulations, trade restrictions, mi
Organizational Strategies
Overall strategies that relate to the entire organization and support the achievement of organizational goals and mission
Functional level strategies
Strategies that relate to each of the functional areas and that support achievement of the organizational strategy
Operations Strategy
The approach, consistent with organization strategy, that is used to guide the operations function.
But... Organization Strategy should take into account the realities of operations strengths and weaknesses
Tactics
The methods, actions, or implementations taken to accomplish strategies, which ultimately achieve goals
The "how to" part of the process
Mission, Organizational strategy, Operations strategy
Productivity
A measure of the effective use of resources usually expressed as the ratio of output to input
Productivity measures are useful for:
-Tracking an operating unit's performance over time
-Planning workforce requirements
-Scheduling equipment
-Financial analy
Why does Productivity Matter?
Higher productivity relative to the competition leads to competitive advantage in the marketplace.
High productivity is linked to higher standards of living -> Have more, work less.
Manufacturing multiplier (1.6-16): manufacturing has beneficial side effe
Measures of Productivity
Partial measures:
output/(single input)
Multi-factor measures:
output/(multiple inputs)
Total measure:
output/(total inputs)
Examples of
Partial Productivity Measures
Productivity Calculation Example
Units produced: 5,000
Standard price: $30/unit
Labor input: 500 hours
Cost of labor: $25/hour
Cost of materials: $5,000
Cost of overhead: 2x labor cost
larger than 1, but is it good enough?
The higher the better
Productivity Growth
Productivity Growth Example
Labor productivity on the ABC assembly line was 25 units per hour in 2009. In 2010, labor productivity was 23 units per hour. What was the productivity growth from 2009 to 2010?
Service Sector Productivity
difficult to measure and manage
involves intellectual activities
has a high degree of variability
Factors Affecting Productivity
Methods
Quality
Capital
Technology
-INCREASE: Calculators, Computers, Faxes, copiers, Internet search engines, Voice mail, cell phones, email
-REDUCE: inflexibility, high costs, mismatched operations, non-work activities
Management
Improving Productivity
1. Develop productivity measures for all operations
2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvements
4. Establish (reasonable) goals
5. Make it clear that management supports and encourages productivity improv
Efficiency = getting the most out of a fixed set of resources
Productivity = effective use of overall resources (e.g., upgrading equipment)
OM Incorporates
suppliers
employees
distributers
retailers
What is the first step in creating a new operation
design of product and process to produce it
What might cause a business to change?
changes in the market
Start of Chapter 4 Notes:
Product and Service Design
The essence of an organization is the goods and services it offers
Every aspect of the organization is structured around them
Product and Service design (or redesign) should be closely tied to an organization's strategy
Reasons for Design or Re-Design
Market Opportunities or Threats drive product and service design (or redesign):
Economic
-Low demand, need to reduce costs, quality problems
Social and Demographic
-Aging populations, population shifts
Political, Liability, or Legal
-Regulations, safety i
Idea Generation Supply-Chain Based
Ideas can come from anywhere in the supply-chain:
-Customers
-Suppliers
-Distributors
-Employees
Idea Generation Competitor-Based
Studying how a competitor operates and its products and services
Reverse engineering
Dismantling and inspecting a competitor's product to discover product improvements
Idea Generation Research Based
Research and Development (R&D)
-Organized efforts to increase (scientific) knowledge or product innovation
Basic research
-Objective: advancing the state of knowledge about a subject without any near-term expectation of commercial applications
Applied res
Quality Function Deployment
An approach that integrates the "voice of the customer" into product and service development
The purpose is to ensure that customer requirements are factored into every aspect of the process
Key Questions for the Organization
Phases in Products Design & Development
1. Feasibility analysis
-Demand, development and production cost, potential profit, technical analysis, capacity req., skills needed, fit with mission.
2. Product specifications
-What's needed to meet customer wants
3. Process specifications
-Weigh altern
Product/Service Life-Stages
Standardization
Extent to which there is an absence of variety in a product, service, or process
Products are made in large quantities of identical items
Every unit [customer] processed goes through the same process [receives essentially the same service]
Standardization Advantages
Fewer parts to deal with in inventory and in manufacturing
Reduced training costs and time
More routine purchasing, handling, and inspection procedures
Orders fillable from inventory
Opportunities for long production runs and automation
Standardization Disadvantages
High cost of design changes increases resistance to improvements: designs may be frozen with too many imperfections remaining
Decreased variety results in less consumer appeal
Mass Customization
A strategy of producing basically standardized goods or services, but incorporating some degree of customization in the final product or service
Techniques:
-Delayed differentiation
-Modular design
Delayed Differentiation
The process of producing, but not quite completing, a product until customer preferences are known
e.g., Produce a piece of furniture, but do not stain it; the customer will choose the stain or personalized M&Ms
Modular Design
A form of standardization in which components are grouped into modules that are easily replaced or interchanged
e.g., PC
Advantages
-simplification of manufacturing and assembly
-relatively low training costs
-easier diagnosis and remedy of failures
-easi
Different phases of a products life cycle require different strategies
in all cases, accurate forecasts of demand and cash flow are critical
Designing (products) for Production
1. Concurrent engineering
2. Computer-Assisted Design (CAD)
3. Production requirements
4. Component commonality
Concurrent Engineering
Bringing design and manufacturing engineers together early in the design phase
-manufacturing personnel, marketing and purchasing personnel in loosely integrated cross-functional teams
-Views of suppliers and customers may also be sought
The purpose:
-ach
Computer Aided Design (CAD)
Increases designers' productivity.
Directly provides information to manufacturing (dimensions, material - BOM).
Perform analysis: engineering ,cost.
Shortens time-to-market
SolidWorks, AutoCad
Production Requirements
Designers must take into account production capabilities
-Equipment
-Skills
-Types of materials
-Schedules
-Technologies
-Special abilities
When Opportunities and Capabilities do not match management must consider expanding or changing capabilities.
Relat
DFM and DFA
Design for Manufacturing (DFM)
-designing products that are compatible with an organization's abilities
Manufacturability
-Ease of fabrication and/or assembly
-Has important implications for cost, productivity and quality
Design for Assembly (DFA)
-reduci
Component Commonality
When products have a high degree of similarity in features and components, a part can be used in multiple products
Benefits:
-Savings in design time
-Standard training for assembly and installation
-Opportunities to buy in bulk from suppliers
-Commonality
Service Design
Begins with a choice of service strategy, which determines the nature and focus of the service, and the target market
Key issues in service design
-Degree of variation in service requirements
-Degree of customer contact and involvement
Differences between Service & Product Design
1. Services are created and delivered at the same time. Less opportunity to correct errors. Training, process design more important.
2. Services cannot be inventoried -> capacity issues.
3. Services are highly visible to consumers. Importance of process d
Challenges to Service Design
Variability
Timing.
Services cannot be stored.
Balancing supply and demand:
possible (e.g., doctor's appointments)
impossible (e.g., emergency room).
Disney's FastPass
Difficult to predict customer requirements
especially when there is direct contact with
Service Blueprint
a method to design and analyze a service.
Steps:
1. Establish boundaries and decide the level of detail needed.
2. Identify and determine the sequence of customer and service actions and interactions. Picture the service from the customer's perspective.
3
Reliability
The ability of a product, part, or system to perform its intended function under a prescribed set of conditions
Reliability is expressed as a probability:
-The probability that the product or system will function when activated
-The probability that the p
The central feature of Taguchi's approach is parameter design.
It focuses on a much smaller subset of possible production environments of standard design of experiments. This can lead to a near optimal solution.
Reliability- When Activated
Finding the probability under the assumption that the system consists of a number of independent components
Requires the use of probabilities for independent events
Independent event
Events whose occurrence or non-occurrence do not influence one another
Reliability Rule 1
If two or more events are independent and success is defined as the probability that all of the events occur, then
the probability of success is
equal to the product of the probabilities of the
events
(#1 works AND #2 works)
Overall reliability is less th
Redundency
One way to enhance reliability is to utilize redundancy, the use of backup components to increase reliability
Rule 2
If two events are independent and success is defined as the probability that at least one of the events will occur, the probability of success is equal to the probability that (either) one occurs (it works)
plus (OR)
1.00 minus that probability (it fails.
Rule 3
If two or more events are involved and success is defined as the probability that at least one of them occurs, the probability of success is 1 - P(all fail).
1 - (#1 fails AND #2 fails AND #3 fails)
Can also be calculated by using Rule 2 multiple times.
What is this system's reliability?
Reliability Over Time
Reliabilities are determined relative to a specified length of time.
Improving Reliability
Component design
Redundancy/backups
System design
Production/assembly techniques
Testing
Preventive maintenance procedures
User education
Chapter One
The Operations Function
Operations Management
The production of goods and services.
Value
Tangible and intangible benefits that customers can derive from consuming a good or service at a price they are willing to pay.
Purchasing Function
Sources inputs into the transformation process of the organization from other for-profit and nonprofit organizations.
Logistics Function
Responsible for the actual movement of goods and/or services across organizations.
Supply Chain
The network of manufacturing and service operations that supply one another from raw materials through manufacturing to the ultimate customer. It consists of the physical flow of materials, money and information along the entire chain of purchasing, produ
The Four major decision responsibilities of operations management?
Process, Quality, Capacity, and Inventory. Look at page 10 for good information.
Cross-Functional Decision Making
Page 12.
Transformation System
Process that converts inputs into outputs.
Inputs
Include energy, materials, labor, capital, and information.
Outputs
Are goods or services created from the inputs.
Internal and External Environments
Internal environments occurs through interaction of cross-functional teams. External environments occurs through economic, physical, social, and political environment of operations.
Lean
Eliminating waste (non-value-adding) activities in every part of the business and improving the flow.
Sustainability
Everyone in society including those in operations, must help protect the environment. Sustainability has been heightened in recent years with concerns over global warming, water contamination, air pollution, and so on.
Supply Chain Management
Includes the integration of suppliers, producers, and customers. Managing the supply chain requires all managers to consider the entire flow of materials, information, and money along the supply chain, from raw materials through production and distributio
E-Business
Electronic information exchange between suppliers and customers.
Globalization of Operations
Strategies for operations should be formulated with global effects in mind and not consider only narrow national interests.
Customer Directed Operations
Every operation should be externally directed to meet customer requirements and hear the "voice of the customer.
Chapter Two
Operations and Supply Chain Strategy.
Operations Strategy (Functional Strategy)
A consistent pattern of decisions for the transformation system and associated supply chain that are linked to the business strategy and other function strategies, leading to a competitive advantage for the firm. Look at page 22 to see McDonald's operatio
Supply Chain Strategy
An extension of operations strategy that considers not only the firm but also the strategies and capabilities of its supply chain partners.
Global Corporation
Facilities and plants are located on a worldwide basis, not country by country.
Immitative
Like commodities-they have predictable demand and low profit margins. Should have a very efficient and low cost supply chain.
Innovative
Have unpredictable demand and high profit margins. They need a flexible and fast supply chain to deal with uncertainty in demand.
Corporate Strategy
Defines the business that the company is pursuing. EX: Walt Disney Productions considers itself in the business of making people happy.
Business Strategy
Follows from the corporate strategy and defines how each particular business will compete.
Operations Objectives
Are the second element of operations strategy. The four common objectives of operations are cost, quality, delivery, and flexibility.
Benchmarking
The comparison to a world-class competitor when operations are behind or ahead of the competition.
Strategic Decisions
Constitute the third element of operations strategy. They should indicate how the operations objectives will be achieved.
Distinctive Competence
Something that operations does better than anyone else.
Competing though quality, low cost objective, delivery time, flexibility.
Page 31-32
Order Winners
An objective that will win orders from the customers in a particular segment that marketing has selected as the target market.
Order Qualifiers
A dimension that is used to screen a product or service as a candidate for purchase.
Sustainability
Refers to minimizing or eliminating the environmental impact of operations.
Chapter Three
Product Design
Strategies for New-Product Development
Market Pull, Technology Push, and Interfunctional.
Market Pull
The market is the primary basis for determining the products a firm should make, with little regard for existing technology. A firm should make what it can sell.
Technology Push
Technology is the primary determinant of the products the firm should make, with little regard for the market.
Interfunctional
The product should not only fit the market needs but have a technical advantage as well.
Cross-Functional Teams
Responsible for the development of a new product.
Concept Development
This phase is concerned with the idea generation and the evaluation of alternative ideas for the new product.
Product Design
This phase is concerned with the designing the physical new product.
Process Design
Should be taking place simultaneously with product design.
Pilot Production/Testing
Complex products require testing of production prototypes before they are put into production. To facilitate full-scale production, an information package should be finalized that contains not only product specification but also process design specificati
Misalighment
No matter how excellent the advanced planning or the technology is, misalignment between the product design and operations is a common occurrence.
Sequential Process
Each function completing its work before the next one starts. Figure 3.3
Concurrent Engineering
A simultaneous development process. All functions are involved from the beginning. Figure 3.3
Collaboration
Means tapping into customers knowledge and expertise to design products they are willing to buy.
When a supplier is considered a potential collaborator, the following criteria should be considered:
Technical Expertise, Capability, Capacity, and Low Risk.
Quality Function Development
A tool for linking customer requirement as defined by the customer technical specifications.
Relationship Matrix
Customer Attributes and Engineering Characteristics and House of Quality... Figure 3.4.
Target Value
Is determined by the importance of various customer attributes, the linkages to ECs, and the desired performance of the new bicycle relative to those of the competitors.
Design for Manufacturing
An approach that consists of two things: (1) simplification of products and (2) manufacture of multiple products using common parts, processes, and modules.
Value Analysis
A method for improving the usefulness of a product without increasing its cost or reducing the cost without reducing the usefulness of product.
Value
The ratio of usefulness to cost.
Value Analysis
Consists of the objective, basic function, and secondary function.
Objective
The primary purpose of the product.
Basic Function
A basic function, if eliminated, would render the product useless in terms of its stated objective.
Secondary Function
A function that is the result of the way the product is designed and permits accomplishment of the basic function.
Modular Design
Makes it possible to have a relatively high product variety and low component variety at the same time.
New-Product Development Process
Three phases: Concept Development, product design, and pilot production/testing.
What are six reasons why domestic business operations decide to change to some form of international operation?
(1) Reduce costs (labor, taxes, tariffs, etc.); (2) Improve the supply chain; (3) Provide better goods and services; (4) Understand markets; (5) Learn to improve operations; (6) Attract and retain global talent
maquiladores
Mexican factories located along the U.S. - Mexico border that receive preferential tariff treatment
WTO
World Trade Organization - an international organization that promotes world trade by lowering barriers to the free flow of goods across borders
NAFTA
North American Free Trade Agreement - a free trade agreement between Canada, Mexico, and the United States
EU
European Union - a European trade group that has 27 member states
improve the supply chain
The supply chain can often be improved by locating facilities in countries where unique resources are available.
provide better goods and services
Although the characteristics of goods and services can be objective and measurable, they can also be subjective and less measurable (e.g., sensitivity to culture). Improved understanding of different cultures as a result of a local presence and reduced re
understand markets
Knowledge of international markets not only helps firms understand where the market is going, but also helps firms diversify their customer base, add production flexibility, and smooth the business cycle. Also, there could be an opportunity to expand the
learn to improve operations
Learning does not take place in isolation. For example, GM found that it could improve operations by jointly building and running, with the Japanese, an auto assembly plant in San Jose, California. This strategy allowed GM to contribute its capital and kn
attract and retain global talent
Global firms can recruit and retain good employees because they provide both greater growth opportunities and insulation against unemployment during times of economic downturn. During economic downturns in one country or continent, a global firm has the m
In spite of __, we live in a period __
cultural and ethical differences; of extraordinary mobility of capital, information, goods, and even people.
mission
The purpose or rationale for an organization's existence.
strategy
How an organization expects to achieve its missions and goals.
supporting mission
Once an organization's mission has been decided, each functional area within the firm determines its supporting mission. By functional area we mean the major disciplines required by the firm, such as marketing, finance/accounting, and productions/operatio
lower-level supporting missions
Within functions (such as marketing or productions/operations) lower-level supporting missions are established for the OM functions.
Firms achieve missions in __
three conceptual ways: (1) differentiation, (2) cost leadership, and (3) response. This means that operations managers are called on to deliver goods and services that are (1) better, or at least different, (2) cheaper, and (3) more responsive.
What are three basic conceptual ways, or strategies that can be used to achieve a company's mission?
A company can be different, or better, it can be cheaper, and/or it can be more responsive.
competitive advantage
The creation of unique advantage over competitors.
Differentiation is concerned with __
providing uniqueness.
differentiation
Distinguishing the offerings of an organization in a way that the customer perceives as adding value.
experience differentiation
Engaging a customer with a product through imaginative use of the five senses, 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.
operating decisions
The strategic decisions of OM are goods and service design, quality, process design, location selection, layout design, human resources and job design, supply-chain management, inventory, scheduling, and maintenance.
Differentiation, low cost, and response can be achieved when __
managers make effective decisions in 10 areas of OM, or the operations decisions.
resources view
A method managers use to evaluate the resources at their disposal and manage or alter them to achieve competitive advantage, or ensuring that the potential strategy (dfferentiation, cost, or response) is compatible with the available resources.
value-chain analysis
A way to identify those elements in the product/service chai that uniquely add value.
Five forces analysis
A method of analyzing the five forces in the competitive environment, which are immediate rivals, potential entrants, customers, suppliers, and substitute products.
In addition to the competitive environment, the operations manager needs to understand __
that the firm is operating in a system with many other external factors that range from political, legal, to cultural.
SWOT analysis
A method of determining internal strengths and weaknesses and external opportunities and threats.
KSFs
key success factors - activities or factors that are key to achieving competitive advantage, sometimes even necessary for a firm to achieve its goals
core competencies
A set of skills, talents, and activities in which a firm is particularly strong. For example, McDonalds KSFs are consistency and quality.
activity map
A graphical link of competitive advantage, KSFs, and supporting activities.
build and staff the organization
Once a strategy and KSFs have been identified, the second step is to group the necessary activities into an organizational structure. The third step is to staff it with personnel who will get the job done.
The operations manager's job is to __
implement an OM strategy, provide competitive advantage, and increase productivity.
MNC
Multinational corporation - a firm that has extensive involvement in international business, owning or controlling facilities in more than one country.
Operations managers of international and multinational firms approach global opportunities with one __
of four operations strategies: international, multidomestic, global, or transnational.
international strategy
An international strategy uses exports and licenses to penetrate the global arena. They can operate internationally easily, with little change to existing operations. Responsiveness is little because they are exporting or licensing goods from the home cou
multidomestic strategy
The multidomestic strategy has decentralized authority with substantial autonomy at each business (think subsidiaries, franchises, or joint ventures). This maximizes competitive response for the local market, however the strategy has little or no cost sav
global strategy
A global strategy has a high degree of centralization, with headquarters coordinating the organization to seek out standardization and learning between plants, thus generating economies of scale. This strategy is appropriate when the strategic focus is co
economies of scale
As production increases, so does efficiency, and the cost per unit also decreases.
transnational strategy
A transnational strategy exploits the economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competence does not reside in just the home country but can exist anywhere in the organization. These firms have the po
What three phases does the management of projects include?
planning, scheduling, and controlling
project organization
In some firms a project organization is developed to make sure existing programs continue to run smoothly on a day-to-day basis while new projects are successfully completed.
project manager
Project managers receive high visibility in a firm and are responsible for making sure that (1) all necessary activities are finished in proper sequence and on time; (2) the project comes withing budget; (3) the project meets its quality goals; and (4) th
What are some ethical issues faced by project managers?
Project managers often deal with (1) offers of gifts from contractors, (2) pressure to alter status reports to mask the reality of delays, (3) false reports for charges of time and expenses, and (4) pressures to compromise quality to meet bonus or penalty
WBS
work breakdown structure - defines the project by dividing it into its major subcomponents (or tasks), which are then subdivided into more detailed components, and finally into a set of activities and their related costs.
gantt charts
Gantt charts are a lost-cost means of helping managers make sure that (1) activities are planned, (2) order of performance is documented, (3) activity time estimates are recorded, and (4) overall project time is developed. Gantt charts do not, however, ad
What purposes do project scheduling serve?
(1) It shows the relationship of each activity to others and to the whole project. (2) It identifies the precedence relationships among activities. (3) It encourages the setting of realistic time and cost estimates for each activity. (4) It helps make bet
PERT
program evaluation technique - a project management technique that employs three time estimates for each activity
CPM
critical path method - a project management technique that uses only one time factor per activity
critical path
The computed longest time path(s) through a network. Finding the critical path is a major part of controlling a project as they represent tasks that will delay the entire project if they are not completed on time. Managers can gain the flexibility needed
What six basic steps do both PERT and CPM follow?
(1) Define the project and prepare the work breakdown structure. (2) Develop the relationships among the activities. Decide which activities must precede and which must follow others. (3) Draw the network connecting all the activities. (4) Assign time and
AON
activity-on-node - a network diagram in which nodes designated activities.
AOA
activity-on-arrow - a network diagram in which arrows designate activities. Also uses dummy activities.
dummy activity
only uses in AOAs, they are used to clarify the relatinoships among the arrows or activities
critical path analysis
A process that helps determine a project schedule.
slack time
Slack is the length of time an activity can be delayed without delaying the entire project. slack = ls - es, or slack = lf - ef
forward pass
A process that identifies all the early times (ES and EF).
ES
earliest start, ES = Max (EF of all immediate predecessors)
EF
earliest finish, EF = ES + activity time
backward pass
An activity that finds all the late start and late finish times.
LF
latest finish, LF = Min(LS of all immediate following activities)
LS
latest start, LS = LF - activity time
total slack
Time shared among more than one activity. Delaying either activity by 1 week causes not only that activity, but also the other activity, to lose its slack. Typically, when two or more noncritical activities appear successively in a path, they share total
What are the three times estimates in PERT?
optimistic time (a) - time an activity will take if everything goes as planned, there should only be a small probability (1/100) that the activity time will be < a; pessimistic time (b) - time an activity will take assuming very unfavorable conditions. In
how is the expected activity time, or t, found?
t = (a + 4(m) + b)/6
How is the variance of activity completion time, or dispersion found?
v = [(b-a)/6]squared
memorize page 76 the project variance formula
memorize page 76 the project variance formula
memorize the standard normal equation on page 77
memorize the standard normal equation on page 77
forecasting
The art and science of predicting future events.
economic forecasts
Planning 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.
What are the four different qualitative forecasting methods?
Jury of executive opinion; delphi method; sales force composite; consumer market survey
jury of executive opinion
A forecasting technique that uses the opinion of a small group of high-level managers to form a group estimate of demand.
delphi method
A forecasting technique using a group process that allows experts to make forecasts.
sales force composite
A forecasting technique based on salesperson's estimates of expected sales.
consumer market survey
A forecasting method that solicits input from customers or potential customers regarding future purchasing plans.
What are the different quantitative methods?
(1) Naive approach, (2) moving averages, (3) exponential smoothing, (4) trend projection, and (5) linear regression
moving averages
A forecasting method that uses an average of the n most recent periods of data to forecast the next period.
naive approach
A forecasting technique which assumes that the demand in the next period is equal to demand in the most recent period.
exponential smoothing
A weighted-moving-average forecasting technique in which data points are weighted by an exponential function.
smoothing constant
The weighting factor used in an exponential smoothing forecast, a number between 0 and 1.
MAD
Mean absolute deviation - a measure of the overall forecast error for a model.
MAPE
Mean absolute percent error (MAPE) - The average of the absolute differences between the forecast and actual values, expressed as a percent of actual values.
MSE
Mean squared error - The average of the squared differences between the forecasted and observed 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 - its standard deviation.
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 more than one independent variable.
tracking signal
A measurement of how well a forecast is predicting actual values.
bias
A forecast that is consistently higher or consistently lower than actual values of a time series.
adaptive smoothing
An approach to exponential smoothing forecasting 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.
product decision
The selection, definition, and design of products.
What are the four phases of a products' life cycle?
The four phases are introduction, growth, maturity, and decline.
product-by-value analysis
A list of products, in descending order of their individual dollar contribution to the firm, as well as the total annual dollar contribution of the product.
pareto principle
Focus on the critical few products, not the trivial many. Product-by-value analysis is used to determine this.
QFD
Quality function deployment - a process for determining customer requirements (the "wants") and translating them into the attributes (the "hows") that each functional area can understand and act on.
house of quality
A part of the quality function deployment process that utilizes a planning matrix to relate customer "wants" to "how" the firm is going to meet those "wants".
manufacturability and value engineering
Activities that help improve a product's design, production, maintainability, and use.
robust design
A design that can be produced to requirements even with unfavorable conditions in the production process.
modular design
A design in which parts or components of a product are subdivided into modules that are easily interchanged or replaced.
CAD
Computer-aided design - interactive use of a computer to develop and document a product.
DFMA
Design for manufacture and assembly - software that allows designers to look at the effect of design on manufacturing of the product.
3-D object object modeling
An extension of CAD that builds small prototypes.
STEP
Standard for the exchange of product data - a standard that provides a format allowing the electronic transmittal of three-dimensional data.
CAM
Computer-aided manufacturing - the use of information technology to control machinery.
When CAD information is translated into instructions for __
CAM, the result of these two technologies is CAD/CAM.
Although __ focuses on preproduction design improvements, __, a related technique, takes place during the production process.
value engineering; value analysis
value analysis
Value analysis seeks improvements that lead to either a better product, or a product made more economically, or a product with less environmental impact.
sustainability
A production system that supports conservation and renewal of resources.
LCA
Life cycle assessment - part of ISO 14000; assesses the environmental impact of a product, from material and energy inputs to disposal and environmental releases
time-based competition
Competition based on time; rapidly developing products and moving them to market
production
Production is the creation of goods and services.
OM
Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.
What functions do all organizations perform to create goods and services?
marketing (generating demand); production/operations (creates the product); finance/accounting (tracks how well the organization is doing)
Why study OM?
Four reasons - it's a major function of any organization; we want to know how goods and services are produced; we want to understand what operations managers do; we study OM because its a costly part of any organization
What categories can the significant events in operations management be broken down into?
The cost focus (1776-1980), the quality focus (1980-1995), and the customization focus (1995-2015).
Eli Whitney
Ely Whitney (1800) is credited for the early popularization of interchangeable parts, which was achieved through standardization and quality control.
Who is credited with interchangeable parts, when?
Ely Whitney in 1800
Frederick W. Taylor
Frederick W. Taylor (1881), known as the father of scientific management, contributed to personnel selection, planning and scheduling, motion study, and the now popular field of ergonomics. One of his major contributions was his belief that management sho
__ contributions was __
Another of Taylor's; the belief that management should assume more responsibility for (1) matching employees to the right job, (2) providing the proper training, (3) providing the proper work methods and tools, and (4) establishing legitimate incentives f
By ___ combined what they knew __
1913, Henry Ford and Charles Sorensen; about standardized parts with the quasi-assembly lines of the meatpacking and mail-order industries and added the revolutionary concept of the assembly line.
Walter Shewhart
Walter Shewhart (1924) combined his knowledge of statistics with the need for quality control and provided the foundations for statistical sampling in quality control.
W. Edwards Deming
W. Edwards Deming (1950) believed, as did Frederick Taylor, that management must do more to improve the work environment and processes so that quality can be improved.
services
Economic activities that typically produce an intangible product (such as education, entertainment, lodging, government, financial, and health services).
productivity
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources, such as labor and capital). Improving productivity means improving efficiency.
What does efficiency mean, what is the difference between being efficient and effective?
Efficiency means doing the job well - with a minimum of resources and waste (productivity). Efficient means doing a job well done, such as applying the 10 decisions of operations management, whereas effective means doing the right thing, such as developin
Only through __ can the standard of living improve.
increases in productivity
High production may imply __, but it does not imply __
only that more people are working or that employment levels are high; high productivity.
productivity equation
productivity = units produced / input used
Multifactor productivity is also known as __
total factor productivity.
What are some measurement problems of productivity?
Quality may change while productivity stays the same, external elements may cause changes in productivity, and precise units of measurement may be lacking
productivity variables
Productivity variables are the three factors critical to productivity improvement - labor, capital, and the art and science of management.
What are the productivity variables and how much do they contribute to the annual increase?
labor (10%), capital (38%), and management (52%)
__ are a major impediment to productivity, costing __
Illiteracy and poor diets; countries up to 20% of their productivity.
What are the three key variables for improved labor productivity?
1) Basic education appropriate for an effective labor force. 2) Diet of the labor force. 3) Social overhead that makes labor available, such as transportation and sanitation.
When __, we can expect __
the capital invested per employee drops; a drop in productivity.
Using labor rather than capital may __
reduce unemployment in the short run, but it also makes economies less productive and therefore lowers wages in the long run.
knowledge societies
Knowledge societies are those in which much of the labor force has migrated from manual work to technical and information-processing tasks requiring ongoing education.
Why has productivity in the service sector proven difficult?
typically labor intensive; frequently focused on unique individual attributes or desires; often an intellectual task performed by professionals; often difficult to mechanize and automate; often difficult to evaluate for quality