Operational Management

Total quality management (TQM)

is an integrated organizational effort designed to improve quality at every level

customer-defined quality

quality expectations as defined by the customer; this is called

Conformance to specifications

measures how well the product or service meets the targets and tolerances determined by its designers

Fitness for use

focuses on how well the product performs its intended function or use

Value for price paid

is a definition of quality that consumers often use for product or service usefulness

Support services provided

are often how the quality of a product or service is judged.

Psychological criteria

is a subjective definition that focuses on the judgmental evaluation of what constitutes product or service quality.

conformance

which is the degree to which a product characteristic meets preset standards

reliability

meaning that the product will function as expected without failure

features

the extras that are included beyond the basic characteristics

durability

the expected operational life of the product

serviceability

how readily a product can be repaired

continuous improvement

A philosophy of never-ending improvement.

plan-do-study-act (PDSA) cycle

describes the activities a company needs to perform in order to incorporate continuous improvement in its operation

benchmarking

Studying the business practices of other companies for purposes of comparison.

quality circle

A team of volunteer production employees and their supervisors who meet regularly to solve quality problems.

Cause-and-effect diagrams

identify potential causes of particular quality problems. They are often called fishbone diagrams because they look like the bones of a fish

flowchart

is a schematic diagram of the sequence of steps involved in an operation or process

checklist

is a list of common defects and the number of observed occurrences of these defects

control charts

Charts used to evaluate whether a process is operating within set expectations.

Scatter diagrams

are graphs that show how two variables are related to one another

Pareto analysis

is a technique used to identify quality problems based on their degree of importance

histogram

is a chart that shows the frequency distribution of observed values of a variable

quality function deployment (QFD)

A tool used to translate the preferences of the customer into specific technical requirements.

reliability

the probability that a product, service, or part will perform as intended for a specified period of time under normal conditions

Quality at the source

is the belief that it is far better to uncover the source of quality problems and correct it than to discard defective items after production

ISO 9000

A set of international quality standards and a certification demonstrating that companies have met all the standards specified.

ISO 14000

A set of international standards and a certification focusing on a company's environmental responsibility.

common causes of variation

Random causes that cannot be identified.

assignable causes of variation

Causes that can be identified and eliminated.

process capability

The ability of a production process to meet or exceed preset specifications.

Product specifications

often called tolerances, are preset ranges of acceptable quality characteristics

process capability index

An index used to measure process capability.

Six Sigma quality

A high level of quality associated with approximately 3.4 defective parts per million.

capacity

The maximum output rate that can be achieved by a facility.

Capacity planning

is the process of establishing the output rate that can be achieved by a facility

design capacity

The maximum output rate that can be achieved by a facility under ideal conditions.

effective capacity

The maximum output rate that can be sustained under normal conditions.

Capacity utilization

simply tells us how much of our capacity we are actually using

best operating level

The volume of output that results in the lowest average unit cost.

economies of scale

A condition in which the average cost of a unit produced is reduced as the amount of output is increased.

diseconomies of scale

A condition in which the cost of each additional unit made increases.

focused factories

Facilities that are small, specialized, and focused on a narrow set of objectives.

capacity cushions

Additional capacity added to regular capacity requirements to provide greater flexibility.

decision tree

is a diagram that models the alternatives being considered and the possible outcomes

Decision points

These are the points in time when decisions, such as whether or not to expand, are made. They are represented by squares, called "nodes.

Decision alternatives

They are represented by "branches" or arrows leaving a decision point.

Chance events

These are events that could affect the value of a decision

Outcomes

For each possible alternative an outcome is listed

expected value (EV)

is a weighted average of the chance events, where each chance event is given a probability of occurrence

Facility location

is determining the best geographic location for a company's facility

Globalization

is the process of locating facilities around the world

Factor rating

can be used to evaluate multiple alternatives based on a number of selected factors

load-distance model

is a procedure for evaluating location alternatives based on distance

Break-even analysis

is a technique used to compute the amount of goods that must be sold just to cover costs

transportation method

The method relies on a specific algorithm to evaluate the cost impact of adding potential location sites to the network of existing facilities

Intermittent operations

are used to produce a variety of products with different processing requirements in lower volumes

Repetitive operations

are used to produce one or a few standardized products in high volume

Project processes

are used to make one-of-a-kind products exactly to customer specifications

Batch processes

are used to produce small quantities of products in groups or batches based on customer orders or product specifications

Line processes

are designed to produce a large volume of a standardized product for mass production

Continuous processes

operate continually to produce a very high volume of a fully standardized product

Process flow analysis

is a technique used for evaluating a process in terms of the sequence of steps from inputs to outputs with the goal of improving its design

process flowchart

is used for viewing the sequence of steps involved in producing the product and the flow of the product through the process

bottleneck

Longest task in the process.

make-to-stock strategy

Produces standard products and services for immediate sale or delivery.

assemble-to-order strategy

Produces standard components that can be combined to customer specifications.

make-to-order strategy

Produces products to customer specifications after an order has been received.

Process performance metrics

are measurements of different process characteristics that tell us how a process is performing

throughput time

Average amount of time it takes a product to move through the system.

process velocity

Ratio of throughput time to value-added time

utilization

Ratio of time a resource is used to time it is available for use.

efficiency

Ratio of actual output to standard output.

Process Layouts

are layouts that group resources based on similar processes or functions

Product Layouts

are layouts that arrange resources in a straight-line fashion to promote efficient production

Hybrid layouts

combine aspects of both process and product layouts

group technology (GT) or cell layouts

Hybrid layouts that create groups of products based on similar processing requirements.

cells

or small product layouts,

fixed-position layout

is used when the product is large and cannot be moved due to its size

block plan

a schematic that shows the placement of departments in a facility

from-to matrix

is a table that shows the number of trips or units of product moved between any pair of departments

REL chart

is a tool that reflects opinions of managers with regard to the importance of having any two departments close together

systematic layout planning (SLP)

Using a relationship chart to develop acceptable layouts is part of a classic layout technique called

ALDEP

Computer software packages for designing process layouts using REL Chart

CRAFT

Computer software packages for designing process layouts using from-to matrix.

Methods analysis

is the study of how a job is done

work measurement

Determines how long it should take to do a job.

standard time

is the time it should take a qualified operator, working at a sustainable pace and using the appropriate tools and process, to do the job

time study

sets a standard time based on timed observations of one employee taken over a number of cycles

performance rating factor

A subjective estimate of a worker's pace relative to a normal work pace.

frequency of occurrence

How often the work element must be done each cycle.

normal time

The mean observed time multiplied by the performance rating factor by the frequency of occurrence.

allowance factor

The amount of time the analyst allows for personal time, fatigue, and unavoidable delays.

elemental time data

Establish standards based on previously completed time studies, stored in an organization's database.

Predetermined time data

is a large database of valid work element times

Work sampling

is a method used for estimating the proportion of time that an employee or machine spends on different work activities

Job design

specifies the work activities of an individual or a group in support of an organization's objectives

technical feasibility

of a job is the degree to which an individual or group of individuals is physically and mentally able to do the job

economic feasibility

of a job is the degree to which the value a job adds and the cost of having the job done create profit for the company

behavioral feasibility

of a job is the degree to which an employee derives intrinsic satisfaction from doing the job

specialization

The breadth of the job design.

Job enlargement

is the horizontal expansion of a job

Job enrichment

is the vertical expansion of a job

Job rotation

exposes a worker to other jobs in the work system

Problem-solving teams

are small groups of employees who meet to identify, analyze, and solve operational problems

Special-purpose teams

address issues of major significance to the company

self-directed teams

Integrated teams empowered to control portions of their process.

alternative workplace

is a combination of nontraditional work practices, settings, and locations that supplements traditional offices

time-based compensation systems

Pay based on the number of hours worked.

output-based (incentive) systems

Pay based on the number of units completed.

waste

is anything that does not add value

types of waste

Material, energy, time, and space.

broad view of the organization

Tasks and procedures are important only if they meet the company's overall goals.

simplicity

The simpler a solution, the better it is.

continuous improvement (kaizen)

A philosophy of neverending improvement.

visibility

Problems must be visible to be identified and solved.

flexibility

A company can quickly adapt to the changing needs of its customers.

JIT system

The three elements are just-in-time manufacturing, total quality management, and respect for people.

just-in-time manufacturing

The element of JIT that focuses on the production system to achieve value-added manufacturing.

master production schedule

final assembly schedule

acceptable quality level (AQL)

to indicate the acceptable number of defective parts

quality at the source

Uncovering the root cause of a quality problem.

respect for people

An element of JIT that considers human resources as an essential part of the JIT philosophy.

kanban card

A card that specifies the exact quantity of product that needs to be produced.

production card

A kanban card that authorizes production of material.

withdrawal card

A kanban card that authorizes withdrawal of material.

small-lot production

The ability to produce small quantities of products.

Internal setups

require the machine to be stopped for the setup to be performed

External setups

can be performed while the machine is still running

uniform plant loading

A constant production plan for a facility with a given planning horizon.

multifunction workers

who can perform more than one job

cell manufacturing

the placement of dissimilar machines and equipment together in order to produce a family of products with similar processing requirements

infinite loading

Scheduling that calculates the capacity needed at work centers in the time period needed without regard to the capacity available to do the work.

finite loading

Scheduling that loads work centers up to a predetermined amount of capacity.

forward scheduling

Schedule that determines the earliest possible completion date for a job.

due date

Time when the job is supposed to be finished.

backward scheduling

Scheduling method that determines when the job must be started to be done on the due date.

slack

The amount of time a job can be delayed and still be finished by its due date.

Input/output control

is a capacity-control technique used to monitor workflow at individual work centers

theory of constraints (TOC)

a system's output is determined by three kinds of constraints: internal resource constraint, market constraint, and policy constraint

internal resource constraint

A regular bottleneck.

market constraint

results when market demand is less than production capacity

Policy constraint

means that a specific policy dictates the rate of production

supply chain

is the network of activities that delivers a finished product or service to the customer

Supply chain management

is the vital business function that coordinates and manages all the activities of the supply chain linking suppliers, transporters, internal departments, third-party companies, and information systems

tier one supplier

Supplies materials or services directly to the processing facility.

tier two supplier
.

Directly supplies materials or services to a tier one supplier in the supply chain

logistics
.

Activities involved in obtaining, producing, and distributing materials and products in the proper place and in proper quantities

traffic management

Responsible for arranging the method of shipment for both incoming and outgoing products or materials.

distribution management

Responsible for movement of material from the manufacturer to the customer.

bullwhip effect

Inaccurate or distorted demand information created in the supply chain.

automated order entry system

A method using telephone models to send digital orders to suppliers.

electronic data interchange (EDI)

A form of computer-to-computer communications that enables sharing business documents.

electronic storefronts

On-line catalogs of products made available to the general public by a single supplier.

net marketplaces

Suppliers and buyers conduct trade in a single Internet-based environment.

virtual private network (VPN)

A private Internetbased communications environment that is used by the company, its suppliers, and its customers for day-to-day activities.

advertising revenue model

Provides users with information on services and products and provides an opportunity for suppliers to advertise.

subscription revenue model

A Web site that charges a subscription fee for access to its contents and services.

transaction fee model

A company receives a fee for executing a transaction.

sales revenue model

A means of selling goods, information, or services directly to customers.

affiliate revenue model

Companies receive a referral fee for directing business to an affiliate.

intranets

Networks that are internal to an organization.

extranets

Intranets that are linked to the Internet so that suppliers and customers can be included in the system.

green supply chain management

Focuses on the role of the supply chain with regard to its impact on the environment.

Raw materials

are the purchased items or extracted materials that are transformed into components or products

Components

are parts or subassemblies used in building the final product

Work-in-process (WIP)

refers to all items in process throughout the plant

finished goods

Products sold to customers.

Distribution inventory

consists of finished goods and spare parts at various points in the distribution system

Maintenance, repair, and operational (MRO) inventory

are supplies that are used in manufacturing but do not become part of the finished product

anticipation inventory

Inventory built in anticipation of future demand.

fluctuation inventory

Provides a cushion against unexpected demand.

lot-size inventory

A result of the quantity ordered or produced.

transportation inventory

Inventory in movement between locations.

speculative inventory

Used to protect against some future event.

inventory turnover

by the level of customer demand satisfied by the supply on hand

periodic counting

A physical inventory is taken periodically, usually annually.

cycle counting

Prespecified items are counted daily.

Vendor-managed inventory (VMI)

requires the vendor to maintain an inventory of certain items at the customer's facility

strategic business plan

with its long-term focus, provides your company's direction and objectives for the next 2 to 10 years

Sales and operations planning

integrates the medium-range functional plans developed by marketing, operations, engineering, and finance

marketing plan

Identifies the markets to be served, desired levels of customer service, product competitive advantage, profit margins, and the market share needed to achieve the objectives of the strategic business plan.

aggregate plan

Includes the budgeted levels of finished products, inventory, backlogs, workforce size, and aggregate production rate needed to support the marketing plan.

financial plan

indicates the sources and uses of funds, expected cash flows, anticipated profits, and projected budgets

engineering plan

supports the research and development of new products introduced in the marketing plan and subsequently planned for in the aggregate plan

master production schedule

is an anticipated production schedule and is typically stated as specific finished goods

level aggregate plan

maintains a constant workforce and produces the same amount of product in each time period of the plan

chase aggregate plan

produces exactly what is needed to satisfy demand during each period

demand-based options

A group of options that respond to demand fluctuations through the use of inventory or back orders, or by shifting the demand pattern.

Reactive options

in which the operations department uses inventories and back orders to react to demand fluctuations.

proactive option

in which marketing tries to shift the demand patterns to minimize demand fluctuations.

capacity-based options

changes output capacity to meet demand through the use of overtime, undertime, subcontracting, hires, fires, and part-timers or temps

Shifting demand

is a proactive marketing approach to leveling demand in which your company tries to change consumer buying patterns by offering incentives

point of departure

is the percentage of normal capacity your company is currently operating at

Magnitude of the change

is the size of change needed

Duration of the change

is the length of time you expect to need the different level of capacity

Material requirements planning (MRP)

is an information system that uses the concept of backward scheduling

capacity requirements planning (CRP)

Determines the labor and machine resources needed to fill the open and planned orders generated by the MRP.

bill of material (BOM)

Lists all the subassemblies, component parts, and raw materials that go into an end item and shows the usage quantity of each required.

Independent demand

is the demand for finished products; it does not depend on the demand for other products

dependent demand

Demand for component parts is based on the number of end items being produced.

time-phased

Expressing future demand, supply, and inventories by time period.

gross requirements

The total-period demand for an item.

open shop orders

Released manufacturing orders.

project

is a unique, one-time set of activities that is intended to achieve an objective in a given time period