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Operations and Supply Chain Management

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the design, operation, and improvement of systems that create and deliver the firm's primary products and services

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Operations and Supply Chain Management

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concerned with the management of the entire system that produces a product or delivers a service

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operations

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manufacturing and service processes that are used to transform the resources employed by a firm into products desired by customers

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manufacturing process

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produces some type of physical product such as an automobile or a computer

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service process

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produces an intangible product, such as a call center that provides information to customers stranded on the highway or a hospital that treats accident victims in an emergency room

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supply chain

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refers to processes that move information and material to and from the manufacturing and service process of the firm; includes the logistics process that physically move product and the warehousing and storage processes that position products

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planning

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consists of processes needed to operate an existing supply chain strategically; a firm must anticipate demand and how it will be met with available resources

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sourcing

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involves the selection of suppliers that will deliver the goods and services needed to create the firm's product; a set of pricing, delivery, and payment processes are needed together with metrics for monitoring and improving the relations between partners of the firm

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making

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this is where the product is produced or the service provided; requires scheduling processes for workers and the coordination of material and other critical resources such as equipment to support producing or providing the service

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delivering

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referred to as logistics processes; carriers are picked to move products to warehouses and customers, coordinate and schedule the movement of goods and information through the supply network

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returning

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involves processes for receiving worn-out, defective, and excess products back from customers

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service

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this is an intangible process that cannot be weighed or measured; require some degree of interaction with the customer; vary from day to day; are perishable and time dependent; and are evaluated as a package of features that affect the five senses

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good

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a tangible output of a process that has physical dimensions

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product-service bundling

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refers to a company building service activities into its product offerings for its customers; example: maintenance, spare part provisioning, training, etc.

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efficiency

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means doing something at the lowest possible cost

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effectiveness

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means doing the right things to create the most value for the company

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value

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metaphorically defined as quality divided by price; if you can provide a customer with a better car without changing the price, this has gone up

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just in time manufacturing

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is an integrated set of activities designed to achieve high-volume production using minimal inventories of parts that arrive at the workstation exactly when they are needed

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ISO 9000

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this was created by the international organization for standardization and plays a major role in setting quality standards for global manufacturers

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strategy

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describes how a firm intends to create and sustain value for its current shareholders

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sustainability

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by adding this to the concept of strategy, we add the requirement to meet these current needs without compromising the ability of future generations to meet their own needs

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stakeholders

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those individuals or organizations that are influenced, either directly or indirectly, by the actions of the firm

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triple bottom line

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to capture the expanding view of strategy, to include sustainability, this term has been coined; it evaluates the firm against social, economic, and environmental criteria (many firms have expanded this view through goals that relate to sustainability)

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social, economic and environmental

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what are the three criteria of the triple bottom line

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social

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this pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business; the company seeks to benefit its employees, the community, and other social entities that are impacted by the firm's existence (part of the triple bottom line)

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economic

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refers to the fact that the firm is obligated to compensate shareholders who provide capital through stock purchases and other financial instruments via a competitive return on investment (part of the triple bottom line)

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environmental

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this refers to the firm's impact on the world; firms should move to reduce the company's ecological footprint by carefully managing its consumption of natural resources and reducing waste (part of the triple bottom line)

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trade-offs

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the underlying logic of this is that an operation cannot excel simultaneously on all competitive dimensions; consequently, management has to decide which parameters of performance are critical to the firm's success and then concentrate the resources of the firm on these particular characteristics

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straddling

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occurs when a company seeks to match the benefits of a successful position while maintaining its existing position; it adds new features, services, or technologies onto the activities it already performs

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supply chain risk

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defined as a likelihood of a disruption that would impact the ability of the company to continuously supply products or services; supply chain disruptions are unplanned and unanticipated events that disrupt the normal flow of goods and materials within a supply chain and expose the firm to this

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productivity

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this is common measure of how well a country, industry, or business unit is using its resources (or factors of production)

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productivity = outputs/inputs

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Formula for calculating productivity

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partial productivity measure

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this is concerned with the ratio of some output to a single input

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multifactor productivity measure

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this is the ratio of some output to a group of inputs (but not all inputs)

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total factor measure of productivity

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expression of the ration of all outputs to all inputs

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capacity

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the ability to hold, receive, store, or accommodate; in a general business sense, it is most frequently viewed as the amount of output that a system is capable of achieving over a specific period of time

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strategic capacity planning

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the objective of this is to provide an approach for determining the overall capacity level of capital-intensive resources--facilities, equipment, and overall labor force size--that best supports the company's long-term competitive strategy

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best operating level

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this is the level of capacity for which process was designed and thus is the volume of output at which average unit cost is minimized

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capacity utilization rate

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this reveals how close a firm is to its best operating level

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capacity utilization rate = capacity used/best operating level

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formula for capacity utilization rate (expressed as a percentage and requires that the numerator and denominator be measured in the same units and time periods)

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capacity flexibility

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having the ability to rapidly increase or decrease production levels, or to shift production capacity quickly from net product or service to another

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focused factory

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this concept holds that a production facility works best when it focuses on a fairly limited set of production objectives (involves the concept of plant within a plant, where a factory may have several of these within the plant)

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capacity cushion

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this needs to be maintained between the projected requirements and the actual capacity; this is the amount of capacity in excess of expected demand

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decision tree

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this is a schematic model of the sequence of steps in a problem and the conditions and consequences of each step

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customer order decoupling point

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this determines where inventory is positioned to allow processes or entities in the supply chain to operate independently; it is where inventory is positioned in the supply chain

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make-to-stock firms

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firms that serve customers from finished goods inventory are known as this

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assemble-to-order firms

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firms that combine a number of preassembled modules to meet a customer's specifications are called this

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make-to-order firms

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firms that make the customer's specifications are called this

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engineer-to-order firms

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firm that will work with a customer to design the product, and then make it from purchased materials, parts, and components

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inventory turn

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the cost of goods sold divided by the average inventory sale, it is a good measure of the total value of the inventory

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Little's Law

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this says that there is a long-term relationship between the inventory, throughput, and flow time of a production system in a steady state

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Inventory = Throughput time x flow time

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formula for Little's Law

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throughput

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this is the long-term average rate that items are flowing through the process (inventory)

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flow time

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this is the time that it takes a unit to flow through a process from beginning to end (inventory)

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steady state

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Little's law assumes that the process is operating in this, meaning that over a long enough period of time the amount that is produced by the factory is equal to the amount shipped to customers

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project layout

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in this kind of process organization, the product (by virtue of bulk or weight) remains in a fixed location and manufacturing equipment is moved to the product rather than vice versa

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workcenter layout

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in this kind of process organization, sometimes referred to as a job shop, is where similar equipment or functions are group together, such as all drilling machines in one area and stamping machines in another

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manufacturing cell layout

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in this kind of process organization, there is a dedicated area where products that are similar in processing requirements are produced and these cells are designed to perform a specific set of processes and the cells are dedicated to a limited range of products

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assembly line

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in this kind of process organization, work processes are arranged according to the progressive steps by which the product is made; the steps are defined so that a specific production rate can be achieved

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continuous process

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in this kind of process organization, which is similar to an assembly line, in that production follows a predetermined sequence of steps, but the flow is constant such as with liquids, rather than discrete

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workstation cycle time

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the most common assembly line is a moving conveyor that passes a series of workstations in a uniform time interval called this

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assembly-line balancing problem

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this problem is one of assigning all tasks to a series of workstations so that each workstation has no more than can be done in the workstation cycle time and so that the unassigned (idle) time across all workstations is minimized

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cycle time (C) = production time per day/required output per day (in units)

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formula for cycle time

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theoretical minimum number of workstations (N1) = Sum of task times (T)/Cycle time (C)

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formula for the theoretical minimum number of workstations (must be rounded up to the next highest integer)

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Efficiency = Sum of task times (T)/Actual number of workstations (Na) x workstation cycle time (C)

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formula to evaluate the efficiency of the number of workstations in a cycle

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total quality management

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this is defined as "managing the entire organization so that it excels on all dimensions of products and services that are important to the customer"

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Total Quality Management

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this movement became a national concern in the US in the 1980's primarily as a response to Japanese quality superiority in manufacturing automobiles and other durable goods such as room air conditioners

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design quality

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this refers to the inherent value of the product in the marketplace and is thus a strategic decision for the firm

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conformance quality

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this refers to the degree to which the product or service design specifications are met

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quality at the source

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this is frequently discussed in the context of conformance quality; this means that the period who does the work takes responsibility for making sure that his or her output meets specifications

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cost of quality

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this means that all of the costs attributable to the production of quality that is not 100 percent perfect; a less stringent definition considers only those costs that are the difference between what can be expected from excellent performance and the current costs that exist

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ISO 9000

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this has become an international reference for quality management requirements in business-to-business dealing; the idea is that defects can be prevented through the planning and application of best practices at every stage of business--from design through manufacturing and then installation and servicing

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ISO 14000

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this standard is primarily concerned with environmental management and addresses the need to be environmentally responsible

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six sigma

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this refers to the philosophy and methods companies such as General Electric and Motorola use to eliminate defects in their products and processes; it states that a process will produce no more than two defects out of every billion units

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defects per million opportunities (DPMO) = (number of defects/number of opportunities for error per unit x number of units) x 1000000

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formula for defects per million opportunities

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Define, measure, analyze, improve, and control (DMAIC) cycle

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this methodology's overarching focus is understanding and achieving what the customer wants, since that is seen as the key to profitability of a production process

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statistical quality control

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this covers the quantitative aspects of quality management; in general it uses a number of different techniques designed to evaluate quality from a conformance view: that is, how well are we doing at meeting the specification that have been set during the design of the parts or services that we are providing

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assignable variation

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this is variation that is caused by factors that can be clearly identified and possibly even managed

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sigma

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this is often used to refer to the sample standard deviation

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capability index (Cpk)

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this shows how well the parts being produced fit into the range specified by the design specification limits; the more off-center, the greater the change to produce defective parts

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process control

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this is concerned with monitoring quality while the product or service is being produced; objectives include: providing timely information on whether currently produced items are meeting design specification and to detect shifts in the process that signal that future products many not meet specifications

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attributes

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these are quality characteristics that are classified as either conforming or not conforming to specifications

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p-charts

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these measure attributes by taking samples and using a single decision-whether the item is good or bad; the sample size must be large

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c-charts

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when measuring attributes and it is desired to monitor the number of defects per unit, this is appropriate

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X and R charts

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these are used in variable sampling, we measure the actual weight, volume, number of inches, or other variable measurements and we develop control charts to determine the acceptability of rejection of the process based on those measurements

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n

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letter used in formulas to stand for the number of units in the sample

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project

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defined as a series of related jobs usually directed toward some major output and requiring a significant period of time to perform

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project management

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this can be defined as planning, directing, and controlling resources (people, equipment, material) to meet technical, cost and time constraints of the project

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pure project

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this is where a self-contained team works full time on the project

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functional project

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this is where the project is housed within a functional division

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matrix project

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this attempts to blend properties of functional and pure project structures; each project utilizes people from different functional areas

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Statement of work (SOW)

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this may be a written description of the objectives to be achieved with a brief statement of the work to be done and a proposed schedule specifying the start and completion dates

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work package

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this is a group of activities combined to be assignable to a single organizational unit

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work breakdown structure (WBS)

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this defines the hierarchy of project tasks, subtasks and work packages

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activities

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these are defined within the context of the work breakdown structure and are pieces of work that consume time

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Gantt chart

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sometimes referred to as a bar chart, it shows both the amount of time involved and the sequence in which activities can be performed

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earned value management (EVM)

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this is a technique for measuring project progress in an objective manner; it has the ability to combine measurements of scope, schedule, and cost in a project; when properly applied it provides a method for evaluating the relative success of a project at a point in time

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Critical path method (CPM)

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this was developed for scheduling maintenance shutdowns at chemical processing plants owned by Du Pont

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Critical path Method (CPM)

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this is based on the assumption that the project activity times can be estimated accurately and that they do not vary

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critical path

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this is the sequence of activities that form the longest chain in terms of their time to complete

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time-cost models

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these models, which are extensions of the basic critical path method, attempt to develop a minimum-cost schedule for an entire project and to control expenditures during the project

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