Operations Management Exam #1 Review (Chapters 1-4,6,;16) – Flashcards

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Three Functions all Organizations Have
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1. Marketing 2. Production/Operations 3. Finance/Accounting
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Supply Chain
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A global network of organizations & activities that supplies a firm with goods & services
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Ten Strategic OM Decisions
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1. Design of Goods & Services 2. Managing Quality 3. Process & Capacity Design 4. Location Strategy 5. Layout Strategy 6. Human Resources & Job Design 7. Supply-Chain Management 8. Inventory Management 9. Scheduling 10. Maintenance
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Services
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Economic activities that typically produce an intangible product (such as education, entertainment, lodging, government, financial, & health services)
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Nine Characteristics of Services
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1. Intangible 2. Produced & consumed simultaneously 3. Unique 4. High customer interaction 5. Inconsistent product definition 6. Often knowledge based 7. Services dispersed 8. Quality may be hard to evaluate 9. Reselling is unusual
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Nine Characteristics of Goods
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1. Tangible 2. Product can usually be kept in inventory 3. Similar products produced 4. Limited customer involvement in production 5. Product standardized 6. Standard tangible product tends to make automation feasible 7. Product typically produced at a fixed facility 8. Many aspects of quality for tangible products are easy to evaluate 9. Product often has some residual value
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Productivity
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The ratio of outputs (goods & services) divided by one or more inputs (such as labor, capital, or management)
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Single-Factor Productivity
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Indicates the ratio of one resources (input) to the goods & services produced (outputs)
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Single-Factor Productivity Equation
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Productivity = Units Produced/Input Used
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Multi-Factor Productivity
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Indicates the ratio of how many or all resources (inputs) to the goods & services produced (outputs)
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Multi-Factor Productivity Equation
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Production = Output/ Labor+Material+Energy+Capital+Misc.
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Six Reasons Domestic Business Operations Decide to Change to Some Form of International Operation
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1. Improve the Supply Chain 2. Reduce Costs 3. Improve Operations 4. Understand Markets 5. Improve Products 6. Attract & Retain Global Talent
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Globalization
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Means customers, talent, & suppliers are worldwide
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Advantages of Globalization
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Globalizations increases efficiency & adds value to: 1. Quality 2. Variety 3. Customization 4. Convenience 5. Timeliness 6. Cost
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Mission
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The purpose or rationale for an organization's existence
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Strategy
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How an organization expects to achieve its missions ; goals
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Competitive Advantage
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The creation of a unique advantage over competitors
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Three Ways to Achieve a Competitive Advantage
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1. Differentiation 2. Low Cost 3. Response
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Differentiation
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Distinguishing the offerings of an organization in a way that the customer perceives as adding value
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Experience Differentiation
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Engaging a customer with a product through imaginative use of the five senses, so the customer "experiences" the product
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Low-Cost Leadership
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Achieving maximum value, as perceived by the customer
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Response
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A set of values related to rapid, flexible, ; reliable performance
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Four Stages of a Product Life Cycle
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1. Introduction 2. Growth 3. Maturity 4. Decline
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SWOT Analysis
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A method of determining internal strengths ; weaknesses ; external opportunities ; threats
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Strategy Development Process (SWOT)
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1. Analyze the Environment 2. Determine the Corporate Mission 3. Form a Strategy
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Outsourcing
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Transferring a firm's activities that have traditionally been internal to external suppliers
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Advantages of Outsourcing
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Lower costs & more specialization
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Disadvantages of Outsourcing
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Added complexity & risk to the supply chain
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Three Phases of Project Management
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1. Planning 2. Scheduling 3. Controlling
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Four Steps of the Planning Phase
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1. Set the Goals 2. Define the Project 3. Develop Work Breakdown Structure 4. Identify Team/Resources
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Four Steps of the Scheduling Phase
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1. Sequence Activities 2. Assign People 3. Schedule Deliverables 4. Schedule Resources
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Three Steps in the Controlling Phase
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1. Monitor resources, costs, & quality
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Work Breakdown Structure (WBS)
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A hierarchical description of a project into more & more detailed components 1. Project 2. Major Tasks in the Project 3. Subtasks in Major Tasks 4. Activities (or "work packages") to be Completed
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Project Charter
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Intended to keep everyone on the same page and prevent a project creep. Contains the following four things: 1. Project scope 2. Goals 3. Who is on the team 4. Roles on the team
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Six Steps of PERT & CPM
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1. Define the project & prepare the work breakdown structure 2. Develop the relationships among activities. Decide which alternatives must precede & which must follow others 3. Draw the network connecting all the activities 4. Assign time and/or cost estimates to each activity 5. Compute the longest time path through the network. This is called the critical path 6. Use the network to help plan, schedule, monitor, & control the project
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Activity-on-Node (AON) Diagram
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A netwrok diagram in which nodes designate activities
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Critical Path Analysis
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A process that helps determine a project schedule
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Earliest Start (ES)
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Earliest time at which an activity can start, assuming all predecessors have been completed
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Earliest Finish (EF)
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Earliest time at which an activity can be finished
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Latest Start (LS)
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Latest time at which an activity can start so as to not delay the completion time of the entire project
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Latest Finish (LF)
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Latest time by which an activity has to finish so as to not delay the completion time of the entire project
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Forward Pass
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A process that identifies all the early times
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Earliest Start Time Rule
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Before an activity can start, all its immediate predecessors must be finished: 1. If an activity has only one immediate predecessor, its ES equals the EF of the predecessor 2. If an activity has multiple immediate predecessors, its ES is the maximum of all EF values of its predecessors.
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Earliest Start Time Equation
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= MAX {EF of all immediate predecessors}
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Earliest Finish Time Rule
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The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) & its activity time.
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Earliest Finish Time Equation
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= ES + Activity Time
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Backward Pass
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An activity that finds all the late start & late finish times
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Latest Finish Time Rule
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This rule is based on the fact that before an activity can start, all its immediate predecessors must be finished: 1. If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity that immediately follows it 2. If an activity is an immediate predecessor to more than one activity, its LF is the minimum of all LS values of all activities that immediately follow it.
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Latest Finish Time Equation
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= MIN{LS of all immediate following activities}
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Latest Start Time Rule
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The latest start time (LS) of an activity is the difference of its latest finish time (LF) & its activity time.
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Latest Start Time Equation
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= LF - Activity Time
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Slack Time
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Free time for an activity. Also referred to as free float or free slack
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Slack Time Equation
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= LS - ES or = LF - EF
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Gantt Charts
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Planning charts used to schedule & allocate time
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Forecasting
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The art & science of predicting future events
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Three Types of Forecasts
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1. Economic Forecasts 2. Technological Forecasts 3. Demand Forecasts
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Economic Forecasts
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Planning indicators that are valuable in helping organizations prepare medium-to long-range forecasts
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Technological Forecasts
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Long-term forecasts concerned with the rates of technological progress
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Demand Forecasts
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Projections of a company's sales for each time period in the planning horizon
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Cycles
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Patterns in the data that occur every several years
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Seasons
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Patterns in the data that occur every several week, months, or quarters
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Moving Averages
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A forecasting technique that uses an average of the "n" most recent periods of data to forecast the next period
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Moving Average Equation
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= SUM of Demand in Previous "n" Periods/"n"
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Weighted Moving Average Equation
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= SUM((Weight for Period "n")(Demand in Period "n"))/SUM Weights
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Three Problems of Moving Averages
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1. Increasing the size of n (the number of periods averaged) does smooth out fluctuations better, but it makes the method less sensitive to changes in the data 2. Moving averages cannot pick up trends very well. Because they are averages, they will always stay within past levels ; will not predict changes to either higher or lower levels. That is, they "lag" the actual values 3. Moving averages require extensive records of past data
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Three Benefits of Improving Quality
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1. Company Reputation 2. Product Liability 3. Global Implications
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Four Cost of Quality Categories
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1. Prevention Costs 2. Appraisal Costs 3. Internal Failure Costs 4. External Failure Costs
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Prevention Costs
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Costs associated with reducing the potential for defective parts or services
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Appraisal Costs
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Costs related to evaluating products, processes, parts, ; services
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Internal Failure Costs
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Costs that results from defective parts or services before delivery to customers
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External Failure Costs
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Costs that occur after delivery of defective parts or services
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Cost of Quality (COQ)
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The cost of doing things wrong- that is, the price of nonconformance
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Total Quality Management (TQM)
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Management of an entire organization so that it excels in all aspects of products ; services that are important to the customer
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PDCA
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A continuous improvement model of plan, do, check, ; act
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DMAIC
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A five step process improvement model: 1. Defines- the project's purpose, scope, & outputs & then identifies the required process information, keeping in mind the customer's definition of quality 2. Measures- the process ; collects data 3. Analyzes- the data, ensuring repeatability ; reproducibility 4. Improves- by modifying or redesigning, existing process ; procedures 5. Controls- the new process to make sure performance levels are maintained
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Six Sigma
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A program to save time, improve quality, ; lower costs
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+/- Six Sigma
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The variance of defects in production
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Employee Empowerment
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Enlarging employee jobs so that the added responsibility ; authority is moved to the lowest level possible in the organization
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Benchmarking
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Selecting a demonstrated standard of performance that represents the very best performance for a process or an activity
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Five Steps for Developing Benchmarks
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1. Determine what to benchmark 2. Form a benchmark team 3. Identify benchmarking partners 4. Collect ; analyze benchmarking information 5. Take action to match or exceed the benchmark
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Just-in-Time (JIT)
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Aims at continuing improvement ; enforced problem solving. Is a system designed to produce or deliver goods just as they are needed
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Three Benefits of JIT on Quality
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1. Cuts the cost of quality 2. Improves quality 3. Better quality means less inventory ; a better, easier-to-employ JIT system
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Seven Quality Tools
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1. Check Sheet 2. Scatter Diagram 3. Cause-and-Effect Diagram 4. Pareto Chart 5. Flowchart (Process Diagram) 6. Histogram 7. Statistical Process Control Chart
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Check Sheet
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An organized method of recording data. Examples would be recording tallies of the areas where defects are occurring or a sheet showing the type of customer complaints
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Scatter Diagram
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A graph of the value of one variable vs. another variable. An example would be a graph showing the relationship between length of a service call and the number of trips a repair person makes back to the truck for parts
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Cause-and-Effect Diagram
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A schematic technique used to discover possible locations of quality problems. They provide a good checklist for initial analysis
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Pareto Charts
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A graphic way of classifying problems by their level of importance, often referred to as the 80-20 rule. Used to help focus on problem solving efforts
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Flowcharts
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Block diagrams that graphically describe a process or system. Used to make sense of or explain a process
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Histograms
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A distribution that shows the frequency of occurrences of a variable. They may also provide insight as to the cause of variations
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Statistical Process Control (SPC)
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A process used to monitor standards, make measurements, ; take corrective action as a product or service is being produced
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Lean
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The use of continuous improvement tools to eliminate waste in a business. This is done by identifying and reducing non-value added activity in a business.
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Three Fundamentals of Lean
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1. Improve Throughput 2. Eliminate Waste 3. Remove Variability
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Takt Time
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The idea of Takt time is to set the rhythm or beat of the production flow. It represents how often a part must be produced to exactly match customer demand.
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Takt Time Equation
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= Net Available Work Time/Customer Demand
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Three Defining Steps in a Process
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1. Value Added 2. Non-Value Added but Required 3. Non-Value Added
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Eight Wastes of Downtown
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1. Defects-scrap, returns, warranties 2. Overproduction-producing more than the customer needs 3. Waiting, downtime, storage, idle time, setup time 4. Not Using Peoples Talents-not using everyone's knowledge 5. Transportation-moving materials internally or externally 6. Inventory-raw, WIP and Finished goods 7. Motion-movement of equipment or people at their workstation 8. Excessive Processing-orienting parts, excessive packaging time
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Value Stream Analysis (VSA)
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Systematic methodology of finding and implementing ways to incrementally improve a process. Can be done in weekly sessions or sometimes done in multiple day events.
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Seven Steps to a VSA
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1. Identify Scope of Process 2. Map Current State Map 3. Identify Waste 4. Create Ideal State of Process 5. Develop Guiding Principles 6. Create Future State Map 7. Develop Action Plan
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Current State Map
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There are 3 versions to every process 1.What it is supposed to be 2.What people think it is 3.What it ACTUALLY is
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Ideal State
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How would you design the process if money, space, time and resources were not to be considered? What is the perfect way to do the process?
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Future State Map
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The future state of the process which incorporates as many elements of guiding principles as possible and eliminates or minimizes the identified wastes. Team should reach CONSENSUS on the design of the future state. New process should be piloted to test methods before full scale implementation.
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Guiding Principles
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What makes an ideal state ideal?
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Kaizen/Rapid Improvement Event (RIE)
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Duration: Can last from several hours to several days. Team: Includes members of all departments and/or workstations that will be impacted by the changes to the process. Structure: Utilize tools such as line balance, cellular manufacturing and standard work to implement process changes needed.
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5s
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A systematic method to simplify, organize and setup work and storage areas to remove clutter and reduce space utilization and waste.
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The Five S's
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1.Sort 2.Set in Order 3.Shine 4.Standardize 5.Sustain
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Kanban
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Method to establish a pull system of materials and resources in an operation. Utilizes some visual signaling method to trigger a supply/production event. Traditional Kanban systems utilize a card to signal when materials should be ordered or produced.
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Poka-Yoke (Error Proofing)
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Utilizes methods that prevent an error from being made or makes it obvious when one is made.
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Standard Work
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1.Developing a standard way to do a task such that different operators get the same result. 2.Create a work instruction that can be followed by an untrained individual with no guidance other than the work instruction itself. 3.Establish method to track results and update work methods as improvements are developed
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Four Goals of Standard Work
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1.Provide everyone that does a task a visual tool to ensure proper execution. 2.Improve the reproducibility of a process and minimize the opportunities for error. 3.Ensure stable work flow through a process. 4.Make training easy and effective.
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What is the Goal?
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To make the company money Alex: Increase net profit while simultaneously increasing both ROI and Cash Flow Jonah: Increase Throughput while simultaneously lowering inventory and operational expense.
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Three Key Variables in the Goal
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1. Throughput 2. Inventory 3. Operational Expense (OE)
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Throughput
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The rate at which the system generates money through sales.
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Inventory
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All the money the system has invested in purchasing things it is going to sell
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Operational Expense (OE)
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All the money the system has invested in converting inventory into Throughput
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Work in Process (WIP)
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1.Anything not in its raw received form. 2.This is a form of inventory 3.Goal is to minimize or eliminate WIP
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Efficiency Equation
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= Time Used/ Time Available
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Two Things That Impact Balancing a Plant
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1. Dependent Variable 2. Statistical Fluctuations
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Boy Scout Example
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The ability to speed up is dependent on what is going on downstream. Fluctuations don't average out, they accumulate. Dependency limits the impact of positive fluctuations. To make up gaps, everyone must move faster than the set pace at the same time (except the leader).
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Jonah's #1 Rule
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Balance production to market demand
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Jonah's #1 Rule
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Balance production to market demand
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Jonah's #1 Rule
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Balance production to market demand
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