MBA 6040 Learning Objectives

Explain the elements of a service-product bundle

Services consist of bundles of services and goods, including explicit services, implicit services, and facilitating goods. It is important to provide the right mic of these three elements and not overlook the psychological (implicit) component of service

Explain service recovery and service guarantees

When services are not delivered as promised, the firm should provide quick and helpful service recovery. A service guarantee can be offered to ensure that the customer understands what is promised and what constitutes an error in service delivery. The service guarantee provides a way for operations to know exactly what is required.

Define operations and supply chain management

deals with the sourcing, production and distribution of the product or service along with managing the relationships with the supply chain partners

Describe the five tenets of lean thinking and the seven forms of waste in a lean system

1. Create Value - specify precisely what about a product or service creates value from the customer's perspective. Value is defined by the customer and provided in the product or service the customer needs at a place, time, and price the customer is willing to pay. Value is not what the firm thinks, rather the 'Voice of the Customer'. 2. Value Stream - identify, study, and improve the value stream of the process for each product or service. This identifies all the processing steps and tasks undertaken to complete a product or deliver a service from beginning to end. Can include both value-added and non-value-added processing steps and tasks. The goal is to eliminate non-value-adding processing steps and tasks. One technique supporting this tenet is value stream mapping. Requires direct observation of work and the flow of work within a process so that opportunities for improvement can be identified. In Japan, it is referred to as Gemba. Improvements come from studying the value stream map and then asking and answering the question "Is this step necessary in creating value for the customer?" 3. Ensure Flow - ensure that a flow within a process is simple, smooth, and error-free, thereby avoiding waste. The traditional approach would be to hold inventory high enough to cover up the problems and thus keep the stream moving. Lean thinking calls for the opposite: lowering inventory to expose the problems. When the problems have been solved, the inventory is lowered again to expose more problems. This is repeated until the process flows smoothly and simply at the true market demand rate while only needing a low level of inventory at any given time. Inventory in this analogy is a form of waste that hides problems that contribute to other forms of waste besides inventory. Simple, smooth, error-free flow, means that the production flows are simple and direct, and do not change from one production run or one customer to another. Small batches mean predictable flows that ensure that the exact appropriate resources, including labor and equipment, can be devoted to each production step. Sometimes suppliers will have to deliver daily or multiple times a day. In service operations, smooth and error-free flow is achieved by reducing waiting time for customers and providing exactly what the customer needs. Value stream mapping is used to reduce or eliminate waiting time. 4. Customer Pull - Produce only what is pulled by the customer. Requires replacing the push system typical in traditional mass production with the pull system of lean production. A pull system waits for the downstream process customer to signal a need for a good or service before producing it. No upstream process is authorized to produce until a downstream customer asks for it, thus minimizing inventory. An example of a push system is the "hub and spoke" system used by airlines. Flying point-to-point by some airlines is a pull system based on what the customer wants. No one wants to connect through a hub, but it's efficient. However, Southwest flew point-to-point using a pull system and revolutionized the industry. 5. Strive for Perfection - Requires continuous improvement of all processes as well as a radical redesign when necessary. More value is provided by the firm in its quest for ultimate perfection for the customer. Perfection is an affordable good or service, delivered rapidly and on time, that meets the needs of the customer. When a customer needs change, the definition of value also changes and so does the definition of what constitutes perfection. No end to the improvements that can be made. Quality is absolutely essential. Defective goods are clearly waste. Use the 5 Whys to strive for perfection. You could also use 5S to support your lean thinking when organizing a shop floor. Seven Forms of Waste 1. Overproduction - Producing more than the demand of customers, resulting in unnecessary inventory, handling paperwork, and warehouse space. 2. Waiting Time - Operators and machines waiting for parts to arrive from suppliers or other operations: customers waiting inline 3. Unnecessary Transportation - Double or triple movement of materials due to poor layouts, lack of coordination, and poor workplace organization. 4. Excess Processing - Poor design or inadequate maintenances of processes, requiring additional labor or machine time 5. Too much inventory - Excess inventory due to large lot sizes, obsolete items, poor forecasts, or improper production planning 6. Unnecessary Motion - Wasted movements of people or extra walking to get materials 7. Defects - Use of material, labor, and capacity for production of defects, sorting out bad parts, or warranty costs with customers

Define Operations Strategy

A consistent pattern of decisions for operations and the associated supply chain that is linked to the business strategy and other functional strategies, leading to a competitive advantage for the firm

Describe typical inputs and outputs of an operations transformation system

Bank Inputs - Tellers, staff, computer equipment, facilities, energy Outputs - Financial services Hospital Inputs - Doctors, nurses, staff, equipment, facilities, energy Outputs - Health services and healthy patients Airline Inputs - Planes, facilities, pilots, flight attendants, maintenance people, labor and energy Outputs - Transportation from one location to another

Carry out forecast analytics for a causal model

Causal forecasting analytics include regression, econometric models, input-output models, and simulation models. These methods are used in an attempt to establish a cause-and-effect relationship between demand and other variables. Causal methods can help in predicting turning points in time-series data and are therefore most useful for medium-to-long-range forecasting. y = estimated demand x = independent variable a = y intercept b = slope y = a + bx

Construct a process flowchart for a given process

Creating a visual diagram can be invaluable in documenting what happens within a transformation process. The following can help identify how the transformation process can be improved by changing some or all of the following elements: 1. Raw materials 2. Product or service design 3. Job design 4. Processing steps or activities used 5. Management control information 6. Equipment or tools 7. Suppliers

Illustrate with an example of a facilities strategy that considers: amount, size, timing, location, and type

Facilities strategy needs to be considered in an integrated fashion with these functional areas and will be affected by the following factors: 1. Predicted demand 2. Cost of facilities 3. Likely behavior of competitors .4 Business strategy 5. Global considerations Amount of Capacity Needed - Determined by forecasted demand and by a strategic decision by the firm about how much capacity to provide in relation to expected demand. - Can best be described by the notion of capacity cushion which is 100% - utilization. Large Cushion - Capacity in excess of average demand is planned and intentional. This is appropriate when there is an expanding market or when the cost of building and operating capacity is inexpensive relative to the cost of running out of capacity. - Electric utilities adopt this approach Moderate Cushion - More conservative with respect to capacity. Capacity is built to average forecasted demand comfortably with enough excess capacity to satisfy unexpected changes in demand as long as the changes are not hugely different from the forecast - An appliance manufacturer would adopt this approach Low Cushion - a small or nearly zero capacity cushion is planned to maximize utilization. This is appropriate when capacity is more expensive than stock outs - Oil refineries, paper mills, capital intensive industries Size of Facilities - Economies of scale are important in deciding amount of capacity because generally fixed costs can be spread lower over more units of production. - EoS occur for two reasons 1. The cost of building and operating large production equipment does not increase linearly with volume 2. Overhead related to managers and staff can be spread over more units of production. Diseconomies of scale can also occur. - The larger the facility, logistics diseconomies are present. In manufacturing, a larger firm would have more transportation costs than two smaller companies that are closer to their markets. - Can also occur because coordination costs increase in larger facilities Optimal facility size will depend on how high the fixed costs are and how rapidly the diseconomies of scale occur. Each firm seems to have its optimal facility size, depending on its demand volume, cost structure, product/service mix, and particular operations strategy Timing of Facility Decisions 1. Preemptive Strategy - firms leads by building capacity in advance of the needs of the market - provides a positive capacity cushion and may stimulate the market while at the same time preventing competition from coming in for a while. - Apple used this strategy 2. Wait-and-see Strategy - firm waits to add capacity until demand develops and the need for more capacity is clear. - company lags market demand, using a lower-risk strategy - A small or negative capacity cushion can develop, and a loss of potential market share may result. - Can be effective because of superior marketing channels or technology can allow the follower to capture market share. - Smartphone market, Android, Automobile companies Facility Location - Made by considering both quantitative and qualitative. Quantitative factors that affect the location decision may include a return on investment, net present value, transportation costs, taxes, and lead times for delivered goods and services - Factors can include language and norms, attitudes among workers and customers, and proximity to customers, suppliers, and competitors. - Front office services are typically located near the customer for customer convenience. Types of Facilities Product-focused facilities (55%) - produce one family or type of product or service, usually for a large market. An example is the Andersen Corporation main facility. Tends to centralize facilities into one location or a few locations. Other examples are large credit card processing operations and auto leasing companies that process leases for cars Market-focused facilities (30%) - located in the markets they serve. Fall into the category since they cannot be transported. Plants that require quick customer response or customized products or that have high transportation costs tend to be market focused. Mattresses are an example Process-focused facilities (10%) - have one or two technology at the most. Frequently produce components or subassemblies that are supplied to other facilities for further processing. Common in the auto industry and oil refineries General-purpose facilities (5%) - may produce several types of products and services using several different processes. Used to manufacture furniture and provide consumer banking and investment services. Hospitals are general purpose.

Contrast and compare the five types of product-flow processes

Continuous and assembly line processes are suited to high volume standard products that are produced at low cost with limited flexibility. The batch and job shop processes are suited to low-to-moderate volume products that are customized or produced in a high variety. The disadvantage of batch processes is the jumbled flow, which reduces throughput and efficiency. The project process is best for unique or creative products that are made one at a time. It requires intensive planning and scheduling and generally results in costly products or services.

Describe the steps in designing a quality control system

1. The first step in designing a quality control system is to identify the critical points in each process where inspection and testing are needed. The guidelines for doing so are as follows: - Ensure that incoming raw materials or purchased services meet specifications. Ideally, an incoming inspection can be eliminated, or reduced to sampling, by certifying the supplier. Supplier certification is normally granted to suppliers that have demonstrated they use SPC and other methods to achieve consistent quality performance. - Inspect products or services during the production produces. As a general rule, the product or service should be inspected by operators before irreversible operations take place before a great deal of value is added to the product. The cost of the inspection is less than the cost of adding more value to the product. A precise determination of where in the process the product or service should be inspected should be made from the process flowchart. - The third and critical inspection point is the finished product or service. In manufacturing, final products are frequently inspected or tested before shipping or before the product is placed in inventory. Defects are noted and fed back to assembly-line personnel so that they can correct the underlying causes. The defects are also used to compute a quality score for comparison among assembly plants. It's better to prevent defects from occurring rather than inspect and correct defects after production. However, some measurement via sampling inspection is necessary to maintain processes in a continuous state of statistical control and to facilitate improvement. Inspection cannot be eliminated, but it can be reduced by a vigorous process of prevention. 2. The second step in designing a quality control system is to decide on the type of measurement to be used at each inspection point. There are two options: - Variables measurement utilizes a continuous scale for product and service characteristics such as time, length, height, and weight. Other examples include the dimensions of parts, viscosity of liquids, and the time it takes to answer a customer service call. - Attribute measurement uses a discrete scale by counting the number of defective units or the number of defects per unit. When quality specs are complex, attribute measurements are required. Determining the type of measurement to use also involves the specification of measuring equipment 3. The third step in defining a quality control system is to decide on the amount of inspection to use. Generally, a production process that is in statistical process control minimizes the amount of inspection needed. Exceptions to this might be when process variables are difficult to define or when the consequence of failure is very high. 4. The final step in designing a quality control system is deciding who will do the inspection. It is best to have workers inspect their own output and be responsible for the quality of their work (quality at the source). A prevention program along with worker responsibility for quality will be less expensive than an extensive inspection program. in high contact services, there is no choice but to have high quality at the source. A well-designed quality control system requires a series of management judgments and the participation of all functions. The guiding principle is to first control the system and then aim for continuous improvement of the stability system.

Design a kanban system to achieve customer pull

A kanban system is used to pull parts through the production system. A fixed number of containers is provided for each part, thus limiting the amount of work-in-process inventory. The pull system can also be applied in service operations by providing only what is needed when it is needed by the customer. The purpose of the kanban system is to signal the need for more parts and ensure that those parts are produced just in time to support subsequent work centers. Parts are kept in small containers and only a specific number of containers are provided. When all containers are filled, production is stopped and no more parts are produced at that work center until the subsequent (receiving) work center provides an empty container. Thus, a work-in-process inventory is limited to available containers. The final assembly schedule is used to pull parts from one work center to the next just in time to support production needs, which are aligned with market demand. If production stops for a time in the receiving work centers, the supplying work centers also stop soon because their parts containers become full since their output is no longer being pulled by the receiving work center. The kanban system can be extended to suppliers so that the suppliers also respond (deliver) only when parts are pulled by the factory. With such a kanban system, all material is pulled through the production system by the final assembly schedule, using a highly-visible shop-floor and supplier control system. These are the characteristics of a pull system in manufacturing or service: - Visibility of a queue of customers, information, or inventory (for manufacturing) - Limits are defined for the length of the queue or amount of inventory - Work stops when the queue is filled at that location and employees move to other tasks - The employees manage the flow through the system

Explain the benefits and costs of CPFR

CPFR is a method used to share and improve forecasts between customers and suppliers along the supply chain and thereby reduce forecasting errors. When a difference in forecast numbers arises, a discussion occurs to identify the basis for the difference. After the discussion, the agreed forecast is developed and is the new basis for replenishment planning. This collaborative forecast gives visibility into the replenishment planning process beyond the usual ordering cycle. The most important parts to remember - Works best in B2B relationships - All parties must be willing to share sensitive information about demand, future sales promotions, new products, lead times, and so forth. Assurances must be provided that competitors will not have access to this proprietary information. - A long-term collaborative relationship that is mutually beneficial is needed. This will require an atmosphere of trust and ongoing management attention. - Sufficient time and resources must be provided for CPFR to succeed. There is a cost to receiving these benefits.

Describe the three phases of new product development

Concept Development - concerned with idea generation and the evaluation of alternative ideas for the new product. Sometimes referred to as the fuzzy front end. Several product concepts are usually generated and evaluated. The physical product is not designed during concept development; rather, the different approaches to defining and meeting market needs are considered and the best approach is selected by the company. The decision to proceed to the product design phase ordinarily requires top management approval. Product Design - Concerned with designing the new product. At the beginning there is a general idea but no specifics. At the end, the firm has a set of product specifications and digital images (or engineering drawings) specified in sufficient detail that production prototypes can be built and tested. Product design requires consideration of many different trade-offs between product cost, quality, and the schedule for bringing the new product to market. Pilot/Production Testing - products require testing before they are put into production. This may include performance tests of hardware, software, etc. During this phase, the process for production is finalized. Since product design is nearing completion, the process can be designed in great detail and tested for its capability to make the product that has been designed. 3D printing is used to make physical prototype development faster and easier.

Evaluate forecast accuracy using a variety of methods

Forecast accuracy is used for the following purposes: 1. To monitor erratic demand observations or outliers, which should be carefully evaluated and perhaps excluded from data analysis 2. To determine when the forecasting method is no longer tracking actual demand and needs to be reset 3. To determine the parameter values that provide the forecast with the best accuracy Four main way to measure 1. Cumulative Sum of Forecast Errors (CFE) 2. Mean Square Error (MSE) 3. Mean Absolute Deviation of Forecast Errors (MAD) 4. Mean Absolute Percentage Errors (MAPE) - CFE is the value of the bias built in to the forecast - square root of MSE is the well-known standard deviation - MSE uses the square of each error term so that positive and negative errors do not cancel each other out. - MAD is computed from the absolute values of the error in each period instead of the squared errors - MAD is the average error over n periods without regard to the positive or negative sign of the terror in each period. - MAD is widely used because it is easy to understand and easy to use - MAPE normalizes the error by computing a percentage error. Makes it possible to compare forecast errors for different time series data. - If one time series has low demand and another has much higher demand values, MAPE will be an accurate way of comparing the errors. Two measures impacting the accuracy of a forecast are bias and deviation. Both should be monitored routinely to control the accuracy of the forecasts obtained. For forecasting applications, tracking signal and MAD are two methods used to determine if bias and deviation, respectively, are well controlled.

Explain the benefits of modular design

Modular design is used to minimize the number of different parts needed to make a product line of related products. This can be done by designing standard modules and considering only the combinations of options that have significant market demand. Controlling the number of different components is important to operations since it allows you to produce more efficiently. Fewer components means fewer parts to be purchased. More parts = more complexity. Modular design offers a fundamental way to change the thinking about product design. Instead of doing it separately, the company designs products around standard component modules and standard processes. The product line is analyzed and divided into basic modules allowing for a great deal of product variety with a reduction in the number of unnecessary products.

Compare and contrast ISO 9000 standards and the Baldridge Award criteria

ISO9000 is based on a set of standards that address meeting customer requirements and continuous improvement. It requires well-defined and documented procedures along with trained operators who implement them to ensure a quality process, a consistent quality product, and improvement. Originally oriented toward compliance, of conformance quality but has since been revised to include customer requirements, continuous improvement, and management leadership to ensure that quality meets customer needs, not just conformance to specifications. The standard continues to be updated. Standards are meant to describe how a company should develop a system and processes for ensuring quality and specifies that a company has a quality system in place, including procedures, policies, and training, to provide quality that consistently meets customer requirements. Does not provide a complete quality system, because it does not address competitive strategy, information systems, and business results. The Baldridge award recognizes companies that achieve a total quality system as defined and measured by the Baldridge criteria. The criteria have become the common definition for excellence in quality and performance excellence for US organizations. Given to at most three organizations in each of six categories: manufacturing, service, small business, health care, education, and nonprofit. These organizations exhibit high levels of quality management practice and performance excellence. There are 7 categories and Items 1. Leadership 2. Strategy 3. Customers 4. Measurement, Analysis, and Knowledge management 5. Workforce 6. Operations 7. Results

Review the role of operations in the firm and the economy

It is the job of operations and supply chain managers to improve profitability and productivity for the firm. Increased productivity leads to increased economic growth and profitability. More output over time from the same resources increases GDP and allows people to get more of what they want beyond mere survival. Operations and supply chain management play a central role in achieving GDP growth and productivity not only for individual companies but for the entire economy of a country.

Compare lean suppliers to traditional manufacturing suppliers

Lean suppliers likely mean new supplier relationships that must be established to make lean production successful. Frequent deliveries and reliable quantity are required. Often times, long-term single-source contracts will be negotiated with suppliers. In a lean production system, suppliers are treated the same way internal work centers are treated. Suppliers may receive kanban cards and special containers and are expected to make frequent deliveries just in time for the process using those supplies. Suppliers are viewed as the external factory and as part of the production team. Lean production systems tend to use fewer suppliers. This is done to establish long term relationships with suppliers and to work together to ensure the quality of the items needed. Many companies develop an 'integrated supplier program' to move toward a lean production system. The features are as follows 1. Early supplier selection - Suppliers are selected before the parts reach the final design, and so the design can be worked out completely with the suppliers 2. Family-of-parts sourcing - A supplier takes responsibility for an entire family of parts, allowing the supplier to establish economic volumes and reduce the number of separate deliveries. 3. Long-term strategic relationship - An exclusive contract for the life of the part can be given to a supplier in exchange for a specific price schedule. 4. Paperwork reduction in receiving and inspection - Reducing the work associated with each order and delivery results in direct savings to the customer and supplier.

Explain how to implement a lean system

Management will be most effective if they can clearly communicate a sustained commitment to lean thinking with all workers. Lean requires a change in philosophy and culture along with changes in practices. 1. Create a product or service value from customer's perspective - Understand customer-defined value and work to eliminate waste 2. Identify, study, and improve the value stream - by using value stream mapping and Gemba observation to improve flow 3. Ensure simple, smooth, and error-free flow - by stabilizing the master schedule, creating uniform load and takt time, cross training workers, reducing setup time and lot size, moving to cellular manufacturing, and focusing on preventative maintenance 4. Produce only what is pulled by the customer - by using a kanban system for visual control and utilizing supplier relationships and co-location 5. Strive for perfection - by using the 5S's to organize the workspace and the 5 Whys to find root causes of problems. Can also use Kaizen for quick continuous improvement projects. To implement a Kaizen, use the following approach: 1. Establish a team of employees that will study the process that needs improvement. These employees should come from different functions and levels of the organization to represent all stakeholders involved with the process. 2. Have the team determine what the customer values. The customer can be internal (next process) or external to the organization. Only the customer can specify what is valued in the good or service 3. Construct a value stream map of all process steps and the associated times or value that is added. then analyze the value stream map and eliminate non-value-adding activities by searching for seven forms of waste. The 5S and 5 Whys technique may be applied at this step to identify and reduce wasted time, space, effort, and resources. 4. Ensure flow to be smooth, steady, and error-free to meet customer demand as it occurs. Stabilize the master schedule to match market demand, produce in small lots, change the layout, and cross-train workers 5. Use customer demand to pill the flow of work through the process. Do not produce until the output is required by the customer. Let the customer signal when work from the process is needed 6. Implement the necessary changes identified by the team to achieve lasting improvement. Then repeat the cycle on another internal process or to the processes of upstream suppliers and downstream customers.

Calculate process-flow capabilities using analytics

Process analytics is essential to process improvement. Little's Law relates inventory to throughput time and flow rate of a stable system. The bottleneck resource determines the capacity of the entire process. I = T x R I = average number of items in a system T = average time it stays in the system R = the product of the average arrival rate to the system

Analyze a process by asking a wide variety of questions informed by the process flowchart

Pizza USA Example 1. What is the capacity of the process? Look at all resources we have - 3 minutes per order and can process 20 orders per hour - chef takes 5 mins per order and can process 12 orders per hour - oven takes 6 mins per order or 10 orders per hour 2. What is the bottleneck in the process? - The bottleneck here is the oven. The assistant and chef both have idle time. You can reallocate tasks but it won't speed up the process. The only way to improve flow would be to add another oven - Process cannot produce more than the bottleneck can process 3. What is the throughput time? - Processing + Waiting time - 1+3+2+24+1+1 = 32 - Adding an oven will increase capacity and move the bottleneck to the chef, but will not change the throughput time. Changes would have to be made in the actual process of cooking, preparations, or other flow times to reduce throughput time 4. What is the flow rate? - Flow rate is determined by the bottleneck capacity of 10 orders per hour. 10 is the maximum, and the actual could be lower. If demand or supply is less than capacity, then the smaller of the two will determine the flow rate. 5. What does it cost to make a pizza if avg demand is 60% of capacity? - Assume the chef gets paid $15 an hour, the asst $11 an hour, and overhead cost is 50% of direct labor cost. at 60% capacity, the average flow rate is 6 pizzas per hour. The cost per hour of operations is $15+$11 = $26 for labor plus $13 for overhead (50% direct labor costs) which equals $39 an hour/6 = $6.50 per pizza. The cost of ingredients is $2.00 per pizza, the total cost is $8.50 per pizza. 6. How can the unit cost of pizzas be reduced? - Increased demand through pricing, advertising, or other means - If demand increases to exceed capacity, increase the flow rate of the entire transformation process by means of automation or process improvements - Reduce the unit cost of labor, materials, or overhead.

Evaluate the role of technology in service management

Technology allows the automation of services for greater efficiency that can result in lower costs and more uniform quality. AI offers the prospect of providing some services that are indistinguishable from human service providers. Both AI and service employees will be needed depending on the type of service provided.

Define and calculate process capability

A process is capable when it can consistently meet its specifications with high probability. This requires that the specification width is greater than the process variation width for a process that is centered. Cp = (Spec Width)/(Process Width) or Cp = (USL - LSL)/6o Spec Width - the difference between the upper specification limit and the lower specification limit. Process Width - computed using six standard deviations of the measurement being monitored. - If Cp = 1, the process is considered to be minimally capable of meeting the specifications. - A process with Cp < 1 is not capable and must be improved by reducing the standard deviation or increasing the specification width - If Cp = 1, the corresponding defect rate of 2600ppm - If Cp = 1.33, the defect rate goes down to 33ppm!! A slight increase in the process capability (Cp) can dramatically drop the defect rate. Customers often specify Cp values 1 to 1.5 or even as high as 2.0. Cp requires the process to be centered for an accurate measure of process capability so a more widely used version was devised (Cpk). u - the mean value o - standard deviation Cpk = Min ((USL - u)/3o, (u - LSL)/3o) Control charts control the process and capability charts determine capability.

Define capacity and utilization

Capacity - maximum output that can be produced over a specific period of time. Can be measured in terms of output such as number of units produced, tons produced, or number of customers served over a specified period. Can also be measured by physical asset availability such as number of hotel rooms available. Utilization is the relationship between actual output and capacity and defined by the following formula: Actual output divided by capacity x 100%. Useful measure for estimating how busy a facility is or the proportion of total capacity being used. It is almost never reasonable to plan for 100 percent utilization since spare capacity is needed for planned and unplanned events. It is possible for firms to operate above 100 percent utilization.

Contrast and compare the chase and level strategies

Chase - The size of the workforce is changed to meet, or chase, demand - not necessary to carry inventory or use demand and supply planning options available for aggregate planning. - Workforce absorbs all changes in demand - Results in a fair amount of hiring and layoff as demand is chased Level - The size of the workforce and the rate of regular-time output are constant - Variations in demand must be absorbed by using inventories, overtime, temp workers, subcontracting, cooperative arrangements, or any of the demand-influencing options discussed above. - Holds the regular workforce at a fixed number to the rate of workforce output is fixed over the aggregate planning period. - Can respond to fluctuations in demand by using the demand and supply planning options. They are two extremes. one makes no changes while the other makes constant changes as demand changes. Many firms use a combination of the two.

Evaluate how concurrent engineering deals with misalignment

Concurrent engineering uses overlapping phases for product design rather than a sequential approach where each function completes its work before the next one starts, which helps reduce the amount of misalignment by utilizing the cross-functional teams to stay aligned. All functions are involved from the beginning. In the first stage, marketing has the major effort, but other functions also have a role. During product design, marketing reduces its effort, but not to zero, while engineering has the major role. Finally, operations picks up the lead as the new product is being tested and launched into the market.

Describe the effect on the service delivery system of customer contact

Customer contact depends on the duration and degree of interaction between the provider and customer. Generally, high-contact services are performed in the front office. Low-contact services are performed away from the customer in the back office. In addition to contact, the degree of uncertainty introduced by the customer will have an impact on efficiency within the service system

Explain the nature of cross-functional decision making with operations

Decision making is highly interactive and systemic in nature although organizational silos create functional prerogatives. Marketing would be cross-functional with operations in the way of quality design and quality management as well as the types of processes selected. Finance and Accounting would interface with Operations on the Inventory levels, degree of automation, and the costing systems used HR would interface with Operations on capacity and scheduling decisions as well quality improvement and skills

Identify the demand and supply options that are available for S&OP

Demand Management 1. Pricing - matinee movie prices, factory discounts, etc 2. Advertising and promotion- Golf courses advertise to lengthen the season 3. Backlogs or complementary offering - 4. Development of complementary offerings - producing a lawnmower and snowblower Supply Management 1. Hiring and laying off employees - any firm 2. Using overtime and undertime - furloughs, manufacturing, education, government 3. Using part-time or temporary labor - restaurants, hospitals, supermarkets, and department stores 4. Carrying inventory - only used in manufacturing 5. Subcontracting - manufacturer of toys or call center operations during peak periods 6. Cooperative arrangements - electric utilities

Describe why forecasting is imporatant

Different decisions require different forecasting methods, including the following in operations. Process design, capacity planning, aggregate planning, scheduling, and inventory management. Decisions outside of the operation that requires forecasts are long-range marketing programs, pricing, new product, and new service introduction cost estimating, and capital budgeting. Forecast errors are common and a little variation is ok, but large variation can cause problems. If you over-forecast, surplus inventory or workers could be cut to lower production levels. If capacity is strained, overtime or extra workers may be added or sales may be lost to stock-outs. Comes in form of clearance racks.

Describe the features of focused operations

Focused operations are used to separate products and processes that have different requirements in terms of the production process or the markets served. Each type of process or product family should be assigned to a different facility or plant-within-a-plant.

Describe the origins and evolution of lean thinking

In the 1960s, Toyota determined it could not copy the American system of mass production. Demand was too low and there was a sever lack of resources. Toyota also developed a strong aversion to waste. Scrap and rework were deemed wasteful, and so was inventory that tied up storage space and valuable resources. Toyota realized it needed to produce automobiles in much smaller batches, with much lower inventory, using simple but high-quality processes and involving workers as much as possible. JIT manufacturing came to the US in 1981 at Kawasaki motorcycle in Nebraska which used TPS ideas. JIT focused primarily on inventory reduction but ignored other aspects of TPS. In 1990 Womack, jones, and Roos studied JIT automobile manufacturing in Japan, the US, and Europe and popularized the term lean thinking. It is defined as the systematic elimination of waste in all production processes by providing exactly what the customer needs and no more.

Explain how S&OP is done

Includes the following characteristics and assumptions: 1. A time horizon of about 12 months with updating of the plan on a periodic basis, perhaps monthly 2. An aggregate level of demand for one or a few categories of a product or service. The demand is assumed to be fluctuating, uncertain, or seasonal 3. The possibility of changing both supply and demand variables 4. A variety of management objectives which might include low inventories, good labor relations, low costs, flexibility to increase future output levels and good customer service 5. Facilities that are considered fixed and cannot be expanded or reduced 1. Decisions are made related to the workforce are made concerning hiring, laying off, overtime, and subcontracting. Decisions regarding output and inventory levels are also made. Determine appropriate resource mix. 2. Can involve plans to influence demand by factors such as pricing, advertising, and product mix 3. Matches supply and demand using a cross-functional team approach. 4. Updated monthly using 12-month rolling planning horizon.

Compare the three strategies for new product introduction

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. Customer needs are determined, and then the firm organizes the technology, resources, and processes needed to design a product and supply the customer. The market will "pull" through the products that are made Technology Push - technology is the primary determinant of the products the firm should make. The firm pursues a technology-based advantage by developing superior technologies in its materials and components. The products are pushed into the market, and marketing's job is to create demand for these new products. Since the products have superior technology, they will have a natural advantage in the market. Interfunctional View - This view combines some of the advantages of the first two strategies with products that fit the market needs (new or existing markets) and have a technical advantage as well. To accomplish this, all functions should collaborate to design the new products needed by the firm. This is done by forming cross-functional teams that are responsible for the new product. This is the most appealing of the three views but also the most difficult to implement. Often, friction must be overcome to achieve the degree of cooperation required for interfunctional product development to succeed. If it can be implemented, the interfunctional approach usually will produce the best results.

Discuss the uses of mass customization and 3D Printing

Mass customization is the ability to make a customized product at approximately the same cost as a mass-produced product. This can be done for some products by using flexible automation, robotics, modular design, and information systems. There are three types of mass customization: modular production/assemble-to-order, fast changeover, and postponement 3D printing and additive manufacturing can rapidly produce prototypes or unique custom products from a 3D digital design. Rather than replace traditional manufacturing it will complement it. Product designs can be transmitted and products can be printed when they are needed.

Explain why a stabilized master schedule is required for smooth flow

Master scheduling is done to achieve a uniform load, where the assignment equals amounts of work to each machine or worker. A master schedule requires daily production within the master schedule and mixed-model assembly. Takt time matches the rate of output with the average demand rate in the market. Also must reduce setup time, lot sizes, and maintenance to achieve a smooth flow. In lean production systems, the takt time of production should be set equal to the average demand rate of the market to match production with demand and thus minimize inventories. Producing at rates less than takt time will result in shortages in meeting demand, and producing at greater rates will result in building up inventory. The objective is to produce the right quantity each day - no more no less. This minimizes finished goods inventory since the production output is closely matched to demand. This also helps reduce work-in-process and raw materials inventories since stabilizing the master schedule provides nearly the constant demands on all work centers and outside suppliers.

Use forecast analytics to calculate a moving average and exponential smoothed average

Moving Average = no seasonal pattern, trend, or cycle components are assumed to be present N = number of periods At = Average Demand Dt = Demand t = period at time At = (Dt +Dt-1 + ... + Dt-N+1)/N Example: Calculate the 3 period and find A3 Period 1: Dt = 10 Period 2: Dt = 18 Period 3: Dt = 29 N = 3 A3 = (29 + 18 + 10)/3 = 19 Forecast error is et = Dt - Ft See example chart in textbook Exponential Smoothed Average At = xDt + (1 - x)At-1 At-1 = the old average (20) Dt = the newest demand (24) x = the weight placed on new demand (.1; always between 0 and 1) .1(24) + .9(20) = 20.4 when x = .1 .5(24) + .5(20) = 22 when x = .5 .9(24) + .1(20) = 23.6

Describe the elements of operational strategy and alignment with business and other functional strategies

Operations strategy consists of mission, objectives, strategic decisions, and distinctive competence. These four elements must be tightly aggregated with one another and with other functions. The operation's mission should be aligned with the business strategy. Possible missions for operations include low cost, fast new product introduction, fast delivery, or best quality.

Contrast pollution prevention, pollution control, and pollution practices

Prevention - Structural investments that reduce or eliminate pollutants from the production process. Investments might include designing the process to waste fewer raw materials, redesigning products or processes to reduce pollutants, or investing in equipment that requires less energy input. Control - Technology but also structural investments but differ from prevention in that they are used to treat or dispose of pollutants and harmful by-products that are output from the process. These technologies most commonly are added to existing processes that were designed and purchased in the past, perhaps when firms were less concerned. Pollution control extends an existing process by adding another step to deal with the waste by-products from the process. Practices - affect the way the processes are used. Such practices include retaining workers to use the existing process in a new manner and increasing cross-functional coordination to seek creative and innovative improvements in environmental impact. These practices also include monitoring and reporting systems related to the way processes operate. Other practices may involve changes in the supply chain, by selecting new suppliers who certify their materials are obtained using sustainable methods.

Explain the principles of process redesign

Process redesign is used for changing how a process is carried out. It is often cross-functional in nature and may require a complete overhaul of work methods, flows, and information systems. Changes may include eliminating some steps and combining others, or as extreme as a complete reconfiguration of process steps.

Characterize product quality based on four dimensions

Quality is defined as meeting or exceeding customer requirements now and in the future. The four dimensions of product quality are quality of design, quality of conformance, "abilities", and field service 1. Quality of Design - determined before a product is produced. Usually the responsibility of a cross-functional product design team, including members from marketing, engineering, operations and other functions. 2. Quality of Conformance - producing a product to meet specifications. Availability, reliability, and maintainability each have a time dimension and extends the meaning of quality over some time horizon. 3. the "abilities" - Availability, reliability, maintainability Availability = Uptime / (Uptime + Downtime) Reliability = MTBF mean time between failure Maintainability = MTTR mean time to repair 4. Field service - represents maintenance, repair, or replacement of the product after it has been sold. Also called customer service. Related to variables such as promptness, competence, and integrity. Quality is more than just good product design; it extends to quality control of production, quality over the life of the product, and quality of field service after the sale.

Explain quality, from a customer perspective

Quality is defined as meeting or exceeding customer requirements now and in the future. The product or service is fit for the customer's use

Explain how setup time, lot size, layout, and maintenance are related to lean thinking

Reducing lot sizes, setup times, and lead times is the key to decreasing inventories in a lean production system and ensures smooth flow. Service and administrative activities should also work toward a fast changeover from one customer to the next and a reduced lead time. Traditional manufacturing managers have focused on reducing production run times per unit and gave too little attention to setup times. Because of that, huge reductions are possible. This allows for dramatic inventory reductions and much smaller lot sizes. Ensuring flow has a natural effect on layout and equipment. Since inventory is kept so low, spaces can be much smaller because of the reduced storage space needed. Lean plants need only 1/3 of the space of non-lean plants. In a lean production system, all stockrooms have been eliminated as stock is kept on the shop floor very close to where it is used. Eliminates wasted space and wasted transportation of materials. Preventative maintenance is extremely important. Since inventory is so low, it is critical to avoid unplanned equipment failures. A lean system requires the right amounts of capacity, inventory, workers, and everything operating as planned--each and every day. Repairs are performed between shifts so that it does not disrupt the regular daily work schedule.

Appraise how globalization has affected services

Service outsourcing and offshoring are trends that present opportunities and challenges. Offshoring often is used to obtain talent from widespread global locations, particularly for information or communications intensive services. A strategic approach should be taken to offshoring and outsourcing, not just chasing low-cost labor, since changing costs, quality, and reliable suppliers in the long-run should be considered

Explain Six Sigma and the DMAIC process

Six Sigma is an organized and systematic approach to process improvement developed in the 1980s to reflect very high levels of consistent quality in all its processes. Six sigma equates to a defect rate of 3.4 parts per million. Six Sigma quality is related to the normal probability distribution denoting the standard deviation of the processes. Most quality control charts are created for processes that are at three sigma. It utilizes the five DMAIC steps: 1. Define - the process is selected for improvement and the project charter is specified 2. Measure - Quality variables valued by the customer are measured and goals are set for improvement 3. Analyze - The root cause of the current defect levels are identified, and alternatives are considered for process changes. The analysis step uses some or all of the seven quality tools. 4. Improve - The process is changed and checked for improvement 5. Control - This step uses a control chart or measurements to ensure that the process improvement is not lost over time. Six Sigma can be applied to processes in manufacturing, service, or administrative areas. Careful analysis using statistical tools is needed to identify the root causes of defects perceived by customers, analyze changes, and control the improved process.

Explain how mistake-proofing and the supply chain are integrated with quality management planning

Supplier certification is a good way to ensure that suppliers have a quality system in place to prevent defects from occurring. - More than 50% of the produce or service inputs are purchased from suppliers - When working with suppliers, several principles should be followed - First, the supplier should be involved in the design of the process to avoid defects from the start. - Suppliers often can recommend new or different materials or services that can improve quality or prevent defects - A concept called rolled yield accounts for the cumulative defect rate observed by the final customer If you can certify a supplier, you give that supplier control over its processes and can pass an audit by the customer or independent agency. The audit ensures a quality system is in place including documenting procedures, training, and ongoing statistical control of the process to prevent defects.

Analyze trends in operations and supply chain management

Sustainability trends and the triple bottom line. Operations and SCM are going above just environmental sustainability efforts to include social and economic sustainability efforts. Examples of these include, Environmental - minimize impact on the environment. reduce carbon footprint, lower greenhouse gases, lower emissions. Social - hiring a diverse workforce, ethical practices, providing equal opportunity, and safe working conditions Economic - making a sufficient profit for firm survival into the future.

Describe the criteria for selecting suppliers for collaboration

Technical Expertise: Does the supplier have technical expertise that the company does not have? Capability: Can the supplier meet targets for cost, quality, and product performance? Capacity: Can the supplier meet the product development schedule and the ramp-up to production? Low Risk: What is the risk that the supplier will not perform as expected?

Explain how the process view of business is cross-functional

The process view is the idea that a business is a set of horizontal processes that are interconnected with the objective of meeting customer needs. Viewing a business as a collection of processes emphasizes the cross-functional nature of decision making. It illustrates that functions must make handoffs to one another in executing a process. As a result, time and information can be lost between processes. In some cases, the number of steps in a process is so large that the system cannot function in an efficient manner.

Describe the four common methods of qualitative forecasting

1. Delphi - Forecast developed by a panel of experts answering a series of questions on successive rounfs. Anonymous responses are fed back on each round to all participants. Three to six rounds may be used to obtain convergence. Uses include capacity or facility planning. To assess when technological changes might occur 2. Market Surveys - PAnels, questionnaires, test markets, or surveys used to gather data on market conditions. Uses include total company sales, major product groups, or individual products 3. Life-Cycles Analogy - Prediction based on the introduction, growth, and maturity phases of similar products. Uses include long-range sales for capacity or facility planning. 4. Informed Judgement - Forecast by a group or an individual on the basis of experience, hunches, or facts about the situation. No rigorous method is used. Uses include total sales and individual products. Most used primarily for long-or-medium range forecasting involving process design, facilities planning, and marketing programs.

Apply continuous improvement concepts using the seven quality tools

1. Flowcharts - Understanding the process and identifying possible problem areas. Reveals steps and waste that can be removed. 2. Check sheets - Tabulating data on the problem area. 3. Histograms - Illustrating the frequency of occurrence of measures. Can indicate that some data points are outliers, or there may be odd shapes to the distribution that indicate skewness or more than one peak in distribution. 4. Pareto charts - Identifying the most important problems. The vital few of the failure modes account for the most observed defects. Shows which defects we should try to eliminate first. Very helpful when one is first studying a quality problem because it helps to focus problem-solving effort where it can have the most impact. 5. Cause-and-effect diagrams - Showing possible causes of the problem. The appearance is that of a fishbone. The bones are probable causes of the problem. Each major cause is then broken down into more detailed causes. 6. Scatter diagrams - Investigating relationships between two variables. If a particular CE are related, the relationship will be apparent as a linear or curved pattern. 7. Control charts - Holding the gains from process improvement. New charts with new centerlines and upper and lower limits can be created, based on data from the improved process.

Define the various costs associated with aggregate planning

1. Hiring and Layoff Costs - consists of recruiting, screening, and training costs required to bring new employees up to full productive skill - Layoff costs include employee benefits, severance pay and other associated costs 2. Overtime and Undertime Costs - consist of regular wages plus an overtime premium - reflect use of employees at less than full productivity 3. Inventory Carrying Costs - associated with maintaining goods in inventory, including cost of capital, cost of storage, obsolescence, and deterioration. - Expressed as a percentage of the dollar value of inventory ranging from 15-35% per year. - Can be thought of an interest charge assessed against the dollar value of inventory held in stock. 4. Subcontracting Costs - price paid to another firm to produce the units. - Can be greater or less than the cost of producing units in-house but typically would be greater than in-house costs. 5. Part-time Labor Costs - less than regular labor - no benefits - may be a union contract 6. Cost of Stock out or Backorder - reflect the effect of reduced customer service. - extremely difficult to estimate, but should capture loss of customer goodwill, loss of profit from the order, and possible loss of future sales.

Describe the five main decisions made by operations and supply chain managers

1. Process - What type of process should be selected? - How should the service delivery system be designed? - How should material and customer flows be managed? - What principles of lean systems should be deployed? - How should environmental and global goals be met? 2. Quality - What should the quality standards be? - How can quality be controlled and improved? - What statistical approaches should be used? - How should the suppliers and customers be involved in quality? 3. Capacity - What is the facility strategy for size, location, and timing? - How should Sales and Operations Planning be implemented? - How should variable demand be handled with capacity adjustments? - What priority rule should be used for scheduling? 4. Inventory - How much inventory should be held? - What should the order size and reorder frequency be? - Who should hold the inventory? - How can the inventories of suppliers and customers be coordinated? 5. Supply Chain - What suppliers should be used for products and services? - How should sourcing be conducted and evaluated - What form of transportation should be used? - How should warehouses be used to allow economic flow of materials?

Evaluate factors that impact forecasting method selection

A forecasting method should be selected on the basis of five factors 1. User and system sophistication 2. Time and resources available 3. Use or decision characteristics - Time series for highly accurate short-range forecasts for inventory, scheduling, and pricing decisions. - Auto manufacturer involving process, facility planning, and marketing programs are long-range in nature requiring qualitative or causal methods to be more accurate. - In the middle time-frame is aggregate planning, capital budgeting, and new product and new service introduction decisions which utilize time series or causal methods 4. Data availability - Box-Jenkins requires 60 data points - Poor data means poor forecasts An economic model may require data that is not available in the short term so another method must be used. 5. Data pattern - will affect the type of forecasting method used. - if time series is level, a fairly simple method can be used. IF more complex, more advanced methods will be needed. - The pattern will also determine whether a time series will suffice or whether causal models are needed - If the data pattern is unstable over time, a qualitative method may be selected.

Differentiate the characteristics of a service organization from a manufacturing organization

A front office service is defined by simultaneous production and consumption. This makes it impossible to store a service for later us, and a service often must be located near customers, with the exception of technology-delivered services such as communication and electricity. The customer is part of the service process during the production and may introduce inefficiencies, but at the same time sales opportunities. Back office services can be buffered from the uncertainty introduced by customers and therefore can be designed for higher efficiency.

Differentiate how employees are unique in lean systems

A lean system requires cross-trained workers who can perform multiple tasks. Cross-training is a critical HR responsibility. Workers are trained to operate several machines in a manufacturing setting or perform a variety of tasks in a service setting. The worker should be trained for several different work areas to set up machines, do routine maintenance, and inspect the parts. The main benefit is that they supply flexibility to the production system. A flexible workforce will require changing the way workers are selected, trained, evaluated, and rewarded. Lean pay systems reward workers on the basis of the number of different jobs they can perform. This encourages workers to learn more skills and become more flexible. Lean is built on the idea of 'Respect for people'. It is respect for everyone's ideas, desire to do a better job, and commitment to improving. This is an essential principle to the TPS that engages employees to accomplish lean objectives. Managers must earn respect by trusting workers and staff to improve the system and encourage them to participate in decision making. Quality teams and suggestion teams are used to actively engage workers and engineers in problem-solving activities. Since inventory is not available to cover up problems, an environment of participation, respect, and teamwork must be created to get all employees to contribute individually and collaboratively toward production requirements and problem-solving. Lean production systems cannot be implemented without worker understanding and cooperation.

Describe how big data analytics are used to forecast

Allowing firms to develop more sophisticated forecasts, using both internal and external data. Big data analytics requires data, computing capabilities, and expertise. Internal data sources include sales and loyalty programs where external data sources include social media or Google Analytics.

Differentiate lean and Six Sigma

Both approaches start with customer needs, but they are differing in objectives, organization, methods, and types of projects. However, they are complimentary in seeking process improvement and can be used in an integrated fashion. Objectives of projects Lean - eliminating waste defined as NVAs Six Sigma - reducing defects in a product or service Organization of projects Six Sigma - relies on full-time black belts as project leaders and vice president champions who select and oversee. More selective in workforce involvement. Black belt training is extensive and requires four weeks of training plus successful completion of one or more projects Lean - rely on part-time project leaders and more informal hierarchy. Involve the entire workforce. Training is more informal and typically lasts a week. Methods Used Lean - relies on a process that starts with a customer need. Do not stress the use of data or statistical analysis. Value stream mapping is used. Uses the concept of pulling demand from the customer to flow the product or service. Does not formally track project cost savings or revenue improvements Six Sigma - Utilizes a highly structured DMAIC system. Does not use flowcharting. Insists on careful tracking by finance Types of Projects Lean - projects are simple and based on employee suggestions. Last about a week and use kaizen events and have much less impact. Will attack many more small improvement projects Six Sigma - used for complex and difficult process improvement projects. Take 3-6 months and aimed at large impact, often $200k in savings or more

Illustrate how the operations and supply chain can become more sustainable

Environmental Sustainability Efforts - Curtail air, water, and landfill pollution - Work toward zero landfill waste - Reduce energy consumption/Increase renewable energy sources - Minimize transportation and total carbon footprint - Work with suppliers to use recyclable and biodegradable packaging - Incorporate product reuse, end-of-life return, and recycling Social Sustainability Efforts - Hiring a diverse workforce - Providing equal opportunities for all employees - Insuring safe and healthy working conditions - Fair handling of employee grievances - Ethical practices of every sort - Following all state and federal regulations Economic Sustainability - Achieved by a business and operations strategy that achieves a sustainable competitive advantage - A firm without a competitive advantage can easily lose market share and customers eroding its top line along with increased costs and ultimately low profitability and threaten firm survival. - Can be achieved with the help of all supply chain partners - Need not cost more or reduce profits - Through product redesign or process changes, costs can be reduced and profits improved.

Explain how companies should make process selection decisions

First, the company should consider market conditions. The assembly-line approach requires a mass market for inexpensive houses, the batch process requires a lower-volume market for medium-priced houses, and the project process requires a market for expensive houses. Second, the company should consider capital requirements. The assembly line process will require a great deal more capital than will the project or batch flow. The assembly line requires capital for a factory and equipment and to finance the partially completed or finished houses. The finance function will be involved with operations in making these capital decisions. Third, should be the availability and cost of labor. The project and batch processes require costly skilled labor, such as plumbers, electricians, and carpenters. Unionization may affect both the supply and the cost of labor. The human resources function will be involved in these decisions with operations because of the employee selection, training, and compensation issues involved. Fourth, The company should consider the state of technology for both process and product. Are innovations likely to come along that will make a process obsolete before the costs are recovered? Assessment of these conditions is part of risk evaluation for the process. In summary, four factors appear to influence process selection: 1. Market Conditions 2. Capital Requirements 3. Labor 4. Technology

Analyze two types of supply chain strategies

Imitative Products - Product Life Cycle: Greater than 2 years - Contribution Margin: 5% to 20% - Avg Forecast Error: 10% - Avg stockout rate: 1% to 2% - Avg forced EOY Markdown: 0% - Objective: Predictable supply at low cost - Manufacturing: High utilization and low-cost production - Inventory: High turnover - Suppliers: Selected for cost and quality Innovative Products - Product Life Cycle: 3 months to 1 year - Contribution Margin: 20% to 60% - Avg Forecast Error: 40% to 100% - Avg stockout rate: 10% to 40% - Avg forced EOY Markdown: 10% to 25% - Objective: Respond quickly to unpredictable demand - Manufacturing: Excess buffer capacity and short throughput time. May have low utilization of capacity - Inventory: Significant buffers of parts or finished goods. May have low turnover - Suppliers: Selected for speed, flexibility, and quality

Design a process control system using control charts

Process control charts should be considered for critical points in the inputs (by the suppliers), as part of the process, and for the outputs. The critical control points are best identified in a flow chart of the process. 2 Key principles: 1. Random variability - no matter how perfectly a process is designed, there will be some random variability in quality characteristics from one unit to another. The aim of process control is to find the range of natural random variation of the process and ensure that production stays within that range. 2. Process control is that production processes are not usually found in a state of statistical control when SPC is not being used. The first job of process control managers is to seek out these sources of unnecessary variation, the assignable cause variation, and bring the process into statistical control so that the remaining variation is due only to random causes. SPC is carried out using control charts. - y-axis represents the quality variable or attribute characteristic that is being controlled - x-axis represents time or a particular sample taken from the process. - The centerline is the average of the quality characteristic being measured - The upper control limit represents the maximum acceptable random variation - The lower control limit indicates the minimum acceptable variation Generally, control limits are set at three standard deviations from the mean. These control limits will include 99.74 percent of the random variation used. 1. Periodic samples are taken and plotted on a control chart 2. When the average of the variable being measured falls within the control limits, the process is okay to continue. 3. From time to time the measurements will signal that the process is no longer in a state of control. 4. Signals include - measurements fall outside of control limits - when plotted, reveal a trend upwards or downwards; an oscillation where measurements alternate in a highly volatile up-down manner, or a pattern with many measurements being within one standard deviation of the centerline. 5. When this happens, the process is not in a state of control and a search should be made to determine assignable causes 6. Assignable (or special) changes are changes in material, operator, or machine that can be corrected and control restored. 7. Common causes occur randomly when the process is under statistical control. Common causes cannot be removed without changing the design of the process itself. 8. The process can be maintained in a constant state of statistical control in which there is only natural random variation in the output of the transformation process.

Describe process thinking and system boundaries

Process thinking is the point of view that all work can be seen as a process. It begins by describing the process of interest as a system. A system is defined by its boundaries, inputs, outputs, suppliers, customers, and system flows. A conversion system made up of workers, customers, and activities carry out the transformation which can then be analyzed by using the system boundaries. The boundaries delineate the resources and activities in the system boundaries is always difficult and somewhat arbitrary, but it must be done to separate the system being analyzed from the larger system or organization in which it operates. A prerequisite to process-flow analysis is the definition of the system to be analyzed. Systems definition requires isolation of the system of interest from its environment by defining a boundary, customers, outputs, inputs, suppliers, and process flows.

Compare product imitator and innovator strategies

Product Imitator - (low cost) business strategy which is typical of a mature, price-sensitive market with a standardized product (or service). Objectives should emphasize cost as the dominant objective, and operations should strive to reduce costs through strategic decisions such as superior process technology, low personnel costs, low inventory levels, a high degree of vertical integration, and quality improvement aimed at saving cost. Marketing and finance also need to pursue and support the product imitator strategy Product Innovator - Typically used in emerging and possibly growing markets where advantage can be gained by bringing to market superior-quality products in a short amount of time. Price is not the dominant form of competition, and higher prices are charged, thereby putting a lower emphasis on costs. Objective is flexibility to introduce superior new products rapidly and effectively. Operations strategic decisions include the use of new product introduction teams, flexible automation that is adapted to new products, a workforce with flexible skills, and rapidly responding to marketplace changes. Finance and marketing are needed to support this strategy as well

Evaluate an example of Quality Function Deployment

QFD is used to connect customer attributes to engineering characteristics. This typically is done through a technique called the house of quality that can be used for both manufacturing and services. Pizza USA Delivery For services, it can be difficult to identify the ECs which are sometimes hard to define and measure. Here, ECs are delivery time (minutes) and customer satisfaction (periodic survery), proportion of orders delivered on time, and the temperature of the pizza when it is delivered. Customer survey will measure intangible CAs such as a clean-cut appearance, courtesy, order completeness, and general satisfaction with the service. CAs are now related to each of the ECs.

Differentiate the ways to compete with operations objectives

Quality - Means satisfying customer requirements. Operations must be capable of meeting requirements set forth by marketing. If you want to compete for w quality, strategic decisions related to product or service design, operations, and the supply chain must support customers' expectations for quality. Quality can be improved by taking preventative measures in training workers, design of the process, and eliminating rework and non-value-added activities. Customers expect very low levels of defects Low Cost - focus on conforming to customer requirements in product/service design and operations processes by eliminating rework, scrap, and other non-value-added activities. Requires investment in automation and information systems as well as an emphasis on conformance quality to reduce costs. Delivery - strategic decisions support fast or on-time delivery depending on the expectations of the customers. Industrial customers want on-time delivery because they schedule loading docks at warehouses or retail stores and do not want several trucks delivering at the same time. When quality improvement efforts reduce NVAs, the time to produce and deliver the product is indirectly reduced. Time can also be reduced by directly improving process changeover times, simplifying complex operations, and redesigning the product or service for fast production Flexibility - If we reduce delivery time, flexibility will automatically improve. Other types of flexibility can be directly improved by adding capacity, buying more flexible equipment, training workers to perform a wider variety of tasks, or redesigning the product or service for high variety.

Attribute how cost of quality is related to financial performance

Quality can both improve revenues and reduce costs. The cost of quality measures the lack of conformance to customer requirements. Quality costs can be divided into control costs and failure costs. Control costs are due to prevention or appraisal. Failure costs may be due to internal or external failures. All except prevention are costs that can be prevented by doing things right the first time. Cost of quality can be about 30% of sales and typically ranges from 20 to 40 percent. A reduction in the cost of quality can lead to significant improvement in profit. Best managed companies reduce their costs of quality from 30 percent of sales to as little as 5 percent in a few years. . Control costs are related to activities that remove defects from the production stream and are done before the process starts. Done by prevention and appraisal. Failure costs are incurred during the production produces or after the product is shipped. Ex: Scrap, rework. downtime. Many companies that invest in prevention activities such as training, process planning, and new-product review, they avoid costs that occur later in production (appraisal, internal failure) or after production (external failure). Investing one dollar in prevention activities generates more than one dollar in appraisal, internal and external failure cost savings. Those savings flow directly to the bottom line which in many companies will more than double profits Improving quality affects profitability and ROI through both increasing revenues and reducing costs. Quality has a powerful effect on the top line, margins, and ultimately the bottom line.

Articulate some key barriers to successful quality improvement efforts

Quality improvement efforts fail when management does not lead by example and does not take a systems approach drive-by customer needs. It's not the approach that matters, it's the implementation process. To improve quality, a company must change its values, culture, and management philosophy which is not easy. - One of the main reasons for quality implementation failure is the lack of leadership by middle and top management - Management should do much more than pay lip service to quality improvement efforts. - They must provide the resources for training, improvement specialists, and time for employees to participate in improvement. - It is only with the full attention that quality will improve. - Sometimes managers instinctively blame the employees when there is a quality failure. Only managers can change the underlying system causes of the quality problem, not the employees. - managers who believe in trade-offs can also take quality improvements off track. To them, quality cannot be achieved without sacrificing schedule or cost. - They would rather ship the product and fix the problem later and believe it costs too much to produce good quality. - managers sometimes interfere with teamwork, which is essential to achieving good quality - Do not delegate decision making to the team - Continue to reward individual performance over team performance - Reward system is ingrained in the organization and is one of the most difficult things to change - Many efforts fail because suppliers are not certified for a functioning quality system. Suppliers attempt to inspect quality into the product rather than develop a preventative approach to quality system design. - Producing quality requires a systems approach to management which must be driven by customer needs. This approach conflicts with the philosophies and values of some companies. Quality improvement requires deep cultural change and executives have to lead by example to make the transformation. - The only way to institute successful quality improvement is through extensive education of all employees and constant leadership at all levels of management.

Correctly place examples of products on the product-process matrix

The product-process matrix provides a dynamic view of the process selection decision by considering the life cycle of both products and processes. The strategy is defined by a position on the matrix for the firm's product and process. The matrix helps provide coordination between marketing decisions about product and operations decisions concerning the process. Project + Unique, one-of-a-kind product = Building Job Shop + Low volume, low standardization = Printing Batch + Low Volume, Multiple Products = Heavy Equipment Assembly Line + Higher Volume, few major products = Auto Assembly Continuous + High volume, high standardization, commodity = Sugar Refinery

Explain the nature of global operations and supply chains

The scope of operations and supply chain strategy has expanded to a global basis, particularly for business pursuing a global business strategy. Facilities and plants are located on a worldwide basis, not country by country. Products and services can be shifted between countries. Components, parts, and services, are sourced on a global basis. The best worldwide suppliers are sought, regardless of their national origin. The entire supply chain is global in nature. The global corporation uses global product design and process technology. Process technology is standardized globally. In a global corporation, demand for products or services is considered on a worldwide, not a local basis. Economies of scale are greatly magnified, and costs can be lowered. Logistics and Inventory control systems are also global in nature. this makes it possible to coordinate shipments of products and components on a worldwide basis.

Describe the differences among order fulfillment processes

The second dimension of process is the type of order fulfillment: MTS, MTO, ATO. With MTS, the replenishment cycle for inventory is separate from the customer order cycle. In contrast, the MTO process is set in motion by customer orders and geared to delivery performance. The MTS process provides standard products, whereas the MTO process is suited to custom orders. The ATO process makes subassemblies in advance for inventory and assembles them into a final product when ordered by the customer.

Organize a variety of service offerings into the service delivery system matrix

The service delivery system matrix is formed by juxtaposing customer wants and needs in terms of customizing a service against the service delivery system. The combination of service package and service process design elements results in three main service types: customer-routed services, co-routed services, and provider-routed services. Each of these service types has different requirements for operations managers to meet.

Define the attributes of the service -profit chain

The service-profit chain indicates how value provided to the customer drives customer satisfaction and loyalty, which leads to revenue growth and profitability. External customer value is the result of employees who are productive, satisfied, and retained by the firm. These employees must be appropriately selected, trained, and rewarded. The service-profit chain indicates the crucial role of employees in delivering services and financial results.

Distinguish service quality from product quality based on its distinct measurement

There are five dimensions that distinguish service quality: tangibles, dependability, responsiveness, assurance, and empathy. These measures can be obtained by surveying customers. SERVQUAL 1. Tanglibles - the appearance of physical facilities, equipment, facilitating goods, and personnel from the service firm. 2. Dependability - The ability of the service firm to perform the promised service dependably and accurately without errors 3. Responsiveness - The ability of the service firm to provide service that is prompt and helpful to the customer. 4. Assurance - the knowledge and courtesy exhibited by employees of the service firm and their ability to convey trust and confidence 5. Empathy - The caring, individualized attention that the service firm provides to its customers. SERVQUAL uses a survey to measure these five dimensions

Apply the quality cycle to a product or service

There is a cycle of product or service quality - from understanding customer needs through the quality of design, production, and use by the customer. This cycle is controlled by specifying quality attributes, determining how to measure each attribute, setting quality standards, establishing a testing program, and finding and correcting causes of poor quality. Continuous improvement of the system through the prevention of defects is the preferred approach. Implementation of planning, control, and improvement of quality through the quality cycle requires this sequence of steps: 1. Define quality attributes on the basis of customer needs 2. Decide how to measure each attribute 3. Set quality standards 4. Establish appropriate tests for each standard 5. Find and correct causes of poor quality 6. Continue to make improvements

Recall the two key quality pioneers and their main ideas

Two key quality pioneers, Deming and Juran, have taken somewhat different approaches to quality but also have much in common. Deming emphasized the role that management should take in quality improvement. He defined quality as continuous improvement of a stable system. This definition emphasizes two things. First, all systems must be stable in a statistical sense. This requires measurements to be taken of quality attributes and monitored over time. If these measurements have a constant variance around a constant average, the system is stable. The second aspect is continuous improvement of the various systems to reduce variation and better meet customer needs. Expressed his philosophy in 14 famous points. 1. Create constancy of purpose 2. Adopt the new philosophy 3. Cease dependence on mass inspection 4. End the practice of awarding business on the basis of price tag alone 5. Improve constantly, and forever, systems of production 6. Institute training 7. Focus management and supervisors on leadership 8. Drive out fear 9. Break down barriers between departments 10. Eliminate programs, exhortations, and slogans 11. Eliminate arbitrary quotas 12. Remove barriers 13. Encourage lifelong education 14. Put everyone to work on implementing these 14 points Also a strong advocate of applying statistics to stabilize and improve processes. Advocates that the idea that most quality problems are caused by poor systems, not by the workers. Management must change the system to improve quality, no the employees. All levels of management must accept responsibility for quality. Juran originated the idea of the quality trilogy: planning, control, and improvement of quality. Suggested that companies should identify the major business goals, customers, and products required. New products are introduced after they are carefully tested and when they meet a verified customer need. Much of quality improvement requires careful planning to ensure that the most important quality problems are attacked first. "the vital few"