MGMT 302 Midterm
quality
"The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs."
10 strategic OM decisions
1. Design of goods and services 2. Managing quality 3. Process strategy 4. Location strategies 5. Layout strategies 6. Human resources 7. Supply-chain management 8. Inventory management 9. Scheduling 10. Maintenance
four life cycle stages
1. Introduction 2. Growth 3. Maturity 4. Decline
operating characteristic (OC) curve
:describes how well an acceptance plan discriminates between good and bad lots. A curve pertains to a specific plan—that is, to a combination of n (sample size) and c (acceptance level). It is intended to show the probability that the plan will accept lots of various quality levels. producer's risk: avoid the mistake of having a good lot rejected Consumer Risk: The opposite
computer numerical controls (CNC)
Computer intelligence often controls this new machinery, allowing more complex and precise items to be made faster. Such machinery, with its own computer and memory
Inventory management
Considers inventory ordering and holding decisions and how to optimize them as customer satisfaction, supplier capability, and production schedules are considered.
Process strategy
Determines how a good or service is produced (i.e., the process for production) and commits management to specific technology, quality, human resources, and capital investments that determine much of the firm's basic cost structure
Managing quality
Determines the customer's quality expectations and establishes policies and procedures to identify and achieve that quality
product focused
High-volume, low-variety processes
Cost
One driver of a low-cost strategy is a facility that is effectively utilized.
response
Response is often thought of as flexible response, but it also refers to reliable and quick response.
five forces model
These potential competing forces are immediate rivals, potential entrants, customers, suppliers, and substitute products.
resources view
This means thinking in terms of the financial, physical, human, and technological resources available and ensuring that the potential strategy is compatible with those resources.
Attribute inspection
classifies items as being either good or defective. It does not address the degree of failure
Henry Ford and Charles Sorensen
combined what they knew about standardized parts with the quasi-assembly lines of the meatpacking and mail-order industries and added the revolutionary concept of the assembly line, where men stood still and material moved.
Automated Guided Vehicles (AGVs)
electronically guided and controlled carts used in manufacturing and warehousing to move parts and equipment
Low-cost leadership
entails achieving maximum value as defined by your customer. It requires examining each of the 10 OM decisions in a relentless effort to drive down costs while meeting customer expectations of value.
contributions from other disciplines
industrial engineering, statistics, management, and economics also biology, anatomy, chemistry, physics
productivity variables
labor, capital, management
Flexible response
may be thought of as the ability to match changes in a marketplace where design innovations and volumes fluctuate substantially.
Employee empowerment
means involving employees in every step of the production process. Consistently, research suggests that some 85% of quality problems have to do with materials and processes, not with employee performance.
Robust design
means that the product is designed so that small variations in production or assembly do not adversely affect the product
managment process
planning, organizing, staffing, leading, and controlling
SWOT analysis
strengths, weaknesses, opportunities, threats
acceptable quality level (AQL)
the poorest level of quality that we are willing to accept
Process control
the use of information technology to monitor and control a physical process. For instance, process control is used to measure the moisture content and thickness of paper as it travels over a paper machine at thousands of feet per minute.
Capital
which contributes about 38% of the annual increase.
Management
which contributes about 52% of the annual increase.
Techniques for building employee empowerment include
(1) building communication networks that include employees; (2) developing open, supportive supervisors; (3) moving responsibility from both managers and staff to production employees; (4) building high- morale organizations; and (5) creating such formal organization structures as teams and quality circles.
seven concepts for an effective TQM program
(1) continuous improvement, (2) Six Sigma, (3) employee empowerment, (4) benchmarking, (5) just-in-time (JIT), (6) Taguchi concepts, and (7) knowledge of TQM tools
Firms achieve missions in three conceptual ways
(1) differentiation, (2) cost leadership, and (3) response
what is very different about the selection of services is the poor definition of the
(1) intangible differences between products and (2) the intangible expectations customers have of those products
nine areas of technology
(1) machine technology, (2) automatic identification systems (AIS), (3) process control, (4) vision systems, (5) robots, (6) automated storage and retrieval systems (ASRSs), (7) automated guided vehicles (AGVs), (8) flexible manufacturing systems (FMSs), and (9) computer-integrated manufacturing (CIM)
issues that outsourcing brings
(1) reduced employment levels, (2) changes in facility requirements, (3) potential adjustments to quality control systems and manufacturing processes, and (4) expanded logistics issues, including insurance, tariffs, customs, and timing.
considerations are important to the design of a product.
1) robust design, (2) modular design, (3) computer-aided design/computer-aided manufacturing (CAD/CAM), (4) virtual reality technology, (5) value analysis, and (6) sustainability/life cycle assessment (LCA).
Crashing a project involves four steps:
1. Compute the crash cost per week (or other time period) for each activity in the network. If crash costs are linear over time, the following formula can be used: 2. Using the current activity times, find the critical path(s) in the project network. Identify the critical activities. 3. If there is only one critical path, then select the activity on this critical path that (a) can still be crashed and (b) has the smallest crash cost per period. Crash this activity by one period. If there is more than one critical path, then select one activity from each critical path such that (a) each selected activity can still be crashed and (b) the total crash cost per period of all selected activities is the smallest. Crash each activity by one period. Note that the same activity may be common to more than one critical path. 4. Update all activity times. If the desired due date has been reached, stop. If not, return to Step 2.
PERT and CPM both follow six basic steps:
1. Define the project and prepare the work breakdown structure. 2. Develop the relationships among the activities. Decide which activities must precede and which must follow others. 3. Draw the network connecting all the activities. 4. Assign time and/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, and control the project.
Current Challenges in Operations Management
1. Globalization 2. Supply Chain Partnering 3. Sustainability 4. Rapid Product Development 5. Mass Customization 6. Lean Operations
three functions to create goods and services
1. Marketing, which generates the demand, or at least takes the order for a product or service (nothing happens until there is a sale). 2. Production/operations, which creates, produces, and delivers the product. 3. Finance/accounting, which tracks how well the organization is doing, pays the bills, and collects the money.
Reasons to study OM
1. OM is one of the three major functions of any organization, and it is integrally related to all the other business functions. All organizations market (sell), finance (account), and produce (operate), and it is important to know how the OM activity functions. Therefore, we study how people organize themselves for productive enterprise. 2. We study OM because we want to know how goods and services are produced. The production function is the segment of our society that creates the products and services we use. 3. We study OM to understand what operations managers do. Regardless of your job in an organization, you can perform better if you understand what operations managers do. In addition, understanding OM will help you explore the numerous and lucrative career opportunities in the field. 4. We study OM because it is such a costly part of an organization. A large percentage of the revenue of most firms is spent in the OM function. Indeed, OM provides a major opportunity for an organization to improve its profitability and enhance its service to society. Example 1 considers how a firm might increase its profitability via the production function.
The management of projects involves three phases
1. Planning: This phase includes goal setting, defining the project, and team organization. 2. Scheduling: This phase relates people, money, and supplies to specific activities and relates activities to each other. 3. Controlling: Here the firm monitors resources, costs, quality, and budgets. It also revises or changes plans and shifts resources to meet time and cost demands.
Four Types of Processes
1. Process Focused 2. Repetitive Focus 3. Product Focus 4. Mass Customization
Techniques for Improving Service Productivity
1. Separation 2. Self-Service 3. Postponement 4. Focus 5. Modules 6. Automation 7. Scheduling 8. Training
The project organization may be most helpful when:
1. Work tasks can be defined with a specific goal and deadline. 2. The job is unique or somewhat unfamiliar to the existing organization. 3. The work contains complex interrelated tasks requiring specialized skills. 4. The project is temporary but critical to the organization. 5. The project cuts across organizational lines.
project scheduling serves several purposes:
1. it shows the relationship of each activity to others and to the whole project. 2. It identifies the precedence relationships among activities. 3. It encourages the setting of realistic time and cost estimates for each activity. 4. It helps make better use of people, money, and material resources by identifying critical bottlenecks in the project.
OM Role in Service
1. tangible component of many services is important 2. the process 3. realize that the customer's expectations are the standard against which the service is judged 4. must expect exceptions
Check Sheets
A check sheet is any kind of a form that is designed for recording data. In many cases, the recording is done so the patterns are easily seen while the data are being taken [see Figure 6.6(a)]. Check sheets help analysts find the facts or patterns that may aid subsequent analysis. An example might be a drawing that shows a tally of the areas where defects are occurring or a check sheet showing the type of customer complaints.
Sustainability and Life Cycle Assessment (LCA)
Addressing sustainability and life cycle assessment (LCA) are two ways of doing this. Sustainability means meeting the needs of the present without compromising the ability of future generations to meet their needs. An LCA is a formal evaluation of the environmental impact of a product. Both sustainability and LCA are discussed in depth in the supplement to this chapter.
Cause-and-Effect Diagrams
Another tool for identifying quality issues and inspection points is the cause-and-effect diagram, also known as an Ishikawa diagram or a fish-bone chart. Figure 6.7 illustrates a chart (note the shape resembling the bones of a fish) for a basketball quality control problem—missed free-throws. Each "bone" represents a possible source of error.
Assignable Variations
Assignable variation in a process can be traced to a specific reason. Factors such as machine wear, misadjusted equipment, fatigued or untrained workers, or new batches of raw material are all potential sources of assignable variations.
To form a decision tree, we use the following procedure:
Be sure that all possible alternatives and states of nature (beginning on the left and moving right) are included in the tree. This includes an alternative of "doing nothing." Payoffs are entered at the end of the appropriate branch. This is the place to develop the payoff of achieving this branch. The objective is to determine the expected monetary value (EMV) of each course of action. We accomplish this by starting at the end of the tree (the right-hand side) and working toward the beginning of the tree (the left), calculating values at each step and "pruning" alternatives that are not as good as others from the same node.
Introductory Phase
Because products in the introductory phase are still being "fine-tuned" for the market, as are their production techniques, they may warrant unusual expenditures for (1) research, (2) product development, (3) process modification and enhancement, and (4) supplier development. For example, when the iPhone was first introduced, the features desired by the public were still being determined. At the same time, operations managers were still groping for the best manufacturing techniques.
Decline Phase
By the time a product is mature, competitors are established. So high-volume, innovative production may be appropriate. Improved cost control, reduction in options, and a paring down of the product line may be effective or necessary for profitability and market share.
Maturity Phase
By the time a product is mature, competitors are established. So high-volume, innovative production may be appropriate. Improved cost control, reduction in options, and a paring down of the product line may be effective or necessary for profitability and market share.
why quality is important:
Company reputation: An organization can expect its reputation for quality—be it good or bad—to follow it. Quality will show up in perceptions about the firm's new products, employment practices, and supplier relations. Self-promotion is not a substitute for quality products. Product liability: The courts increasingly hold organizations that design, produce, or distribute faulty products or services liable for damages or injuries resulting from their use. Legislation such as the Consumer Product Safety Act sets and enforces product standards by banning products that do not reach those standards. Impure foods that cause illness, nightgowns that burn, tires that fall apart, or auto fuel tanks that explode on impact can all lead to huge legal expenses, large settlements or losses, and terrible publicity. Global implications: In this technological age, quality is an international, as well as OM, concern. For both a company and a country to compete effectively in the global economy, products must meet global quality, design, and price expectations. Inferior products harm a firm's profitability and a nation's balance of payments.
contract manufacturing
Contract manufacturing is becoming standard practice in many industries, from computers to automobiles. For instance, Johnson & Johnson, like many other big drug companies whose core competency is research and development, often farms out manufacturing to contractors. On the other hand, Sony's core competency is electromechanical design of chips. This is its core competency, but Sony is also one of the best in the world when it comes to rapid response and specialized production of these chips. Therefore, Sony finds that it wants to be its own manufacturer, while specialized providers come up with major innovations in such areas as software, human resources, and distribution. These areas are the providers' business, not Sony's, and the provider may very well be better at it than Sony.
Supply-chain management
Decides how to integrate the supply chain into the firm's strategy, including decisions that determine what is to be purchased, from whom, and under what conditions.
Design of goods and services
Defines much of what is required of operations in each of the other OM decisions. For instance, product design usually determines the lower limits of cost and the upper limits of quality, as well as major implications for sustainability and the human resources required.
The steps for developing benchmarks are
Determine what to benchmark. Form a benchmark team. Identify benchmarking partners. Collect and analyze benchmarking information. Take action to match or exceed the benchmark.
Scheduling
Determines and implements intermediate- and short-term schedules that effectively and efficiently utilize both personnel and facilities while meeting customer demands.
Human Resources
Determines how to recruit, motivate, and retain personnel with the required talent and skills. People are an integral and expensive part of the total system design.
Advantages of PERT
Especially useful when scheduling and controlling large projects. Straightforward concept and not mathematically complex. Graphical networks help highlight relationships among project activities. Critical path and slack time analyses help pinpoint activities that need to be closely watched. Project documentation and graphs point out who is responsible for various activities. Applicable to a wide variety of projects. Useful in monitoring not only schedules but costs as well.
Histograms
Histograms show the range of values of a measurement and the frequency with which each value occurs [see Figure 6.6(f)]. They show the most frequently occurring readings as well as the variations in the measurements. Descriptive statistics, such as the average and standard deviation, may be calculated to describe the distribution. However, the data should always be plotted so the shape of the distribution can be "seen." A visual presentation of the distribution may also provide insight into the cause of the variation.
To build the house of quality, we perform seven basic steps:
Identify customer wants. (What do customers want in this product?) Identify how the good/service will satisfy customer wants. (Identify specific product characteristics, features, or attributes and show how they will satisfy customer wants.) Relate customer wants to product hows. (Build a matrix, as in Example 1, that shows this relationship.) Identify relationships between the firm's hows. (How do our hows tie together? For instance, in the following example, there is a high relationship between low electricity requirements and auto focus, auto exposure, and number of pixels because they all require electricity. This relationship is shown in the "roof" of the house in Example 1.) Develop importance ratings. (Using the customer's importance ratings and weights for the relationships shown in the matrix, compute our importance ratings, as in Example 1.) Evaluate competing products. (How well do competing products meet customer wants? Such an evaluation, as shown in the two columns on the right of the figure in Example 1, would be based on market research.) Determine the desirable technical attributes, your performance, and the competitor's performance against these attributes. (This is done at the bottom of the figure in Example 1.)
Six Sigma
In a statistical sense, it describes a process, product, or service with an extremely high capability (99.9997% accuracy). For example, if 1 million passengers pass through the St. Louis Airport with checked baggage each month, a Six Sigma program for baggage handling will result in only 3.4 passengers with misplaced luggage. The more common three-sigma program (which we address in the supplement to this chapter) would result in 2,700 passengers with misplaced bags every month. The second TQM definition of Six Sigma is a program designed to reduce defects to help lower costs, save time, and improve customer satisfaction. Six Sigma is a comprehensive system—a strategy, a discipline, and a set of tools—for achieving and sustaining business success:
Growth Phase
In the growth phase, product design has begun to stabilize, and effective forecasting of capacity requirements is necessary. Adding capacity or enhancing existing capacity to accommodate the increase in product demand may be necessary.
CHARACTERISTICS OF SERVICES
Intangible: Ride in an airline seat Produced and consumed simultaneously: Beauty salon produces a haircut that is consumed as it is produced Unique: Your investments and medical care are unique High customer interaction: Often what the customer is paying for (consulting, education) Inconsistent product definition: Auto insurance changes with age and type of car Often knowledge based: Legal, education, and medical services are hard to automate Services dispersed: Service may occur at retail store, local office, house call, or via Internet. Quality may be hard to evaluate: Consulting, education, and medical services Reselling is unusual: Musical concert or medical care
Six Sigma is a comprehensive system—a strategy, a discipline, and a set of tools—for achieving and sustaining business success:
It is a strategy because it focuses on total customer satisfaction. It is a discipline because it follows the formal Six Sigma Improvement Model known as DMAIC. This five-step process improvement model (1) Defines the project's purpose, scope, and outputs and then identifies the required process information, keeping in mind the customer's definition of quality; (2) Measures the process and collects data; (3) Analyzes the data, ensuring repeatability (the results can be duplicated) and reproducibility (others get the same result); (4) Improves, by modifying or redesigning, existing processes and procedures; and (5) Controls the new process to make sure performance levels are maintained. It is a set of seven tools that we introduce shortly in this chapter: check sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control.
JIT is related to quality in three ways:
JIT cuts the cost of quality: This occurs because scrap, rework, inventory investment, and damage costs are directly related to inventory on hand. Because there is less inventory on hand with JIT, costs are lower. In addition, inventory hides bad quality, whereas JIT immediately exposes bad quality. JIT improves quality: As JIT shrinks lead time, it keeps evidence of errors fresh and limits the number of potential sources of error. JIT creates, in effect, an early warning system for quality problems, both within the firm and with vendors. Better quality means less inventory and a better, easier-to-employ JIT system: Often the purpose of keeping inventory is to protect against poor production performance resulting from unreliable quality. If consistent quality exists, JIT allows firms to reduce all the costs associated with inventory.
quickness
Johnson Electric Holdings, Ltd., with headquarters in Hong Kong, makes 83 million tiny motors each month. The motors go in cordless tools, household appliances, and personal care items such as hair dryers; dozens are found in each automobile. Johnson's major competitive advantage is speed: speed in product development, speed in production, and speed in delivery.
Lean operations
Lean is the management model sweeping the world and providing the standard against which operations managers must compete. Lean can be thought of as the driving force in a well-run operation, where the customer is satisfied, employees are respected, and waste does not exist. The theme of this text is to build organizations that are more efficient, where management creates enriched jobs that help employees engage in continuous improvement, and where goods and services are produced and delivered when and where the customer desires them. These ideas are also captured in the phrase Lean.
Entering Data
Let us again consider the Milwaukee Paper Manufacturing project. Recall that this project has eight activities (repeated below). The first step is to define the activities and their precedence relationships. To do so, we select File|New to open a blank project. We type the project start date (as July 1), then enter all activity information (see Program 3.1). For each activity (or task, as Microsoft Project calls it), we fill in the name and duration. The description of the activity is also placed in the Task Name column in Program 3.1. As we enter activities and durations, the software automatically inserts start and finish dates. The next step is to define precede
Natural Variations
Natural variations affect almost every process and are to be expected. Natural variations are the many sources of variation that occur within a process, even one that is in statistical control. Natural variations form a pattern that can be described as a distribution.
Automatic Identification Systems (AISs) and RFID
New equipment, from numerically controlled manufacturing machinery to ATMs, is controlled by digital electronic signals. Electrons are a great vehicle for transmitting information, but they have a major limitation—most OM data does not start out in bits and bytes.
Mass customization
Once managers recognize the world as the marketplace, the cultural and individual differences become quite obvious. In a world where consumers are increasingly aware of innovation and options, substantial pressure is placed on firms to respond in a creative way. And OM must rapidly respond with product designs and flexible production processes that cater to the individual whims of consumers. The goal is to produce customized products, whenever and wherever needed.
transition to production
One of the arts of management is knowing when to move a product from development to production
Sustainability
Operations managers' continuing battle to improve productivity is concerned with designing products and processes that are ecologically sustainable. This means designing green products and packaging that minimize resource use, can be recycled or reused, and are generally environmentally friendly.
Continuous Improvement
PLAN-DO-CHECK-ACT Walter Shewhart, another pioneer in quality management, developed a circular model known as PDCA (plan, do, check, act) as his version of continuous improvement. Deming later took this concept to Japan during his work there after World War II. The PDCA cycle (also called a Deming circle or a Shewhart circle) is shown in Figure 6.3 as a circle to stress the continuous nature of the improvement process.
Tracking the Time Status of a Project
Perhaps the biggest advantage of using software to manage projects is that it can track the progress of the project. In this regard, Microsoft Project has many features available to track individual activities in terms of time, cost, resource usage, and so on.
modular designs
Products designed in easily segmented components Modular designs offer flexibility to both production and marketing. Operations managers find modularity helpful because it makes product development, production, and subsequent changes easier.
Limitations
Project activities have to be clearly defined, independent, and stable in their relationships. Precedence relationships must be specified and networked together. Time estimates tend to be subjective and are subject to fudging by managers who fear the dangers of being overly optimistic or not pessimistic enough. There is the inherent danger of placing too much emphasis on the longest, or critical, path. Near-critical paths need to be monitored closely as well.
Ethical Issues Faced in Project Management
Project managers often deal with (1) offers of gifts from contractors, (2) pressure to alter status reports to mask the reality of delays, (3) false reports for charges of time and expenses, and (4) pressures to compromise quality to meet bonuses or avoid penalties related to schedules.
Some of these measurement problems are:
Quality External elements Precise units of measure
radio frequency identification (RFID)
RFID is integrated circuitry with its own tiny antennas that use radio waves to send signals a limited range—usually a matter of yards. These RFID tags provide unique identification that enables the tracking and monitoring of parts, pallets, people, and pets—virtually everything that moves. RFID requires no line of sight between tag and reader.
Maintenance
Requires decisions that consider facility capacity, production demands, and personnel necessary to maintain a reliable and stable process.
Layout Strategies
Requires integrating capacity needs, personnel levels, technology, and inventory requirements to determine the efficient flow of materials, people, and information.
Location Strategy
Requires judgments regarding nearness to customers, suppliers, and talent, while considering costs, infrastructure, logistics, and government.
standard for the exchange of product data(STEP; ISO 10303)
STEP permits 3-D product information to be expressed in a standard format so it can be exchanged internationally.
Scatter Diagram
Scatter diagrams show the relationship between two measurements. An example is the positive relationship between length of a service call and the number of trips a repair person makes back to the truck for parts. Another example might be a plot of productivity and absenteeism, as shown in Figure 6.6(b). If the two items are closely related, the data points will form a tight band. If a random pattern results, the items are unrelated.
Growth of Services
Services constitute the largest economic sector in postindustrial societies. Although the number of people employed in manufacturing has decreased since 1950, each person is now producing almost 20 times more than in 1950 Services became the dominant employer in the early 1920s, with manufacturing employment peaking at about 32% in 1950. The huge productivity increases in agriculture and manufacturing have allowed more of our economic resources to be devoted to services
Supply-chain partnering
Shorter product life cycles, demanding customers, and fast changes in technology, materials, and processes require supply-chain partners to be in tune with the needs of end users. And because suppliers may be able to contribute unique expertise, operations managers are outsourcing and building long-term partnerships with critical players in the supply chain.
CHARACTERISTICS OF GOODS
Tangible: The seat itself Product can usually be kept in inventory (beauty care products) Similar products produced (iPods) Limited customer involvement in production Product standardized (iPhone) Standard tangible product tends to make automation feasible Product typically produced at a fixed facility Many aspects of quality for tangible products are easy to evaluate (strength of a bolt) Product often has some residual value
Rapid product development
Technology combined with rapid international communication of news, entertainment, and lifestyles is dramatically chopping away at the life span of products. OM is answering with new management structures, enhanced collaboration, digital technology, and creative alliances that are more responsive and effective.
Malcolm Baldrige National Quality Award
The award is named for former Secretary of Commerce Malcolm Baldrige. Winners include such firms as Motorola, Milliken, Xerox, FedEx, Ritz-Carlton Hotels, AT&T, Cadillac, and Texas Instruments. (For details about the Baldrige Award and its 1,000-point scoring system, visit www.nist.gov/baldrige/.)
Crossover Charts
The comparison of processes can be further enhanced by looking at the point where the total cost of the processes changes. For instance, Figure 7.3 shows three alternative processes compared on a single chart.
process regions
The direct interaction region includes process steps that involve interaction between participants. For example, a sandwich buyer directly interacts with employees of a sandwich store (e.g., Subway, in the middle of Figure 5.12). The surrogate (substitute) interaction region includes process steps in which one participant is acting on another participant's resources, such as their information, materials, or technologies. This occurs when the sandwich supplier is making sandwiches in the restaurant kitchen (left side of Figure 5.12) or, alternately, when the customer has access to buffet ingredients and assembles the sandwich himself (right side of the figure). Under surrogate interaction, direct interaction is limited. The independent processing region includes steps in which the sandwich supplier and/or the sandwich customer is acting on resources where each has maximum control. Most make-to-stock production fits in this region (left side of Figure 5.12; think of the firm that assembles all those prepackaged sandwiches available in vending machines and convenience stores). Similarly, those sandwiches built at home occur to the right, in the customer's independent processing domain.
Globalization
The rapid decline in the cost of communication and transportation has made markets global. Similarly, resources in the form of capital, materials, talent, and labor are also now global. As a result, countries throughout the world are contributing to globalization as they vie for economic growth. Operations managers are rapidly seeking creative designs, efficient production, and high-quality goods via international collaboration.
process focused
The vast majority of global production is devoted to making low-volume, high-variety products in places called "job shops." Such facilities are organized around specific activities or processes. In a factory, these processes might be departments devoted to welding, grinding, and painting. In an office, the processes might be accounts payable, sales, and payroll. In a restaurant, they might be bar, grill, and bakery.
poka-yoke
These special devices avoid errors and provide quick feedback of problems. A simple example of a poka-yoke device is the diesel gas pump nozzle that will not fit into the "unleaded" gas tank opening on your car
integration of the product development and manufacturing organizations
This approach allows for easy shifting of resources between the two organizations as needs change. The operations manager's job is to make the transition from R&D to production seamless.
service recovery
This means they train and empower frontline employees to immediately solve a problem. For instance, staff at Marriott Hotels are drilled in the LEARN routine—Listen, Empathize, Apologize, React, Notify—with the final step ensuring that the complaint is fed back into the system.
theory of comparative advantage
This theory focuses on the economic concept of relative advantage. According to the theory, if an external provider, regardless of its geographic location, can perform activities more productively than the purchasing firm, then the external provider should do the work. This allows the purchasing firm to focus on what it does best—its core competencies.
Productivity of the service sector has proven difficult to improve because service-sector work is:
Typically labor intensive (e.g., counseling, teaching). Frequently focused on unique individual attributes or desires (e.g., investment advice). Often an intellectual task performed by professionals (e.g., medical diagnosis). Often difficult to mechanize and automate (e.g., a haircut). Often difficult to evaluate for quality (e.g., performance of a law firm).
activity on node (AON) and activity on arrow (AOA)
Under the AON convention, nodes designate activities. Under AOA, arrows represent activities. Activities consume time and resources.
Aggressive new product development requires that organizations build structures internally that have open communication with customers, innovative product development cultures, aggressive R&D, strong leadership, formal incentives, and training. Only then can a firm profitably and energetically focus on specific opportunities such as the following:
Understanding the customer is the premier issue in new-product development. Many commercially important products are initially thought of and even prototyped by users rather than producers. Such products tend to be developed by "lead users"—companies, organizations, or individuals that are well ahead of market trends and have needs that go far beyond those of average users. The operations manager must be "tuned in" to the market and particularly these innovative lead users. Economic change brings increasing levels of affluence in the long run but economic cycles and price changes in the short run. In the long run, for instance, more and more people can afford automobiles, but in the short run, a recession may weaken the demand for automobiles. Sociological and demographic change may appear in such factors as decreasing family size. This trend alters the size preference for homes, apartments, and automobiles. Technological change makes possible everything from smart phones to iPads to artificial hearts. Political and legal change brings about new trade agreements, tariffs, and government requirements. Other changes may be brought about through market practice, professional standards, suppliers, and distributors.
eViewing the Project Schedul
When all links have been defined, the complete project schedule can be viewed as a Gantt chart. We can also select View|Network Diagram to view the schedule as a project network (shown in Program 3.2). The critical path is shown in red on the screen in the network diagram. We can click on any of the activities in the project network to view details of the activities. Likewise, we can easily add or remove activities from the project network. Each time we do so, Microsoft Project automatically updates all start dates, finish dates, and the critical path(s). If desired, we can manually change the layout of the network (e.g., reposition activities) by changing the options in Format|Layout.
Computer-Integrated Manufacturing (CIM)
When this capability is integrated with inventory control, warehousing, and shipping as a part of a flexible manufacturing system, the entire system is called computer-integrated manufacturing (CIM)
Acceptance sampling
a form of testing that involves taking random samples of "lots," or batches, of finished products and measuring them against predetermined standards. Sampling is more economical than 100% inspection. The quality of the sample is used to judge the quality of all items in the lot
supply chain
a global network of organizations and activities that supply a firm with goods and services
house of quality
a graphic technique for defining the relationship between customer desires and product (or service)
Process Chain
a sequence of steps that accomplishes an activity, such as building a home, completing a tax return, or preparing a sandwich. A process participant can be a manufacturer, a service provider, or a customer. A network is a set of participants.
Virtual reality
a visual form of communication in which images substitute for the real thing but still allow the user to respond interactively
Manufacturability and value engineering
activities are concerned with improvement of design and specifications at the research, development, design, and preproduction stages of product development.
work order
an instruction to make a given quantity of a particular item, usually to a given schedule. The ticket that a waiter writes in your favorite restaurant is a work order. In a hospital or factory, the work order is a more formal document that provides authorization to draw items from inventory, to perform various functions, and to assign personnel to perform those functions.
Strategy
an organization's action plan to achieve the mission Each functional area has a strategy for achieving its mission and for helping the organization reach the overall mission. These strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses.
process strategy
an organization's approach to transforming resources into goods and services. The objective is to create a process that can produce offerings that meet customer requirements within cost and other managerial constraints
Product life-cycle management (PLM)
an umbrella of software programs that attempts to bring together phases of product design and manufacture—including tying together many of the techniques discussed in the prior two sections, Defining a Product and Documents for Production. The idea behind PLM software is that product design and manufacture decisions can be performed more creatively, faster, and more economically when the data are integrated and consistent.
international business
any firm that engages in international trade or investment
Pareto Charts
are a method of organizing errors, problems, or defects to help focus on problem-solving efforts. They are based on the work of Vilfredo Pareto, a 19th-century economist. Joseph M. Juran popularized Pareto's work when he suggested that 80% of a firm's problems are a result of only 20% of the causes
Product development teams
are charged with the responsibility of moving from market requirements for a product to achieving a product success (refer to Figure 5.3). Such teams often include representatives from marketing, manufacturing, purchasing, quality assurance, and field service personnel. Many teams also include representatives from vendors
Control charts
are graphic presentations of data over time that show upper and lower limits for the process we want to control [see Figure 6.6(g)]. Control charts are constructed in such a way that new data can be quickly compared with past performance data. We take samples of the process output and plot the average of each of these samples on a chart that has the limits on it. The upper and lower limits in a control chart can be in units of temperature, pressure, weight, length, and so on.
quality loss function (QLF)
attempts to estimate the cost of deviating from the target value. Even though the item is produced within specification limits, the variation in quality can be expected to increase costs as the item output moves away from its target value
Program evaluation and review technique (PERT) and the critical path method (CPM)
both developed in the 1950s to help managers schedule, monitor, and control large and complex projects. CPM arrived first, as a tool developed to assist in the building and maintenance of chemical plants at duPont. Independently, PERT was developed in 1958 for the U.S. Navy.
inspection
can involve measurement, tasting, touching, weighing, or testing of the product (sometimes even destroying it when doing so)
Engineering change notices (ECNs)
change some aspect of the product's definition or documentation, such as an engineering drawing or a bill of material. For a complex product that has a long manufacturing cycle, such as a Boeing 777, the changes may be so numerous that no two 777s are built exactly alike—which is indeed the case. Such dynamic design change has fostered the development of a discipline known as configuration management, which is concerned with product identification, control, and documentation.
Vision systems
combine video cameras and computer technology and are often used in inspection roles. Visual inspection is an important task in most food-processing and manufacturing organizations.
Walter Shewhart (1924)
combined his knowledge of statistics with the need for quality control and provided the foundations for statistical sampling in quality control.
Joint ventures
combined ownership, usually between just two firms, to form a new entity. Ownership can be 50-50, or one owner can assume a larger portion to ensure tighter control. Joint ventures are often appropriate for exploiting specific product opportunities that may not be central to the firm's mission. Such ventures are more likely to work when the risks are known and can be equitably shared.
Additive manufacturing
commonly called, 3D printing, is frequently used for design testing, prototypes, and custom products
just-in-time (JIT)
continuing improvement and enforced problem solving. JIT systems are designed to produce or deliver goods just as they are needed
Alliances
cooperative agreements that allow firms to remain independent but use complementing strengths to pursue strategies consistent with their individual missions
work breakdown structure (WBS)
defines the project by dividing it into its major subcomponents (or tasks), which are then subdivided into more detailed components, and finally into a set of activities and their related costs. The division of the project into smaller and smaller tasks can be difficult, but is critical to managing the project and to scheduling success. Gross requirements for people, supplies, and equipment are also estimated in this planning phase.
Process-chain-network (PCN) analysis
developed by Professor Scott Sampson, focuses on the ways in which processes can be designed to optimize interaction between firms and their customers
project organization
developed to make sure existing programs continue to run smoothly on a day-to-day basis while new projects are successfully completed
make-or-buy decision
distinguishes between what the firm wants to produce and what it wants to purchase. Because of variations in quality, cost, and delivery schedules, the make-or-buy decision is critical to product definition
PERT Analysis Microsoft Project
does not perform the PERT probability calculations discussed in Examples 10 and 11. However, by clicking View|Toolbars|PERT Analysis, we can get Microsoft Project to allow us to enter optimistic, most likely, and pessimistic times for each activity. We can then choose to view Gantt charts based on any of these three times for each activity.
Samples
ecause of natural and assignable variation, statistical process control uses averages of small samples (often of four to eight items) as opposed to data on individual parts. Individual pieces tend to be too erratic to make trends quickly visible.
project manager/ product development teams
ensure that the transition from development to production is successful allow a wide range of resources and talents to be brought to bear to ensure satisfactory production of a product that is still in flux
transnational strategy
exploits the economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competence does not reside in just the "home" country but can exist anywhere in the organization. Transnational describes a condition in which material, people, and ideas cross—or transgress—national boundaries. These firms have the potential to pursue all three operations strategies (i.e., differentiation, low cost, and response). Such firms can be thought of as "world companies" whose country identity is not as important as their interdependent network of worldwide operations. Nestlé is a good example of such a company. Although it is legally Swiss, 95% of its assets are held and 98% of its sales are made outside Switzerland. Fewer than 10% of its workers are Swiss.
Microsoft Project
extremely useful in drawing project networks, identifying the project schedule, and managing project costs and other resources.
average outgoing quality (AOQ)
given (1) any sampling plan that replaces all defective items encountered and (2) the true incoming percent defective for the lot, it is possible to determine the average outgoing quality (AOQ) in percentage defective
differentiation
going beyond both physical characteristics and service attributes to encompass everything about the product or service that influences the value that the customers derive from it.
Flowcharts
graphically present a process or system using annotated boxes and interconnected lines [see Figure 6.6(e)]. They are a simple but great tool for trying to make sense of a process or explain a process. Example 2 uses a flowchart to show the process of completing an MRI at a hospital.
global strategy
has a high degree of centralization, with headquarters coordinating the organization to seek out standardization and learning between plants, thus generating economies of scale. This strategy is appropriate when the strategic focus is cost reduction but has little to recommend it when the demand for local responsiveness is high. Caterpillar, the world leader in earth-moving equipment, and Texas Instruments, a world leader in semiconductors, pursue global strategies. Caterpillar and Texas Instruments find this strategy advantageous because the end products are similar throughout the world. Earth-moving equipment is the same in Nigeria as in Iowa.
multidomestic strategy
has decentralized authority with substantial autonomy at each business. These are typically subsidiaries, franchises, or joint ventures with substantial independence. The advantage of this strategy is maximizing a competitive response for the local market; however, the strategy has little or no cost advantage. Many food producers, such as Heinz, use a multidomestic strategy to accommodate local tastes because global integration of the production process is not critical. The concept is one of "we were successful in the home market; let's export the management talent and processes, not necessarily the product, to accommodate another market."
Mass customization
he rapid, low-cost production of goods and services that fulfill increasingly unique customer desires. But mass customization (see the upper-right section of Figure 7.1) is not just about variety; it is about making precisely what the customer wants when the customer wants it
core competencies
he set of unique skills, talents, and capabilities that a firm does at a world-class standard. They allow a firm to set itself apart and develop a competitive advantage. Organizations that prosper identify their core competencies and nurture them. While McDonald's KSFs may include layout, its core competency may be consistency and quality
design for manufacture and assembly (DFMA)
hich focuses on the effect of design on assembly. For instance, DFMA allows Ford to build new vehicles in a virtual factory where designers examine how to put a transmission in a car on the production line, even while both the transmission and the car are still in the design stage.
assembly chart
hows in schematic form how a product is assembled. Manufactured components, purchased components, or a combination of both may be shown on an assembly chart. The assembly chart identifies the point of production at which components flow into subassemblies and ultimately into a final product
Group technology
identifies components by a coding scheme that specifies size, shape, and the type of processing (such as drilling)
Concurrent engineering
implies speedier product development through simultaneous performance of the various stages of product development (as we saw earlier in Figure 5.3). Often the concept is expanded to include all elements of a product's life cycle, from customer requirements to disposal and recycling. Concurrent engineering is facilitated by teams representing all affected areas (known as cross-functional teams).
Competitive advantage
implies the creation of a system that has a unique advantage over competitor Three Ways: differentiation, low cost, and response.
Four International Strategies
international, multidomestic, global, or transnational
Benchmarking
involves selecting a demonstrated standard of products, services, costs, or practices that represent the very best performance for processes or activities very similar to your own.
multinational corporation (MNC)
is a firm with extensive international business involvement. MNCs buy resources, create goods or services, and sell goods or services in a variety of countries. The term multinational corporation applies to most of the world's large, well-known businesses.
time-function mapping, or process mapping
is a modified flowchart with time added on the horizontal axis
Service blueprinting
is a process analysis technique that focuses on the customer and the provider's interaction with the customer
Eli Whitney (1800)
is credited for the early popularization of interchangeable parts, which was achieved through standardization and quality control. Through a contract he signed with the U.S. government for 10,000 muskets, he was able to command a premium price because of their interchangeable parts.
flexible manufacturing system (FMS)
is flexible because both the material-handling devices and the machines themselves are controlled by easily changed electronic signals (computer programs).
Process redesign
is the fundamental rethinking of business processes to bring about dramatic improvements in performance. Effective process redesign relies on reevaluating the purpose of the process and questioning both purpose and underlying assumptions. It works only if the basic process and its objectives are reexamined.
Operations management
is the set of activities that creates value in the form of goods and services by transforming inputs into outputs
Computer-aided design (CAD)
is the use of computers to interactively design products and prepare engineering documentation. CAD uses three-dimensional drawing to save time and money by shortening development cycles for virtually all products (see the 3-D design photo in the Regal Marine Global Company Profile that opens this chapter).
source inspection
it is just doing the job properly with the operator ensuring that this is so consistent with the concept of employee empowerment, where individual employees self-check their own work
mission
its purpose—what it will contribute to society. Mission statements provide boundaries and focus for organizations and the concept around which the firm can rally.
Frederick W. Taylor (1881)
known as the father of scientific management, contributed to personnel selection, planning and scheduling, motion study, and the now popular field of ergonomics. One of his major contributions was his belief that management should be much more resourceful and aggressive in the improvement of work methods. Taylor and his colleagues, Henry L. Gantt and Frank and Lillian Gilbreth, were among the first to systematically seek the best way to produce.
Adding Service Efficiency
limit the options, delay customization, modularization, automation, moment of truth
Product-by-value analysis
lists products in descending order of their individual dollar contribution to the firm. It also lists the total annual dollar contribution of the product. Low contribution on a per-unit basis by a particular product may look substantially different if it represents a large portion of the company's sales.
bill of material (BOM)
lists the hierarchy of components, their description, and the quantity of each required to make one unit of a produc
Gantt charts
low-cost means of helping managers make sure that (1) activities are planned, (2) order of performance is documented, (3) activity time estimates are recorded, and (4) overall project time is developed.
Precise Unites of Measure
may be lacking. Not all automobiles require the same inputs: Some cars are subcompacts, others are 911 Turbo Porsches.
External Elements
may cause an increase or a decrease in productivity for which the system under study may not be directly responsible. A more reliable electric power service may greatly improve production, thereby improving the firm's productivity because of this support system rather than because of managerial decisions made within the firm.
Quality
may change while the quantity of inputs and outputs remains constant. Compare an HDTV of this decade with a black-and-white TV of the 1950s. Both are TVs, but few people would deny that the quality has improved. The unit of measure—a TV—is the same, but the quality has changed.
Build-to-order (BTO)
means producing to customer orders, not forecasts. But high-volume build-to-order is difficult. Some major challenges are: Product design must be imaginative. Successful build-to-order designs include a limited product line and modules. Ping Inc., a premier golf club manufacturer, uses different combinations of club heads, grips, shafts, and angles to make 20,000 variations of its golf clubs. Process design must be flexible and able to accommodate changes in both design and technology. For instance, postponement allows for customization late in the production process. Toyota installs unique interior modules very late in production for its popular Scion, a process also typical with customized vans. Postponement is further discussed in Chapter 11. Inventory management requires tight control. To be successful with build-to-order, a firm must avoid being stuck with unpopular or obsolete components. With virtually no raw material, Dell puts custom computers together in less than a day. Tight schedules that track orders and material from design through delivery are another requirement of mass customization. Align Technology, a well-known name in orthodontics, figured out how to achieve competitive advantage by delivering custom-made clear plastic aligners within 3 weeks of the first visit to the dentist's office (see the OM in Action box "Mass Customization for Straight Teeth"). Responsive partners in the supply chain can yield effective collaboration. Forecasting, inventory management, and ordering for JCPenney shirts are all handled for the retailer by its supplier in Hong Kong. Mass customization/build-to-order is the new imperative for operations. There are advantages to mass customization and building to order: first, by meeting the demands of the marketplace, firms win orders and stay in business; in addition, they trim costs (from personnel to inventory to facilities) that exist because of inaccurate sales forecasting.
Variable inspection
measures such dimensions as weight, speed, size, or strength to see if an item falls within an acceptable range.
Statistical process control (SPC)
monitors standards, makes measurements, and takes corrective action as a product or service is being produced. Samples of process outputs are examined; if they are within acceptable limits, the process is permitted to continue. If they fall outside certain specific ranges, the process is stopped and, typically, the assignable cause located and removed.
reliability
of scheduling. One way the German machine industry has maintained its competitiveness despite having the world's highest labor costs is through reliable response. This response manifests itself in reliable scheduling. German machine firms have meaningful schedules—and they perform to these schedules.
time-based competition
operations managers who master this art of product development continually gain on slower product developers. To the swift goes the competitive advantage
Modules
parts or components previously prepared, often in a product-focused (continuous) process.
target-oriented quality
philosophy of continuous improvement to bring the product exactly on target
Quality robust
products are products that can be produced uniformly and consistently in adverse manufacturing and environmental conditions. Taguchi's idea is to remove the effects of adverse conditions instead of removing the causes. Taguchi suggests that removing the effects is often cheaper than removing the causes and more effective in producing a robust product. In this way, small variations in materials and process do not destroy product quality.
automated storage and retrieval systems (ASRSs)
provide for the automatic placement and withdrawal of parts and products into and from designated places in a warehouse. Such systems are commonly used in distribution facilities of retailers such as Walmart, Tupperware, and Benetton
Taguchi Concepts
quality robustness, target-oriented quality, and the quality loss function.
Total quality management (TQM)
refers to a quality emphasis that encompasses the entire organization, from supplier to customer. TQM stresses a commitment by management to have a continuing companywide drive toward excellence in all aspects of products and services that are important to the customer. Each of the 10 decisions made by operations managers deals with some aspect of identifying and meeting customer expectations. Meeting those expectations requires an emphasis on TQM if a firm is to compete as a leader in world markets.
Quality function deployment (QFD)
refers to both (1) determining what will satisfy the customer and (2) translating those customer desires into the target design.
Computer-aided manufacturing (CAM)
refers to the use of specialized computer programs to direct and control manufacturing equipment. When CAD information is translated into instructions for CAM, the result of these two technologies is CAD/CAM. The combination is a powerful tool for manufacturing efficiency.
quality circle
s a group of employees who meet regularly to solve work-related problems. The members receive training in group planning, problem solving, and statistical quality control. They generally meet once a week (usually after work but sometimes on company time). Although the members are not rewarded financially, they do receive recognition from the firm. A specially trained team member, called the facilitator, usually helps train the members and keeps the meetings running smoothly.
Value analysis
seeks improvements that lead to either a better product, or a product made more economically, or a product with less environmental impact
engineering drawing
shows the dimensions, tolerances, materials, and finishes of a component
assembly drawing
simply shows an exploded view of the product. An assembly drawing is usually a three-dimensional drawing, known as an isometric drawing; the relative locations of components are drawn in relation to each other to show how to assemble the unit
Flexibility
the ability to respond with little penalty in time, cost, or customer value. This may mean modular, movable, or digitally controlled equipmen
Statistical process control (SPC)
the application of statistical techniques to ensure that processes meet standards
repetitive process
the classic assembly line
Production
the creation of goods and services
route sheet
the operations necessary to produce the component with the material specified in the bill of material. The route sheet for an item will have one entry for each operation to be performed on the item. When route sheets include specific methods of operation and labor standards, they are often known as process sheets.
lot tolerance percentage defective (LTPD)
the quality level of a lot that we consider bad. We wish to reject lots that have this or a poorer level of quality. If it is agreed that an unacceptable quality level is 70 defects in a lot of 1,000, then the LTPD is 70/1,000 = 7% defective.
ISO 9000
the quality standard with international recognition Its focus is to enhance success through eight quality management principles: (1) top management leadership, (2) customer satisfaction, (3) continual improvement, (4) involvement of people, (5) process analysis, (6) use of data-driven decision making, (7) a systems approach to management, and (8) mutually beneficial supplier relationships.
Configuration management
the system by which a product's planned and changing configurations are accurately identified and for which control and accountability of change are maintained.
information technology
the systematic processing of data to yield information
Key success factors (KSFs)
those activities that are necessary for a firm to achieve its goals. Key success factors can be so significant that a firm must get them right to survive. A KSF for McDonald's, for example, is layout. Without an effective drive-through and an efficient kitchen, McDonald's cannot be successful.
objective of the product decision
to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage
experience differentiation
to engage the customer—to use people's five senses so they become immersed, or even an active participant, in the product.
Outsourcing
transferring activities that have traditionally been internal to external suppliers. The expansion is accelerating due to three global trends: (1) increased technological expertise, (2) more reliable and cheaper transportation, and (3) the rapid development and deployment of advancements in telecommunications and computers.
Checklists
type of poka-yoke to help ensure consistency and completeness in carrying out a task
Process charts
use symbols, time, and distance to provide an objective and structured way to analyze and record the activities that make up a process.1 They allow us to focus on value-added activities.
Value Chain Analysis
used to identify activities that represent strengths, or potential strengths, and may be opportunities for developing competitive advantage. These are areas where the firm adds its unique value through product research, design, human resources, supply-chain management, process innovation, or quality management.
International Strategy
uses exports and licenses to penetrate the global arena. This strategy is the least advantageous, with little local responsiveness and little cost advantage. But an international strategy is often the easiest, as exports can require little change in existing operations, and licensing agreements often leave much of the risk to the licensee.
R-chart
values indicate that a gain or loss in dispersion has occurred. Such a change may be due to worn bearings, a loose tool, an erratic flow of lubricants to a machine, or to sloppiness on the part of a machine operator
value-stream mapping (VSM)
variation of time-function mapping however, value-stream mapping takes an expanded look at where value is added (and not added) in the entire production process, including the supply chain.
functional area
we mean the major disciplines required by the firm, such as marketing, finance/accounting, and production/operations
Crashing
we shorten the duration of a project in the cheapest manner possible
Labor
which contributes about 10% of the annual increase. Key Variables: 1. Basic education appropriate for an effective labor force. 2. Diet of the labor force. 3. Social overhead that makes labor available, such as transportation and sanitation
flowchart
which is a schematic or drawing of the movement of material, product, or people. For instance, the flowchart in the Global Company Profile for this chapter shows the assembly processes for Harley-Davidson. Such charts can help understanding, analysis, and communication of a process.
crash time
which is defined as the shortest duration required to complete an activity
activity map
which links competitive advantage, KSFs, and supporting activities. For example, Figure 2.8 shows how Southwest Airlines, whose core competency is operations, built a set of integrated activities to support its low-cost competitive advantage
