Operations Management Exam 1

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Quality

the standard of something as measured against other things of a similar kind; the degree of excellence of something

Process Improvement

the systematic study of the activities and flows of each process to improve it

What does 'improve' stand for in the six sigma improvement model?

the team uses analytical and critical thinking to generate a long list of ideas for improvement

Break-even quantity

the volume at which total revenues equal total costs.

what is an example of a common cause?

the weather

control charts look into what?

they take a deeper look into sample sets and shows you how much variation/control is in the process.

what does a smaller z value mean?

tighter limits; UCL and LCL are drawn in

What are the two performance measurements?

variables and attributes

what chart uses this equation to find UCL & LCL? UCL = double x bar + A₂(R bar) LCL = double x bar - A₂(R bar)

x-chart

what should you do if your control chart shows a sudden change?

you should monitor, investigate & determine the root cause, and possible make changes

what should you do if your control chart shows a run/trend?

you should take action because common cause is present

equation for a desired z score:

z = (UCL or LCL - goal output)/σ the amount of variation acceptable

equation for z score: (based on an individual point)

z = (x-mean)/standard deviation

Steps in the six sigma improvement model:

1. define 2. measure 3. analyze 4. improve 5. control

Typically, how many sigma (standard deviations) are UCL/LCL above/below the mean?

3 sigma

In a six sigma process, how many defects are there per million?

3-4

A 1 sigma process is what percent defect free?

30.23%

In a 3 sigma process, _____ standard deviations of the product fall within the set _________ _______.

3; control limits (goal posts)

if z = 6, then what is the sigma process?

6 sigma

explain what a 6 sigma process means

6 standard deviations of the distribution are falling within tolerances OR the process is 99.9996% defect free

A 2 sigma process is what percent defect free?

69.13%

A 3 sigma process is what percent defect free?

93.32%

What percent of products are defect free in a 3 sigma process?

93.32%

A 4 sigma process is what percent defect free?

99.379%

A 5 sigma process is what percent defect free?

99.978%

What percent of products are defect free in a 5 sigma process?

99.98%

In a six sigma process, _________% of the products are defect free

99.996

A 6 sigma process is what percent defect free?

99.9996%

Order Winners

A criterion customers use to differentiate the services or products of one firm from those of another.

Decision Theory

A general approach to decision making when the outcomes associated with alternatives are often in doubt.

Operation

A group of resources performing all or part of one or more processes.

Total Quality Management (TQM)

A philosophy that stresses three principles for achieving high levels of process performance and quality (1) customer satisfaction (2) employee involvement (3) continuous improvement in performance

Assemble-to-Order Strategy

Components at the ready, mass customization; found in batch processes

What does customer satisfaction mean in terms of TQM?

Conformance to specifications (is it as advertised?), value (how much the customer is willing to pay?), fitness for use (does it do what the customer wants it to do?/customer needs to be educated about what your product is capable of doing), support (customer service), and psychological impressions (have to keep the customer's interest even after they buy the product).

What are the different process types?

Core processes, support processes, and nested processes.

Design-to-Order Strategy

Customer involved in the design process; found in job processes

Maximax

Decision rule that chooses the alternative that has the best result, given the best event will occur; "best of the best".

Minimax Regret

Decision rule that looks to minimize the worst possible negative effect (regrets) associated with making a wrong decision; which decision will you regret the least if it doesn't work out. "Best worst regret"

Laplace

Decision rule that places equal weight, or assumes equal probability, for each of the possible events.

Accuracy

Describes the difference between the measurement and the part's actual value

Precision

Describes the variation you see when you measure the same part repeatedly with the same device.

Six Sigma

Disciplined, data-driven approach and methodology for eliminating defects.

When do unknowns exists and full disclosure of information may not be avaliable?

During decision making under uncertainty

Total costs =

F + cQ (fixed costs + (variable cost x quantity)

Quantity =

F/(p - c) (Fixed Costs/(Price - Variable Costs))

What does front and back office mean?

Front office - Part of the business that interacts with people; more flexible. Back office - More standardized part of the business (ex: assembly line).

Execution

Getting work done, being as efficient as possible, driving revenue, bottom line improvement.

Flow

How the work progresses through the sequence of steps in a process.

Batch Process

In between job and line processes. Standardized and efficient BUT you have the ability to change to make a different product.

What are some examples of operational decisions?

Make or buy/expand or retract, where to invest funds, determining the appropriate amount of credit to lend, or calculating a customer loyalty discount.

Make-to-Stock Strategy

Mass production; found in line processes

Order Qualifiers

Minimum level required from a set of criteria for a firm to do business in a particular market segment.

Ideally do you want variation?

No

What do you do if your control chart shows normal distribution?

No action is necessary

Is quality cheap?

No, but it's cheaper if you're proactive (expensive if product is found faulty after it's sold to customers).

What is at the center of business in all industries?

Operational decisions

What does this graph show?

Order Qualifier

What does this graph show?

Order Winner

Types of costs when it comes to quality:

Prevention costs, appraisal costs, internal failure costs, external failure costs, and ethical failure costs

Make-to-Order Strategy

Process begins with customer request; found in job processes

Support Processes

Processes that amplify the core processes; create a synergistic effect. (everything that makes your business high quality ex: UNO is the bookstore or gym)

what are the control charts for variables?

R-chart & x̅-chart

Different between workforce and equipment:

The workforce is more flexible while equipment is general-purpose and special-purpose

What should you think of when finding out what process you should be using?

Think of the end goal/product and how you're going to get there.

What is this picture representing?

Total Quality Management

What is operations strategy in simple terms?

Understanding what type of business you want to be and how to execute it.

What typically happens to order winners?

Usually they will become qualifiers (from competitors copying your idea) unless your competitors can't figure out how you did it.

sampling over a period of time allows us to start seeing what?

Variation

Job Process

Very customizable; customer engagement

Line Process

Very standardized; mass production, consistent quality.

What kind of control chart generally has 7 consecutive data points above/below center and the distribution curve has shifted?

Run/trend control chart

Value

Saves time, energy, or money

Customization

Service level ranging from highly customized to standardized.

Nested Processes

The concept of a process within a process. (processes that feed into each other)

Competitive Capabilities

The cost, quality, time, and flexibility dimensions that a process or supply chain ACTUALLY POSSESSES and is able to deliver.

Competitive Priorities

The critical dimensions that a process or supply chain MUST POSSESS to satisfy its internal or external customers both now and in the future.

Who ultimately determines quality?

The customers

Productivity

The effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input.

Process Divergence

The extent to which the process is highly customized with considerable latitude as to how its tasks are performed.

Supply Chain Management

The synchronization of a firm's processes with those of its suppliers and customers to match the flow of materials, services, and information with customer.

Operations Management

The systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external customers; execution

What does 'analyze' stand for in the six sigma improvement model?

a process analysis is done, using the data on measures, to determine where improvements are necessary.

Preference Matrix

a table that allows you to rate an alternative according to several performance criteria; this approach could be biased.

nominal value

a target for design specifications; quality goal

Sensitivity analysis

a technique for systematically changing parameters in a model to determine the effects of such changes.

What is the goal of Six sigma?

achieving low rates of defective output

what happens during a type I error?

action is taken when it is not necessary

What does it mean to have a flexible workforce?

allows you to move the employees around in the processes; this is invaluable.

tolerance

an allowance above or below the nominal value; how much defect or lack of quality are you/customer accept

Break-even analysis

analysis to compare processes by finding the volume at which two different processes have equal total costs.

defect

any instance when a process fails to satisfy its customer

assignable cause

any variation-causing factors that can be identified and eliminated (ideally)

How do you achieve six sigma process?

by acceptance sampling and by producing at the acceptable quality level (AQL)

what is one way that you can always increase your revenue?

by cutting internal costs

what is one way that you can always get better?

by lowering your standard deviation

variables

characteristics (data) that can be measured; hard values, precise.

attributes

characteristics (data) that can be quickly counted for acceptable performance.

type II error

concludes that the process is in control and only randomness is present, when actually the process is out of statistical control

type I error

concludes that the process is out of control based on a sample result that fails outside the control limits, when in fact it was due to pure randomness.

what are D₃ and D₄?

constants that provide 3 standard deviation (3 sigma) limits for the given sample size

appraisal costs

cost incurred when the firm assesses the performance level of its processes

prevention costs

costs associated with preventing defects before they happen.

internal failure costs

costs resulting from defects that are discovered during the production of a service or product.

external failure costs

costs that arise when a defect is discovered after the customer receives the service or product

Maximin

decision rule that chooses the alternative that has the best result, given the worst event will occur; "best of the worst".

Variation = __________ = ____________ __________

error; quality issues

when improving quality, who should you include?

everyone

What is quality in simple terms?

how well the product/service fits the market demand

measure of effectiveness (MOE)

is the process/product achieving the desired end state or effect

measure of performance (MOP)

is the process/product working as designed?

As the standard deviation decreases (gets smaller), what will the curve look like?

it gets taller and skinnier because there is less variation

as the standard deviation increases, what will the curve look like?

it gets wider and fatter because there is more variation

what does it mean for your process if points are falling within limits?

it means that the process is capable of producing at a consistent and dependable rate

what are examples of variables?

length, weight, temp, etc.

range =

max-min

x̅-chart

measures the consistency of the process

c-chart

measures the number of defects when more than one defect can be present in a service/product; still usable

p-chart

measures the proportion of the defective services/products generated; not usable

R-chart

measures the variability of the process

what should you do when your control chart is showing that you're exceeding control limits?

migration (shut down the process until you find root cause) is required at the minimum.

what happens during a type II error?

no action is taken when it was necessary

what kind of control chart stays within statistical control and the distribution curve doesn't breach the control limits (UCL/LCL)?

normal distribution control

Productivity =

output/input

what are the control charts for attributes and what do they ultimately measure?

p-chart & c-chart; they measure defects

Total Revenue =

pQ (price x quanitity)

Everything is ____________ ___________; always need to ______ _________.

process orientated; add value

What does it mean when your control chart exceeds control limits?

quality is compromised so you should take action & your distribution curve has breached a control limit (either UCL or LCL)

what chart uses this equation to find the UCL & LCL? UCL = D₄R ̅(R bar) LCL = D₃R-(R bar)

r-chart

What are three things that you can do to ensure good decision making?

reduce the risk and keep costs to a minimum, increase quality and compliance, & improve efficiency, effectiveness, and consistency.

Six Sigma _________ spread and ___________ the process

reduces; centers

Every decision carries ________ and companies can pay a ____________ price for poor decision-making both in terms of _____________ and _______________.

risk; high; money; reputation

what kind of data do z scares measure?

single data points (a raw score)

Six sigma is a process by which ______ __________ ____________ of product fall within the set ________ __________.

six standard deviations (sigma); control limits (tolerances)

do you want your standard deviation to be large or small?

small

ethical failure costs

societal and monetary cost associated with deceptively passing defective services or products to internal or external customers such that it jeopardizes the well-being of stockholders, customers, employees, partners, and creditors; you knowingly let out a defective product.

standard deviation =

square root of the sum of x - mean^2 divides by n - 1 ((all x values - the mean)^2/(n-1))

mean =

sum of all 'x'/n

how do you want your bell curve to look and why?

tall and skinny because there is less variation

what does this graph show?

that the process is not capable

what does this picture show?

that you can reduce variation, the higher the sigma (& process capability)

process capability

the ability of the process to meet the design specification for a service or product

acceptance sampling

the application of statistical techniques to determine if a quantity of material from a supplier should be accepted or rejected based on the inspection or test of one or more samples; randomly test as you go but before the customers receive them.

statistical process control (SPC)

the application of statistical techniques to determine whether a process is delivering what the customer wants (quality)

what is a double x bar?

the central line of the chart, which can either be the average of past sample means or a target value set for the process; average of averages

The statistical process control (SPC) is the relationship between what?

the distribution of sample means & the process distribution

what are the characteristics of a process that is not capable?

the distribution of the process falls outside of the specification limits & the process is not working as designed and defects are being produced

what are the qualities of a capable process?

the distribution of the process' results falls within the specification limits & the process is working as designed and not producing defects

Process Analysis

the documentation and detailed understanding of how work is performed. Understanding need, identifying inefficiencies, and watching for opportunities for improvement and/or redesigned.

Customer Contact

the extent to which the customer is present is actively involved, and receives personal attention during the services process; more flexible.

What does 'measure' stand for in the six sigma improvement model?

the metrics to evaluate how to improve the process are determined

what do attributes count?

the number of defects or defective items

what is a z value?

the number of standard deviations from the mean

What does 'control' stand for in the six sigma improvement model?

the process is monitored to make sure that high performance levels are maintained.

common cause

the purely random, unidentifiable sources of variation that are unavoidable with the current process; you cannot control these

acceptable quality level (AQL)

the quality level desired by the consumer

Learning curves

the rate at which employees acquire and develop skillsets conducive to improving productivity

What does 'define' stand for in the six sigma improvement model?

the scope and boundaries of the process to be analyzed are first established

What are the steps in decision theory?

1. List the feasible alternatives. 2. List the events (states of nature). 3. Calculate the payoff for each alternative in each event. 4. Estimate the likelihood of each event. 5. Select the decision rule to evaluate the alternatives.

Benchmarking

A systematic procedure that measures a firm's processes, services, and products against those of industry leaders

What does every process need to do?

Add value

What is supply chain management in simple terms?

An interrelated series of processes within and across firms that produces a service or product to the satisfaction of customers. (external/internal customers and suppliers)

Plan-Do-Study-Act Cycle

An iterative four-step management method used in business for the control and continual improvement of processes an products; made popular by William Edwards Deming (who is considered by many to be the father or modern quality control)

Process

Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers.

What do more competitors in the market mean for you?

It forces you to become better

What does continuous improvement mean, in terms of TQM?

Kaizen (always improving), Plan-Do-Study-Act Cycle, and be proactive instead of reactive (costs less).

Reengineering

The fundamental rethinking and radical redesign or processes to improve performance dramatically in terms of cost, quality, service, and speed.

Operations Strategy

The means by which operations implement the firm's corporate strategy and help to build a customer-driven firm; drive bottom-line improvement

Core Processes

The primary function; the very reason the business exists (what you do as a business ex: UNO is education)

What are order winners in simple terms?

What sets you apart from competitors

What is competitive priorities in simple terms?

What you NEED to do

What is competitive capabilities in simple terms?

What you can ACTUALLY do

What are order qualifiers in simple terms?

What you need to do in order to exist in the market.

When is productivity good?

When input is less.

What will set you apart from everyone else?

Your ability to execute

Six sigma

a comprehensive and flexible system for achieving, sustaining, and maximizing business success by minimizing defects and variability in processes.


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