Operations Management Exam 1 Study Guide

Multifactor Productivity Equation

$ Value of Outputs / ($Labor + $Materials + $Overhead)

Competitive Priorities and Capabilities

Competitive Priorities are the critical operational dimensions a process or supply chain must possess to satisfy internal or external customers, both now and the future. · This is important to the customers · Price and speed are always considered for customers who are buying the products · Competitive priorities are planned for processes and the supply chain created from them. Examples of Competitive Priorities are: o Low-Cost Operations (Costco and Walmart) o Top Quality (Rolex Watches and Armani Suits) o Consistent quality (McDonald's and Chipotle) o Delivery Speed (Netflix and Hulu) o On-time delivery (UPS) o Development speed (Apple and Samsung) o Customization (XoticPC, custom gaming laptops) o Variety (Amazon) o Volume flexibility (USPS) Competitive Capabilities are the cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver · Important to the organization · Managers must match capabilities to the priorities, at the very least make it close as possible · Competitive Priorities and Capability share these topics of importance that impacts both o Labor o Lower quality o Fewer Options o Higher Production o Less Marketing

Continuous-Flow Process

Continuous - Flow process is the extreme end of high-volume standardized production, with rigid line flows. · High-volume, high standardization, commodity products · Continuous flow doesn't stop at all if the inputs is continuous · Physical Tangible Products, but what customers wouldn't want to physical grab onto · Examples: o Bar Soap and Liquid Soap o Petroleum refining o Chemicals o Soft Drinks o Cooking Oil Refining

Customer Involvement

Customer Involvement: the ways in which customers become part of the process and the extent of their participation · Pros: o Increases net value of customer o Better quality o Faster Delivery o Greater Flexibility o Lower Costs o Coordination across the supply chain · Cons: o Disruptive o Less Efficient o More challenging to manage timing and volume

Job Process

Job Process creates the flexibility needed to produce a wide variety of products in significant quantities, with considerable divergence in the steps performed. · Customized process, with a flexible and unique sequence of tasks · Low-Volume products made to customer order · Examples: o Customized cabinets o Expensive Suits o Expensive Cars o Boats o Gaming Rigs

Labor Productivity Formula

Labor Productivity = Units Produced / Labor time Used

Line Process

Line Process lies between the batch and continuous processes on the continuum; volumes are high, and products are standardized, which allows resources to be organized around particular products. · Few major products, higher volume · Connected line, highly repetitive work · Physical Tangible Products that customers what to use · Examples: o Computers o Automobiles (Ford) o Appliances (Cooking) o Toys

Core Processes and Support Processes

Supply Chains has two important processes, they are the core processes and support processes. · Core Processes: Activities that your customers are willing to pay for because they add value to your product or service. Examples of core processes include: · Hotel's Reservation handling that ensures external customers getting their desired features in their room · A new car design for an auto manufacturer to differentiate their models from a competitor · Amazon's features of multiple sections for variety and quicker delivery makes ordering their attractive and easy. ·There are 4 Core Processes: · Supplier Relationship Process is the process that selects, materials, and information and facilitates the timely and efficient flow of these firms into the items into the firm. o Working with your suppliers add value to the services and/or products of the firm. Essentially, a firm can get better prices and better quality on inputs, ensure on-time delivery, and ideas and insight on substitutes or other inputs that will enhance the firm's products or services. · New Services/Product Development Process is the process that designs new services or products that are developed for external customers or originated from external customers. · Order fulfillment, customers like to have their product fulfill their needs and if successful, that will attract the customers back for more goods. · Customer Relationship Process is the process of finding the customers, how to attract them, and building a relationship with them to ensure retention. This is where familiarity with the customers will make them more at ease upon issues and make the order process more smoothly upon every interaction. Support Processes are activities that provides vital resources and inputs to the core processes and it's essential to the management of the businesses. Supply Chain Process Examples: o Outsourcing: Exploring available suppliers for the best options to perform processes in terms of price, quality, delivery time, and environmental issue (Apple) o Warehousing: Receiving shipments from suppliers, verifying quality, placing in inventory, and reporting receipt for inventory records. (Fanatics Merchandise) o Sourcing: Selecting, certifying, and evaluating suppliers and managing supplier contracts (Supervisor who inspects goods before usages in a food company, like inspecting tomatoes before making them into the soups at Campbell's Soups) o Customer Service: Providing information to answer questions or resolve problems using automated information services as well as voice-to-voice contact with customers (Xfinity Customer Service) o Logistics: Selecting transportation mode (train, ship, truck, airplane, or pipeline) scheduling both inbound and outbound shipments, and providing intermediate inventory storage. o Cross-docking: Packing of products of incoming shipments so they can be easily sorted more economically at intermediate warehouses for outgoing shipments to their final destination.

External and Internal Customers

The customers that use or consume the products of processes are external and internal customers. · External Customers are the people that pay for and use the products or services a firm offers. Can be end-user or an intermediary o End-users are regular people outside the company that purchase the outputs. o An intermediary are manufacturers, retailers, and financial institutions. · Internal Customers are employees that are within the company that relies on other employee and processes' inputs to perform their work. o The General Managers and Supervisors rely on the work of regular employees to perform their work.

Service and Manufacturing Processes

There are two differences between Service and manufacturing processes: · The nature of outputs: o A tax return is a service process that provides important non-tangible information while a car is a manufacturing process that is physically used. o The nature of outputs for a manufacturing process is more easily measured than a service process. · The degree of customer contact o A tax return requires a lot of customer contact due to needing the customer's input to provide the service process. o A medical clinic or primary care requires that the. customer's input for the doctors to provide service. o A car doesn't need the input of the customers. The finished car only requires customer contact upon inspecting it. o Goods in a supermarket, for instance, have customers walking around inspecting goods to purchase the manufacturing processes. · Service Processes Outputs Examples: o CPA's with audits and tax returns o Lawyers with defending or prosecuting o Salons providing nail care and hairstyles o Airlines that provides transportation · Manufacturing Processes Outputs Examples: o Making Automobiles o Food Products like can foods or package food o Electronics, T.Vs, and Phones o Bathing products, Shampoo and Soap · These days a lot of companies provide both service and manufacturing processes. o Apple stores provide manufacturing outputs like Phones and Tablets, but also provide service outs like troubleshooting and fixing these products as well. o Toyota has cars, but also have oil changes and other car services outputs for the customers. o McDonald produced food behind the counter is a manufacturing process, however, the ordering and interactions between the customers and cashier are service processes.

Supply Chain

· A Supply chain is a series of processes within and across firms that produce a service or product to the satisfaction of the customer. · A firm can have multiple supply chains, which vary by the product or service provided. o For example, Campbell's Soups have different supply chains for each of their soups that will have different processes to get the desired products. o A restaurant is similar to a firm making products, however, their outputs are dishes. There are different supply chains to get a product from a dish that involves grilling meat versus making soup or pasta.

Flexibility Workforce and Equipment

· A flexible workforce is a workforce whose members are capable of doing many tasks, either at their own workstations or as they move from one workstation to another · Flexible Equipment is more affordable and produces an output that despite being less efficient than specialized equipment, is better when customization is high and volume is low. o Low volumes mean that process designers should select flexible, general-purpose equipment versus specialized gear due to costs.

Service Blueprint

· A service blueprint is a special flowchart of a service process that shows which steps have high customer contact. A spaghetti diagram. · The service blueprint is more frontend. · The service blueprint shows when and what steps for interacting with the customers. o There, you can identify how it went and improve on o If the process was successful, allowing the customer the "moment of truth" of knowing what the organization do and what they can provide for them, allowing the customer to either order a service or not · Time Stamps would be shown to show the difference in time. That it would allow identifying what customers come in and what demographics they are. o Example: Different customers come at specific time periods in a Supermarket, like Publix and you can identify who they are based on what time they came in.

Assemble-to-Order Strategy

· Assemble-to-Order Strategy is an approach to producing a wide variety of products from relatively few sub-assemblies and components after the customer orders are received. · Assemble-to-Order Strategy is a Line Process for assembly and a Large Batch Process for fabrication. · Not recommended to have stocked finished products due to numerous possible options thus making product forecasting inaccurate. · Postponement and Mass customization are key features, making finished products is on standby until orders are received but they are nearly finished beforehand. · Examples: o Fast Food Restaurants, all parts are cooked, but not yet assembled until customer orders o Clowns with their animal-shaped balloon, waiting for input from children to start making o Hotdog stands o Chiptole

Pareto Charts

A graphic way of classifying problems by their level of importance often referred to as the 80-20 rule Steps to do a Pareto Chart: · Step 1: List all the complaints · Step 2: Place the complaints on the most to least frequency · Step 3: Find the Percentages, must be 100% · Step 4: Do a running total (count) must be 100% · Step 5: Find and select the complaints that would total 80% or close to it, from descending order from most to least and · Step 6: Analyzed the complaints

Batch Process

Batch Process differs from the job process with respect to volume, variety, and quantity · Multiple products, with low (small batches) to moderate volume (large batches) · Disconnected line flows and moderately repetitive work due to time constraints and waiting time to make products, cannot be rushed and unavoidable · Examples: o Bakery goods and desserts o Metal screws and bolts o Potato Chips or Onion Rings o Fried Food o Anything that requires wait time or time constraint before making more

Productivity formula

Productivity = Outputs/Inputs

Capital Intensity (Automation)

· Automation is a system, process, or piece of equipment that is self-acting and self-regulating o Substituting labor-saving capital equipment and technology for labor has been a classic way of improving productivity and quality consistency in manufacturing processes. · Fixed automation is a manufacturing process that produces one type of part or product in a fixed sequence of simple operations. · A flexible automation is a manufacturing process that can be changed easily to handle various products

Systems

· Characteristics of Systems: o Systems have Purpose o All parts must be present for a system to carry out its purpose optimally o Interconnected parts and Interdependent parts o Order/Arrangement affects the performance of a system o Systems attempt to maintain stability through feedback · Examples of Systems: o Professional Sport Teams o Car o Marriage o Work Staff · Not systems, but collection: o Kitchen o Toolbox o DataBases of Customer Names

Data Analysis Tools

· Checklists are a form used to record the frequency of occurrences of certain process failures · Histograms summarize data measured on a continuous scale showing the frequency distribution on some process failure. · Bar Chart is a series of bars representing the frequency of occurrence of data characteristics measured on a yes/or no basis. · Scatter Diagrams is a plot of two variables showing whether they are related. · A cause-and-effect diagram is a diagram that relates a key performance problem to its potential causes · Graphs are representations of data in a variety of pictorial forms, such as line charts and pie charts

Core Competencies

· Core competencies are the unique resources and strengths that an organization's management considers when formulating strategy. These competencies are: o Workforce: A well-trained and flexible workforce allows organizations to respond to market needs in a timely fashion. o Facilities: Having well-located facilities is a primary advantage because it takes longer to make new ones, Also, having flexible facilities gives you a competitive advantage allowing different processes of different services or products at different volumes to be used there instead of creating a new one. o Market and Financial Know-How: Basically the ease to generate capital for your business knowledge versus your competitor gives you a step up against them. o System and Technology: Having cutting edge equipment for your workers and having them trained in them to increase efficiency will make business more efficient. Also, patents for new equipment that your company made will give you an advantage.

Six Sigma Process Improvement Model

· Define: The scope and boundaries of the process to be analyzed. · Measure: It is important to have good performance measures to evaluate a process for clues on how to improve it · Analyze: Use the date on measures to perform process analysis to determine where improvements are necessary · Improve: The most important step, the analytical and creative thinking, the design team generates a long list of ideas for improvements, these ideas are sifted and analyzed. Ideas that are justifiable where the benefits outweigh the costs are reflected in a new process design that can meet new performance objectives. · Control: Monitor the process to make sure that high-performance levels are maintained.

Design-to-Order Strategy

· Design to Order Strategy is when a firm can design new products that do not currently exist and then manufacture them to meet a demand · Design-to-Order Strategy is a Job Process o Designer pair of shoes for a special client o Industrial Scale custom-built reactor wherein the specifications/requirements would be unique. o Custom Fish Tanks (Animal Planet's TV Show Tanked)

Economies of Scope

· Economic of scope is the economies that reflect the ability to produce multiple products more cheaply in combination than separately o Cambell's Soups o Dell Laptops

External and Internal Suppliers

· External suppliers are businesses or individuals who provide the resources, services, products and materials for the firm's short term and long-term needs o For example, a furniture company needs wood, fabric, and nails and screws that are purchases from other companies. 3rd Parties supply the Inputs · Internal suppliers are the employees or processes that supply important information or materials to a firm's processes o Furniture companies themselves need internal suppliers to create the finished products of furniture like the different parts that employees create.

Service Process Structuring

· Front Office process is characterized by high customer contact where the service provider interacts directly with the internal or external customer. o A seller on the sales floor o An agent from a real estate agent o Barbershop and Salons · Hybrid Office process is characterized by moderate levels of customer contact and standard services with some options available o Banks o Gyms o Grocery Stockers · Back Office is a process with low customer contact and little service customization. o Manager in the back office o Any administrative position

Swim Lane Flowchart

· It allows you to see how an order or a process starts · An important step is identifying the handoff of the continuation of the process from one group to the group. This allows those in charge to analyze these issues: o Place Accountability for whom o Detect Missing work or steps o When did the issue occur · The Swim lane flow chart is more backend · Decision points: Do not make decision points on exception, make them base on what is practical and its works for your purpose

Make-to-Order Strategy

· Make-to-Order Strategy is when manufacturers make products to customer's specifications in low volumes. · Make-to-Order Strategy is a Job Process or Small Batch process depending on the product · The product is based on standard design but involves a more complex process to assemble the final product than it would on a standard design. · Products are very similar but have many different variations · Examples include: o Steak Houses will be customized steaks by size, desired finished cooking quality like rare or well-done, and finishes of garlic butter and fresh crack pepper o Painter and sculptor: Specifically have to talk to them and tell them how you want, features and imaginative creativity sharing o Photo albums: What to include, extra features o Medical Equipment

Make-to-Stock Strategy

· Make-to-stock strategy involves holding items in stock for immediate delivery, thereby minimizing customer delivery times. · Make-to-stock strategy is either a Line or Continuous-flow Process. · A make-to-stock strategy with a line process is called mass production. · Examples: o Soft Drinks o Chemicals o Electronic chips o Plastic Utensils o Garden Tools

Operation Management

· Operation Management is the systematic design, direct, and control of processes that transform inputs into services and products for internal and external customers. o Disney's performance in its operations management has become a source of competitive advantage for firms in both service and manufacturing sectors due to reputation.

Order Winners and Qualifiers

· Order Winners are competitive advantages such as quality, delivery speed, reliability, product design, flexibility, and image that cause a firm's customers to select that company's products or services. Order Winner's examples are: o Sony gamers (God of War) versus Xbox gamers (Gears of War) o Name brand (Oreos' recognition and advertisement) versus Walmart (Great Value Cookies' significant price reduction but similar finished products) · Order Qualifiers are competitive standards that make a firm's product viewed as fit for purchase by consumers o Safety standards and any regulations that must be pass before the good is allowed to be sold in the market or promises of customer satisfaction like free returns of the product if they don't satisfy

Managing Processes

· Process Strategy is the pattern of decisions made in managing processes so that they will achieve their competitive priorities · Process Analysis is the documentation and the detailed understanding of how work is performed and how it could be redesigned · Process Structure is the process type relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics o A layout

Process

· Process is any activity or group of activities that takes one or more inputs, transforms them and provides one or more outputs for its customers. o Processes often are clustered into operations and in turn, become supply chains. o An operation is a group of resources performing all of part of one or more processes.

Process Reengineering

· Reengineering refers to the rethinking and radical redesign of organizational processes to achieve dramatic improvements

Feedback Loops

· Reinforcing Loop is all about encouraging positive feedback. This means making changes to improve on this and ensure it is a steady increase. o An example would be a savings account, savings increases thus increase interest payments that will go in the savings account which continues the loop to get the most amount of savings in the account as time possible. o Another example would be the loop of sales, sales to customers encourages word of mouth effect which led to sales. In that consequence, that sales increase as more customers buy the goods and spread news of it to more customers which encourage more sales. · Balancing loops are continually trying to keep a system at some desired level of performance. They are characterized by keeping things how they are. Thermostats in your house keep your home at a steady temperature. A human's body temperature will do the same. o Balancing loops are generally stabilizing or goal-seeking. They resist change in one direction by producing a change in the opposite direction, which negates the previous effects. (This is why they are also called negative feedback loops.) For example, when the thermostat in your home detects that the room temperature is higher than the thermostat setting, it shuts down the heat.

Iceberg

· The Iceberg consist of: o Events: Events are what people react to the most. Similar or the same events eventually leads to seeing the underlying patterns. o Patterns: Once experiencing similar or the same events, a person can see trends within the events. These patterns are what causes the events to occur therefore we then try to replicate or prevent the events from occurring and improve on it to create a better outcome. This will lead to analyzing the systemic structures. o Systemic Structures: Systemic structures are the ways in which the parts of a system are organized. Due to the Events and Patterns being caused by the systemic structures, we then analyze it and depending on the outcome of the Events and Patterns, we improve or change something.