Operations Management
Ishikawa diagram (fish-bone chart)
(cause and effect?) Causes: material, machinery/equipment, manpower, methods --> after development POSSIBLE QUALITY PROBLEMS and INSPECTION POINTS are HIGHLIGHTED
Assembly drawing
an exploded view of the product, usually a three-dimensional drawing known as an ISOMETRIC DRAWING
3-D printing
an extension of CAD that build prototypes and small lots
Work order
an instruction to make a given quantity of a particular item
Product life-cycle management (PLM)
an umbrella of software programs that attempts to bring together the phases of product design and manufacture. 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 consistant
Alliances
cooperative agreements that allow firms to remain independent, but pursue strategies consistent with their individual mission
1.5 current: 5 hrs a day to produce 100 care packages new: 5 hrs a day to produce 133 care packages productivity? new productivity? percentage increase?
current: 20 packages per labor hour new: 26.6 packages per labor hour 26.6/20= 1.33= 33% increase
Capacity Analysis
determining the throughput capacity of workstations in a system and ultimately the capacity of the entire system
Make-or-buy decision
distinguishes between what the firm wants to PRODUCE and what it wants to PURCHASE--> critical to product definition
ISO's latest modification
emphasized how an organization can use a QUALITY management approach to achieve SUSTAINED success. Encourages organizations to plan for their economic survival through continuing the systematic improvement of performance, efficiency, and effectiveness
Source inspection
employees self-check their own work Controlling or monitoring at the point of production or purchase-- at the source
ISO standard encourages
establishment of quality management procedures, detailed documentation, work instructions, and record keeping. Assessment includes: self-appraisal and problem identification
The forecast is only the
estimate of the demand until the demand becomes known --> forecasts drive decisions in many areas --> impact of product demand forecast on 1. supply-chain management 2. human resources (HR) 3. capacity
Joint venture
firms establishing join ownership to pursue new products or markets
Control Charts
graphic presentations of data over time that show upper and lower limits for the process we want to control. 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 Upper and lower limits ex: temp. pressure, weight, length
Surrogate (substitute) interaction region (process chain)
includes process steps in which one participant is acting on another participants's resources, such as their information, materials, or technologies. DIRECT INTERACTION IS LIMITED ex: when the sandwich SUPPLIER is making sandwiches in the restaurant kitches ex: CUSTOMER has ACCESS to buffet ingredients and assembles sandwich HIMSELF.
Direct interaction region (process chain)
includes process steps that involve interaction between participants ex: sandwich buyer directly interacts with employees of a sandwich store
Independent processing region (process chain)
includes steps in which the sandwich supplier and/or sandwich customer is acting on resources where each has maximum control ex: firm that assembles pre-packages sandwiches ex: sandwiches built at home
Computer-aided design (CAD)
interactive use of a computer to develop and document a product
Employee empowerment
involving employees in every step of the production process -- TQM programs that delegate responsibility for quality to shop-floor employees tend to be twice as likely to succeed at those implemented with "top-down" directives
Product life-cycle
may be a matter of a few days (concert t-****), months (seasonable fashions), years (Madden NFL football video games), or decades (Boeing 737) --> task for operations manager: design a system that helps introduce new products successfully (develop STRATEGIES for new and EXISTING products) Strategies change as products move through their life cycle 1. Introductory phase 2. growth phase 3. maturity phase 4. decline phase
Variable inspection
measures such dimensions as weight, speed, size, or strength to see if an item falls within an acceptable range
Sustainability
meeting the needs of the present without compromising the ability of future generations to meet their needs
What has Taco bell done to serve "Twice the volume with half the labor"
pg 18
Mass customization and rapid product development were identified as challenges to modern manufacturing operations. What is the relationship between these challenges? Examples?
pg 19
Applying Expected Monetary Value (EMV) to Capacity Decisions
pg 311 when there is uncertainty
Profit-and-loss statement + three strategic options for the firm
pg 7 table 1.1
manufacturing based quality
quality= conforming to standards and "making it right the first time"
Value analysis
seeks improvements that lead to either a better product, or a product made more economically, or a product with less environmental impact takes place DURING the production process, when it is clear that a new product is a success.
Target-oriented quality
strives to keep the product at the desired specifications, producing more (and better) units near the target --> a philosophy of continuous improvement to bring the product exactly on target
Forecasting
the art and science of predicting future events
Effective capacity
the capacity a firm EXPECTS the achieve given the current operating constraints, often lower then design capacity because the facility may have been designed for an earlier version of the product or a different product mix than is currently being produced.
Design capacity
the maximum theoretical output of a system in a given period under ideal conditions, normally expressed as a rate, such as the number of tons of steel that can be produced per week, per month, or per year. "maximum number of units the company is capable of producing"
Utilization
the percent of DESIGN CAPACITY actually achieved
Efficiency
the perfect of EFFECTIVE CAPACITY actually achieved --> operations managers tend to be evaluated on efficiency --> the key to improving efficiency is often found in correcting quality problems and in effective scheduling, training, and maintenence.
Throughput time
the time it takes a unit to go through production from start to end
Quality
the totality of features and characteristics of a product or service that bears on its ability to satisfy stated of implied needs
Taguchi Concepts
three concepts aimed at improving both product and process quality 1. quality robustness 2. quality loss function 3. target-oriented quality
Operations manager's objective:
to build a total quality management system that identifies and satisfies customer needs --> total quality takes care of the customer
product based quality
views quality as a precise and measurable variable
2 General Forecasting approaches
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Adaptive forecasting/smoothing
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Associative forecasting models (regression and correlation analysis)
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Bias error
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Capacity
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Coefficient of correlation
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Coefficient of determination
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Collaborative planning, forecasting, and replenishment (CPFR)
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Cycles
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Delphi Method (qualitative)
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Economic Forecasts
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Exponential smoothing WITH TREND ADJUSTMENT (equation)
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Tracking signal
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Trend
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Trend Projection
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Weighted Moving average equation
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linear-regression analysis
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KEYS to quality service
1. Designing the product 2. managing the service process 3. Matching customer expectations to the product 4. Preparing for the exceptions
Limitations of NPV
1. Investments with the same NPV may have different projected lives and different salvage values 2. Investments with the same NPV may have different cash flows (may make substantial differences in the company's ability to pay its bills) 3. The assumption is that we know future interest rates (we don't) 4. Assumes payments are always made at the end of the period
4 Different Qualitative Methods
1. Jury of executive opinion 2. Delphi method 3. Sales force composite 4. Market survey
Capacity planning can be viewed in three horizons
1. Long range capacity 2. Intermediate range 3. Short run
Tactics for adjusting capacity to demand
1. Making staffing changes (increasing, decreasing) 2. Adjusting equipment 3. Improving processes to increase throughput 4. Redesigning products to facilitate more throughput 5. Addressing process flexibility to better meet changing product preferences 6. Closing facilities
3 popular ways of measuring the forecast error
1. Mean absolute deviation (MAD) 2. Mean squared error (MSE) 3. Mean absolute percent error (MAPE)
Cost of Quality (COQ)
1. Prevention costs 2. Appraisal costs 3. Internal failure costs 4. External failure costs
Time horizons fall into three categories
1. Short-range forecast 2. Medium-range forecast 3. Long-range forecast
4 Components of a time series
1. Trend 2. Seasonality 3. Cycles 4. Random variations
Seven concepts of TQM
1. continuous improvement 2. six sigma 3. employee empowerment 4. benchmarking 5. just-in-time (JIT) 6. Taguchi concepts 7. knowledge of TQM tools
Assumptions of the break-even
1. costs and revenue are shown as straight lines, increase linearly, and in direct proportion to the volume of units being produced 2. neither fixed nor variable costs need to be a straight line ex: fixed costs change as more capital equipment used, labor costs change, revenue may change with discounts
Capacity Exceeds demand
1. price reductions or aggressive marketing 2. product changes 3. layoffs and plant closing
Aspect of service quality
3. Manager may be able to influence both the quality of the service and the expectation. Don't promise more than you can deliver 4. The quality control system must recognize and HAVE A SET OF ALTERNATIVE PLANS FOR LESS-THAN OPTIMAL OPERATING CONDITIONS
Robust Design
A design that can be produced to requirements EVEN with unfavorable conditions in the PRODUCTION process
Histogram
A distribution that shows the frequency of occurrences of a variable
Engineer drawing
A drawing that shows the dimensions, tolerances, materials and finishes of a component (shows how to make one item on the bill of material)
Quality loss function
A mathematical function that identifies all costs connected with poor quality and shows how these costs increase as product quality moves from what the customer wants
Break-even analysis
A means of finding the point, in dollars and units, at which costs equal revenues Firms must operate above this level to achieve profitability Requires an estimation of fixed costs, variable costs, and revenue
Check list
A type of poka-yoke that lists the steps needed to ensure consistency and completeness in a task
JIT and QUALITY
Better quality and less inventory are better, easier to employ JIT system: Often the purpose of 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
Expected production
Effective capacity x Efficiency = expected production
Associative Models
Linear regression
Total Quality Managment (TQM)
Management of an entire organization so that it excels in all aspects of products and services that are important to the customer
Activity on Node
NODES designate activities --> most use AoN 1. we only list the immediate predecessor
Slack
Slack= LS- ES Slack = LF-EF
Bottleneck time
The time of the slowest workstation (the one that takes the longest) in the production system
Computer-aided manufacturing
The use of information technology to control machinery
Concurrent engineering
Use of cross-functional teams in product design and manufacturing --> implies speedier product development through simultaneous performance of various aspects of product development --> dominant structure for product development
Utilization formula
Utilization= Actual output/Design Capacity
Variance for time
Variance for times= [(pessimistic time-optimistic time)/6)]squared
Variance of PERT
Variance= [(b-a)/6]squared
Multiproduct break-even
Weight each product's contribution by its proportion of sales
Selecting the smoothing constant
When it is high it gives more weight to recent data When it is low it gives more weight to past data
Network
a set of participants
Standard for the exchange of product data (STEP)
a standard that provides a format allowing the electronic transmission of three-dimensional data
Configuration management
a system by which a product's planned and changing components are accurately identified
Virtual reality
a visual form of communication in which images substitute for reality and typically allow the user to respond interactively
Set of seven tools
check sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control
Attribute inspection
classifies items as being either good or defective --> does not address the DEGREE of failure
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
Intermediate range
(3-36 months) we can add equipment, personel, and shifts we can subcontract and we can BUILD or USE inventory this is the "aggregate planning" task
Medium-range forecast
(intermediate) 1. spans from 3 months to 3 years Useful in a. sales planning b. production planning and budgeting c. cash budgeting d. analysis of various operating plans
Short run
(up to 3 months) we are primarily concerned with scheduling jobs and people as well as allocating machinery --> modifying capacity in the short run is difficult, as we are usually constrained by existing capacity
user based quality
quality "lies in the eyes of the beholder" higher quality= better performance, nicer features, and other improvements
A forecast is usually classified by
the FUTURE TIME HORIZON that it covers
Capacity decisions
-Often determine capital requirements and therefore a large portion of FIXED COST - whether demand will be satisfied or whether facilities will be idle
Exponential smoothing equation
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Focus forecasting
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Focus forecasting is based on 2 principles
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Forecasting in the service sector
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Human Resources
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Jury of executive opinion (qualitative)
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Market Survey (qualitative)
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Mean Absolute Percent Error (MAPE)
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Mean Absolute deviation (MAD)
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Mean Squared Error (MSE)
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Measuring forecast error
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Monitoring and controlling forecasts
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Moving average equation
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Moving-average
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Multiple regression
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Naive Approach
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Notes on the use of the LEAST SQUARED method
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Qualitative forecasts
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Quantitative forecasts
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Random variations
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Regression analysis EQUATIONS
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Sales force composite (qualitative)
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Seasonal variations
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Seasonality
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Standard error of the estimate (standard deviation of the regression)
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Steps to get the Seasonal forecast
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Supply-Chain management
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Technological forecasts
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Bottleneck (cont.)
1) the BOTTLENECK is the operation with the longest (slowest) process time, after dividing by the number of parallel (redundant) operations, 2) the SYSTEM CAPACITY is the inverse of the BOTTLENECK TIME, and 3) the THROUGHPUT TIME is the total time through the longest path in the system, assuming no waiting
When and where to inspect
1. At your supplier's plant while the supplier is producing 2. At your facility upon receipt of goods from your supplier 3. Before costly or irreversible processes 4. During the step-by-step production process 5. When production or service is complete 6. Before delivery to your customer 7. At the point of customer contact
To form a decision tree
1. Be sure that all possible alternatives and states of nature (beginning on the left and moving right) are entered at the end of the appropriate branch. This includes an alternate of "doing nothing" 2. Payoffs are entered at the end of the appropriate branch. This is the place to develop the payoff of achieving this branch 3. The OBJECTIVE is to determine the EXPECTED VALUE OF EACH COURSE OF ACTION. --> We accomplish this by starting at the end of the tree (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.
Implications of quality
1. Company reputation 2. Product liability 3. Global implications (meet global quality, design, and price expectations)
DMAIC 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 and reproducability 4. IMPROVES: by modifying or redesigning, existing processes and procedures 5. CONTROLS: the new process to make sure performance levels are maintained
Steps for benchmarking
1. Determine what to benchmark 2. Form a benchmark team 3. Identify benchmark partners 4. Collect and analyze benchmarking information 5. Take action to match or exceed the benchmark
Managing quality helps build successful strategies of
1. Differentiation 2. low cost 3. response
4 considerations for a good capacity decision
1. Forecast demand accurately (product life cycle, sales, etc.) 2. Match technology increments and sales volume ( 3. Find the optimum operating size (volume) 4. Build for change (build flexibility into facilities and equipment; changes will occur in processes, as well as products, product volume and product mix)
Long-range forecast
1. Generally 3 years or more in time span Used in a. planning for new products b. capital expenditures c. facility location or expansion d. research and development
TOC 5 step process
1. Identify the constraints 2. Develop a plan for overcoming the identified constraints 3. Focus resources on accomplishing step 2 4. Reduce the effects of the constraints by offloading work or by expanding capability. Make sure that the constraints are recognized by all those who can have an impact on them 5. When one set of constraints is overcome, go back to Steo 1 and identify new constraints
Medium and long-range forecasting differ from short-range because
1. M and L deal with MORE COMPREHENSIVE ISSUES supporting management decisions regarding planning and products, plants, and processes 2. ST EMPLOYS DIFFERENT METHODOLOGIES (mathematical techniques such as moving averages, exponential smoothing, and trend exploration are all common to ST) Broader, less quantitative methods are useful in predicting such issues as: whether a new product should be introduced into a company's line 3. S T tend to be MORE ACCURATE
4 principles of bottleneck management
1. Release work orders to the system at the pace set by the bottleneck's capacity 2. Lost time at the bottleneck represents lost capacity for the whole system 3. Increasing the capacity of a non-bottleneck is a mirage 4. Increasing the capacity of the bottleneck increases capacity for the whole system
Revenue function (of break-even)
1. Revenue begins at the origin and proceeds upward to the right, increasing by the selling price of each unit 2. Where the revenue function crosses the total cost line (the sum of fixed and variable costs) is the break-even point, with a profit corridor to the right and a loss corridor to the left
Forcasting may involve
1. Taking historical data (such as pat sales) and projecting them into the future with a mathematical model 2. a subjective or intuitive prediction 3. be based on demand-driven data (such as customer plans to purchase, and projecting them into the future) 4. a combination of these (a mathematical model adjusted by a manager's good judgement)
Aspect of service quality
1. Tangible component of many services is important (how well service is designed and produced Ex: checkout bill at the hotel, warm the food is at taco bell, how well your car runs after you pick it up at the shop
Two measures of system performance
1. Utilization 2. Efficiency
Techniques for building employee empowerment
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 5. creating such formal organization structures as teams and quality circles
Demand Exceeds Capacity
1. firm may curtail demand by raising prices, scheduling long lead times, and discouraging marginally profitable business 2. long term solution: increase capacity
Increase service efficiency and limit interaction
1. limit the options 2. delay customization 3. modularization 4. automation 5. moment of truth
Short-range forecast
1. time span of up to 1 year 2. generally less than 3 months Used for a. planning purchasing b. job scheduling c. workforce levels d. job assignments e. production levels
ISO 9000's 8 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 8. mutually beneficial supplier relationships
Aspect of service quality
2. SERVICE QUALITY is related to the SERVICE PROCESS OM manager can design processes (service products) that have these attributes and can ensure their quality (TQM)
Theory of constraints
A body of knowledge that deals with anything that limits an organization's ability to achieve it's goals Constraints can be physical (process or personnel availability, raw materials, or supplies) or non-physical ( procedures, morale, and training)
Flowchart (Process diagram)
A chart (block diagrams) that describes the steps in a process (present a process or a system using annotated boxes and interconnected lines)
Statistical Process Control Chart (SPC)
A chart with time on the horizontal axis for plotting values of a statistic --> monitors standards, makes measurements, and takes corrective action a 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 rangers, the process is stopped and, typically, the assignable cause located and removed.
Six Sigma (cont.)
A comprehensive system-- a STRATEGY (focuses on total customer satisfaction), a DISCIPLINE (follows the formal six sigma improvement model , DMAIC), and a set of tools-- for achieving and sustaining business success (seven tools)
Engineering change notice (ECN)
A correction or modification of an engineering drawing or bill of material
Modular design
A design in which parts or components of a product are subdivided into modules that are easily interchanged or replaced
Scatter Diagram
A graph of the value of one variable vs. another variable
House of Quality
A graphic technique (involving 7 steps) for defining the relationship between customer desires and product (or service).
Quality circle
A group of employees who meet regularly to solve work-related problems --> receive training in group planning, problem solving, and statistical quality control
Pareto charts
A method of organizing errors, problems, or defects to help focus on problem-solving efforts. --> also, a graphic way of classifying problems (defects) by their level of importance (frequency)
Group technology
A product and component coding system that specifies the size, shape, and type of processing; it allows similar products to be grouped
Six Sigma
A program to save time, improve quality, and lower costs Statistical sense: describes a process, product, or service with an extremely high capability Program sense: design to reduce defects to help lower costs, save time, and improve customer satisfaction
Cause-and-effect diagrams
A schematic technique used to discover possible locations of quality problems --> a tool that identifies process elements (causes) that may affect an outcome
ISO 9000
A set of quality standards developed by the International Organization for Standardization (ISO)
Actual (or Expected/rated)
Actual= (Effective capacity)(Efficiency) With a knowledge of effective capacity, a manager can find the expected output of a facility
Bottleneck
An operation that is the limiting factor or constraint --> has the lowest effective capacity of any operation in the system and thus limits the system's output
Check-Sheet
An organized method of recording data
Process-Chain-Network Analysis (PCN)
Analysis that focuses on the ways in which processes can be designed to optimize interaction between firms and their customers
TQM in services vs products
Approach to product comparison differs because of service's poor definition of the 1) intangible differences between products and 2) the intangible expectations customers have of these products
Quality characteristics may be measured as either
Attributes or Variables
Break even
BEP$= F/ 1-(V/P) BEPx= F/(P-V)
Documents for service
Because of the high interaction of most services, the documents for moving the product to production often take the form of explicit JOB INSTRUCTIONS OR SCRIPT
Backward pass
Begins with the last activity in the project
Process participant
Can be a manufacturer, a service provider, or a customer
Time-based competition
Competition based on time; rapidly developing new products and moving them to market
Maturity phase-- strategy options
Competitors have been established SO high volume, innovative production may be appropriate. 1. Improved cost control 2. reduction in operations 3. pairing down of the product line may be effective or necessary for profitability and market share
Prevention costs
Costs associated with reducing the potential for defective parts or services ex: training, quality improvement programs
Appraisal costs
Costs related to evaluating products, processes, parts, and services Ex: testing, labs, inspectors
External failure costs
Costs that occur after delivery of defective parts or services Ex: returned goods, liabilities, lost goodwill, costs to society, rework (hardest to estimate)
Internal failure costs
Costs that result from production of defective parts or services before delivery to customers Ex: rework, scrap, downtime
Labor Productivity Solved Problem pg. 21
Current= 240/300 = .8 crates per labor hour Potential= 260/308= .844 crates per labor hour Using current productivity as a base the increase will be = .844/.8=1.055= 5% increase
JIT and QUALITY
Cuts the cost of quality Ex: scrap, rework, inventory investment, and damage costs are directly related to inventory on hand . Because there is less inventory on hand, costs are lower. Inventory HIDES bad quality whereas JIT immediately EXPOSES bad quality
Service-Sector Demand and Capacity Mangement
Demand management= scheduling customers Capacity management = scheduling the workforce
Just-in-time (JIT)
Designed to produce or deliver goods just as they are needed --> philosophy of continuing improvement and enforced problem solving
Seven steps in the forecasting system
Determine the use of the forecast Select the items to be forecasted Determine the time horizon of the forecast Select the forecasting model(s) Gather the data needed to make the forecast Make the forecast Validate and implement results
Process domain
Each participant has a PROCESS DOMAIN that includes the set of activities over which it has control The activities are organized into three PROCESS REGIONS for each participant
Efficiency
Efficiency= Actual output/effective capacity
Operations Managers Job in regards to productivity
Enhance (improve) the ratio of outputs to inputs Improving productivity means improving efficiency High production does not mean high productivity
Break-even point in units
F/(P-V) Total fixed costs/ (Price-variable cost)
Break-even point in dollars
F/1-(V/P) Total fixed cost/1-(Variable cost-price)
Exponential smoothing
Form of weighted moving average Weights decline exponentially Most recent data weighted most Requires smoothing constant () Ranges from 0 to 1 Subjectively chosen Involves little record keeping of past data
Inspection
Goal: detect a bad process immediately Can involve: measurement, tasting, touching, weighing, or testing of a product (even destroying) Does not: change a product or add value but is a VEHICLE for improving the system OM need to know: 1. when to inspect 2. where to inspect
Long range capacity
Greater than 3 years function of adding facilities and equipment that have a long lead time
Decision trees (product design)
Helpful when there are a series of decisions and various outcomes that lead to SUBSEQUENT decisions followed by other outcomes
Quality house
House 1: Customer requirements + Design characteristics House 2: Specific components House 3: production process House 4: Quality plan
JIT and Quality
Improves Quality Ex: shrinks lead time, keeps evidence of errors fresh and LIMITS the number of potential sources of error. JIT creates an early WARNING system of quality problems (both within the firm and with vendors )
3 Problems of moving averages
Increasing n smooths the forecast but makes it less sensitive to changes Does not forecast trends well Requires extensive historical data
Quality loss equation
L=D(squared) x C L= loss to society D(squared)= square of the distance from the target value C= cost of the deviation at the specific limit
Work Breakdown structure
Level 1. Project 2. Major tasks in the project 3. Subtasks in major tasks 4. Activities (or "work packages" to be completed)
LEARN routine
Listen, Empathize, Apologize, React, Notify (ensuring the complaint is fed back into the system)
Gantt Chart
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 4. overall project time is developed On simple projects: permit managers to observe the progress of each activity and to spot and tackle problem areas *they do not adequately illustrate the interrelationships between the activities and the resources (unlike PERT and CPM)
Decline stage -- strategy options
May need to be ruthless with these products (poor products in which to invest resources and managerial talent) UNLESS dying products make some UNIQUE CONTRIBUTION to the firm's reputation or its product line OR can be sold with an unusually high contribution --> THEIR PRODUCTION SHOULD BE TERMINATED
Time-series models
Naive approach Moving averages Exponential smoothing Trend projection
PERT
Optimistic time (a) , pessimistic time(b) , most likely time (m) Using PERT, we often assume that activity time estimates follow the BETA probability distribution --- appropriate for determining the EXPECTED VALUE and VARIANCE for activity completion times
Net Present Value
P= F/(1+i)nth 1. compute the present value of all cash flows for each investment alternative 2. When deciding among alternatives you pick the investment with the highest net present value 3.. When making several investments, those with the higher net present values are preferable to investments with lower net present values
Typical performance measures used in benchmarking
Percentage of defect, cost per unit/order, processing time per unit, service response time, return on investment, customer satisfaction rates, customer retention rates
Continuous Improvement
Plan-Do-Check-Act: a continuous improvement model of plan, do, check, act
What are the measurement problems that occur when one tries to measure productivity?
Precise units of measure are often unavailable
Quality robust
Products that are consistently built to meet customer needs in spit of adverse conditions in the production process
Demand Forecasts
Projections of demand for company's products of services. They need demand driven forecasts, where the focus is on rapidly identifying and tracking customer desires May use: 1. Point of-sale (POS) data 2. retailer-generated reports of customer preferences, any any other Demand driven forecasts drive a company's production, capacity, and scheduling system
Improved Quality
Sales gains via: 1. improved response 2. flexible pricing 3. improved reputation Reduced Costs via 1. increased productivity 2. lower rework and scrap costs 3. lower warranty costs
Benchmarking
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. Idea: develop a target at which to shoot and then to develop a standard or benchmark against which to compare your performance
Adding service Efficiency
Service productivity of notoriously low (in part because of customer involvement in the DESIGN or the DELIVERY of the service, or both) -- this complicates the product design challenge
Smoothing constant
Smoothing constant generally .05 ≤ a ≤ .50 As a increases, older values become less significant Chose high values of when underlying average is likely to change Choose low values of when underlying average is stable
Project standard deviation
Square root of the project variance
Break-even equation
TR=TC Px=F + Vx P=price per unit (after all discounts)
Capacity
The "throughput" or the number of units a facility can hold, receive, store or produce in a given time
Combination of qualities
The characteristics that connote quality must be first identified through research (user), then translated into specific product attributes (product) then manufacturing process is organized to ensure that products are made precisely to specifications (manufacturing). A process that ignores any of these steps will not result in a quality product
Contribution
The difference between selling price and variable cost Only when total contribution exceed total fixed costs will there be profit
Earliest finish time rule
The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time EF= ES + activity time
Latest Start time rule
The latest start time (LS) of an activity is the difference of its latest finish time (LF) and its activity time LS=LF-activity time
Crashing
The process by which we shorten the duration of a project in the cheapest manner possible so that total completion is reduced Crash time: the shortest duration required to complete an activity Crash cost: logical for the crash cost of an activity to be higher than its normal cost
Productivity
The ratio of outputs (goods and services) divided by the inputs (resources, such as labor and capital)
Product decision
The selection, definition, and design of products Objective: to develop and implement a product strategy that meets the demans of the marketplace with a competitive advantage . - product strategy may focus on developing a competitive advantage via 1. differentiation, low cost, rapid response, or a combination of these
Quantitative forecasting methods
Time-series models 1. Naive approach 2. Moving averages 3. Exponential smoothing 4. Trend projection Associative Model 5. Linear regression
Service Recovery
Training and empowering frontline workers to solve a problem immediately
PokaYoke
a foolproof device or technique that ensures production of good units every time
Life Cycle Assessment (LCA)
a formal evaluation of the environmental impact of a product
Assembly chart
a graphic means of identifying how components flow into subassemblies and final products
Before anything can be produced
a product's FUNCTIONS and ATTRIBUTES must be defined
Forecasts may be influenced by
a product's position in its life cycle-- whether in an introduction, growth, maturity, or decline stage
Process chain
a sequence of steps that accomplishes an activity, such as building a home, completing a tax return, or preparing a sndwhich
1.11
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1.7 -- show the percent change in productivity Multi-factor basis (dollars as common denom) Last year: units: 1,000 Labor hours: 300 (X 10) Resin (pounds): 50 (x 5) Capital invested: 10,000 ( x .01) Energy (BTU): 3,000 (x .50) Now Units: 1,000 Labor hours: 275 (x 10) Resin: 45 (x 5) Capital: 11,000 (x .01) Energy: 2,850 (x .50)
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Give an example of a situation in which project management is needed?
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Project Scheduling -- sequencing and alloting time to all project activities
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External Development strategies -- speeding development
1. Alliances 2. Joint ventures 3. purchase technology or expertise by acquiring the developer
Manufacturability and value engineering benefits
1. Cost reduction 2. Reduced complexity of the product 3. additional standardization of components 4. improvement of functional aspects of the product 5. Improved job design and job safety 6. improved maintainability (serviceability) of the product 7. robust design
PERT and CPM follow six basic steps
1. Define the project and prepare the work breakdown structure 2. Develop the relationship among the activities. Decide which activities must precede and which must follow 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, the CRITICAL PATH 6. Use the network to help plan, schedule, monitor, and control the project
Identify the 10 strategic OM decisions
1. Design of goods and services 2. Managing quality 3. Process and capacity design 4. Location strategy 5. Layout strategy 6. Human resources and job design 7. Supply-chain management 8. Inventory management 9. Scheduling 10. Maintenance pg 8 table 1.2 (for descriptions of each)
Four areas that are significant to improving labor productivity
1. Design of goods and services? 2. Managing quality 3. process and capacity design 4. supply-chain-management
Identify four people who have contributed to the theory and techniques of operations management
1. Eli Whitney -- early popularization of interchangeable parts (achieved through the standardization of quality conrol) 2. Frederick W. Taylor -- management should be more resourceful and aggressive in the improvements of work methods 3 & 4. Henry Ford + Charles Sorenson -- assembly line
Three popular techniques that allow managers to plan, schedule, and control
1. Gantt charts 2. PERT 3. CPM
7 steps of House of Quality
1. Identify customer WANTS (what do cust. want in this product?) 2. Identify HOW the good/service will satisfy customer wants 3. Relate customer WANTS to product HOWS 4. Identify relationships between the firm's HOWS 5. Develop importance ratings 6. Evaluate competing products 7. Determine the desirable technical attributes, your performance, and the competitor's performance against these attributes
ES time rule
1. If a activity has only a single immediate predecessor, its ES equals the EF of the predecessor 2. If an activity has multiple immediate predecessors, its ES is the maximum of all EF values of its predecessors ES= Max (EF of all immediate predecessors)
What are the three basic functions of a firm?
1. Marketing (selling) -- generates the demand, takes the order for product or service 2. Finance (accounting) -- tracks how well the organization is doing, pays the bills, collects the money 3. Operations/Production -- creates the product
Internal development strategies - speeding development
1. Migrations of existing products 2. Enhancements to existing products 3. New internally developed products
The management of projects involves three phases
1. Planning: goal setting, defining the project and team organization 2. Scheduling: relates people, money, and supplies to specific activities and relates activities to each other 3. Controlling: the firm monitors resources, costs, quality, and budgets. It also revises or changes plans and shifts resources to meet time and cost demands
Limitations of PERT ( and CPM)
1. Project activities have to be CLOSELY DEFINED, INDEPENDENT, and STABLE in their RELATIONSHIPS 2. PRECEDENCE relationships MUST be SPECIFIED and NETWORKED together 3. Time estimates tend to be subjective and are subject to FUDGING by managers (who fear the dangers of being overly optimisitic or not pessimistic enough) 4. DANGER in placing TOO MUCH EMPHASIS on the LONGEST, OR CRITICAL PATH. NEAR-CRITICAL paths need to be monitored closely as well
Project organization
1. Projects can be defined as a series of related tasks directed toward a major output 2. PROJECT ORGANIZATION is developed to make sure existing programs continue to run smoothly on a day-to-day basis while new projects are successfully completed 3. Project organization is an effective way of assigning people and physical resources needed 4. It is a temporary organization structure designed to achieve results by using specialists from throughout the firm
Project scheduling serves what purposes
1. Shows the relationship of each activity to others and to the whole projects 2. Identifies the precedence relationships among activities 3. encourages the setting of realistic time and cost estimates for each activity 4. helps make better use of people, money, and material resources by identifying critical bottlenecks in the project
Operations managers must be aware of these dynamics and be able to anticipate changes in product opportunities, the products themselves, product volume, and product mix
1. Understanding the customer 2. Economic change 3. sociological and demographic 4. technological change 5. political and legal change 6. market practice, professional standards, suppliers, distributors
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 managers receive high visibility in the firm for
1. making sure that all necessary activities are finished in proper sequence and on time 2. the project comes within the budget 3. the project meets its quality goals 4. the people assigned to the project receive the motivation, direction, and information needed to do their job Project managers should be : good coaches and communicators and able to organize activities from a variety of disciplines
Advantages of PERT (and CPM)
1. useful when scheduling and controlling LARGE projects 2. Straightforward concept (not mathematically complex) 3. Graphical networks help highlight RELATIONSHIPS among project activities 4. Critical Path & slack time analysis help pinpoint activities that need to be CLOSELY WATCHED 5. Project documentation and graphs point out WHO IS RESPONSIBLE FOR VARIOUS ACTIVITIES 6. Applicable to WIDE VARIETY of projects 7. Useful in MONITORING SCHEDULES and COSTS
Activity on Arrow
ARROWS represent activities. nodes represent the starting and finishing time of an activity and are called an EVENT. NODES consume neither time nor resources. Identify the node (event) with a number.
Manufacturability and value engineering
Activities that help improve a product's design, production, maintainability, and use. May be the best cost-avoidance technique available to operations managemen. Yeild value improvement by focusing on achieving the functional specifications necessary to meet customer requirements in an optimal way.
Work Breakdown Structure defined
First: carefully establish the project's objectives then break the project down into manageable parts. Work breakdown structure (WBS) : defines the project by dividing it into its major subcomponents (or task) which are then subdivided into more detailed components, and finally into a set of activities and their related costs --> critical to managing the project and schedule success.
Project variance
Found by summing the variance of CRITICAL activities
Why study OM?
Four reasons 1. OM is one of the three major business functions of any organization and is integratedly related to all the other business functions. All orgs market, finance, and produce (operate), and its important to know how the OM activity functions. Therefore we study HOW PEOPLE ORGANIZE THEMSELVES FOR PRODUCTIVE ENTERPRISE. 2. Because we want to know how GOODS AND SERVICES ARE PRODUCED. Production function = segment of society that creates products and services we use 3. to UNDERSTAND WHAT OPERATIONS MANAGERS DO. 4. because OM IS SUCH A COSTLY PART OF AN ORGANIZATION. OM provides a major opportunity to improve profitability and enhance service to society
Crashing a project (step 1 &2)
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 Crash cost per period = (crash cost-normal cost)/(normal time-crash time) 2. Using the current activity times, find the critical path(s) in the project network.
Latest finish time rule
If an activity is an immediate predecessor for just a single activity, its LF equals the LS of the activity the immediately follows it If an activity is an immediate predecessor to more than one activity, its LF is hte minimum of all LS values of all activities that follow it LS= Min (LS of all immediate following activities)
1.9-- cleaned 65 rugs Labor: 520 hours @ $ 13 per hour Solvent: 100 gallons at $ 5 per gallon Machine Rental: 20 dys @ $50 per day What is the labor productivity per dollar? What is the multifactor productivity
Labor productivity per dollar? 65/520 hours= .125 rugs per labor hour
U.S. described as "knowledge society" How does this affect productivity measurement and the comparison of productivity between the U.S. and other countries?
Measurement of productivity is an excellent way to evaluate a country's ability to provide an improving standard of living for it's people. Only through increases in productivity can the standard of living improve. Only through increases in productivity can labor, capital, and management receive additional payments. The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is a result of of mix of CAPITAL (38% of 2.5%) LABOR (10% of 2.5%) and MANAGEMENT (52% of 2.5%)
5 reasons productivity is hard to improve in the service sector
Service sector work is 1. Typically labor intensive 2. Frequently focus on unique individual attributes 3. Often an intellectual task performed by professionals 4. Often difficult to mechanize and automate 5. Often difficult to evaluate
Calculating Slack time &
Slack= LS-ES Slack= LF-EF
Identifying critical path
The activities with zero slack are called the critical activities and are said to be on the critical path. The critical path is a continuous path through the project network that : 1. Starts at the first activity in the project 2. Terminates at the last activity in the project 3. Includes only critical activities
Product-by-value report allows
management to evaluate possible strategies for each product. These may include 1. increasing cash flow (increasing contribution by raising price or lowering cost) 2. increasing market penetration (improving quality and/or reducing cost or price) 3. reducing costs (improving production process)
Design for manufacture and assembly (DFMA)
software that allows designers to look at the effect of the design on manufacturing the products
To find the EXPECTED ACTIVITY TIME of PERT
t( the beta distribution) weights three time estimates t is used in the project network to compute all earliest and latest times PERT makes two assumptions: 1. total project completion times follow a normal probability distribution 2. activity times are statistically independent t=(a+4m+b)/6
Product development teams
teams charged with moving from market requirements for a product to achieving product success Objective: make the good or service a success, including marketability, manufacturability, and serviceability
Product-by-value report may
tell management which product offerings should be eliminated and which fail to justify further investment in research and development or capital equipment . Product-by-value analysis FOCUSES attention on the strategic direction for each product
Critical path analysis
the LONGEST time path through the network ES and EF are determined during the FORWARD PAS LS and LF and determined during the BACKWARD PASS
Current: 40 hrs per day make 120 boxes Increase: 125 boxes per day What is their productivity? What is new productivity ? What is their increase in productivity per hour? What will be their percentage change in productivity?
120/40=3 125/40=3.125 increase= .125 percentage= 4.16
Crashing a project (step 3&4)
3. If there is only one critical path, 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 form 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. (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
Organizing for Product Development
4 approaches 1. organization with distinct departments advantage: fixed duties and responsibilities disadvantage: lack of forward thinking 2. assign a product manager to "champion" the product through the product development system and related organizations 3. (Best) use of teams: PRODUCT DEVELOPMENT TEAMS, DESIGN FOR MANUFACTURABILITY TEAMS, VALUE ENGINEERING TEAMS 4. activities are all in one organization
Product-by-value analysis definition
A list of products, in descending order of their individual dollar contribution to the firm, as well as the TOTAL ANNUAL DOLLAR CONTRIBUTION of the product (low contribution of 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
A list of the hierarchy of components, their description, and the quantity of each required to make ONE UNIT OF PRODUCT ( in the food-service industry = PORTION-CONTROL STANDARDS) In more complex products, a bill of material is referenced on other bills of material of which they are a part
Route sheet
A listing of all the operations necessary to produce a component with the material specified in the bill of material
difference between PERT and CPM
PERT employs three time estimates for each activity. These time estimates are used to compute expected values and standard deviations for the activity. CPM makes the assumption that activity times are known with certainty and hence requires only one time factor for each activity. They can help answer these questions... pg 65
Product Development Stages
Product concepts are developed from a variety of sources, both external and internal to the firm. Concepts that survive the product idea stage progress through various stages, with nearly constant review, feedback, and evaluation in a highly participative environment to minimize failure
Growth Phase -- Strategy options
Product design has begun to stabilize --> effective forecasting of capacity requirements is necessary May be necessary to ADD CAPACITY or ENHANCE existing capacity to accommodate the increase in product demand
Introductory phase-- Strategy options
Production techniques are still being "fine -tuned" for the market. May warrant unusual expenditures for 1. research, 2. product development 3. process modification and enhancement 4. supplier development
Quality Function Deployment
QFD is used early in the design process to help determine WHAT WILL SATISFY THE CUSTOMER and WHERE TO DEPLOY QUALITY EFFORTS Refers to both 1. determining what will satisfy the customer 2. translating those customer desires into the target design a. the idea is to capture a rich understanding of what the customer wants to identify alternative process solutions b. the information is then integrated into the evolving product design
Quality HOUSE need more info
Quality plan (last house) is a set of specific tolerances, procedures, methods, and sampling techniques that will ensure that the production process meets the customer requirements QFD effort is devoted to meeting customer requirements. The SEQUENCE of houses is a very effective way of IDENTIFYING, COMMUNICATING, AND DEPLOYING PRODUCTION RESOURCES. In this way we produce quality products, meet customer requirements, and win orders.
