OPMA Final Exam

The costs of quality are generally classified into four types:

-Appraisal costs: Costs of the inspection, testing, and other tasks to ensure that the product or process is acceptable. -Prevention costs: The sum of all the costs to prevent defects, such as the costs to identify the cause of the defect, to implement corrective action to eliminate the cause, to train personnel, to redesign the product or system, and to purchase new equipment or make modifications. -Internal failure costs: Costs for defects incurred within the system: scrap, rework, repair. -External failure costs: Costs for defects that pass through the system: customer warranty replacements, loss of customers or goodwill, handling complaints, and product repair.

TQM has two fundamental operational goals:

-Careful design of the product or service. -Assurance that the organization's systems can consistently produce the design.

There are three forms of certification:

-First party: A firm audits itself against ISO 9000 standards. -Second party: A customer audits its supplier. -Third party: A "qualified" national or international standards or certifying agency serves as an auditor.

To ensure good master scheduling, the master scheduler (the human being) must:

-Include all demands from product sales, warehouse replenishment, spares, and interplant requirements. -Never lose sight of the aggregate plan. -Be involved with customer order promising. -Be visible to all levels of management. -Objectively trade off manufacturing, marketing, and engineering conflicts. -Identify and communicate all problems.

Lot-for-lot (L4L) is the most common technique. It:

-Sets planned orders to exactly match the net requirements. -Produces exactly what is needed each week with none carried over into future periods. -Minimizes carrying cost. -Does not take into account setup costs or capacity limitations

Assemble-to-order

A final assembly is made from standard options that the customer chooses. Examples: trucks, generators, motors (high expected benefits).

Factor-rating system

An approach for selecting a facility location by combining a diverse set of factors. Point scales are developed for each criterion. Each potential site is then evaluated on each criterion and the points are combined to calculate a rating for the site.

Assemble-to-stock

Combines multiple component parts into a finished product, which is then stocked in inventory to satisfy customer demand. Examples: watches, tools, appliances (high expected benefits).

Process

Includes industries such as foundries, rubber and plastics, specialty paper, chemicals, paint, drug, food processors (medium expected benefits).

Engineer-to-order

Items are fabricated or assembled completely to customer specification. Examples: turbine generators, heavy machine tools (high expected benefits).

Make-to-stock

Items are manufactured from purchased materials rather than assembled from parts. These are standard stock items carried in anticipation of customer demand. Examples: piston rings, electrical switches (low expected benefits).

Make-to-order

Items are manufactured from purchased materials to customer order. These are generally industrial orders. Examples: bearings, gears, fasteners (low expected benefits).

Third-party logistics company

a company that manages all or part of another company's product delivery operations.

Enterprise Resource Planning (ERP)

a computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm.

Available to promise

a feature of MRP systems that identifies the difference between the number of units currently included in the master schedule and the actual (firm) customer orders.

A work package is

a group of activities combined to be assignable to a single organizational unit. It still falls into the format of all project management; the package provides a description of what is to be done, when it is to be started and completed, the budget, measures of performance, and specific events to be reached at points in time.

Defects per Million Opportunities (DPMO)

a metric used to describe the variability of a process.

Statistical Quality Control (SQC)

a number of different techniques designed to evaluate quality from a conformance view.

Early start schedule

a project schedule that lists all activities by their early start times.

Late start schedule

a project schedule that lists all activities by their late start times. This schedule may create savings by postponing purchases of material and other costs associated with the project.

Project

a series of related jobs usually directed toward some major output and requiring a significant period of time to perform.

Transportation method

a special linear programming method that is useful for solving problems involving transporting products from several sources to several destinations.

Project milestones

a specific event in a project.

Six Sigma

a statistical term to describe the quality goal of no more than 3.4 defects out of every million units. Also refers to a quality improvement philosophy and program.

Pure project

a structure for organizing a project where a self-contained team works full time on the project (skunkworks).

Matrix project

a structure that blends the functional and pure project structures. Each project uses people from different functional areas. A dedicated project manager decides what tasks need to be performed and when, but the functional managers control which people to use.

Functional project

a structure where team members are assigned from the functional units of the organization. The team members remain a part of their functional units and typically are not dedicated to the project.

Centroid method

a technique for locating single facilities that considers the existing facilities, the distances between them, and the volumes of goods to be shipped.

Master Production Schedule (MPS)

a time-phased plan specifying how many end items the firm plans to build, and when.

Foundational principle of EVM:

a true understanding of cost performance and schedule performance relies first on measuring technical performance objectively.

International logistics

all functions concerned with the movement of materials and finished goods on a global scale.

Net change systems

an MRP system that calculates the impact of a change in the MRP data (the inventory status, BOM, or master schedule) immediately.

DMAIC

an acronym for the Define, Measure, Analyze, Improve, and Control improvement methodology followed by companies engaging in Six Sigma programs.

Cross-docking

an approach used in consolidation warehouses where, rather than making larger shipments, incoming shipments are broken down into small shipments for local delivery in an area.

Malcolm Baldrige National Quality Award

an award established by the U.S. Department of Commerce given annually to companies that excel in quality.

Frozen

could be defined as anything from absolutely no changes in one company to only the most minor of changes in another.

Assignable variation

deviation in the output of a process that can be clearly identified and managed.

Common variation

deviation in the output of a process that is random and inherent in the process itself.

Cost of Quality (COQ)

expenditures related to achieving product or service quality, such as the costs of prevention, appraisal, internal failure, and external failure.

Time-cost model

extension of the critical path models that considers the trade-off between the time required to complete an activity and cost. This is often referred to as "crashing" the project.

ISO 9000

formal standards for quality certification developed by the International Organization for Standardization.

A super bill-of-materials

includes items with fractional options. (A super bill can specify, for example, 0.3 of a part. What that means is that 30 percent of the units produced contain that part and 70 percent do not.)

The least unit cost method

is a dynamic lot-sizing technique that adds the ordering and inventory carrying cost for each trial lot size and divides by the number of units in each Page 288lot size, picking the lot size with the lowest unit cost.

The least total cost method (LTC)

is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal.

A task

is a further subdivision of a project. It is usually not longer than several months in duration and is performed by one group or organization. A subtask may be used if needed to further subdivide the project into more meaningful pieces.

A modular bill-of-materials

is the term for a buildable item that can be produced and stocked as a subassembly.

External benchmarking

looking outside the company to examine what excellent performers inside and outside the company's industry are doing in the way of quality.

The purpose of time fences is to:

maintain a reasonably controlled flow through the production system. Unless some operating rules are established and adhered to, the system could be chaotic and filled with overdue orders and constant expediting.

Quality at the source

making the person who does the work responsible for ensuring that specifications are met.

Total Quality Management (TQM)

managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.

Liquid

may allow almost any variations in products, with the provisions that capacity remains about the same and that there are no long lead time items involved.

Slushy

may allow changes in specific products within a product group so long as parts are available.

Time fences

periods of time having some specified level of opportunity for the customer to make changes.

Activities

pieces of work within a project that consume time. The completion of all the activities of a project marks the end of the project.

Project management

planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project.

Attributes

quality characteristics that are classified as either conforming or not conforming to specification.

Variables

quality characteristics that are measured in actual weight, volume, inches, centimeters, or other measure.

Conformance quality

refers to the degree to which the product or service design specifications are met.

Design quality

refers to the inherent value of the product in the marketplace and is thus a strategic decision for the firm.

Gantt chart

shows in a graphic manner the amount of time involved and the sequence in which activities can be performed. Often referred to as a bar chart.

A project starts out as a:

statement of work (SOW). The SOW may be a written description of the objectives to be achieved, with a brief statement of the work to be done and a proposed schedule specifying the start and completion dates. It also could contain performance measures in terms of budget and completion steps (milestones) and the written reports to be supplied.

Hub-and-spoke systems

systems that combine the idea of consolidation and that of cross-docking.

Earned Value Management (EVM)

technique that combines measures of scope, schedule, and cost for evaluating project progress.

Logistics

the art and science of obtaining, producing, and distributing material and product to the proper place and in the proper quantities.

Bill-of-Materials (BOM)

the complete product description, listing the materials, parts, and components, and also the sequence in which the product is created (also called the product structure file or product tree because it shows how a product is put together).

Product demand for end items comes primarily from two main sources:

the first is known customers who have placed specific orders, such as those generated by sales personnel, or from interdepartment transactions. These orders usually carry promised delivery dates. There is no forecasting involved in these orders—simply add them up. The second source is the aggregate production plan. The aggregate plan reflects the firm's strategy for meeting demand in the future. The strategy is implemented through the detailed master production schedule.

Work Breakdown Structure (WBS)

the hierarchy of project tasks, subtasks, and work packages.

Material Requirements Planning (MRP)

the logic for determining the number of parts, components, and materials needed to produce a product.

MRP system works as follows:

the master production schedule states the number of items to be produced during specific time periods. A bill-of-materials file identifies the specific materials used to make each item and the correct quantities of each. The inventory records file contains data such as the number of units on-hand and on-order. These three sources—master production schedule, bill-of-materials file, and inventory records file—become the data sources for the material requirements program, which expands the production schedule into a detailed order scheduling plan for the entire production sequence.

Upper and lower specification limits

the range of values in a measure associated with a process that is allowable given the intended use of the product or service.

Capability index (Cpk)

the ratio of the range of values allowed by the design specifications divided by the range of values produced by the process.

Critical path

the sequence(s) of activities in a project that form(s) the longest chain in terms of their time to complete.