Operations Management Exam 1
Quality
the standard of something as measured against other things of a similar kind; the degree of excellence of something
Process Improvement
the systematic study of the activities and flows of each process to improve it
What does 'improve' stand for in the six sigma improvement model?
the team uses analytical and critical thinking to generate a long list of ideas for improvement
Break-even quantity
the volume at which total revenues equal total costs.
what is an example of a common cause?
the weather
control charts look into what?
they take a deeper look into sample sets and shows you how much variation/control is in the process.
what does a smaller z value mean?
tighter limits; UCL and LCL are drawn in
What are the two performance measurements?
variables and attributes
what chart uses this equation to find UCL & LCL? UCL = double x bar + A₂(R bar) LCL = double x bar - A₂(R bar)
x-chart
what should you do if your control chart shows a sudden change?
you should monitor, investigate & determine the root cause, and possible make changes
what should you do if your control chart shows a run/trend?
you should take action because common cause is present
equation for a desired z score:
z = (UCL or LCL - goal output)/σ the amount of variation acceptable
equation for z score: (based on an individual point)
z = (x-mean)/standard deviation
Steps in the six sigma improvement model:
1. define 2. measure 3. analyze 4. improve 5. control
Typically, how many sigma (standard deviations) are UCL/LCL above/below the mean?
3 sigma
In a six sigma process, how many defects are there per million?
3-4
A 1 sigma process is what percent defect free?
30.23%
In a 3 sigma process, _____ standard deviations of the product fall within the set _________ _______.
3; control limits (goal posts)
if z = 6, then what is the sigma process?
6 sigma
explain what a 6 sigma process means
6 standard deviations of the distribution are falling within tolerances OR the process is 99.9996% defect free
A 2 sigma process is what percent defect free?
69.13%
A 3 sigma process is what percent defect free?
93.32%
What percent of products are defect free in a 3 sigma process?
93.32%
A 4 sigma process is what percent defect free?
99.379%
A 5 sigma process is what percent defect free?
99.978%
What percent of products are defect free in a 5 sigma process?
99.98%
In a six sigma process, _________% of the products are defect free
99.996
A 6 sigma process is what percent defect free?
99.9996%
Order Winners
A criterion customers use to differentiate the services or products of one firm from those of another.
Decision Theory
A general approach to decision making when the outcomes associated with alternatives are often in doubt.
Operation
A group of resources performing all or part of one or more processes.
Total Quality Management (TQM)
A philosophy that stresses three principles for achieving high levels of process performance and quality (1) customer satisfaction (2) employee involvement (3) continuous improvement in performance
Assemble-to-Order Strategy
Components at the ready, mass customization; found in batch processes
What does customer satisfaction mean in terms of TQM?
Conformance to specifications (is it as advertised?), value (how much the customer is willing to pay?), fitness for use (does it do what the customer wants it to do?/customer needs to be educated about what your product is capable of doing), support (customer service), and psychological impressions (have to keep the customer's interest even after they buy the product).
What are the different process types?
Core processes, support processes, and nested processes.
Design-to-Order Strategy
Customer involved in the design process; found in job processes
Maximax
Decision rule that chooses the alternative that has the best result, given the best event will occur; "best of the best".
Minimax Regret
Decision rule that looks to minimize the worst possible negative effect (regrets) associated with making a wrong decision; which decision will you regret the least if it doesn't work out. "Best worst regret"
Laplace
Decision rule that places equal weight, or assumes equal probability, for each of the possible events.
Accuracy
Describes the difference between the measurement and the part's actual value
Precision
Describes the variation you see when you measure the same part repeatedly with the same device.
Six Sigma
Disciplined, data-driven approach and methodology for eliminating defects.
When do unknowns exists and full disclosure of information may not be avaliable?
During decision making under uncertainty
Total costs =
F + cQ (fixed costs + (variable cost x quantity)
Quantity =
F/(p - c) (Fixed Costs/(Price - Variable Costs))
What does front and back office mean?
Front office - Part of the business that interacts with people; more flexible. Back office - More standardized part of the business (ex: assembly line).
Execution
Getting work done, being as efficient as possible, driving revenue, bottom line improvement.
Flow
How the work progresses through the sequence of steps in a process.
Batch Process
In between job and line processes. Standardized and efficient BUT you have the ability to change to make a different product.
What are some examples of operational decisions?
Make or buy/expand or retract, where to invest funds, determining the appropriate amount of credit to lend, or calculating a customer loyalty discount.
Make-to-Stock Strategy
Mass production; found in line processes
Order Qualifiers
Minimum level required from a set of criteria for a firm to do business in a particular market segment.
Ideally do you want variation?
No
What do you do if your control chart shows normal distribution?
No action is necessary
Is quality cheap?
No, but it's cheaper if you're proactive (expensive if product is found faulty after it's sold to customers).
What is at the center of business in all industries?
Operational decisions
What does this graph show?
Order Qualifier
What does this graph show?
Order Winner
Types of costs when it comes to quality:
Prevention costs, appraisal costs, internal failure costs, external failure costs, and ethical failure costs
Make-to-Order Strategy
Process begins with customer request; found in job processes
Support Processes
Processes that amplify the core processes; create a synergistic effect. (everything that makes your business high quality ex: UNO is the bookstore or gym)
what are the control charts for variables?
R-chart & x̅-chart
Different between workforce and equipment:
The workforce is more flexible while equipment is general-purpose and special-purpose
What should you think of when finding out what process you should be using?
Think of the end goal/product and how you're going to get there.
What is this picture representing?
Total Quality Management
What is operations strategy in simple terms?
Understanding what type of business you want to be and how to execute it.
What typically happens to order winners?
Usually they will become qualifiers (from competitors copying your idea) unless your competitors can't figure out how you did it.
sampling over a period of time allows us to start seeing what?
Variation
Job Process
Very customizable; customer engagement
Line Process
Very standardized; mass production, consistent quality.
What kind of control chart generally has 7 consecutive data points above/below center and the distribution curve has shifted?
Run/trend control chart
Value
Saves time, energy, or money
Customization
Service level ranging from highly customized to standardized.
Nested Processes
The concept of a process within a process. (processes that feed into each other)
Competitive Capabilities
The cost, quality, time, and flexibility dimensions that a process or supply chain ACTUALLY POSSESSES and is able to deliver.
Competitive Priorities
The critical dimensions that a process or supply chain MUST POSSESS to satisfy its internal or external customers both now and in the future.
Who ultimately determines quality?
The customers
Productivity
The effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input.
Process Divergence
The extent to which the process is highly customized with considerable latitude as to how its tasks are performed.
Supply Chain Management
The synchronization of a firm's processes with those of its suppliers and customers to match the flow of materials, services, and information with customer.
Operations Management
The systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external customers; execution
What does 'analyze' stand for in the six sigma improvement model?
a process analysis is done, using the data on measures, to determine where improvements are necessary.
Preference Matrix
a table that allows you to rate an alternative according to several performance criteria; this approach could be biased.
nominal value
a target for design specifications; quality goal
Sensitivity analysis
a technique for systematically changing parameters in a model to determine the effects of such changes.
What is the goal of Six sigma?
achieving low rates of defective output
what happens during a type I error?
action is taken when it is not necessary
What does it mean to have a flexible workforce?
allows you to move the employees around in the processes; this is invaluable.
tolerance
an allowance above or below the nominal value; how much defect or lack of quality are you/customer accept
Break-even analysis
analysis to compare processes by finding the volume at which two different processes have equal total costs.
defect
any instance when a process fails to satisfy its customer
assignable cause
any variation-causing factors that can be identified and eliminated (ideally)
How do you achieve six sigma process?
by acceptance sampling and by producing at the acceptable quality level (AQL)
what is one way that you can always increase your revenue?
by cutting internal costs
what is one way that you can always get better?
by lowering your standard deviation
variables
characteristics (data) that can be measured; hard values, precise.
attributes
characteristics (data) that can be quickly counted for acceptable performance.
type II error
concludes that the process is in control and only randomness is present, when actually the process is out of statistical control
type I error
concludes that the process is out of control based on a sample result that fails outside the control limits, when in fact it was due to pure randomness.
what are D₃ and D₄?
constants that provide 3 standard deviation (3 sigma) limits for the given sample size
appraisal costs
cost incurred when the firm assesses the performance level of its processes
prevention costs
costs associated with preventing defects before they happen.
internal failure costs
costs resulting from defects that are discovered during the production of a service or product.
external failure costs
costs that arise when a defect is discovered after the customer receives the service or product
Maximin
decision rule that chooses the alternative that has the best result, given the worst event will occur; "best of the worst".
Variation = __________ = ____________ __________
error; quality issues
when improving quality, who should you include?
everyone
What is quality in simple terms?
how well the product/service fits the market demand
measure of effectiveness (MOE)
is the process/product achieving the desired end state or effect
measure of performance (MOP)
is the process/product working as designed?
As the standard deviation decreases (gets smaller), what will the curve look like?
it gets taller and skinnier because there is less variation
as the standard deviation increases, what will the curve look like?
it gets wider and fatter because there is more variation
what does it mean for your process if points are falling within limits?
it means that the process is capable of producing at a consistent and dependable rate
what are examples of variables?
length, weight, temp, etc.
range =
max-min
x̅-chart
measures the consistency of the process
c-chart
measures the number of defects when more than one defect can be present in a service/product; still usable
p-chart
measures the proportion of the defective services/products generated; not usable
R-chart
measures the variability of the process
what should you do when your control chart is showing that you're exceeding control limits?
migration (shut down the process until you find root cause) is required at the minimum.
what happens during a type II error?
no action is taken when it was necessary
what kind of control chart stays within statistical control and the distribution curve doesn't breach the control limits (UCL/LCL)?
normal distribution control
Productivity =
output/input
what are the control charts for attributes and what do they ultimately measure?
p-chart & c-chart; they measure defects
Total Revenue =
pQ (price x quanitity)
Everything is ____________ ___________; always need to ______ _________.
process orientated; add value
What does it mean when your control chart exceeds control limits?
quality is compromised so you should take action & your distribution curve has breached a control limit (either UCL or LCL)
what chart uses this equation to find the UCL & LCL? UCL = D₄R ̅(R bar) LCL = D₃R-(R bar)
r-chart
What are three things that you can do to ensure good decision making?
reduce the risk and keep costs to a minimum, increase quality and compliance, & improve efficiency, effectiveness, and consistency.
Six Sigma _________ spread and ___________ the process
reduces; centers
Every decision carries ________ and companies can pay a ____________ price for poor decision-making both in terms of _____________ and _______________.
risk; high; money; reputation
what kind of data do z scares measure?
single data points (a raw score)
Six sigma is a process by which ______ __________ ____________ of product fall within the set ________ __________.
six standard deviations (sigma); control limits (tolerances)
do you want your standard deviation to be large or small?
small
ethical failure costs
societal and monetary cost associated with deceptively passing defective services or products to internal or external customers such that it jeopardizes the well-being of stockholders, customers, employees, partners, and creditors; you knowingly let out a defective product.
standard deviation =
square root of the sum of x - mean^2 divides by n - 1 ((all x values - the mean)^2/(n-1))
mean =
sum of all 'x'/n
how do you want your bell curve to look and why?
tall and skinny because there is less variation
what does this graph show?
that the process is not capable
what does this picture show?
that you can reduce variation, the higher the sigma (& process capability)
process capability
the ability of the process to meet the design specification for a service or product
acceptance sampling
the application of statistical techniques to determine if a quantity of material from a supplier should be accepted or rejected based on the inspection or test of one or more samples; randomly test as you go but before the customers receive them.
statistical process control (SPC)
the application of statistical techniques to determine whether a process is delivering what the customer wants (quality)
what is a double x bar?
the central line of the chart, which can either be the average of past sample means or a target value set for the process; average of averages
The statistical process control (SPC) is the relationship between what?
the distribution of sample means & the process distribution
what are the characteristics of a process that is not capable?
the distribution of the process falls outside of the specification limits & the process is not working as designed and defects are being produced
what are the qualities of a capable process?
the distribution of the process' results falls within the specification limits & the process is working as designed and not producing defects
Process Analysis
the documentation and detailed understanding of how work is performed. Understanding need, identifying inefficiencies, and watching for opportunities for improvement and/or redesigned.
Customer Contact
the extent to which the customer is present is actively involved, and receives personal attention during the services process; more flexible.
What does 'measure' stand for in the six sigma improvement model?
the metrics to evaluate how to improve the process are determined
what do attributes count?
the number of defects or defective items
what is a z value?
the number of standard deviations from the mean
What does 'control' stand for in the six sigma improvement model?
the process is monitored to make sure that high performance levels are maintained.
common cause
the purely random, unidentifiable sources of variation that are unavoidable with the current process; you cannot control these
acceptable quality level (AQL)
the quality level desired by the consumer
Learning curves
the rate at which employees acquire and develop skillsets conducive to improving productivity
What does 'define' stand for in the six sigma improvement model?
the scope and boundaries of the process to be analyzed are first established
What are the steps in decision theory?
1. List the feasible alternatives. 2. List the events (states of nature). 3. Calculate the payoff for each alternative in each event. 4. Estimate the likelihood of each event. 5. Select the decision rule to evaluate the alternatives.
Benchmarking
A systematic procedure that measures a firm's processes, services, and products against those of industry leaders
What does every process need to do?
Add value
What is supply chain management in simple terms?
An interrelated series of processes within and across firms that produces a service or product to the satisfaction of customers. (external/internal customers and suppliers)
Plan-Do-Study-Act Cycle
An iterative four-step management method used in business for the control and continual improvement of processes an products; made popular by William Edwards Deming (who is considered by many to be the father or modern quality control)
Process
Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers.
What do more competitors in the market mean for you?
It forces you to become better
What does continuous improvement mean, in terms of TQM?
Kaizen (always improving), Plan-Do-Study-Act Cycle, and be proactive instead of reactive (costs less).
Reengineering
The fundamental rethinking and radical redesign or processes to improve performance dramatically in terms of cost, quality, service, and speed.
Operations Strategy
The means by which operations implement the firm's corporate strategy and help to build a customer-driven firm; drive bottom-line improvement
Core Processes
The primary function; the very reason the business exists (what you do as a business ex: UNO is education)
What are order winners in simple terms?
What sets you apart from competitors
What is competitive priorities in simple terms?
What you NEED to do
What is competitive capabilities in simple terms?
What you can ACTUALLY do
What are order qualifiers in simple terms?
What you need to do in order to exist in the market.
When is productivity good?
When input is less.
What will set you apart from everyone else?
Your ability to execute
Six sigma
a comprehensive and flexible system for achieving, sustaining, and maximizing business success by minimizing defects and variability in processes.