CPIM - SMR 1, SMR II, SMR III, SMR IV - Global Environment and Sustainability, SMR V - Infrastructure and Financial Measurement, SMR V - Operations Strategy, SMR Final Review, SMR Final Review, APICS - SMR Vocabulary, SMR - Strategic Management of Re...

Global Strategy

"Think global - Act global" - Emphasizes strong branding and consistent competitive strategy (low cost-leadership across multiple markets). Sale of same product in all markets. Strong branding. Same competitive strategy in all markets. Plants and suppliers located where advantageous. Transfer of ideas, tech, capabilities among markets.

Transnational Strategy

"Think global - Act local" - Used when there are benefits to standardization but a need for local responsiveness. May use mass customization to meet local preferences.

Multi-domestic Strategy

"Think local - Act local" - significant cross country differences exist in areas such as customer preferences, physical conditions that require different product performance specifications, and government standards. Products adapted to accommodate local preferences. Plants located in multiple countries & use local suppliers. Wide autonomy for country managers.

Strategic Group

# of companies competing. Each company examined for product range, price / quality, attributes, similar technologies, technical support.

Lead capacity strategy

-) Adding capacity in anticipation of an increase in demand -) An aggressive strategy with the goal of luring customers away from the company's competitors by improving the service level and reducing lead time

Lag capacity strategy

-) Adding capacity only after the organization is running at full capacity or beyond due to increase in demand -) Decreases the risk of waste, but it may result in the loss of possible customers either by stockout or low service levels

Redundancy

1) A backup capability, coming either from extra machines or from extra components within a machine, to reduce the effect of breakdowns. 2) The use of one or more extra or duplicating components in a system or equipment (often to increase reliability).

Product Profiling

1) A graphical device used to ascertain the level of fit between a manufacturing process and the order-winning criteria of its products. Product profiling can be used at the process or company level to compare the manufacturing capabilities with the market requirements to determine areas of mismatch and identify steps needed for realignment. 2) Removing material around a predetermined boundary by means of numerically controlled machining. The numerically controlled tool path is automatically generated on the system.

Prototyping

1) A specialized product design and development process for developing a working model of a product. 2) A specialized system development process for performing a determination where user needs are extracted, presented, and developed by building a working model of the system. Generally, these tools make it possible to create all files and processing programs needed for a business application in a matter of days or hours for evaluation purposes.

Learning Organization

1) Group of people who have woven a continuous, enhanced capacity to learn into the corporate culture. 2) An organization in which learning processes are analyzed, monitored, developed, and aligned with competitive goals.

Cash Conversion Cycle

1) In retailing, the length of time between the sale of products and the cash payments for a company's resources. 2) In manufacturing, the length of time from the purchase of raw materials to the collection of accounts receivable from customers for the sale of products or services.

Operational Performance Measurements

1) In traditional management, performance measurements related to machine, worker, or departmental efficiency or utilization. These performance measurements are usually poorly correlated with organizational performance. 2) In Theory of Constraints, performance measurements that link causally to organizational performance measurements. Throughput, inventory, and operating expense are examples. See: Global Performance Measurements, Local Performance Measurements, Strategic Performance Measurements.

Flexibility

1) The ability of the manufacturing system to respond quickly, in terms of range and time, to external or internal changes. Six different categories can be considered: - Mix flexibility - Design changeover flexibility - Modification flexibility - Volume flexibility - Rerouting flexibility - Material flexibility In addition, flexibility involves concerns of product flexibility. Flexibility can be useful in coping with various types of uncertainty. 2) The ability of a supply chain to mitigate, or neutralize, the risks of demand forecast variability, supply continuity variability, cycle time plus lead time uncertainty, and transit time plus customs clearance time uncertainty during periods of increasing or diminishing volume.

Process Control

1) The function of maintaining a process within a given range of capability by feedback, correction, and so forth. 2) The monitoring of instrumentation attached to equipment (valves, meters, mixers, liquid, temperature, time, etc.) from control room to ensure that a high-quality product is being produced to specification.

Sunk Cost

1) The unrecovered balance of an investment. It is a cost, already paid, that is not relevant to the decision concerning the future that is being made. Capital already invested that for some reason cannot be retrieved. 2) A past cost that has no relevance with respect to future receipts and disbursements of a facility undergoing an economic study. This concept implies that since a past outlay is the same regardless of the alternative selected, it should not influence the choice between alternatives.

Flexibility objective in design process

1. Ability to anticipate and respond to competitors moves 2. Responsiveness to changes in customer requirements, consumer preferences, and technology 3. Ability to bring internally developed technical solution to the markets quickly 4. Support of speed-to-market competitive advantage 5. Ability to adapt the design process to meet local requirement and sustainability goals 6. Impact of excess capacity on design process flexibility 7. External competitive advantage: design flexibility into products

Ratio analysis

1. Ability to pay current liabilities: liquidity ratio: current ratio, quick ratio 2. Ability to sell inventory and collect receivables: activity ratio: inventory turn, A/R turnover, day's sale in account receivable 3. Ability to pay long-term debt: debt ratio: 4. Ability to make profit: profitability: rate of return on asset

Costing management implication

1. Absorption costing provides an incentive to build inventory 2. Absorption costing conflicts with lean and theory of constraint's methodology 3. Performance measures tied to operating income results can create perverse incentives 4. Organization should consider: a) adopting performance incentives based on variable costing b) using a balanced set of performance measures c) placing strictly controls on inventory buildup

Reasons to implement change

1. Achieve competitive advantage 2. Maintain viability over the long term 3. Keep current with constant technological developments 4. Overcome the gap between organizational performance and expectations 5. Address changing regulation

Principles of sustainability

1. Achieving high performance level in the long term 2. Avoiding detrimental behaviors in the short term

Objectives of operations strategy

1. Align operations with business strategy and market requirements 2. Provide vision of an operations strategy 3. Define performance objectives 4. Reconcile strategic decisions to performance objectives

Focused differentiation strategy

1. Apply differentiation strategy to a target market niche 2. The strategy meets unique buyer needs for special products and service attributes or seller capabilities 3. Companies often target customers willing to pay a premium for a product/service

Focused low-cost strategy

1. Apply low-cost strategy to a target maker niche 2. The strategy meets well-defined buyers needs 3. Focus is on lowest overall cost 4. Reconfigure the value chain to reduce costs

Supply Chain Strategy

1. Arm's length and long-term partnership 2. Disintermediation 3. Outsourcing 4. Vertical integration 5. Supplier reduction 6. Bullwhip effect

Profit sanctuaries and cross-market subsidization for gaining competitive advantages

1. Attack a rival's home market: sacrifice profit to weaken rival in home market 2. Selectively attack rivals in different country market to improve market share

3 types of implementation approaches

1. Big Bang Approach: Quickest time to benefit Least amount of human resources Can be traumatic Risks are significant 2. Step Approach: Ideal for large complex projects Allows high degree of focus Lengthens time to benefit Cutover strategy can be complex 3. Parallel: Ideal for small or high risk ventures Safest Requires a large amount of support

Strategic changes in workforce management

1. Build an organization with the resource strengths to execute strategy successfully 2. Marshal money and people to drive strategy execution 3. Institute policies and procedures that facilitate strategy execution 4. Adopt best practices and continually improve value chain activities 5. Install information and operating systems to facilitate strategy execution 6. Tie rewards directly to good strategy execution 7. Instill a corporate culture that promotes strategy execution 8. Exercise strong leadership to drive execution forward

Sustainable Management System Model

1. Business case: perform a cost and benefit analysis 2. Organizational component: get management buy-in 3. Operational component: link to strategic plan, engage stakeholders, train personnel 4. Enterprise resource planning and information technology 5. Monitoring and audits

Basic location factors

1. Capital requirement 2. Cost factors 3. Community factors 4. Flexibility 5. Risk factors

Implement Strategic change

1. Change processes and procedure 2. Change roles and responsibility 3. Change organizational design 4. Change measurement system 5. Educate and train affected individual

Lead culture change

1. Communicate to employees that change is necessary 2. Encourage employees to get involved 3. View the entire suggestions rapidly 4. Break down walls that inhibit communication 5. Give employees a sense of mission 6. Communicate positive and negative business result

Threat of Market Entrants

1. Companies in other industries that use their core competencies to enter other markets. 2. Companies within an industry that enter new market segments or geographical markets in the same industry to increase sales

Arm's length (transaction) relationship strategy

1. Competition among suppliers 2. Independent decision 3. Short-term relationship 4. Advantage: competition leads to low cost and possibly high value 5. Disadvantage: little supplier royalty, high transaction costs

Strategy in rapidly growing phase

1. Competitive strategy and focus: Further differentiation 2. Product strategy: innovation to expand product lines and lower prices 3. Marketing strategy: new geographical markets, brand building 4. Distribution channel: access to new channels 5. Supply Chain: further cost reduction

Strategy in declining phase

1. Competitive strategy and focus: harvest cash flow or sell and invest elsewhere 2. Product strategy: selective innovation and differentiation 3. Marketing strategy: Selective promotions 4. Distribution channel: Further consolidation 5. Supply Chain: intense focus on efficiency, low cost leadership

Strategy in maturing phase

1. Competitive strategy and focus: low-cost leader 2. Product strategy: emphasis on cost and service, product pruning 3. Marketing strategy: expand sales to current customers, international markets, brand promotion 4. Distribution channel: closure of low-volume, high-cost channels 5. Supply Chain: technology and flexibility to lower cost, mergers

Strategy in emerging phase

1. Competitive strategy and focus: low-cost or differentiation 2. Product strategy: perfection of product and technology 3. Marketing strategy: Awareness then brand loyalty 4. Distribution channel: first-mover advantages 5. Supply Chain: partnership to gain resources and expertise

Evaluate competitors

1. Competitor strengths and weaknesses 2. Predict next moves: determine which ones: a) Badly need to increase market share b) Have the need and resources to move to a different position in a cluster c) Are candidates for acquisition d) Are likely to enter new geographic markets e) Are likely to expand product offerings and enter new product segments

Long-term partnership strategy

1. Compromise between vertical integration and transaction relationship 2. Continuing relationship based on mutual advantage and trust 3. Multiple points of contact between organization 4. Advantages: dependability of delivery, quality of materials, joint development

Locations of value chain activities for gaining competitive advantages

1. Concentration in few location a) lower manufacturing costs b) economies of scale c) learning curve effect d) proximity to research and development and supplier infrastructure 2. Dispersing of activities a) fulfill customer expectation: distribution centers, sales and service activities b) to manage business risks: exchange rates, supply, politics, etc...

Quality objective in design process

1. Conformance quality means being free of design errors 2. Specification quality is high when a product competes successfully in the market 3. Techniques such as quality function deployments (QFD) support excellence in specification quality 4. Quality of design output is critical to low-cost provider and differentiation strategy

Deployment issues relating to facilites

1. Consistency with operations performance objectives 2. Number and size of facilities 3. Changes of location 4. timing and scale of capacity changes

Cost objective in design process

1. Costs incurred by the design activities 2. Causes of late completion of design output 3. Financial impacts of late completion

Formative strategy issues

1. Customized vs standardized products 2. Location advantages 3. Economic policies and political climate

Disintermediation strategy

1. Cut out the middle man 2. Bypasses downstream supply chain operations 3. Shorten the supplier chain 4. reduces costs and increase net profits 5. Better visibility of customer demand and preferences

Four primary customer needs

1. Delivery: The customer gets the product when they need it. 2. Price: The customer needs to feel that they are receiving value for the money. 3. Reliability: The product performs as specified on a consistent reliable basis. 4. Options: Customers have enough choices to satisfy their needs.

Preventing failures

1. Design out fail points 2. Build in redundant system 3. Use failsafe work method 4. Perform maintenance: preventive maintenance, total productive maintenance 5. Mitigate risk

Speed objective of design process

1. Early product and service launch 2. Ability to delay the start of design 3. More opportunities for new product and service introduction and innovation 4. Benefits from the support of flexibility in responding to the marketplace 5. Requires high quality of specifications 6. Ties to competitive advantage in the market

Steps in change process

1. Establish the sense of urgency 2. Form a powerful guiding coalition 3. Create a vision 4. Communicate the vision 5. Empower others to achieve the vision 6. Plan for and create short-term wins 7. Consolidate improvements and produce still more change 8. Institutionalize new approaches

Strategic options for market entry

1. Exporting from home base 2. Licensing 3. Franchising 4. Alliances and joint ventures with foreign partners

Four categories of cost drivers in ABC costing

1. Factory sustaining activities: represent fixed and variable expenses that are unidentifiable by product. Examples would be plant management, facilities and grounds, etc. 2. Product sustaining activities are those that develop and update product and manufacturing information. Examples include engineering, bills of material, routings and standards. 3. Batch level activities are those that match the supply of materials, labor and capacity with demand. Examples include purchasing, receiving, material planning, etc. 4. Unit level activities are costs traditionally associated with individual production units. Examples include materials, direct labor, tooling, etc.

Functional layouts

1. Fixed-position layout 2. Functional layout 3. Cell layout 4. Product layout

Quality characteristics

1. Functionality - how well the product or service does its job 2. Appearance - sensory characteristics such as look, feel, sound and smell 3. Reliability - consistency of performance or length of acceptable performance 4. Durability - useful life 5. Recovery - problem resolution 6. Contact - knowledge and courtesy of staff

Five reasons for expanding globally

1. Gain access to new customers 2. Achieve lower cost, and competitiveness 3. Exploit core competencies 4. Spread business risk 5. Global leadership

Five reasons to expand globally

1. Gain access to new customers, 2. achieve lower costs and enhance competitiveness, 3. leverage strong core competencies, 4. spread business risk, 5. global leadership

Benefits of ERP system

1. Greater visibility of financial and operational performance 2. Adoption of better, integrated business processes 3. Improved control of operations 4. Better communication and information exchange with customers 5. Integration with supply chains of customer and supplier

Business strategy objectives

1. Grow the business 2. Differentiate from rivals 3. Outperform rivals 4. Achieve high levels of financial and market performance 5. Create sustainable competitive advantage

Adding capacity with new large-scale facilities

1. High overcapacity until demand catches up with capacity 2. Initial higher unit costs

Financial statement analysis types

1. Horizontal analysis: by time series comparing year to year 2. Vertical analysis: comparing percent of each item 3. Ratio analysis

Five key issues of the internal environment

1. How well the current strategy is working 2. Strengths and weaknesses, opportunities and threads 3. Competitiveness of prices and costs 4. Strength relative to competitors 5. Highest priority issues for management

Best-cost provider strategy

1. Hybrid, low cost approach to offer a differentiated product and service 2. Upscale attributes are incorporated using strategic advantage of lower-cost production than rivals 3. Product and service is significantly better than low-cost version 4. Price is significantly lower than higher-priced differentiated alternatives

Benefits of cash flow statements

1. Identify activities that cause cash inflows and outflows 2. Shows if operations generating cash 3. Shows if growth can be financed from cash 4. Enables organizations to take advantage of investment opportunities 5. Explains how organizations can pay dividends when net profit shows a loss 6. Identifies need to liquidate assets or borrow to support operations

Failure mode and effect analysis (FMEA)

1. Identify and ranks potential failures 2. Provide three scores: probability of failure occurrence, degree of severity, likelyhood of escape from detection 3. Multiples all three scores to determine risk priority number (RPN) 4. Prioritize potential failures for corrective action

Industry attractiveness and profitability

1. Industry decision factors: a) the industry's growth potential b) the effect of competition on current and future profitability c) The impact of driving forces on profitability d) The risk and uncertainty in the industry future e) Effects on regulation, environmental issues, customer demand, and industry overcapacity 2. Company-specific decision factors: a) Competitive position b) Relationship between competitive strength to rivals and industry attractiveness c) Ability to capitalize on vulnerabilities of competitors

Job design

1. Influence of volume and variety 2. Allocation of tasks 3. Job commitment through meaningful work: job enlargement, job enrichment, job rotation, empowerment and teams

Manage the bullwhip effect

1. Information sharing 2. Channel alignment 3. Operational efficiency and improved forecasting

Linkages

1. Inside-out: influences of company on society: infrastructure, HR, technology development, logistics, etc... 2. Outside-in: influences of society on company: available resource: HR, transportation, policies, local demand standards, etc...

Types of benchmarking

1. Internal 2. External 3. Non-competitive 4. Competitive 5. Performance 6. Practice

Examples of visual management

1. Kanban work authorization 2. Visual WIP management 3. Local display of production and quality data 4. Key performance measurement report

Assess the current strategy

1. Key competitive factors: a) efforts to build competitive advantages b) plans to outperform rivals c) ability to react to changing conditions d) geographic coverage e) collaborative partnership and strategic alliances 2. Value chain capabilities 3. Quantitative and other measures: a) Sales and market shares growth compared to competitors b) New customer acquisition rate c) Changes in net profit margins d) Net profit and ROI trends e) Innovation and new product, service introduction f) Improvement in financial strength and credit rating g) Strong positive brand association

Adding capacity with small-scale facilities

1. Less overcapacity as demand catches up with capacity 2. Possible lower initial unit costs

Basic competitive options

1. Localized multicountry strategy: a) Product adapted and packaged to accommodate local preferences b) Difficult to develop a single competitive strategy c) Plants located in multiple countries and use of local suppliers d) wide autonomy for country manager --> higher cost structure in multicountry strategy 2. Global strategy a) Sales of same product in all markets and emphasis on strong brand b) Use of the same competitive strategy in all markets c) Plants and best suppliers located where advantageous d) Transfer ideas, technologies and capabilities among markets 3. Hybrid strategy

Techniques for gaining competitive advantages

1. Location of value chain activities to reduce costs 2. Transfer of competitive competencies and capabilities to operations in foreign market 3. Use of profit sanctuaries and cross-market subsidization

Types of competitive strategies

1. Low cost provider: lower overal costs to broad customer 2. Broad differentiation: differentiate in products attribute, service, and image 3. Best-cost provider: excellent product attributes at a lower cost 4. a focused low-cost provider: appeals to a narrow market with low cost 5. focused differentiation: offer a differentiated product to a narrow market

Low-cost provider strategy

1. Maintain high value chain efficiency, low value chain costs 2. Maintain low price, not neccesary frills-free 3. Underprice competitors to increase total profits 4. Achieve lasting strategic competancy that rivals find hard match

Benchmarking guidelines

1. Make benchmarking a continuous process 2. Use benchmarking for ideas not solutions 3. Understand your own processes 4. Use benchmarking to understand further not imitate 5. Allocate resources: staff and monetary resources

Outsourcing strategy

1. Make or buy decision 2. Cost, quality, speed, dependability, and flexibility 3. Operations ownership is not a strategic advantage 4. Tradeoff with vertical integration 5. Business process or product outsourcing

Steps to Corporate Strategy

1. Mission Statement 2. Company objectives 3. Environmental scanning 4. Internal strength and weakness analysis 5. Corporate Strategy

Corporate Social Responsibility (CSP)

1. Moral obiligation 2. sustainability 3. liscense to operate 4. reputation

6 simple rules for choosing the right measurements

1. Multiple measures are better than single measures. 2. Measurements should provide an agreed upon basis for decision making. 3. Measurements should be immediately understandable. 4. Measurements should be easily and correctly interpreted. 5. Measurements should be economical to obtain and apply. 6. Measurements must cause the correct response from a strategic perspective.

Project characteristics

1. One time focus 2. Specific purpose and desired results 3. Start and finish 4. Time frame for completion 5. Involvement of a cross functional group of people 6. Limited set of resources 7. Logical sequence of interdependent activities 8. Clear user of the results

Vertical integration strategy

1. Ownership of an organization's supply network 2. Strategic positioning 3. Financial and marketing strategy drivers

Cost of quality

1. Prevention costs 2. Appraisal costs 3. Internal failure costs 4. External failure costs

Three major process dimensions

1. Process entities 2. Process objects 3. Process activities

Broad differentiation strategy

1. Product and service attributes lower buyer's costs of using 2. Buyers are attracted to intangible features of the product and service 3. Price premium is greater than cost to differentiate 4. Strategic capabilities are hard to match

Service process types

1. Professional services: relatively low volume, and delivered by highly trained people. Ex: IT, level, architectural, design, medical 2. Service shops: are somewhat standardized, but still be customized to meet customers' need. Ex: banks, school, restaurant, high-end stores, etc... 3. Mass services: high numbers of transactions, low customized service. Ex: airlines, rail networks, supermarket

Dependability objective of design process

1. Project management minimizes internal delays 2. Close relationship with suppliers and customers reduces process uncertainty 3. Flexible design process increases responsiveness 4. Dependable design process creates certainty of new product introduction and innovation schedules 5. Process dependability (internal) directly supports external competitive advantages in speed and quality

Manufacturing process types

1. Project process 2. Job shop process 3. Batch process 4. Mass process 5. Continuous process

Management's changing role

1. Promote cultural change 2. Use supervisors as coaches 3. Manage by observation 4. Share information 5. Provide incentives and recognition 6. Schedule extra time for dialog and problem solving

Performance appraisal and rewards

1. Provide attractive perks and fringe benefits 2. Rely on promotion from within whenever possible 3. Make sure employee's ideas and suggestions are valued 4. Create a work atmosphere with sincerity, caring, and mutual respect 5. State the strategic vision in inspirational terms 6. Share information with employees about financial performance, strategy, operations measures, market condition, and competitors' action 7. Have a workplace with appealing furniture and amenities 8. Be flexible in the approach to people management in multicultural environments

Competitive strength assessment - rating criteria

1. Quality and product performance 2. Reputation and image 3. Technological skills 4. Dealer network 5. Product and service innovation 6. Financial resources 7. Relative cost position 8. Customer service

Strategy for change

1. Reacting to change 2. Anticipating to change 3. Leading change

Supplier reduction strategy

1. Reduce the complexity of managing and coordinating suppliers 2. Reduce transaction cost 3. Focus on strategic issues

To set an org strategy for CSR, org should

1. Set the goal of shared value, 2. Identify points of intersection, 3. choose which social issues to address

Organizational forms

1. Simple: generally less than four levels 2. Functional: more formal design for larger complex organizations 3. Divisional: often called business units. They have all the functional staff necessary to conduct operations. 4. Conglomerate: like divisional designs, there is little task dependency among the groups 5. Hybrid: often referred to as a matrix design. This is usually required when several functional areas must be integrated.

Performance objectives

1. Speed 2. Dependability 3. Flexibility 4. Quality 5. Cost

Learning organization

1. Systematic problem solving 2. Experimentation with new approaches 3. Learning from their own experiences and past history 4. Learning from the experiences and best practices of others 5. Transferring knowledge quickly and efficiently throughout the organization

Seven key issues of External Environment

1. The industry's dominant economics features 2. Strength of competition forces facing industry members 3. Forces driving industry change 4. Market positions occupied by industry members 5. Likely strategic moves by rivals 6. Key factors for future success in the industry 7. Industry attractiveness and profitability

Business strategy options

1. Thinking strategically about a company's external environment. 2. Thinking strategically about a company's internal environment.

3 phases of performance measurement change

1. Tinkering with Cost Systems - Companies will often tinker with the existing cost system to better reflect reality. They usually do this by changing the overhead allocation. 2. Cut the Gordian Knot - Companies will recognize that there is no way a cost accounting system can provide the appropriate measures for the business. They will "cut the cord" to the system and begin the process of adapting new measures for the business. 3. Embracing Change - Companies will finally change the manufacturing measures to become an integral part of the manufacturing strategy. If strategic objectives are to be met, then the measures must be supportive of these objectives.

Fault Tree Analysis (FTA)

1. Works backward from failure. 2. Identifies all possible causes of failure. 3. Branches with two nodes: AND - all branches below node A must occur for a node above it to occur. OR - Only one of the branches below this node must occur for the node above it to occur.

Four dimensions of operations management

1. level of interaction 2. operations management function 3. critical resources 4. decision focus.

Manufacturing and service facilities

1. manufacturing: factories, service centers, R&D lab, distribution 2. Service: Retail stores, warehouse, hospitals, office buildings, fire station

Transfer of competence and capability for gaining competitive advantages

1. to be first into new markets to gain market leadership and increase revenue 2. sustainable competitive advantages

External stake holders, top management, general management and staff

3 main groups to Strategic Plan

Managerial Accounting

A branch of accounting that uses techniques such as break-even analysis, cost-volume-profit analysis, make-buy analysis, and others to provide information used in day-to-day decision making.

Differentiation Strategy

A business strategy that focuses on setting a product or service apart from the competition - focusing on making a product or service unique.

Lead Capacity Strategy

A capacity strategy in which, as demand increases and is expected to increase capacity is added prior to the realization of demand.

Manufacturing Strategy

A collective pattern of decisions that acts upon the formulation and deployment of manufacturing resources. To be most effective, the manufacturing strategy should act in support of the overall strategic direction of the business and provide for competitive advantages (edges).

Process focus

A company has a wide range of non-standard products. ETO & MTO. Job shop. Low volume, high variety. Functional layout.

Profit Sanctuary

A company's home or location operation that has higher volume than other locations & more profitability that gives the company extra strength to compete and competitive advantage

Business strategy

A company's________________is the framework for its operations strategy to manage resources.

Strategic Sourcing

A comprehensive approach for locating and sourcing key material suppliers, which often includes the business process of analyzing total-spend-for-material spend categories. There is a focus on the development of long-term relationships with trading partners who can help the purchaser meet profitability and customer satisfaction goals. From an information technology applications perspective, strategic sourcing includes automation of request for quote (RFQ), request for proposal (RFP), electronic auctioning (e-auction or reverse auction), and contract management processes.

Strategic Sourcing

A comprehensive approach for locating and sourcing key mtl suppliers, analyzing total spend for mtls, spend categories, developing long term relationships with trade partners, meet profitability and service goals. (RFQ, RFP, Contract Mgmt, electronic auction)

Knowledge-based System

A computer program that employs knowledge of the structure of relations and reasoning rules to solve problems by generating new knowledge from the relationships about the subject.

DSS - Decision Support System

A computer system designed to assist managers in selecting and evaluating courses of action by providing a logical, usually qualitative, analysis of the relevant factors.

Decision Support System

A computer system designed to assist managers in selecting and evaluating courses of action by providing logical, usually quantitative, analysis of the relevant factors.

Concurrent Engineering

A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs. Synonym: Participative design/Engineering

Participative Design/Engineering

A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs. Synonym: Co-design, Concurrent Design, Concurrent Engineering, New Product Development Team, Parallel Engineering, Simultaneous Design/Engineering, Simultaneous Engineering, Team Design/Engineering See: Early Manufacturing Involvement

TBC - Time-Based Competition

A corporate strategy that emphasizes time as a vehicle for achieving and maintaining a sustainable competitive edge. Its characteristics are 1) It deals only with those lead times that are important to the customers; 2) The lead-time reductions must involve decreases in both the mean and the variance; and 3) The lead-time reductions must be achieved through system/process analysis (the processes must be changed to reduce lead times). TBC is a broad-based strategy. Reductions in lead times are achieved by changing the processes and the decision structures used to design, produce, and deliver products to the customers. TBC involves design, manufacturing, and logistical processes.

Process Costing

A cost accounting system in which the costs are collected by time period and averaged over all the units produced during the period. This system can be used with either actual or standard costs in the manufacture of a large number of identical units.

Activity-based Cost Accounting

A cost accounting system that accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects. It is an attempt to allocate overhead costs on a more realistic basis than direct labor or machine hours. Synonym: Activity-based costing, Activity-based cost accounting See: Absorption Costing

ABC Costing

A cost accounting system that accumulates costs based on cost drivers from activities performed, costs allocated to products, customers, markets, or other projects. It is an attempt to allocate OVHD costs on a more realistic basis than direct labor or machine hours.

Actual cost system

A cost system that collects historically as they are applied to production and allocates indirect costs to products produced based on the specific costs and achieved volume of the products.

Standard cost system

A cost system that uses cost determined before production for estimating cost of production then compares to actual costs and variances are computed.

Learning Curve

A curve reflecting the rate of improvement in time per piece as more units of an item are made. A planning technique, the learning curve is particularly useful in project-oriented industries in which new products are frequently phased in. The basis for the learning curve calculation is that workers will be able to produce the product more quickly after they get used to making it. Synonym: Experience Curve, Manufacturing Progress Curve

Value based quality

A degree of excellence at an acceptable price

SLA - Service Level Agreement

A document that represents the terms of performance for organic support.

Cost driver

A factor that determines workload effort required to perform an activity.

Operations Management

A field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service org through the concepts from design engineering, industrial engineering, management of information systems, quality management, production management, inventory management, accounting, and other functions.

KPI - Key Performance Indicator

A financial or nonfinancial measure that is used to define and assess progress toward specific organizational goals and typically is tied to an organization's strategy and business stakeholders. A KPI should not be contradictory to other departmental or strategic business unit performance measures.

Network Planning

A generic term for techniques that are used to plan complex projects. Two of the best known network planning techniques are the critical path method (CPM) and the program evaluation and review technique (PERT).

Product Profiling

A graphical devise used to ascertain the level of fit between the manufacturing process and the order-winning criteria of its products. It can be used at the process or company level to compare the manf. capabilites with the market requirements to determine areas of mismatch or identify steps needed for realignment.

Work break down structure

A hierarchial description of a project in which each lower level is more detailed. Project summary work break down.

Best-cost provider

A hybrid approach that incorporates excellent product attributes into items at a lower cost than others, but at a price below the ability of their rivals to match. Efficient manufacturing or service strategy to incorporate upscale features.

Echelon

A level of supply chain nodes.

Balanced Scorecard

A list of financial and operational measurements used to evaluate organizational or supply chain performance. The dimensions of the balanced scorecard might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives. It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.

Fault tree analysis

A logical procedure that works backward from a failure to identify all possible causes of the failure.

Virtual Cell

A logical rather than physical grouping of manufacturing resources. Resources in virtual cells can be dispersed throughout a facility. Product mix changes may change the layout of a virtual cell. This technique is used when it is not practical to move the equipment.

Customer-Supplier Partnership

A long-term relationship between a buyer and a supplier characterized by teamwork and mutual confidence. The supplier is considered an extension of the buyer's organization. The partnership is based on several commitments. The buyer provides long-term contracts and uses fewer suppliers. The supplier implements quality assurance processes so that incoming inspection can be minimized. The supplier also helps the buyer reduce costs and improve product and process designs. Synonym: Customer Partnership See: Outpartnering

Synchronized Production

A manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques where every action is evaluated in terms of the global goal of the system. Both kanban, which is part of the JIT philosophy, and drum-buffer-rope, which is part of the Theory of Constraints philosophy, represent synchronized production control approaches. Synonym: Synchronous Manufacturing See: Drum-Buffer-Rope, Kanban, Synchronous Scheduling

Quick Asset Ratio

A measure of a firm's financial stability. It is defined as (current assets - inventory) / current liabilities. A value greater than one is desirable. Synonym: Quick Ratio, Acid Test, Acid Test Ratio

Quick asset ratio

A measure of a firm's financial stability. It is defined as current assents - inventory / current liabilities. The greater the value than one is desirable.

Total Factor Productivity

A measure of productivity (of a department, plant, strategic business unit, firm, etc) that combines the individual productivities of all its resources, including labor, capital, energy, material, and equipment. These individual factor productivities are often combined by weighting each according to its monetary value and then adding them. For example, if material counts for 40 percent of the total cost of sales and labor 10 percent of the total cost of sales, etc, total factor productivity = .4(material productivity) +.1(labor productivity)+ etc.

Total Cost of Material Acquisition (enabler - performance indicator)

A measure of what we spend in total, to obtain the required material. Paperless purchasing and receiving systems reduce cost over time.

Key performance indicator

A measure that is used to define and assess progress toward specific organizational goals and typically is tied to an organization's strategy and business stakeholders. Should not be contradictory to other depts or BU performance measures.

Equivalent unit cost of one

A method of costing that uses the total cost incurred for all like units for a period of time divided by equivalent units completed during the same time period.

Payback

A method of evaluating an investment opportunity that provides a measure of the time required to recover the initial amount invested in a project.

Payback Method

A method of evaluating an investment opportunity that provides a measure of the time required to recover the initial amount invested in a project.

Discounted cash flow

A method of investment analysis in which future cash flows are converted, or discontinued, to their value at the present time. The net present value of an item is estimated to be the sum of all discounted future cash flows.

Discounted Cash Flow

A method of investment analysis in which future cash flows are converted, or discounted, to their value at the present time. The net present value of an item is estimated to be the sum of all discounted future cash flows.

QFD

A methodology designed to ensure that all major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and operation of supporting production management system

QFD - Quality Function Deployment

A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system. QFD can be viewed as a set of communication and translation tools. QFD tries to eliminate the gap between what the customer wants in a new product and what the product is capable of delivering. QFD often leads to a clear identification of the major requirements of the customers. These expectations are referred to as the voice of the customer (VOC). See: House of Quality

Five Forces Model of Competition

A methodology for analyzing competitive pressures in a market and assessing the strength and importance of each of those pressures. They are: - Buyer - Supplier - New Entrant Risk - Competing products in other industries risk - Current Rivalry risks

Throughput accounting

A mgmt accounting method that is based on the belief that because every system has a constraint the most effective way to evaluate the impact of purposed changes is by measuring throughput, inventory, and operating expense.

Information System Architecture

A model of how the organization operates regarding information. The model considers four factors: 1) Organizational functions, 2) Communication of coordination requirements, 3) Data modeling needs, and 4) Management and control structures. The architecture of the information system should be aligned with and match the architecture of the organization.

Continuous Improvement

A never-ending effort to expose & eliminate root causes of problems, small step improvements as opposed to big stem improvements.

Economy of scale

A phenomenon whereby larger volumes of production reduce unit cost by distributing fixed cost over larger quantities.

Focused Factory

A plant established to focus the entire manufacturing system on a limited, concise, manageable set of products, technologies, volumes, and markets precisely defined by the company's competitive strategy, technology, and economics. See: Cellular Manufacturing

FMEA - Failure Mode Effects Analysis

A procedure in which each potential failure mode in every sub-item of an item is analyzed to determine its effect on other sub-items and on the required function of the item.

Failure mode affects analysis

A procedure in which each potential failure mode in every sub-item of an item is analyzed to determine its effect on the other sub-items and on the required function of the item.

Business process redesign

A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic org. improvements in cost, quality, service, and speed.

BPR - Business Process Engineering

A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed. Any BPR activity is distinguished by its emphasis on 1) Process rather than functions and products and 2) the customers for the process.

BPR - Business Process Reengineering

A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed. Any BPR activity is distinguished by its emphasis on 1) Process rather than functions and products and 2) the customers for the process.

Postponement

A product design strategy that shifts product differentiation closer to the consumer by postponing identity changes, such as assembly or packaging, to the last possible supply chain location.

Chase Strategy

A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine chase and level production schedule methods. Synonym: Chase Production Method

Statistical process controls

A quantitative way of determining if quality processes are in control. Based on samples taken over time. Enables observer to identify root causes and implement corrective actions

Variable quality measures

A quantity that can assume any of a given set of values that are measured on a continuous scale length, weight, time

Perpetual Inventory Record

A record (inventory) is maintained at all times of the current stock by recording each material movement as it occurs.

Learning Curve

A reflection of the rate of improvement in time per piece as more units of an item are made.

Return on Investment

A relative measure of financial performance that provides a means for comparing various investments by calculating profits returned during a specified time period.

Avg. Return on Investment def.

A relative measure of financial performance that provides a means for comparing various investments by calculating the profits returned during a specified time period.

ROI - Return on Investment

A relative measure of financial performance that provides a means for comparing various investments by calculating the profits returned during a specified time period. In the Theory of Constraints, ROI is calculated as throughput minus operating expense divided by investment.

ISO 14000 Series Standards

A series of generic environmental management standards developed by the International Organization of Standardization, which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company's environmental operations.

ISO 14000 Series Standards

A series of generic environmental management standards developed by the international organization of standardization, which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company's environmental operations.

ISO 9000

A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. The standards, initially published in 1987, are not specific to any particular industry, product, or service. The standards were developed by the International Organization for Standardization, known as ISO, a specialized international agency for standardization composed of the national standards bodies of 91 countries. The standards underwent major revision in 2008 and now include ISO9000:2008 (definitions), ISO9001:2008 (requirements), and ISO9004:2008 (continuous improvement). See: ISO/TS 16949, QS 9000

ISO 9000

A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system.

Benchmark measures

A set of measurements (or metrics) that is used to establish goals for improvements in processes, functions, products, and so on. Benchmark measures are often derived from other firms that display best-in-class achievement.

Baseline Measures

A set of measurements (or metrics) that seeks to establish the current or starting level of performance of a process, function, product, firm, and so on. Baseline measures are usually established before implementing improvement activities and programs.

Benchmarking

A set of measurements that is used to establish goals for improvements in the processes, functions, products, and so on. Often derived from other firms that display best in class achievement.

Quality Circle

A small group of people that usually work as a team / unit that meet frequently to solve problems concerning the quality of items produced and process capabilities.

Functional Strategy

A strategy that is built from the business strategy for the various business functions such as finance, marketing, and production.

Supply Chain

A string of operations through an org.'s supply network.

SWOT Analysis

A structured approach to analyzing the internal strengths and weaknesses of a company's resources & capabilities and it's external market opportunities and threats.

House of quality

A structured process that relates customer defined attributes to the product's technical features needed to support and generate these attributes.

HOQ - House of Quality

A structured process that relates customer-defined attributes to the product's technical features needed to support and generate these attributes. This technique achieves this mapping by means of a six step process: 1) Identification of customer attributes; 2) Identification of supporting technical features; 3) Correlation of the customer attributes with the supporting technical features; 4) Assignment of priorities to the customer requirements and technical features; 5) Evaluation of competitive stances and competitive products; and 6) Identification of those technical features to be used (deployed) in the final design of the product. HOQ is part of the Quality Function Deployment (QFD) process and forces designers to consider customer needs and the degree to which the proposed designs satisfy these needs. See: Customer-defined Attributes, Quality Function Deployment

Performance Measurement System

A system for collecting, measuring, and comparing a measure to a standard for a specific criterion for an operation, item, good, service, business, etc. A performance measurement system consists of a criterion, a standard, and a measure. Synonym: Metrics See: Performance Criterion, Performance Measure, Performance Standard

Participative Management

A system that encompasses various activities of high involvement in which subordinates share a significant degree of decision-making power with their immediate superiors. Participative management draws on the rationale that everyone in an organization is capable of and willing to help guide and direct the organization toward agreed-on goals and objectives.

Strategic Mapping

A technique to compare how various companies in a market compete against each other.

RAM - Responsibility Assignment Matrix

A tool to ensure that each component of work in a project is assigned to a responsible person.

Five Forces Model

A tool used to analyze the principal competing pressures in a market and to assess the strength and importance of each.

Process Focused

A type of manufacturing organization in which both plant and staff management responsibilities are delineated by production process. A highly centralized staff coordinates plant activities and intracompany material movements. This type of organization is best suited to companies whose dominant orientation is to a technology or a material and whose manufacturing processes tend to be complex and capital intensive. See: Product Focused, Process-focused Organization

Product Focused

A type of manufacturing organization in which both plant and staff responsibilities are delineated by product, product line, or market segment. Management authority is highly decentralized, which tends to make the company more responsive to market needs and more flexible when introducing new products. This type of organization is best suited to companies whose dominant orientation is to a market or consumer group and where flexibility and innovation are more important than coordinated planning and tight control. See: Process Focused, Process-focused Organization

Continuous Manufacturing

A type of manufacturing process that is dedicated to the production of a very narrow range of standard products. The rate of product change and new product information is very low. Significant investment in highly specialized equipment allows for a high volume of production at the lowest manufacturing cost. Thus, unit sales volumes are very large, and price is almost always a key order-winning criterion. Examples of items produced by a continuous process includes gasoline, steel, fertilizer, glass, and paper. Synonym: Continuous Production

QS 9000

A variation of ISO 9000 certification with additional requirements tailored for the automobile industry, including suppliers.

QS 9000

A variation of ISO 9000 certification with additional requirements tailored for the automobile industry, including suppliers. QS 9000 is being superseded by ISO/TS 16949 which incorporates many European standards. See: ISO 9000, ISO/TS 16949

Operational equipment effectiveness

Ability of the cells machines to make product on time and to the right quality, based on machine availability, efficiency, and quality - bottleneck

GAAP - Generally Accepted Accounting Principles

Accounting practices that conform to conventions, rules, and procedures that have general acceptability by the accounting profession.

Generally accepted accounting principles (GAAP)

Accounting practices that conform to conventions, rules, and procedures that have general acceptability by the accounting profession.

The goal of sustainability

Achieve high performance levels in the long term. Avoid detrimental behaviors in the short term.

Sustainability

Activities that provide present benefit without compromising the needs of future generations.

ABM

Activity based management

VOC - Voice of Customer

Actual customer descriptions in words for the functions and features customers desire for goods and services. In the strict definition, as relates to quality function deployment (QFD), the term customer indicates the external customer of the supplying entity.

Tracking / Chasing Demand

Adding additional capacity in small increments to follow the demand pattern.

Tracking Capacity Strategy

Adding capacity in small amounts to attempt to respond to changing demand in real time in the marketplace. This approach may satisfy total demand and help minimize unit costs, but it can be difficult in some situations to add incremental amounts of capacity, especially if the facility has no more space available.

Support across the border, shared knowledge base, increased competitive advantage, unbalanced work load shared between countries

Advantages of cross border operations

Lower transportation costs, reduced delivery time, less exchange rate impact

Advantages of multiple international locations

Licensing strategy for market entry

Advantages: 1. Applicable to proprietary technical know-how or unique patented product 2. Income generated by royalties 3. Low resource requirement 4. Low investment risk Drawback: 1. Sharing valuable intellectual property with 3rd party 2. Difficult in enforcing gray areas of license agreement 3. High risk of patent infringement

Strategic alliances and joint ventures strategy for market entry

Advantages: 1. Better access to attractive markets through well positioned local companies 2. Economies of scales in production and marketing 3. Fills in technical expertise gaps of local company 4. Fill in market knowledge gap of company seeking access Drawback: 1. More business risk than other strategy 2. Impact of cultural differences on decision making 3. Disagreement on what are remain propriety to one party 4. Differences in corporate values and ethical standards

Large-scale operations

Advantages: 1. Economies of scale 2. Average cost per unit decrease as utilization increase 3. Good fit for high-volume, low-variety products 4. Flexibility to adjust volume Disadvantages: 1. Less flexibility of equipment, workers 2. Worker skills not as high as in small-scale operations 3. Diseconomies of scale

Small-scale operations

Advantages: 1. Locate near local knowledge networks 2. Respond faster to regional needs and trends 3. Agile and more entrepreneurial management Disadvantages: 1. Average production cost per unit is higher than for large-scale operations

Export strategy for market entry

Advantages: 1. Low-risk initial move 2. Modest investment needed 3. Economies of scales of home-country production 4. Reliance on the expertise of foreign wholesalers in handling marketing, import and distribution of products 5. Establish its own distribution, sales promotion, brand awareness function Drawback 1. High cost of shipping 2. Possible loss of home-country production cost in long run 3. Possible loss of cost advantage to rival's plants 4. Currency exchange rate

Focused Low - Cost Provider

Aim is at very specific market. Providing special features to meet demand at a low price. Special attributes for niche market.

Focused Differentiation

Aim is for provider to provide special extra attributes to niche needs. Cost is not a key factor. Customized service. Long term aim is to service niche market in best way possible.

Objectives of the operation's strategy

Align operations with business strategy and market requirements, provide vision of an operation's strategy, define performance objectives, reconcile strategic decisions to performance objecties

Objectives of operation's strategy

Align operations with business strategy and market requirements, provide vision of an operations strategy, define performance objectives, reconcile strategic decisions to performance objectives. (Alignment, vision, operations objectives, reconcile)

Objectives of operations strategy

Alignment, vision, performance objectives,

Cost of Quality

All costs associated with prevention activities and the improvement of quality throughout the firm before, during, and after production of a product.

Design for quality

All parties involved in total project start to finish so product is designed to meet customer requirements with manufacturing processes in mind.

ERP and push system

Allows to: 1. Plan the schedules and routings of product through work centers 2. Plan schedule releases for make-to-stock products made on high-volume line 3. Recommend the release of work orders 4. Facilitate reporting at each stage of production

Payback Period Calculation

Amount invested / expected annual net cash inflow

Financial throughput

Amount of money generated in a time period. Sales revenue - Total Variable cost

Project Costing

An accounting method of assigning valuations that is generally used in industries where services are performed on a project basis. Each assignment is unique and costed without regard to other assignments.

Project Costing

An accounting method of assigning valuations that is generally used in industries where services are performed on a project basis. Each assignment is unique and costed without regard to other assignments. Examples are shipbuilding, construction projects, and public accounting firms. Project costing is opposed to process costing where products to be valued are homogeneous.

Contribution Margin

An amount equal to the difference between sales revenue and variable costs.

Contribution Margin definition

An amount equal to the difference between sales revenue and variable costs.

Competitive Analysis

An analysis of a competitor that includes its strategies, capabilities, prices, and costs.

SWOT Analysis

An analysis of strengths, weaknesses, opportunities, and threats of and to an organization. SWOT analysis is useful in developing strategy.

Competitive Analysis

An analysis of the market place comparing the company's competitors; market share, marketing strategy, ad spend, price, costs, strengths etc.

Cash Flow

An analysis that compares the timing of money being received and expenses being paid

Absorption Costing

An approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production. The fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs. Synonym: Allocation Costing See: Activity-based Costing

Value Chain Analysis

An examination of all links a company uses to produce and deliver its products and services starting from the origination point and continuing through delivery to the final customer.

Bullwhip effect

An extreme change in the supply position upstream in a supply chain generated by a small change in demand down stream in the supply chain.

Bullwhip Effect

An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.

Alignment

An important objective of operations strategy is to align operations with business strategy and market requirements. It is also to align operations perspective with market perspective.

Job enlargement

An increase in the # of tasks an employee performs.

Employee enrichment

An increase in the # of tasks as employee performs and an increase in the control over those tasks.

Job Enrichment

An increase in the number of tasks that an employee performs and an increase in the control over those tasks. It is associated with the design of jobs and especially the production worker's job. Job enrichment is an extension of job enlargement.

Job Enlargement

An increase in the number of tasks that an employee performs. Job enlargement is associated with the design of jobs, particularly production jobs, and its purpose is to reduce employee dissatisfaction.

Cash-to-Cash Cycle Time

An indicator of how efficiently a company manages its assets to improve cash flow. Inventory days + AR days - AP days = C2C cycle. See: Cash Conversion Cycle

Cash to cash cycle

An indicator of how efficiently a company manages its assets to improve cash flow. Inventory days + accounts receivables days - account payable days.

Variable costing

An inventory valuation method in which only variable production costs are applied to the product. Fixed overhead is not assigned to the product. Direct labor, direct material, and variable overhead applied. Used in "make or buy" decisions.

Variable Costing

An inventory valuation method in which only variable production costs are applied to the product; fixed factory overhead is not assigned to the product. Traditionally, variable productions costs are direct labor, direct material, and variable overhead costs. Variable costing can be helpful for internal management analysis but is not widely accepted for external financial reporting. For inventory order quantity purposes, however, the unit costs must include both the variable and allocated fied costs to be compatible iwth the other terms in the order quantity formula. For make-or-bur decisions, variable costing should be used rather than full absorption costing. Synonym: Direct Costing

Absorption or full costing

An inventory valuation technique in which all costs incurred in a period to directly manufacture or support the production of products be charged to the units completed.

JIT

An operating philosophy aimed at the elimination of waste.

Horizontally Integrated Firm

An organization that seeks to produce and sell a type of product in numerous markets. Similar products in various geographical locations.

Horizontally Integrated Firm

An organization that seeks to produce or sell a type of product in numerous markets. The horizontal integration exists when an organization produces or sells similar products in various geographical locations. Horizontal integration in marketing occurs more frequently than horizontal integration in production. See: Vertically Integrated Firm

Productivity

An overall measure of the ability to produce a good or service. Actual output compared to actual input of resources, labor, capital etc.

Infrastructure Elements

An underlying base or foundation especially for an organization or system. Elements of a strategy including decisions, rules, policies, personnel, guidelines, & organizational structure. Must use overall strategy of the company and manf. process. Impacts competitiveness

Wip to Swip

Analyze WIP to determine pull system effectiveness

Inventory Turns calculation

Annual cost of goods sold / average inventory

Avg. ROI

Annual net cash income / initial cash investment x 100

Traceability

Any material that is used to make a product must be accompanied with a release document that lists the origin of this material and the tests performed on it.

Trading Partner

Any organization external to the firm that plays an integral role within the supply chain community and whose business fortune depends on the success of the supply chain community.

Focused low-cost provider

Appeals to a narrow market segment and underprices rivals by lower-cost production or service. Reconfigures value chaine to reduce cost.

Generic Social Issues

Are not significantly affected by the organization's operations. Do not influence the organization's long term competitiveness

Value Chain social issues

Are significantly affected by the organization's activiites

Social dimensions of competitive context issues

Are social issues in the external environment that can affect the driver's of the orgs competitiveness

Use failsafe work methods

Assume that human error is inevitable and design systmes to prevent human errors.

Cross subsidization advantages

Attack a rival's home market or main profit sanctuary to divert resources and attention to defending its home market position. And selectively attack rivals in different country markets to improve market share

ARR Calculation

Average annual operating income from an asset / average amount invested in an asset

The Deming Prize

Award for companywide statistical quality control

Value-creating operations

Basic building blocks of org's supply network and supply chain

Price leadership, product differentiation, customer focus

Basic business strategy approaches

Closing

Bring projects and project phases and contracts with customers to a close; hand over deliverables to customer

Channel alignment

Bringing all operations in a supply chain in line with each other through coordinated production scheduling, material movement, stock levels, and sales strategies. VMI

Integrated Measurement Model

Broad strategic objectives, measures at the top can be exploded down into detailed ones at the operations level, selected performance indicators, measures to track depends on competitive strategy

Core Competencies

Bundles of skills or knowledge sets that enable a firm to provide the greatest level of value to its customers in a way that is difficult for competitors to emulate and that provides for future growth. Core competencies are embodied in the skills of the workers and in the organization. They are developed through collective learning, communication, and commitment to work across levels and functions in the organization and with the customers and suppliers. For example, a core competency could be the capability of a firm to coordinate and harmonize diverse production skills and multiple technologies. To illustrate, advanced casting processes for making steel require the integration of machine design with sophisticated sensors to track temperature and speed, and the sensors require mathematical modeling of heat transfer. For rapid and effective development of such a process, materials scientists must work closely with machine designers, software engineers, process specialists, and operating personnel. core competencies are not directly related to the product or market.

BPR

Business Process Engineering

BPR

Business Process Reengineering

Sustainable Management Systems Model Components

Business case - costs and benefits (waste disposal, salaries, reduced fines, savings), Org. component - Mgmt buy-in, resources, mgmt structure, Operational component - link SMS to overall strategic plan (procedures, training, engage stakeholders), ERP - facilitate business operations internally and externally, Monitoring and audits - review SMS performance at regular intervals.

Five Sustainable Management Systems model components

Business case, organizational component, operational component, enterprise resource planning, monitoring and audits

Rivalry among competitors is stronger when

Buyer demand grows slowly or falls off, number of rivals increases, products are commodities, cost to switch brands is low, rivals make aggressive moves to attract buyers, rivals have diverse strategies

Rivalry among competitors is weaker when

Buyer demand is growing, rival products are strongly differentiated, customer loyalty is high, costs to switch brands is high, there are fewer than five sellers

Buyers bargaining power is weaker when

Buyers purchase the item infrequently, cost to switch brands is high, surge in demand creates a sellers market, sellers brand reputation is important to buyer, a specific sellers product or service best matches buyer requirements.

Inventory Turns

COGS / avg. inventory - measures the # of times per year a company sells its average inventory

Labor costs

Calculated by taking the standard hours required to produce a product and applying a labor rate to it.

Expand Globally - Achieve lower costs and gain competitiveness

Can result in higher sales volumes needed to capture economies of scale, leading to improved competitiveness

Capacity Requirements Planning

Capacity check of the plan created by MRP. Calculating standard hours required by work center per time period for a full horizon of the MPS.

Four main operations decision areas

Capacity strategy, supply network strategy, process technology strategy, development and organization

Net Cash Inflow

Cash flow intake - Cash outflow

Cash Flow

Cash inflow - cash outflow

What is a disadvantage to selecting a large scale change in capacity?

Causes excess capacity while demand catches up

Day-by-the-hour

Cell's ability to match takt time and act quickly when problems arise

Labor grade

Classification of workers whose capability indicates their level of skill or craft.

Utilization

Clocked hours / hours available

Closing phase

Close project, close contracts

Capacity constrained resource

Close to becoming a bottleneck if not managed carefully.

Social responsibility

Commitment by top management to behave ethically and to contribute to community development. Improving the workforce's quality of life.

Social Responsibility

Commitment by top management to behave ethically and to contribute to community development. This may also entail improving the workforce's quality of life.

Rivalry among competing sellers

Companies in the same industry compete among themselves for new customers, market share, long term competitive advantage.

Value Chain and operation strategies

Companies need to align ______________ with the selected competitive business strategy.

4th step in HOQ is

Compare customer requirements with technical design requirements and assigned relationship rating

Once value chain analysis is complete company must

Compare to that of rival companies including primary and secondary activities

External benchmarking

Compares an operation with operations in other organizations

Non-competitive benchmarking

Compares an operation with those of non-rival organizations

Competitive benchmarking

Compares an operation with those of rival organizations

Performance benchmarking

Compares an organization's achievements with those of another in selected performance areas, such as process design, delivery, as determined by the five generic performance objectives

Practice benchmarking

Compares an organization's practices to best practices

Internal benchmarking

Compares operations within the same organization

Benchmarking

Comparing a company's costs, products, and services to that of a company thought to have superior performance. The benchmark target is often a competitor but is not always a firm in the same industry. Seven types of benchmarking have been cited: 1) Competitive benchmarking. 2) Financial benchmarking. 3) Functional benchmarking. 4) Performance benchmarking. 5) Process benchmarking. 6) Product benchmarking. 7) Strategic benchmarking. See: Competitive benchmarking, Financial benchmarking, Functional benchmarking, Performance benchmarking, Process benchmarking, Product benchmarking, Strategic benchmarking.

Main advantage of arm's length transactions

Competition among suppliers can lead to low purchase price and possible high value.

Use of SPC can lead to

Competitive advantage

Business strategy must reflect the company's

Competitive advantage - strong points

Industry Attractiveness & Profitability: Company specific decision factors

Competitive position in relation to rivals (strong / weak), relationship between competitive strength relative to rivals and industry attractiveness, ability to capitalize on vulnerabilities of competitors & outperform them.

Industry attractiveness - Company specific

Competitive position, competitive strength in relation to rivals, ability to capitalize on vulnerabilities of competitors and out perform them,

It's better to chose one competitive strategy than to

Compromise between them

Long term partnerships with suppliers

Compromise between vertical integration and transactional relationship. Continuing relationships based on mutual advantage and trust. Sharing forecasts and inventory data. Multiple points of contact exist.

Insourcing

Concept of making a strategic decision to utilize in-house facilities rather than outsource the requirement.

Project Phases

Conceptual, Planning, Execution, Monitoring and Controlling, and Closing

Project phases

Conceptual, planning, execution, monitoring, closing

SWOT Analysis leads to

Conclusions about the company's overall business health and sustainability and preliminary recommendations for actions to improve it's market position and profitability.

Transcendent quality

Condition of excellence

Manufacturing based quality

Conformance to requirements

Conceptual Phase

Consider project feasibility, environment, and stakeholders:

Process Technology

Consists of machines, equipment, and software that help processes transform materials and customers.

An important aspect of TQM is

Continuous improvement

Execution

Coordinate people and resources and direct activities consistent with the project plan

Internal strength and weakness analysis at a corporate level reviews

Core competence, value chain analysis, SWOT analysis

Important design decisions

Cost and flexibility

Prevention Costs

Cost caused by quality improvement activities that focus on reduction of failure, appraisal costs, education, training, supplier certification.

Buyers bargaining power is stronger when

Cost to switch brands is low, buyers are large and can demand concessions, buyer demand is weak or buyers are few, buyer's name adds prestige to seller's customer list, buyer can postpone purchases for later offers, buyer has resources to become a competitor

Suppliers bargaining power is stronger when

Cost to switch to alternate supplier is high, there are few suppliers, supplier has an enhanced quality, supplier has resources to become a powerful rival

Suppliers bargaining power is weaker when

Cost to switch to alternative is low, item is a commodity, good substitutes exist, suppliers are abundant, buyers account for a big fraction of suppliers sales, buyers can manufacture their own requirements

Important delivery decisions

Cost, speed, dependability, flexibility

Appraisal Costs

Costs associated with the formal evaluation and audit of quality and inspection, quality audits, testing, calibration, and checking.

Process costing

Costs incurred by production are collected by time period and averaged over all units produced during that time period.

Operating expense

Costs incurred while producing output

External Failures

Costs related to things that go wrong after a product reaches customer -- returns and warranties

HOQ steps: Product Planning

Create technical requirements that incorporate what customer wants.

Inventory reduction

Create work cells and floor stock balances on shop floor with backflushing

The root of quality is

Creating value for customers by meeting or exceeding expectations

Competitive Intelligence

Critical to anticipating moves rivals are likely to make in order to counter or out maneuver them.

Disadvantages of franchising

Cultural differences with respect to quality, pressure to modify the product to meet local buyer tastes, which may be detrimental to the brand

Quick ratio

Current asses - inventory / liabilities = shows the ability to pay current liabilities without having to see inventories

Quick Ratio (acid test ratio)

Current assets - inventory / current liabilities - shows the ability to pay current liabilities without having to sell inventories

Current Ratio

Current assets / current liabilities

Current Ratio

Current assets / current liabilities - shows the ability to pay current liabilities from assets that can be converted to cash in the near term.

Current ratio

Current assets / liabilities = shows the ability to pay current liabilities from assets that can be converted to cash in the near term

Current Ratio

Current assets divided by current liabilities.

1st step in HOQ is

Customer wants and needs

Disintermediation

Cutting out the middleman. Bypasses downstream supply chain operations. Shortens supply chain. Reduces costs and increases profit. Gains better visibility of customer demand and preferences.

Circumstances that favor dispersing global activities across national markets

DCs, sales, and services activities located in various markets for order fulfill LT, service and repair, hedging exchange rates, transportation delays, and political instability

Pull environment key performance measures

Day-by-the-hour, first-time-through, wip-to-swip, operational equipment effectiveness

DSS

Decision Support System

In what MLC phase are the sales growth rates lower than the economy's growth rate?

Declining phase

In what MLC phase does produce strategy focus on differentiation of profitable products and low production costs?

Declining phase

Value Chain Analysis

Deconstructing the value chain for a product by determining physical flow of product from raw material to final customer. Analyze complexity in supply chain.

Value Chain Analysis

Deconstructing the value chain for the product by determining physical flow of product cost from raw material stage, to suppliers, to manufacturers, through distribution channels to price at final customer.

Planning Phase

Define objectives and design project, identify activities, estimate resources, develop budget and project plan: Objectives, scope, strategy: SOW, work breakdown structure

SLA - Service level agreements

Define the relationship between two functional areas in an org, response times, range of services, acceptable quality

Main advantage of supplier relationship

Dependability of delivery, quality of materials, joint development of new products and processes.

Preventing Risk - 5 strategies

Design out fail points, build in redundant systems, use failsafe methods, perform maintenance, mitigate risk

Three categories of strategic operations decisions

Design, delivery, development

Supply Chain Management

Design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.

Final stage of internal strategy development process

Determine company's price and cost competitiveness and create a detailed comparison of a company's competitive strengths and weaknesses to it's rivals.

Final phase of internal analysis

Determine company's price and cost competitiveness, create detailed comparison of company's strengths and weaknesses relative to rivals.

Marketing strategy

Determine market segment, focus on market niche, competitive analysis

Activity based cost accounting - price competitiveness

Determine the internal value chain or supply chain costs incurred by company's own primary activities and support activities.

ABC Costing is used in internal analysis to

Determine the internal value chain or supply chain costs incurred by it's own primary and support activities

Broad differentiation

Differentiates its products in the market to appeal to a broad base of customers; differentiating factors include product attributes, service, and image. JIT deliveries, selling online to lower transaction cost, higher quality. Image and prestige, parts and service, are attraction to buyers.

Execution (Implementation) phase

Direct and manage, perform quality assurance, establish and develop project team, distribute information

Three major choices related to vertical integration

Direction (upstream, downstream), Extent (how far should extend), Balance among operations (fully balanced, or service 3rd part operations?)

Four phases of recovery process

Discover, Act, Learn, Plan

Four phases of recovery processq

Discover, act, learn, plan

SWOT step 2

Draw preliminary findings and conclusions about relative strength or weakness of business, attractive aspects of business, aspects that are of concern.

Design out fail points

During the design phase of products development, organizations can employ methods such as FMEA to determine potential failures and redesign to prevent them

Competitive Stance

Each competitor markets his product its own way to increase market share and give them a competitive edge?

Gross profit

Earnings after cogs have been deducted for a given time period.

Net profit

Earnings less misc. income and expenses such as royalties, interest, and tax

Operation profit

Earnings remaining after all expenses deducted from gross profit

Performance characteristics that enable supply chains to speed throughput and shorten LT

Efficiency, quality, reduction in complexity, dependability, and flexibility

Analyze competitive approach: key competitive factors

Efforts to build competitive advantage, plans to outperform rivals, ability to react to changing conditions, geographic coverage, collaborative partnerships and strategic alliances.

In what MLC do companies attempt to perfect product or technology?

Emerging phase

Utilization (inhibitors - performance indicators)

Encourages unwanted production of unwanted product. Use to measure spare capacity and not people.

Operations performance objectives

Ensure that operations perform within the supply chain is based on the right mix of speed, quality, dependability, flexibility, and cost.

Expand Globally - Access to new customers

Ensures continued growth in demand for product

Environmental sustainability

Ensuring current processes involving the environment are pursued with the idea of keeping the environment as pristine as possible.

ERP

Enterprise Resources Planning

ERP

Enterprise resource planning systems

Holistic approach to desigh

Entire life cycle of product is considered.

ISO 14000

Environmental mgmt system based on a set of international standards

Product Layout

Equipment and workers are located to accommodate the flow of a product or customer in high volume operations. Auto assembly and self service cafeterias.

Kotter's 8 Steps to Transformation

Establish a sense of urgency, form a powerful guiding coalition, create a vision, communicate a vision, empower others to achieve the vision, plan for and create short term wins, consolidate improvements; produce still more change, institutionalize new approaches

Strategic Options for Market Entry

Exporting from home base, licensing, franchising, joint venture and alliances.

Strategic options for global entry

Exporting, licensing, franchising, joint ventures, direct ownership

Unions, stock holders, customers, suppliers, the community

External stakeholders

Strategic Drivers

Factors that influence business unit and manufacturing strategies.

FMEA

Failure Mode Effects Analysis

Nonevident Failure

Failure occurring in either a product or a production process that is not immediately evident. This may be indicative of a faulty design.

Sources of failure: supply

Failure of timing or quality of goods or services delivered into an operation

Sources of failure: environmental disruption

Failures caused by forces outside of the operation's control., such as weather, terrorism, etc.

Sources of failure: customer

Failures due to customer misuse

Sources of failure: product or service design

Failures not designed out of a product or service at time of development.

New entry threats are weaker when

Few potential entrants, entry barriers are high, poor industry outlook, slow demand growth, current industry members are strong

Balanced Scorecard Measurements

Financial perspective, customer perspective, internal business perspective, innovation and learning perspective

Four functional strategies created from corporate/ business strategy

Financial strategy, product development strategy, marketing strategy, operations strategy

The four Functional Strategies

Financial strategy, product development strategy, marketing strategy, operations strategy

Substitute products

Firms in other industries offering substitutes

Statement of work

First project planning document that should be prepared describes the purpose, history, deliverables, and measurable success. Captures support from customers and identifies contingency plans. Persuasive project.

User based quality

Fitness for use

Exporting, licensing, franchising, joint venture, direct ownership

Five international channel strategies

New customers, lower costs, exploit core competencies, access to other markets, spread business risk

Five major reasons for a company to compete internationally

Breakeven Point

Fixed costs / Unit contribution margin

Project manufacturing

Fixed position, functional layout, cell layout. Discrete products made one at a time that are highly customized.

Process layout

Flow lines, work cells, and group technology layouts. The work moves down a line through a series of processes and move, wait, queue is reduced Full over-lapping practiced.

Low cost provider

Focuses on overall costs in order to underprice competitors; sells to a broad range of customers. High capacity utilization, information technology, and supply chain efficiency.

ERP - Enterprise Resources Planning

Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so that organization can use its internal knowledge to see external advantage.

ERP - Enterprise Resource Planning

Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.

Quality characteristics

Functionality, appearance, reliability, durability, recovery, contact

Market Life Cycle: Rapidly Growing Phase

Further differentiation, innovation to expand product lines, lower prices, new geographical markets, brand building, access to new channels, further cost reduction

Market Life Cycle - Rapidly Growing Phase

Further differentiation, innovation to expand product lines, lower prices, new geographical markets, brand building, access to new channels, further cost reduction. Weak competitors drop out.

Five reasons to expand globally

Gain access to new customers, achieve lower costs and enhance competitiveness, leverage strong core competencies, spread business risk, global leadership

GAAP

Generally Accepted Accounting Principles

Social issues affecting the organization

Generic social issues, value chain social issues, social dimensions of competitive context.

What are the three approaches to competing globally

Global strategy, transnational strategy, multi domestic strategy

Transportation costs, communication barriers, cultural barriers, exchange rate, cost of shipment

Globalization issues

Expand Globally - Global leadership

Globalization of the world economy has induced leading companies in almost all industries to expand to foreign markets. Industry leadership means global leadership.

Business Strategy objectives

Grow the business, differentiate from rivals, outperform rivals, achieve high levels of financial and market performance, create sustainable competitive advantage

Market Life Cycle - Declining Phase

Harvest cash flow or sell and invest elsewhere, selective innovation and differentiation, selective promotions, further consolidation, intense focus on efficiency, low cost leadership

Market Life Cycle: Declining Phase

Harvest cash flow or sell and invest elsewhere, selective innovation and differentiation, selective promotions, further consolidation, intense focus on efficiency, low cost leadership

Responsive CSR

Have a positive effect on society, are incidental to the organization's business.

Build in redundant systems

Have back up processes or resources in place in case of a failure

Disadvantage of exporting

High costs of shipping to foreign markets, possible loss of home country cost savings advantage in long term, possible loss of cost advantages to rivals, rise of adverse effects from fluctuations in currency exchange rates

HOQ

House of Quality

QFD uses

House of quality "voice of customer"

Parts per million defects (enabler - performance indicator)

How many defects are recorded as qty or value %? Should reduce as TQM improves.

Value added per employment dollar (enabler - performance indicator)

How much of each dollar / wage can be seen as increasing the value added to the product. Improves as waste is reduced.

Five Force Model

How rivals compete for business in the marketplace; competition between sellers, treat of new entrants, threat of substitute products, supplier bargaining power, buyer bargaining power.

Overhead Rates (inhibitors - performance indicators

How the company costs, not directly related to manf., are allocated across all products as a %. A department should not be measured on how much product is stocked to recover overhead. Overhead is only recovered when product is sold.

Sources of failure: operation

Human, organizational, technology or facilities,

FEMA

Identifies and ranks potential failures providing three scores and prioritizes failures for corrective action

Failure mode and effects analysis (FMEA)

Identifies product or service failures and rates them for probability of failure, degree of severity, likelihood of escaping from detection. 1-5 scale to receive a RPN

Planning phase detailed planning

Identify activities, estimate time and resources, plan the project, set the schedule, develop the budget - statement of work and work breakdown structure

Process Improvement

Identify and eliminate causes of poor quality, process variation, and non-value added activities.

SWOT Phase 1

Identify strengths, weaknesses, opportunities, threats

SWOT step 1

Identify strengths, weaknesses, opportunities, threats

HOQ steps: Process Planning

Identify the manufacturing process steps required to produce product.

Lifecycle Costing

In evaluating alternatives, the consideration of all costs - including acquisition, operation, and disposition costs - that will be incurred over the entire time of product ownership.

Economic Value Added

In managerial accounting, the net operating profit earned above the cost of capital for a profit center.

Economic value add

In managerial accounting, the net operating profit earned above the cost of capital for a profit center.

PERT - Product Evaluation and Review Technique

In project management, a network analysis technique in which each activity is assigned a pessimistic, most likely, and optimistic estimate of duration. The critical path method is then applied using a weighted average of these times for each node. PERT computes a standard deviation of the estimate of project duration. See: Critical Path Method, Graphical Evaluation and Review Technique, and Network Analysis

Work breakdown Structure

In project mgmt, a hierarchical description of a project in which each lower level is more detailed

Scope

In project mgmt, the totality of the products to be created by a project

Overhead costs

Indirect costs that can not be easily related to a job. Depreciation, machinary, lights etc.

Industry attractiveness - Aggregate

Industry growth potential, driving forces, competition, regulation, risk

Industry Attractiveness & Profitability: Industry level decision factors

Industry's growth potential, effect of competition on current & future profitability, impact of driving forces on profitability, risk & uncertainty in the industry's future, effects of regulation, environmental issues, customer demand, and industry over-capacity.

Bathtub Curve

Infant mortality (early life), normal life, wear out

Bathtub Curve

Infant mortality, normal life, wear out

Inside out linkages

Influences of an organization's value chain activities on society

Outside in linkages

Influences of society on an organizations value chain activities

How to manage the bullwhip effect

Information sharing, channel alignment, and operational efficiency and improved forecasting

Payback Period

Initial cash investment / annual net cash income

Asset, Expense

Initially recorded as a__________inventory becomes an________when product is sold.

Trends vs. Absolutes (enabler - performance indicator)

Instead of recording actual results, we need to take the absolute results, then interpret them so we can make plans to improve the process.

Buyers with financial resources are a threat to sellers in their ability to

Integrate backwards

Types of benchmarking

Internal, external, non-competitive, competitive, performance, practice

Direct shipment, consolidated shipments, local distribution

International trade shipment options

Market Life Cycle Phase

Introduction, emerging, rapidly growing, maturing, declining

Strategic CSR

Involves transforming internal value chain processes and delivering value to customers in a way that addresses external social issues while strengthening company competitiveness.

Outsourcing Logic

Is activity of strategic importance, does company have specialized knowledge, is company's operations superior, is significant operations performance improvement likely? ----> No =

Conceptual project phase

Is the plan feasible, geographic, social, political, internal impacts to the project, uncertainty, complexity, who are stakeholders?

Social Dimensions of Competitive Context

Issues in the external environment that affect the driver's of competitiveness

Value Chain Social Issues

Issues significantly affected by org. normal activities

Generic Social Issues

Issues that may be important to society, but do not significantly affect the org. operations.

KPI

Key Performance Indicator

Analyzing internal environment includes

Key competitive factors (competitive advantage, collaborative partnerships and strategic alliances, value chain capabilities, SWOT

Multi domestic strategy disadvantages

Less innovation, increased production and distr. costs, lack of a single world wide competitive advantage

Global strategy disadvantages

Less responsive to changes in local markets, increased transportation and tariffs, higher global mgmt costs.

Shipment Linearity (enabler -performance indicator)

Level of shipments each day in the period. As variation is removed from manufacturing, shipments will be made on a regular basis instead of major shipments at month end.

Business strategy

Link between corporate strategy and operation strategy

Disadvantage of arm's length transactions

Little loyalty to customers. High transaction costs of numerous purchases.

Techniques for gaining competitive advantage globally

Location of value chain activities to reduce cost, transfer of competitive competencies & capabilities to operations in foreign markets, use of profit sanctuaries and cross market subsidization

Techniques for gaining global competitive advantage

Location of value chain to reduce costs, transfer of core competency and capabilities to foreign markets, use of profit sanctuaries and cross market subsidization

Identify points of intersection

Look for linkages between organization and society.

Market Life Cycle - Emerging Phase

Low cost or differentiation strategy, perfection of technology, awareness then brand loyalty, first mover advantage, partnerships to gain resources, expertise

Market Life Cycle: Emerging Phase

Low cost or differentiation, perfection of technology and product, awareness then brand loyalty, first mover advantage, partnerships to gain resources, expertise

Five generic competitive strategies

Low cost provider, broad differentiation, best cost provider, focused differentiation, low cost focus differentiation

Market Life Cycle - Maturing Phase

Low-cost leader, emphasis on cost and service, product pruning, expand sales to current customers, international markets, brand promotion, closure of low-volume high-cost channels, technology and flexibility to lower costs, mergers

Market Life Cycle: Maturing Phase

Low-cost leader, emphasis on cost and service; product pruning, expand sales to current customers, international markets, brand promotion, closure of low volume, high cost channels, technology and flexibility to lower costs, mergers

Types of competitive strategies

Low-cost provider, broad differentiation, best-cost provider, focused low-cost provider, focused differentiation

Five Generic Competitive Strategies

Low-cost provider, broad differentiation, best-cost provider, focused low-cost provider, focused differentiation.

Functional layout

Machines and skills are grouped together into work centers and the product is routed around the plant to have various operations performed.

Driving Forces

Major underlying causes of change in industry conditions and the competitive landscape; ie internet, globalization, innovation, risk reduction, differentiated products

Driving Forces

Major underlying causes of change in industry conditions and the competitive landscape; such as globalization, long-term growth rates, product innovation, risk reduction, entry and exit of major firms.

Reductionist Approach

Manager considers how to reduce the root causes that require a trade off. Must address issues so trade off is no longer applicable.

Trade-Off Approach

Manager considers how various options are related. High customer service = high inventory levels.

Overview Approach

Manager considers main factors of strategic core focus. More than one or two issues at the same time. Checklist.

Sequential Approach

Manager focuses on one of the five strategic objectives at a time. Cost, quality, speed, flexibility, dependability. Then moves on to next objective.

Circumstances that favor concentration of global activities in a few locations

Manf costs lower than others in certain regions, economies of scale, learning curve effects, proximity to research and development, location of suppliers

Mistake Proofing

Manf. or set up activities designed to prevent an error resulting in product defect.

MES

Manufacturing Execution Systems

Mistake proofing

Manufacturing or set-up techniques designed to prevent an error resulting in defect.

New entry threats are stronger when

Many possible entrants, entry barriers are low, industry is expanding, good profit outlook, rapid demand growth, current industry members are weak

Industry's dominant economic features

Markets, rivals, customers, buyers, products, supply and demand, technology, vertical integration, economies of scale, product innovation learning and experience

Transnational strategy

Mass customization, benefit to standardization, but need for local responsiveness.

Product / Service design

Matching firm capabilities and processes to meet the market needs and product life cycles.

Functional layout

Materials and semifinished products move through work centers that provide the necessary transformation. Routings differ for different products, flow pattern is complex. Surgery, radiography, hospital departments, air craft engines.

In what MLC phase does competition intensify?

Maturing phase

In what MLC phase is low cost leadership the competitive strategy?

Maturing phase

When does product pruning take place?

Maturing phase

First-time Through

Measure effectivenss of standardized work as reflected in output quality

Performance Objectives

Measurements that enable the firm to monitor whether or not the firm's strategy is being accomplished. Thus, the measurement should be aligned to strategy. Performance objectives may differ based on the hierarchical level of the firm (eg. department, business unit, corporation) and should be aligned with the corresponding strategy for that level.

Strategic Performance Measurements

Measurements that relate to the long-term goals of a business. Examples include profitability, market share, growth, and productivity. See: Global Performance Measurements, Operational Performance Measurements

Global measurements

Measurements used to judge the performance of a system as a whole.

Global Measurements

Measurements used to judge the performance of the system as a whole.

Cost of Quality (enabler - performance indicator)

Measures what is spent to obtain products that meet the required quality standards. Costs should reduce as the JIT / TQM policies are gradually adopted.

Sustainability

Meet needs of the present without comprising the ability of future generations to meet their own needs.

Quality functional deployment

Methodology designed to ensure that all requirements of the customer are identified through design and process engineering. Voice of the customer.

Failsafe or Poke Yoke

Methods of performing operations so that actions that are incomplete can't be completed.

Failsafe work methods (Poke Yoke)

Methods of performing operations so that actions that are incorrect can not be completed.

Strategic CSR

Modifies internal value chain processes to address social issues while reinforcing competitiveness. Addresses external social issues in a manner that is compatible with competitive advantage.

Monitoring and Controlling

Monitor, assess planned against actual and intervene if project is off course

Monitoring and control phase

Monitor, assess, intervene

Arguments for Corporate Social Responsibility

Moral obligation, sustainability, license to operate, reputation

Disadvantage to joint venture

More business risk than the other options, impact of cultural differences in mgmt style, disagreements on technology, differences in corporate values and ethical standards.

Competing Internationally Strategies

Multidomestic strategy, global strategy, transnational strategy

Transferring core competencies to build competitive advantage reasons

Need to be first into new markets to gain market leadership and increase revenues, long term sustainable global market leadership against competitors

Transfer of competence and capability to foreign markets

Need to be the first into a new market to gain market leadership and increase revenues. Long-term sustainable global leadership.

A/R Turnover

Net credit sales / average net A/R - measures the ability to collect cash from customers in turns per year

Not required by law - volunteer

Non-compulsory government regulation

Substitute competitive pressures are weaker when

Not a good quality, higher priced, cost to switch is high

Lag capacity strategy

Not adding capacity until a firm is operating at or beyond full capacity. This keeps unit costs minimized by working at full capacity but does not satisfy total demand.

Lag Capacity Strategy

Not adding capacity until the firm is operating at or beyond full capacity. This keeps unit costs minimized by working at full capacity, but does not satisfy total demand.

Number of Kanban's (enabler - performance indicator)

Number of Kanban's decrease as process improves and variation decreases.

Concepts that enhance design process

Number of parts minimized, use of proven capable parts, modular design.

Alignment, vision, performance objectives

Objectives of operations strategy

Reduce throughput to be competitive, meet quality standards, product mix & flexibility to meet market demand, support competitiveness and profitability.

Objectives of process design

Planning project phase

Objectives, scope, strategy

Failures

Occurrences that have negative consequences to operations.

Insourcing

Occurs when operations are delegated to an internal entity; a strategic decision often made to maintain control of certain critical production or competencies.

Broad Differentiation

Offering something different to the customer. Stresses variation at an extra cost. Long-term offer new features to keep in front of competition.

Focused differentiation

Offers differentiated products with customized attributes to a narrow market segment. Unique special product or service. Buyers willing to pay premium for product.

Variance (inhibitors - performance indicators)

One of the objectives to continuous improvement is to remove variance from the process and to make small step improvements. Measuring employees against variance is counter-productive.

Capacity Strategy

One of the strategic choices that a firm must make as part of its manufacturing strategy. There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity strategy adds capacity in anticipation of increasing demand. A lag strategy does not add capacity until the firm is operating at or beyond full capacity. A tracking strategy adds capacity in small amounts to attempt to respond to changing demand in the marketplace.

Expand Globally - Spread business risk

Operating in widespread markets can be a cushion against economic downturns in home and other markets

Capabilities

Operations management must first provide into the business strategy process the __________ of the organization.

Capacity strategy, supply network strategy, process technology strategy, development and organization

Operations strategy decision areas

Vision

Operations strategy must provide its own vision. This is not a vision of what the operations wants to achieve, but a vision of capabilities operations must have to provide value to the business and contribution operations must make to provide value to the business

Quality is considered to be a

Order qualifier

For differentiated products, quality can be a

Order winner

Leading Demand

Organizing more capacity to meet anticipated future demand.

Agility of suppliers

Orgs often cannot redirect resources as fast as their suppliers can to meet changing or new product and service requirements.

Arm's length or transactional relationships with suppliers

Orgs seek the best supplier whenever it is necessary to buy a particular item. Best price / conditions - fosters competition among suppliers. More transactions are independent of each other. Transactions are short term.

The SMS should be linked to the

Overall strategic plan

Vertical Integration

Ownership of the supply network, strategic positioning of the company, financial and marketing strategy drivers

Capital budgeting comparison methods

Payback period, accounting rate of return, net present value, internal rate of return

Stakeholder

People with a vested interest in a company, including managers, employees, stockholders, customers, suppliers, and others. * Involve in plans for change.

Quality, speed, dependability, flexibility, cost

Performance Objectives

In variable costing, fixed manf. overhead is applied to the

Period cost

Introduction, Growth, Maturity, Phase Out

Phases of product life cycle

Competitive strategy should have a balanced plan to

Please customers, counter rivals, respond to market, secure competitive advantage

SWOT Phase 2

Preliminary findings and conclusions about: 1. the relative strength or weakness of the business, 2. the attractive aspects of the business, 3. aspects that are of concern.

Total productive maintenance

Preventative maintenance plus continuing efforts to adapt, modify, and refine equipment to increase flexibility, reduce mtl handling, and promote continuous flow.

Costs of quality

Prevention costs, appraisal costs, internal failure, external failure

3 competitive advantage approaches

Price leadership, product differentiation, customer focus

Competitive pressure from substitute products

Price, quality, cost of switching

Competitive pressure from substitute products is related to these three things

Price, quality, cost of switching

HOQ results:

Prioritized list of customer wants, how we compare to competitors, what 1st solutions are and how they affect other customer attributes and each other, establish areas of improvement to work on.

FEMA three scores

Probability of failure occurrence, degree of severity, likelihood of escape from detection

Forward Integration

Process of buying or owning elements of the production cycle and the channel of distribution forward toward the final customer. See: Vertical Integration

Coupling and connectivity

Process technology can be used to couple or link the separate activities of a production process into a interconnected processing system.

Quality at the source

Producers responsibility is to provide 100% acceptable quality material to the consumer. Objective is to reduce or eliminate shipping / receiving quality inspections and lines stopped as a result of defect.

Time to market is reduced to absolute minimum, product is at a level of quality to meet demand, concepts of standardization and simplification to reduce cost and time to market, design equal or better than competition

Product / Process design critical objectives

PERT

Product Evaluation and Review Technique

Produced based quality

Product attributes define quality

In absorption costing, fixed manf. overhead is applied to the

Product cost

Mass continuous manufacturing

Product layout. Higher volume than repetitive process. Products flow continuously from one part to another and are not discrete. Gasoline, steel, glass. Capital intensive and less flexible than repetitive process.

Product focus

Product or service focus company that produces a limited number of standard products on dedicated lines. High volume, low variety. Repetition.

Fixed position layout

Product or service is stationary. Power generators, restaurants with servers.

Multi domestic strategy

Products adapted to accommodate local preferences, plants located in multiple countries, use local suppliers, wide autonomy for managers

Visual management and pull system

Products which are: 1. demand variances are low, high-volume and continous 2. Product complexity is low 3. Linear, or plant layout 4. Very little WIP

Outsourcing can be a strategic advantage if

Profit margins are low or the company does not have proprietary advantages in specialized knowledge, skills, or intellectual property.

MES - Manufacturing Execution Systems

Programs and systems that participate in shop floor control, including programmed logic controllers and process control computers for direct and supervisory control of manufacturing equipment; process information systems that gather historical performance information, then generate reports; graphical displays; and alarms that inform operations personnel what is going on in the plant currently and a very short history into the past. Quality control information is also gathered and a laboratory information management system may be part of this configuration to tie process conditions to the quality data that are generated. Thereby, cause-and-effect relationships can be determined. The quality data at times affect the control parameters that are used to meet product specifications either dynamically or off line.

Manufacturing execution systems

Programs and systems that participate in shop floor control.

Responsive CSR

Provides good citizenship, mitigates adverse effects of business activities

Visual Mgmt systems are best used in

Pull systems, lean

ERP functionality is best used in

Push systems

QFD

Quality Function Deployment

Purchase Price (inhibitors - performance indicator)

Quality and OTP are more important than price. Overall cost is really important, including cost to work with supplier and actions when supplier fails.

Attribute quality measures

Quality control value that is either yes or no value or is counted rather than being measured on a continuous scale

Internal Failures

Quality costs related to things that go wrong before product reaches the customer, scrap, rework, retesting, re-inspection

ISO 9000

Quality mgmt system based on a set of international standards

Development decisions

Quality, and cost

Operations Strategy performance objectives

Quality, cost, speed, dependability, flexibility

Competitive strategy performance objectives

Quality, speed, flexibility, dependability, cost

Value Chain support activities

R&D, HR, general administration

Value Chain Support Activities

R&D, technology, Human Resources, general administration

In what MLC do weak competitors drop out?

Rapidly growing phase

In what MLC phase do companies focus on new geographical areas?

Rapidly growing phase

Throughput

Rate at which product is being produced during a defined period of time.

Approaches to strategic change

Reacting to change, anticipating change, leading change

Three approaches to strategic change

Reacting to change, anticipating change, leading change

Substitute competitive pressures are stronger when

Readily available, attractively priced, have better features, cost of switching is low

The EFQM excellence model

Recognizes TQM and customer satisfaction

Mitigate risks

Reduce the negative consequences of risks through mitigation planning; economic mitigation such as having insurance.

Reductionist Approach (alt. operations strategy)

Reduce the root cause that require trade off. Mgmt approach must then address these factors so the trade off is no longer applicable. Required strategy builds these approaches into a plan.

Commonparts

Reduced setup, inventory costs, improved flexibility to customer demands, half design costs.

Scalability

Refers to being able to shift quickly to a higher level of useful capacity.

Automation

Refers to the ability of process technology to make decisions or carry out activities on its own.

Process Capability

Refers to the ability of the process to produce parts that conform to (engineering) specifications. Process capability relates to the inherent variability of a process that is in a state of statistical control See: Cp, Cpk, Process Capability Analysis

Trade-Off Approach (alt. operations strategy)

Requires the operations manager to consider how the various options are related. High service = high inventory. High volume vs. low cost.

Overview approach (alt. operations strategy)

Requires the operations manager to consider the main factors of the resources available, the technology in use, levels of integration approach to quality, relationship between management and work force, and planning.

Resiliency

Resiliency in the supply chain is the ability to return to a position of equilibrium after experiencing an event that causes operational results to deviate from expectations. Resiliency is increased by strategically increasing the number of response options and/or decreasing the time to execute those options. Resiliency is improved by risk monitoring and control.

Cell Layout

Resources for production processes are grouped into a cell or manf. unit, in which all transforming resources are located to facilitate flow. Work stations that are dedicated to assembly of high quality components for computer manf.

Value chain capabilities

Responsible for planning and execution of operations to carry out the business strategy.

Efficiency (inhibitors - performance indicators)

Restricts cross training. Efficiency goes down when management moves someone to another area to train. Should not be used to measure people.

Defects per person (inhibitors - performance indicators)

Restricts the idea that JIT works with teams and not individuals.

ROI

Return on Investment

RPN

Risk priority number - results from FMEA so failures can be ranked for corrective action

RPN

Risk priority number provided by FEMA analysis

Five Force Model market areas

Rivalry among competing sellers, suppliers to sellers, buyers to sellers, potential new entrants, substitution products

Global strategy

Sale of same product in all markets, strong brands, same competitive advantage in all markets, plants and suppliers located where advantageous, transfer of ideas, tech.. capabilities among markets

Profit Margin

Sales less all fixed and variable costs

Gross Margin

Sales less manufacturing costs both fixed and variable

Signs substitute competition is strong

Sales of substitutes are growing faster than sales in industry, producers of substitutes are adding new capacity, profits of producers of substitutes are rising

Acceptable Quality Level

Sample quantity received and make a "pass / fail" decision based on sample.

Supply Chain Management's objectives

Satisfy customers by providing goods and services when needed at a competitive cost, that are consistent with competitive strategies

Supply Chain Mgmt Objectives def.

Satisfy customers by providing goods and services when needed, at competitive cost, that are consistent with competitive strategies

Dumping

Selling goods below cost in selected markets to gain competitive advantage or off load surplus production

Statistical process controls

Serves to reduce lead time because its methods can be used to objectively close the engineering process and design capability gap.

SLA

Service Level Agreement

Setting the CSR strategy

Set the goal of shared value, identify points of interaction, choose which social issues to address

Disadvantages of licensing

Sharing valuable intellectual property and trade secrets with 3rd parties, difficulty of enforcing the gray areas of license agreements as to what items are proprietary, high risk of patent infringement

Responsibility at the source

Shifting day to day responsibility of running a work cell from managers to those actually involved.

Virtual Organization

Short-term alliances between independent organizations in a potentially long-term relationship to design, produce, and distribute a product. Organizations cooperate based on mutual values and act as a single entity to third parties.

Benchmarking guidelines

Should be continuous, used for ideas and not solutions, should not be used for imitation, requires leadership and continuity, resources and mgmt attention

Corporate Social Responsibility (CSR)

Should be included in corporate objectives / business model; moral obligation, sustainability, license to operate, reputation.

Strategic group maps

Show clusters of industry rivals that have similar competitive approaches and market positions, geographical approach and price / quality. Objective is to establish these clusters to reveal close / distant competitors.

Design for Manufacturability

Simplification of parts, products, and processes to improve quality and reduce manufacturing costs.

Design for manufacturability

Simplification of parts, products, and processes to improve quality and reduce manufacturing parts. All parties involved from start to finish and uses QFD.

Barriers to entry from substitutes

Sizeable economies of scale or capital, consumer loyalty, strong and highly capitalized incumbents, inability to overcome advantages of incumbents in terms of proprietary technology, learning, experience, local supplier relationship, distribution channels

Core Competencies

Skills or knowledge sets that enable a firm to provide the greatest level of value to its customers in a way that is difficult for competitors to emulate and provides for future growth.

Benchmarking should be used for ideas and not

Solutions

Value Chain Activities - reasons for few locations

Some locations manf. costs lower than others, economies of scale, learning curve effects, proximity to research and development and supplier infrastructure

Innovation Speed

Specialist manf. are more likely to create innovations faster and at a lower cost.

HOQ steps: Process Control Planning

Specifies what process control methods to be used to ensure that the end result is of the desired quality level.

Efficiency

Standard hours / actual hours

Productivity calculation

Standard hours of output / clock time scheduled

Certified Supplier

Status awarded to a supplier who consistently meets pre-determined quality, cost, delivery, financial, and count objectives. Incoming inspection may not be required.

Periodic Inventory Record

Stock record are not continuously maintained & instead the stock is counted periodically. Ordering decisions made on the stock balance.

SWOT Analysis

Strengths, weaknesses, opportunities, threats

Expand Globally - Leverage strong competencies

Strong core competencies in a domestic market may give a company a competitive advantage in other countries.

Free on Board

Supplier shipping material from overseas. Bank releases payment once the goods are loaded on the ship. Ownership passes to the customer. Customer responsible for insurance and shipping of the goods to his premises.

Value Chain primary activites

Supply Chain Mgmt, operations, distribution, sales and marketing, service, profit margin

Supply Chain Mgmt Objectives

Supply chain management and operations management objectives

Value Chain Primary Activities

Supply chain mgmt, Operations, Distribution, Sales and Marketing, Service, Profit Margin

Counter trade

Supplying country not paid in cash, instead goods and services

Perform maintenance

Take care of physical equipment and facilities to reduce risk of failure

2nd step in HOQ is

Technical characteristics

3rs step in HOW is

Technical design requirements

Core Process

That unique capability that is central to a company's competitive strategy.

Core process

That unique capability that is central to a company's competitive strategy.

Sustainability

The ability of an org to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Product-Mix Flexibility

The ability to change over quickly to other products produced in a facility, as required by demand shifts in mix.

Surge Capacity

The ability to meet sudden, unexpected increases in demand by expanding production with existing personnel and equipment.

Resilience

The ability to prevent, withstand, and recover from unwanted events.

Agility

The ability to succesfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization. Agility merges the four distinctive competencies of cost, quality, dependability, and flexibility.

Agility

The ability to successfully manufacture and market a broad range of low-cost, high quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization. Merges four distinctive competencies: cost, quality, dependability, flexibility.

Cross Subsidization

The ability to use profits from one or more markets to compete in other markets through cross market subsidies

Use of profit sanctuaries and cross market subsidies

The ability to use profits from one or more markets to compete in other markets through cross market subsidies. These subsidies enable the reduction of profit margins on certain products to force rivals to do the same.

Preventive Maintenance

The activities, including adjustments, replacements, and basic cleanliness, that forestall machine breakdowns. The purpose is to ensure that production quality is maintained and that delivery schedules are met. In addition, a machine that is well cared for will last longer and cause fewer problems. Synonym: Periodic Maintenance

Competitive Advantage

The advantage a company has over its rivals in attracting customers and defending against competitors. Sources of the advantage include characteristics a competitor can not easily duplicate; brand name, technology, skill set, etc.

Competitive Advantage

The advantage a company has over its rivals in attracting customers and defending against competitors. Sources of the advantage include characteristics that a competitor cannot duplicate without substantial cost and risk, such as a manufacturing technique, brand name, or human skill set. Synonym: Competitive Edge

Investment

The amount of money invested to be able to produce required output, includes cost of material.

Throughput time or cycle time

The completion time between two discrete units. The length of time from when material enters a facility until it exists.

Alignment

The concept of matching the market need to the resources of the company.

Capital Investment

The concept of spending money on an undertaking that will provide an income in the future.

Volume

The decision on plant layout relies heavily on?

Vertical Integration

The degree to which a firm has decided to directly produce multiple value-adding stages from raw material to the sale of the product to the ultimate consumer. The more steps in the sequence, the greater the vertical integration. A manufacturer that decides to begin producing parts, components, and materials that it normally purchases is said to be backward integrated. Likewise, a manufacturer that decides to take over distribution and perhaps sale to the ultimate consumer is said to be forward integrated. See: Backward Integration, Forward Integration

Vertical Integration

The degree to which a firm has decided to produce multiple value added stages from raw mtl to the sale to customer.

Gantt Chart

The earliest and best-known type of planning and control chart, especially designed to show graphically the relationship between planned performance and actual performance over time. Named after its originator, Henry L. Gantt, the chart is used for 1) Machine loading, in which one horizontal line is used to represent capacity and another to represent load against that capacity; or 2) Monitoring job progress, in which one horizontal line represents the productions schedule and another parallel line represents the actual progress of the job against the schedule in time. Synonym: Job Progress Chart, Milestone chart

Process Control

The function of maintaining a process within a given range of capability by feedback, correction, etc.

Value Chain

The functions with in an org. that adds value to the goods or services that org sells to customers?

Value Chain

The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.

Supply Chain

The global network used to deliver products and services from raw material to end customers through an engineered flow of information, physical distribution, and cash.

Inside out linkages

The influences of an organization's value chain activities on society. Infrastructure, HR Mgt, procurement, inbound logistics. operations, outbound logistics, sales

Outside in linkages

The influences of society on an organization's value chain activities. Inputs to business (HR, transportation), competitive rules and incentives (policies), local demand standards (quality, safety, consumer rights), availability of supporting industries (service providers, producers).

Cash conversion cycle

The length of time from the purchase of raw materials to the collection of accounts receivables from customer for the sale of products and services.

Break-even Point

The level of production or the volume of sales at which operations are neither profitable nor unprofitable. The break-even point is the intersection of the total revenue and total cost curves. See: Total Cost Curve

Look ahead period

The longest batching period used for any item

Supply chain management

The management of relationships and flows along the string of operations and processes that produce value in the form of products and services to the customer.

Product positioning

The marketing effort involved in placing a product in a market to serve a particular niche or function.

Product Positioning

The marketing effort involved in placing a product in a market to serve a particular niche or function. Synonym: Service Positioning

Hurdle Rate

The minimum acceptable rate of return on a project.

Residual Income

The net operating income that an investment center earns above the minimum required return on its operating assets.

Risk

The potential for unwanted negative consequences from events.

Net Present Value

The present (discounted) value of future earnings (operating expenses have been deducted from net operating revenues) for a given number of time periods.

Net value Method

The present value of future earnings for a given # of time periods.

Backward Integration

The process of buying or owning elements of the production cycle and channel of distribution back toward raw material suppliers. See: Vertical Integration

Backward Integration

The process of buying or owning elements of the production cycle back towards the raw mtl.

Forward Integration

The process of buying or owning elements of the production cycle forward to the customer. Distribution channels.

Disintermediation

The process of eliminating an intermediate stage or echelon in a supply chain.

Disintermediation

The process of eliminating an intermediate stage or echelon in a supply chain. Total supply chain operating expense is reduced, total supply chain inventory is reduced, total cycle time is reduced, and profits increase amon the remaining echelons. See: Echelon

Outsourcing

The process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution - the replacement of internal capacity and production by that of the supplier. See: Subcontracting

Operations planning

The process of setting goals and targets and establishing measures constrained by and target for achieving the strategic tactical plans.

Environmental Scanning

The process used to find out all the key approaches used by a company & the advantage it gives them in the marketplace?

Key Success Factors

The product attributes, organizational strengths, and accomplishments with the greatest impact on future success in the marketplace.

Jobbing

The production of unique products to meet a customer's requirement - low volume, high variety.

Throughput-based performance measures (enabler - performance indicator)

The rate at which output is produced. Time between each produce made is reduced as waste is reduced.

Internal Rate of Return

The rate of compound interest at which the company's outstanding investment is repaid by proceeds from the project.

Failure recovery

The set of actions that are taken after then negative effects of failure have occurred that reduce the impact of negative effects

Corporate Culture

The set of important assumptions that members of the company share. It is a system of shared values about what is important and beliefs about how the company works. These common assumptions influence the ways the company operates.

Local Measures

The set of measurements that relates to a resource, operation, process, or part and usually has low correlation to global organization measures. Examples are errors per printed page, departmental efficiency, and volume discounts.

Corporate Strategy

The strategy of an enterprise that identifies how a company will function in its environment. Such as how to satisfy customers, how to grow business, how to compete, how to achieve financial objectives.

Cost-volume profit analysis

The study of how profits change with various levels of output and selling price.

Net Income

The surplus of income over expenses shown in the income statement.

Strategic Group Mapping

The technique used to illustrate different market or competitive positions that rival firms occupy.

Strategic Group Mapping

The technique used to illustrate different market or competitive positions that rival firms occupy. A company can use this tool to show possible changes in the positions of it's rivals.

Key Success Factors (KSF)

The things that a company needs to get right to be a successful competitor; product and service attributes, processes, costs, resources, capabilities

Delivery Lead Time

The time from the receipt of a customer order to the delivery of the product. Synonym: Delivery cycle

Velocity (enabler - performance indicator)

The time taken to produce an amount of output. As wasteful activities are removed, so is the time required.

Operations Strategy

The total pattern of decisions that shape the long-term capabilities of an operation and their contribution to overall strategy. Operations strategy should be consistent with overall strategy. See: Strategic Plan

Activity based management

The use of activity based costing information about cost pools and drivers, activity analysis, and business processes to identify business strategies; improve product design, manufacturing, and distribution, and remove waste from operations.

ABM - Activity Based Management

The use of activity-based costing information about cost pools and drivers, activity analysis, and business processes to identify business strategies; improve product design, manufacturing, and distribution; and remove waste from operations. See: Activity-based Cost Accouting

Perceived value

The value the market gives to a product that may not bear relation to cost. What customers are willing to pay.

Balanced Scorecard

There are factors beyond financial performance that need to be measured. Financial performance measures, internal process performance measures, customer performance measures, learning and growth measures. Single report.

Economies of scale

These are natural to suppliers due to volume over any of their customers as a result of manf. components for and providing services provided to many customers.

Order Qualifiers

Those competitive characteristics that a firm must exhibit to be a viable competitor in the market place.

Order Winners

Those competitive characteristics that cause a firm's customers to choose their product over the competition.

Inventory turns, employees to output ratio, market share

Three ways to benchmark your company with a competitor

TBC

Time-Based Competition

Sustainability

To meet needs of the present without compromising the ability of future generations to meet their own needs

Horizontal Structure

Top mgmt strategic decisions, collaborative chain of authority, cross functional teams, flexible job descriptions, encouraged employee decision making, high org flexibility

Hierarchical Structure

Top mgmt strategic decisions, top-down chain of authority, functional supply chain mgmt, highly structured job definitions, low employee decision making, low org flexibility

SWOT Phase 3

Translate findings and conclusions into potential actions for improving strategy & business prospects. 1. Strengthen competitive capabilities. 2. Pursue market opportunities with greatest potential. 3. Reduce the company's competitive weaknesses and liabilities. 4. Use strengths to limit impact of external threats.

SWOT step 3

Translate findings and conclusions into potential actions for improving strategy; strengthen competitive capabilities, pursue market opportunities, reduce competitive weakness, limit impact of threats

HOQ steps: Product Design

Translate technical requirements into component characteristics.

Control Charts

Upper and lower limits, show the performance of many samples of a process taken over time.

Market positioning

Use strategic group mapping technique: 1. Price and quality of goods and services sold 2. Distribution channels 3. Product and service features that appeal to different market segments

Cross subsidization

Used to attack a rival's home market or main profit sanctuary and selectively attack rivals in different country markets to improve market share. Can come from product lines in the same country, not necessarily home market or profit sanctuary.

The Malcolm Bridge National Quality Award

Uses a broad set of critera to evaluate and award quality mgmt

Environmentally unstable situation

Using natural resources faster than they can be replenished

Economy of scope

Using one versatile plant to produce many different products at a lower cost than making each product in different plants at a higher cost.

Insourcing

Using the firm's internal resources to provide goods and services. See: Make-or-Buy Decision

Benchmarking

Usually completed by third party bench marking service that aggregate data by converting it into average cost per activity or publish raw date to determine price position relative to rivals.

Batch manufacturing

Usually produces multiple units of discrete product at at time. Small batch similar to jobbing. Large batch similar to repetitive processes.

Employee Involvement

Utilize the brain power of all employees but also to develop their skills, create ownership, and sense of pride enabling managers to manage and not fight fires.

Tools used to analyze price competitiveness

Value chain analysis, ABC costing, and bench marking

Companies need to align _________ and _____ with selected competitive business strategy.

Value chain and operations strategies

How to determine price competitiveness

Value chain cost analysis, ABC analysis of value chain costs, benchmarking rival costs

Best Cost Provider

Value for money. Aim is to provide that little extra value at a very good price. The product versions will include extra features at a reasonable price. Long term, additional features at lower cost than competitor.

Intellectual Property

Various legal entitlements that attach to certain names, written and recorded media, and inventions.

Business level

Vertical integration is a strategic move at the______________

VOC

Voice of Customer

Key Success Factors

What a company needs to get right in order to be a successful competitor; technology, manf. distribution, marketing, capabilities, customer service.

Detailed routings and CRP

What is not used in project manufacturing?

Spare parts, warranty, guarantees

What must be forecasted in the phase out phase of the product life cycle?

P&IM and block scheduling

What should be used in project manufacturing?

Maturity

What stage of the product life cycle incorporates trends and seasonality?

Licensing

When a company has a patented process or product but lacks org. and financial resources to enter a foreign market

S&OP

When is functional strategy turned into reality?

Routing

Where the product is made. Sequence of operations, methods used, time, tooling needed, and BOM evaluations.

Strategic Group Mapping reveals

Which companies are close or distant competitors in terms of competitive characteristics; price, quality, geographic coverage

Introduction

Which phase in the product life cycle is the most difficult?

Sequential Approach (alt. operations strategy)

Works on the principle that the company can only concentrate on one of the five strategic objectives at a time (cost, quality, speed, dependability, flexibility).

Speed

______of design means competitive edge.

Franchising strategy for market entry

advantages: 1. Low cost and risk of setting up and operating 2. Franchisor selects, trains, support and monitor franchisee Drawback: 1. Cultural differences leads to different quality concerns 2. Modify product to satisfy local taste may be detrimental to the brand

Payback period

amount invested / expected annual net cash inflow

Target cost

are costs which need to be achieved to reach certain market share levels

Repetitive manufacturing

cell layout, product layout. Production activities repetitive and predictable. Very high volume with little variety. Auto assembly line.

Jobbing manufacturing

functional layout, cell layout, service shop. Resources such as equipment and labor are shared among tasks but achieve different results for different products. Very low repetition and many products are one of a kind. Wide variety of routings. High worker skill required. Specialist tool making.

Five forces analysis

is a tool to analyze the principal competing pressures in a market

Contribution margin

is calculated by subtracting variable costs from revenue. It is an improved way of managing the business from an internal operations viewpoint. It cannot be a substitute for full absorption accounting for reporting to the "outside" world.

Economic Value Added (EVA)

measures the net profit over the cost of all the capital used to create that profit. There are three ways that EVA can be raised. 1. Earn more profit without using more capital 2. Use less capital - most companies find ways to do this 3. Invest capital in higher return projects

Concurrent engineering

participative design / engineering. Defines it as a concept that refers to the participation of all functional areas of the firm in the product design activity. Suppliers and customers included.

Project crashing

the assignment of additional resources to one or more critical activities in order to shorten the project time lines.

Debt ratio

total liabilities / total assets = measures the ability to pay off loans ability is higher if ratio is lower