Operations Management BUSA 3120 Final Exam
What are the four international operations strategies? Name and explain each.
2. transnational strategy - A transnational strategy exploits the economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competence does not reside in just the "home" country but can exist anywhere in the organization. Transnational describes a condition in which material, people, and ideas cross—or transgress—national boundaries. These firms have the potential to pursue all three operations strategies (i.e., differentiation, low cost, and response).
What are the four international operations strategies? Name and explain each.
3. International Strategy - An international strategy uses exports and licenses to penetrate the global arena. This strategy is the least advantageous, with little local responsiveness and little cost advantage. But an international strategy is often the easiest, as exports can require little change in existing operations, and licensing agreements often leave much of the risk to the licensee.
Name and explain the 3 general strategies firms use to compete
3. Response - Response is often thought of as flexible response, but it also refers to reliable and quick response. Indeed, we define response as including the entire range of values related to timely product development and delivery, as well as reliable scheduling and flexible performance.
What are the four international operations strategies? Name and explain each.
4. Multidomestic Strategy - The multidomestic strategy has decentralized authority with substantial autonomy at each business. These are typically subsidiaries, franchises, or joint ventures with substantial independence. The advantage of this strategy is maximizing a competitive response for the local market; however, the strategy has little or no cost advantage. Many food producers, such as Heinz, use a multidomestic strategy to accommodate local tastes because global integration of the production process is not critical. The concept is one of "we were successful in the home market; let's export the management talent and processes, not necessarily the product, to accommodate another market."
What is forecast "bias"?
A consistent tendency for forecasts to be greater or less than the actual values (that is, for a high absolute cumulative error) is called a bias error. Bias can occur if, for example, the wrong variables or trend line are used or if a seasonal index is misapplied.
What are the two categories of forecasting methods? Define each. When is each appropriate to use?
One is a quantitative analysis; the other is a qualitative approach. Quantitative forecasts use a variety of mathematical models that rely on historical data and/or associative variables to forecast demand. Subjective or qualitative forecasts incorporate such factors as the decision maker's intuition, emotions, personal experiences, and value system in reaching a forecast. Some firms use one approach and some use the other. In practice, a combination of the two is usually most effective.
What is Operations Management?
Operations Management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.
Concisely define and describe Total Quality Management. What are the important concepts/elements that make up a TQM program (briefly explain each)?
(1) continuous improvement, (2) Six Sigma, (3) employee empowerment, (4) benchmarking, (5) just-in-time (JIT), (6) Taguchi concepts, and (7) knowledge of TQM tools. Continuous Improvement Total quality management requires a never-ending process of continuous improvement that covers people, equipment, suppliers, materials, and procedures. The basis of the philosophy is that every aspect of an operation can be improved. The end goal is perfection, which is never achieved but always sought. Plan-Do-Check-Act Walter Shewhart, another pioneer in quality management, developed a circular model known as PDCA (plan, do, check, act) as his version of continuous improvement. Deming later took this concept to Japan during his work there after World War II. The PDCA cycle (also called a Deming circle or a Shewhart circle) is shown in Figure 6.3 as a circle to stress the continuous nature of the improvement process. The term Six Sigma, popularized by Motorola, Honeywell, and General Electric, has two meanings in TQM. In a statistical sense, it describes a process, product, or service with an extremely high capability (99.9997% accuracy).The second TQM definition of Six Sigma is a program designed to reduce defects to help lower costs, save time, and improve customer satisfaction. Six Sigma is a comprehensive system—a strategy, a discipline, and a set of tools—for achieving and sustaining business success: It is a strategy because it focuses on total customer satisfaction. It is a discipline because it follows the formal Six Sigma Improvement Model known as DMAIC. This five-step process improvement model (1) Defines the project's purpose, scope, and outputs and then identifies the required process information, keeping in mind the customer's definition of quality; (2) Measures the process and collects data; (3) Analyzes the data, ensuring repeatability (the results can be duplicated) and reproducibility (others get the same result); (4) Improves, by modifying or redesigning, existing processes and procedures; and (5) Controls the new process to make sure performance levels are maintained. It is a set of seven tools that we introduce shortly in this chapter: check sheets, scatter diagrams, cause-and-effect diagrams, Pareto charts, flowcharts, histograms, and statistical process control. Motorola developed Six Sigma in the 1980s, in response to customer complaints about its products and in response to stiff competition. The company first set a goal of reducing defects by 90%. Within one year, it had achieved such impressive results—through benchmarking competitors, soliciting new ideas from employees, changing reward plans, adding training, and revamping critical processes—that it documented the procedures into what it called Six Sigma. Although the concept was rooted in manufacturing, GE later expanded Six Sigma into services, including human resources, sales, customer services, and financial/credit services. The concept of wiping out defects turns out to be the same in both manufacturing and services. Employee empowerment means involving employees in every step of the production process. Consistently, research suggests that some 85% of quality problems have to do with materials and processes, not with employee performance. Therefore, the task is to design equipment and processes that produce the desired quality. This is best done with a high degree of involvement by those who understand the shortcomings of the system. Those dealing with the system on a daily basis understand it better than anyone else. One study indicated that TQM programs that delegate responsibility for quality to shop-floor employees tend to be twice as likely to succeed as those implemented with "top-down" directives. Benchmarking is another ingredient in an organization's TQM program. Benchmarking involves selecting a demonstrated standard of products, services, costs, or practices that represent the very best performance for processes or activities very similar to your own. The idea is to develop a target at which to shoot and then to develop a standard or benchmark against which to compare your performance. The steps for developing benchmarks are: 1. Determine what to benchmark. 2. Form a benchmark team. 3. Identify benchmarking partners. 4. Collect and analyze benchmarking information. 5. Take action to match or exceed the benchmark. The philosophy behind just-in-time (JIT) is one of continuing improvement and enforced problem solving. JIT systems are designed to produce or deliver goods just as they are needed. JIT is related to quality in three ways: JIT cuts the cost of quality: This occurs because scrap, rework, inventory investment, and damage costs are directly related to inventory on hand. Because there is less inventory on hand with JIT, costs are lower. In addition, inventory hides bad quality, whereas JIT immediately exposes bad quality. JIT improves quality: As JIT shrinks lead time, it keeps evidence of errors fresh and limits the number of potential sources of error. JIT creates, in effect, an early warning system for quality problems, both within the firm and with vendors. Better quality means less inventory and a better, easier-to-employ JIT system: Often the purpose of keeping inventory is to protect against poor production performance resulting from unreliable quality. If consistent quality exists, JIT allows firms to reduce all the costs associated with inventory. Tagouchi Concepts Most quality problems are the result of poor product and process design. Genichi Taguchi has provided us with three concepts aimed at improving both product and process quality: quality robustness, target-oriented quality, and the quality loss function. Quality robust products are products that can be produced uniformly and consistently in adverse manufacturing and environmental conditions. Taguchi's idea is to remove the effects of adverse conditions instead of removing the causes. Taguchi suggests that removing the effects is often cheaper than removing the causes and more effective in producing a robust product. In this way, small variations in materials and process do not destroy product quality. Taguchi introduced the concept of target-oriented quality as a philosophy of continuous improvement to bring the product exactly on target. As a measure, Taguchi's quality loss function (QLF) attempts to estimate the cost of deviating from the target value. Even though the item is produced within specification limits, the variation in quality can be expected to increase costs as the item output moves away from its target value. (These quality-related costs are estimates of the average cost over many such units produced.) The QLF is an excellent way to estimate quality costs of different processes. A process that produces closer to the actual target value may be more expensive, but it may yield a more valuable product. The QLF is the tool that helps the manager determine if this added cost is worthwhile. Check Sheets LO 6.6 Use the seven tools of TQM A check sheet is any kind of a form that is designed for recording data. In many cases, the recording is done so the patterns are easily seen while the data are being taken [see Figure 6.6(a)]. Check sheets help analysts find the facts or patterns that may aid subsequent analysis. An example might be a drawing that shows a tally of the areas where defects are occurring or a check sheet showing the type of customer complaints. Scatter Diagrams Scatter diagrams show the relationship between two measurements. An example is the positive relationship between length of a service call and the number of trips a repair person makes back to the truck for parts. Another example might be a plot of productivity and absenteeism, as shown in Figure 6.6(b). If the two items are closely related, the data points will form a tight band. If a random pattern results, the items are unrelated. Cause-and-Effect Diagrams Another tool for identifying quality issues and inspection points is the cause-and-effect diagram, also known as an Ishikawa diagram or a fish-bone chart. Figure 6.7 illustrates a chart (note the shape resembling the bones of a fish) for a basketball quality control problem—missed free-throws. Each "bone" represents a possible source of error. Pareto Charts Pareto charts are a method of organizing errors, problems, or defects to help focus on problem-solving efforts. They are based on the work of Vilfredo Pareto, a 19th-century economist. Joseph M. Juran popularized Pareto's work when he suggested that 80% of a firm's problems are a result of only 20% of the causes. Flowcharts Flowcharts graphically present a process or system using annotated boxes and interconnected lines [see Figure 6.6(e)]. They are a simple but great tool for trying to make sense of a process or explain a process. Example 2 uses a flowchart to show the process of completing an MRI at a hospital. Histograms Histograms show the range of values of a measurement and the frequency with which each value occurs [see Figure 6.6(f)]. They show the most frequently occurring readings as well as the variations in the measurements. Descriptive statistics, such as the average and standard deviation, may be calculated to describe the distribution. However, the data should always be plotted so the shape of the distribution can be "seen." A visual presentation of the distribution may also provide insight into the cause of the variation. Statistical Process Control (SPC) Statistical process control (SPC) monitors standards, makes measurements, and takes corrective action as a product or service is being produced. Samples of process outputs are examined; if they are within acceptable limits, the process is permitted to continue. If they fall outside certain specific ranges, the process is stopped and, typically, the assignable cause located and removed. Control charts are graphic presentations of data over time that show upper and lower limits for the process we want to control [see Figure 6.6(g)]. Control charts are constructed in such a way that new data can be quickly compared with past performance data. We take samples of the process output and plot the average of each of these samples on a chart that has the limits on it. The upper and lower limits in a control chart can be in units of temperature, pressure, weight, length, and so on.
What are two typical measures of supply chain performance?
1)Inventory turnover is computed on an annual basis, using Equation: Inventory turnover=Cost of goods sold/Average inventory investment 2)The second is the amount of money invested in inventory, usually expressed as a percentage of assets, as shown in Equation (11-1) and Example 2: Percentage invested in inventory=(Average inventory investment/Total assets)×100 (11-1) Example 2
What are some roles and decisions that people in operations do and make?
1. Design of goods and services - e.g. product design usually determines lower limits of cost and higher limits of quality, sustainability, and human resources required.
Name and explain the 3 general strategies firms use to compete
1. Differentiation - differentiation should be thought of as going beyond both physical characteristics and service attributes to encompass everything about the product or service that influences the value that the customers derive from it. Therefore, effective operations managers assist in defining everything about a product or service that will influence the potential value to the customer.
What are the four international operations strategies? Name and explain each.
1. Global Strategy - A global strategy has a high degree of centralization, with headquarters coordinating the organization to seek out standardization and learning between plants, thus generating economies of scale. This strategy is appropriate when the strategic focus is cost reduction but has little to recommend it when the demand for local responsiveness is high.
Name and explain the 5 specific strategies for competing that were presented in class. Think of companies that represent these.
1. Low cost - lower cost, better value; 2. Quality (differentiation)- "better" product or service; 3. Flexibility (differentiation/response) - Can "customize" product/service. Can change to meet volume.; 4. Delivery (response) - Faster (from order to customer) always "on time"; 5. Broad product line (differentiation)- "better" product or service than the competition.
Name and explain the 3 general strategies firms use to compete
2. Low-cost leadership - entails achieving maximum value as defined by your customer. It requires examining each of the 10 OM decisions in a relentless effort to drive down costs while meeting customer expectations of value. A low-cost strategy does not imply low value or low quality.
What is a GIS (purpose and use)?
A geographic information system (GIS) stores, accesses, displays, and links demographic information to a geographical location. For instance, retailers, banks, food chains, gas stations, and print shop franchises can all use geographically coded files from a GIS to conduct demographic analyses. By combining population, age, income, traffic flow, and density figures with geography, a retailer can pinpoint the best location for a new store or restaurant. Here are some of the geographic databases available in many GISs: Census data by block, tract, city, county, congressional district, metropolitan area, state, and zip code Maps of every street, highway, bridge, and tunnel in the U.S. Utilities such as electrical, water, and gas lines All rivers, mountains, lakes, and forests All major airports, colleges, and hospitals For example, airlines use GISs to identify airports where ground services are the most effective. This information is then used to help schedule and to decide where to purchase fuel, meals, and other services. Commercial office building developers use GISs in the selection of cities for future construction. Building new office space takes several years; therefore, developers value the database approach that a GIS can offer. GIS is used to analyze factors that influence the location decisions by addressing five elements for each city: (1) residential areas, (2) retail shops, (3) cultural and entertainment centers, (4) crime incidence, and (5) transportation options.
What is the purpose of a tracking signal?
A tracking signal is a measurement of how well a forecast is predicting actual values. As forecasts are updated every week, month, or quarter, the newly available demand data are compared to the forecast values. The tracking signal is computed as the cumulative error divided by the mean absolute deviation (MAD): Tracking signal= Cumulative error/MAD =∑(Actual demand in period i−Forecast demand in period i)/MAD where MAD=∑|Actual−Forecast|/n
Why is the location decision so important?
Firms throughout the world are using specific concepts and techniques to address the location decision because location greatly affects both fixed and variable costs. Location has a major impact on the overall risk and profit of the company.
Explain the triple bottom line. What are the 3 P's?
Firms that do not consider the impact of their decisions on all their stakeholders see reduced sales and profits. Profit maximization is not the only measure of success. A one-dimensional bottom line, profit, will not suffice; the larger socioeconomic systems beyond the firm demand more. One way to think of sustainability is to consider the systems necessary to support the triple bottom line of the three Ps: people, planet, and profit
What are three types of forecasts?
Technological forecasts are concerned with rates of technological progress, which can result in the birth of exciting new products, requiring new plants and equipment.
Name and explain the factors that affect location decisions
Besides globalization, a number of other factors affect the location decision. Among these are labor productivity, foreign exchange, culture, changing attitudes toward the industry, and proximity to markets, suppliers, and competitors. Labor Productivity Employees with poor training, poor education, or poor work habits may not be a good buy even at low wages. By the same token, employees who cannot or will not always reach their places of work are not much good to the organization, even at low wages. (Labor cost per unit is sometimes called the labor content of the product.) Exchange Rates and Currency Risk Although wage rates and productivity may make a country seem economical, unfavorable exchange rates may negate any savings. Sometimes, though, firms can take advantage of a particularly favorable exchange rate by relocating or exporting to a foreign country. However, the values of foreign currencies continually rise and fall in most countries. Such changes could well make what was a good location in 2015 a disastrous one in 2019. Operational hedging describes the situation where firms have excess capacity in multiple countries and then shift production levels from location to location as exchange rates change. Although wage rates and productivity may make a country seem economical, unfavorable exchange rates may negate any savings. Sometimes, though, firms can take advantage of a particularly favorable exchange rate by relocating or exporting to a foreign country. However, the values of foreign currencies continually rise and fall in most countries. Such changes could well make what was a good location in 2015 a disastrous one in 2019. Operational hedging describes the situation where firms have excess capacity in multiple countries and then shift production levels from location to location as exchange rates change. Costs We can divide location costs into two categories, tangible and intangible. Tangible costs are those costs that are readily identifiable and precisely measured. They include utilities, labor, material, taxes, depreciation, and other costs that the accounting department and management can identify. In addition, such costs as transportation of raw materials, transportation of finished goods, and site construction are all factored into the overall cost of a location. Government incentives, as we see in the OM in Action box "Iowa—Home of Corn and Facebook," also affect a location's cost. -Intangible costs are less easily quantified. They include quality of education, public transportation facilities, community attitudes toward the industry and the company, and quality and attitude of prospective employees. They also include quality-of-life variables, such as climate and sports teams, that may influence personnel recruiting. Political Risk, Values, and Culture The political risk associated with national, state, and local governments' attitudes toward private and intellectual property, zoning, pollution, and employment stability may be in flux. Governmental positions at the time a location decision is made may not be lasting ones. However, management may find that these attitudes can be influenced by their own leadership. Proximity to Markets For many firms, locating near customers is extremely important. Particularly, service organizations, like drugstores, restaurants, post offices, or barbers, find that demographics and proximity to market are the primary location factors. Manufacturing firms find it useful to be close to customers when transporting finished goods is expensive or difficult (perhaps because they are bulky, heavy, or fragile). To be near U.S. markets, foreign-owned auto giants such as Mercedes, Honda, Toyota, and Hyundai are building millions of cars each year in the U.S. Proximity to Suppliers Firms locate near their raw materials and suppliers because of (1) perishability, (2) transportation costs, or (3) bulk. Bakeries, dairy plants, and frozen seafood processors deal with perishable raw materials, so they often locate close to suppliers. Companies dependent on inputs of heavy or bulky raw materials (such as steel producers using coal and iron ore) face expensive inbound transportation costs, so transportation costs become a major factor. And goods for which there is a reduction in bulk during production (e.g., trees to lumber) typically need facilities near the raw material. Proximity to Competitors (Clustering) Both manufacturing and service organizations also like to locate, somewhat surprisingly, near competitors. This tendency, called clustering, often occurs when a major resource is found in that region. Such resources include natural resources, information resources, venture capital resources, and talent resources.
What are implications of having or not having "quality" on a business?
Company reputation: An organization can expect its reputation for quality—be it good or bad—to follow it. Quality will show up in perceptions about the firm's new products, employment practices, and supplier relations. Self-promotion is not a substitute for quality products. Product liability: The courts increasingly hold organizations that design, produce, or distribute faulty products or services liable for damages or injuries resulting from their use. Legislation such as the Consumer Product Safety Act sets and enforces product standards by banning products that do not reach those standards. Impure foods that cause illness, nightgowns that burn, tires that fall apart, or auto fuel tanks that explode on impact can all lead to huge legal expenses, large settlements or losses, and terrible publicity. Global implications: In this technological age, quality is an international, as well as OM, concern. For both a company and a country to compete effectively in the global economy, products must meet global quality, design, and price expectations. Inferior products harm a firm's profitability and a nation's balance of payments.
What are three types of forecasts?
Demand forecasts are projections of demand for a company's products or services. Forecasts drive decisions, so managers need immediate and accurate information about real demand. They need demand-driven forecasts, where the focus is on rapidly identifying and tracking customer desires. These forecasts may use recent point-of-sale (POS) data, retailer-generated reports of customer preferences, and any other information that will help to forecast with the most current data possible. Demand-driven forecasts drive a company's production, capacity, and scheduling systems and serve as inputs to financial, marketing, and personnel planning. In addition, the payoff in reduced inventory and obsolescence can be huge.
What are three types of forecasts?
Economic forecasts address the business cycle by predicting inflation rates, money supplies, housing starts, and other planning indicators.
What are the time horizons for forecasting? What techniques are more appropriate for each time frame?
First, intermediate and long-range forecasts deal with more comprehensive issues supporting management decisions regarding planning and products, plants, and processes. Implementing some facility decisions, such as GM's decision to open a new Brazilian manufacturing plant, can take 5 to 8 years from inception to completion. Second, short-term forecasting usually employs different methodologies than longer-term forecasting. Mathematical techniques, such as moving averages, exponential smoothing, and trend extrapolation (all of which we shall examine shortly), are common to short-run projections. Broader, less quantitative methods are useful in predicting such issues as whether a new product, like the optical disk recorder, should be introduced into a company's product line. Finally, as you would expect, short-range forecasts tend to be more accurate than longer-range forecasts. Factors that influence demand change every day. Thus, as the time horizon lengthens, it is likely that forecast accuracy will diminish. It almost goes without saying, then, that sales forecasts must be updated regularly to maintain their value and integrity. After each sales period, forecasts should be reviewed and revised.
Name and explain several differences between goods and services. Describe how these differences change how a company must manage their business.
Goods: Tangible, Product can usually be kept in inventory, Similar products produced, Limited customer involvement in production, Product standardized, Standard tangible product tends to make automation feasible, Product typically produced at a fixed facility, Many aspects of quality for tangible products are easy to evaluate, Product often has some residual value
What are some roles and decisions that people in operations do and make?
Human resources and job design: Determines how to recruit, motivate, and retain personnel with the required talent and skills. People are an integral and expensive part of the total system design.
How do you calculate the forecast error for one period?
If Ft denotes the forecast in period t, and At denotes the actual demand in period t, the forecast error (or deviation) is defined as: Forecast error = Actual demand − Forecast value = At−Ft Several measures are used in practice to calculate the overall forecast error. These measures can be used to compare different forecasting models, as well as to monitor forecasts to ensure they are performing well. Three of the most popular measures are mean absolute deviation (MAD), mean squared error (MSE), and mean absolute percent error (MAPE). We now describe and give an example of each.
As related to forecasting, explain "responsiveness" ? How can you make a forecast more responsive when using: 1) a simple moving average, 2) a weighted moving average, or 3) exponential smoothing? Answer for each method separately.
In terms of forecasting, responsiveness is the ability of a forecast to change as needed to fit demand or trends. 1) simple moving average - serves as an estimate of the next periods demand using historical values, this is a good method if the market is fairly steady and helps to smooth out irregularities by adding in new data from each passing month and removing the first month. 2) weighted moving average - serves as an estimate of the next periods demand using both historical data and weights that put more emphasis on values to account for patterns or trends. 3) exponential smoothing - where α is a weight, or smoothing constant, chosen by the forecaster, that has a value greater than or equal to 0 and less than or equal to 1. The latest estimate of demand is equal to the old forecast adjusted by a fraction of the difference between the last period's actual demand and last period's forecast. Example 3 shows how to use exponential smoothing to derive a forecast.
What are some roles and decisions that people in operations do and make?
Inventory management: Considers inventory ordering and holding decisions and how to optimize them as customer satisfaction, supplier capability, and production schedules are considered.
What are some roles and decisions that people in operations do and make?
Layout strategy: Requires integrating capacity needs, personnel levels, technology, and inventory requirements to determine the efficient flow of materials, people, and information.
How does product design affect sustainability? List several ways, Consider the 3 Rs (not 3 Ps) when answering this questions.
Life cycle assessment evaluates the environmental impact of a product, from raw material and energy inputs all the way to the disposal of the product at its end-of-life. The goal is to make decisions that help reduce the environmental impact of a product throughout its entire life. Focusing on the 3Rs—reduce, reuse, and recycle—can help accomplish this goal. By incorporating the 3Rs, product design teams, process managers, and supply-chain personnel can make great strides toward reducing the environmental impact of products—to the benefit of all stakeholders. Product design is the most critical phase in product life cycle assessment. The decisions that are made during this phase greatly affect materials, quality, cost, processes, related packaging and logistics, and ultimately how the product will be processed when discarded. During design, one of the goals is to incorporate a systems view in the product or service design that lowers the environmental impact. This is the first R. Such an approach reduces waste and energy costs at the supplier, in the logistics system, and for the end user. For instance, by taking a systems view, Procter & Gamble developed Tide Coldwater, a detergent that gets clothes clean with cold water, saving the consumer about three-fourths of the energy used in a typical wash. Product designers often must decide between two or more environmentally friendly design alternatives.This process focuses on the second and third Rs: reuse and recycle. The design team analyzes the amount of revenue that might be reclaimed against the cost of disposing of the product at its end-of-life. Logistics As products move along in the supply chain, managers strive to achieve efficient route and delivery networks, just as they seek to drive down operating cost. Doing so reduces environmental impact. Management analytics (such as linear programming, queuing, and vehicle routing software) help firms worldwide optimize elaborate supply-chain and distribution networks. Networks of container ships, airplanes, trains, and trucks are being analyzed to reduce the number of miles traveled or the number of hours required to make deliveries. End-of-Life Phase We noted earlier that during product design, managers need to consider what happens to a product or its materials after the product reaches its end-of-life stage. Products with less material, with recycled material, or with recyclable materials all contribute to sustainability efforts, reducing the need for the "burn or bury" decision and conserving scarce natural resources. Innovative and sustainability-conscious companies are now designing closed-loop supply chains, also called reverse logistics. Firms can no longer sell a product and then forget about it. They need to design and implement end-of-life systems for the physical return of products that facilitate recycling or reuse.
What are some ways for businesses to design services to be productive ( efficient)?
Limit the Options Because customers may participate in the design of the service (e.g., for a funeral or a hairstyle), design specifications may take the form of everything from a menu (in a restaurant), to a list of options (for a funeral), to a verbal description (a hairstyle). However, by providing a list of options (in the case of the funeral) or a series of photographs (in the case of the hairstyle), ambiguity may be reduced. An early resolution of the product's definition can aid efficiency as well as aid in meeting customer expectations. Delay Customization Design the product so that customization is delayed as late in the process as possible. This is the way a hair salon operates. Although shampoo and condition are done in a standard way with lower-cost labor, the color and styling (customizing) are done last. It is also the way most restaurants operate: How would you like that cooked? Which dressing would you prefer with your salad? Modularization Modularize the service so that customization takes the form of changing modules. This strategy allows for "custom" services to be designed as standard modular entities. Just as modular design allows you to buy a high-fidelity sound system with just the features you want, modular flexibility also lets you buy meals, clothes, and insurance on a mix-and-match (modular) basis. Investments (portfolios of stocks and bonds) and education (college curricula) are examples of how the modular approach can be used to customize a service. Automation Divide the service into small parts, and identify those parts that lend themselves to automation. For instance, by isolating check-cashing activity via ATM, banks have been very effective at designing a product that both increases customer service and reduces costs. Similarly, airlines have moved to ticketless service via kiosks. A technique such as kiosks reduces both costs and lines at airports—thereby increasing customer satisfaction—and providing a win-win "product" design.
What are some roles and decisions that people in operations do and make?
Location strategy: Requires judgments regarding nearness to customers, suppliers, and talent, while considering costs, infrastructure, logistics, and government.
What are some roles and decisions that people in operations do and make?
Maintenance: Requires decisions that consider facility capacity, production demands, and personnel necessary to maintain a reliable and stable process.
What is the importance of forecasting to a firm?
Managers are always trying to make better estimates of what will happen in the future in the face of uncertainty. Making good estimates is the main purpose of forecasting.Effective planning in both the short run and long run depends on a forecast of demand for the company's products.Good forecasts are of critical importance in all aspects of a business: The forecast is the only estimate of demand until actual demand becomes known. Forecasts of demand therefore drive decisions in many areas. Product demand has an impact on three activities: (1) supply-chain management, (2) human resources, and (3) capacity.
What are some roles and decisions that people in operations do and make?
Managing quality: Determines the customer's quality expectations and establishes policies and procedures to identify and achieve that quality.
Explain the concept of the moment of truth in services. So, how can business try to make this "moment" better/positive?
Moment of Truth High customer interaction means that in the service industry there is a moment of truth when the relationship between the provider and the customer is crucial. At that moment, the customer's satisfaction with the service is defined. The moment of truth is the moment that exemplifies, enhances, or detracts from the customer's expectations. That moment may be as simple as a smile from a Starbucks barista or having the checkout clerk focus on you rather than talking over his shoulder to the clerk at the next counter. Moments of truth can occur when you order at McDonald's, get a haircut, or register for college courses. The operations manager's task is to identify moments of truth and design operations that meet or exceed the customer's expectations.
What does a negative value mean, i.e. was the forecast overestimating or underestimating what really occurred?
Negative signals mean that demand is less than forecast. A good tracking signal—that is, one with a low cumulative error—has about as much positive error as it has negative error. In other words, small deviations are okay, but positive and negative errors should balance one another so that the tracking signal centers closely around zero.
Explain the triple bottom line. What are the 3 P's?
People Companies are becoming more aware of how their decisions affect people—not only their employees and customers but also those who live in the communities in which they operate. Most employers want to pay fair wages, offer educational opportunities, and provide a safe and healthy workplace. So do their suppliers. But globalization and the reliance on outsourcing to suppliers around the world complicate the task. This means companies must create policies that guide supplier selection and performance. Sustainability suggests that supplier selection and performance criteria evaluate safety in the work environment, whether living wages are paid, if child labor is used, and whether work hours are excessive. Apple, GE, Procter & Gamble, and Walmart are examples of companies that conduct supplier audits to uncover any harmful or exploitative business practices that are counter to their sustainability goals and objectives. Planet When discussing the subject of sustainability, our planet's environment is the first thing that comes to mind, so it understandably gets the most attention from managers. Operations managers look for ways to reduce the environmental impact of their operations, whether from raw material selection, process innovation, alternative product delivery methods, or disposal of products at their end-of-life. The overarching objective for operations managers is to conserve scarce resources, thereby reducing the negative impact on the environment. Profit Social and environmental sustainability do not exist without economic sustainability. Economic sustainability refers to how companies remain in business. Staying in business requires making investments, and investments require making profits. Though profits may be relatively easy to determine, other measures can also be used to gauge economic sustainability. The alternative measures that point to a successful business include risk profile, intellectual property, employee morale, and company valuation. To support economic sustainability, firms may supplement standard financial accounting and reporting with some version of social accounting. Social accounting can include brand equity, management talent, human capital development and benefits, research and development, productivity, philanthropy, and taxes paid.
Identify the four costs of quality.
Prevention costs: costs associated with reducing the potential for defective parts or services (e.g., training, quality improvement programs). Appraisal costs: costs related to evaluating products, processes, parts, and services (e.g., testing, labs, inspectors). Internal failure costs: costs that result from production of defective parts or services before delivery to customers (e.g., rework, scrap, downtime). External failure costs: costs that occur after delivery of defective parts or services (e.g., rework, returned goods, liabilities, lost goodwill, costs to society).
What are some roles and decisions that people in operations do and make?
Process and capacity strategy: Determines how a good or service is produced (i.e., the process for production) and commits management to specific technology, quality, human resources, and capital investments that determine much of the firm's basic cost structure.
What are the 10 OM decisions?
Product selection and design , Quality, Process, Location, Layout, Human resources, Supply chain, Inventory, Scheduling, Maintenance.
What is productivity? How is it measured?
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources, such as labor and capital). This The use of just one resource input to measure productivity is known as single-factor productivity. However, a broader view of productivity is multifactor productivity, which includes all inputs (e.g., capital, labor, material, energy). Multifactor productivity is also known as total factor productivity. Multifactor productivity is calculated by combining input units.
Why is productivity more difficult to improve for service-dominated businesses than goods-producing firms?
Productivity measurement is particularly difficult in the service sector, where the end product can be hard to define. For example, economic statistics ignore the quality of your haircut, the outcome of a court case, or the service at a retail store. In some cases, adjustments are made for the quality of the product sold but not the quality of the sales presentation or the advantage of a broader product selection. Productivity measurements require specific inputs and outputs, but a free economy is producing worth—what people want—which includes convenience, speed, and safety. Traditional measures of outputs may be a very poor measure of these other measures of worth. Note the quality-measurement problems in a law office, where each case is different, altering the accuracy of the measure "cases per labor-hour" or "cases per employee."
What are some roles and decisions that people in operations do and make?
Scheduling: Determines and implements intermediate- and short-term schedules that effectively and efficiently utilize both personnel and facilities while meeting customer demands.
How would you determined the best smoothing constant (a) to use when trying to develop a forecast method using exponential smoothing?
Selecting the Smoothing Constant - Exponential smoothing has been successfully applied in virtually every type of business. However, the appropriate value of the smoothing constant, α, can make the difference between an accurate forecast and an inaccurate forecast. High values of α are chosen when the underlying average is likely to change. Low values of α are used when the underlying average is fairly stable. In picking a value for the smoothing constant, the objective is to obtain the most accurate forecast.
Name and explain several differences between goods and services. Describe how these differences change how a company must manage their business.
Services: Intangible, Produced and consumed simultaneously, Unique, High customer interaction, Inconsistent product definition, Often knowledge based, Services dispersed, Quality may be hard to evaluate, Reselling is unusual.
What are the time horizons for forecasting? What techniques are more appropriate for each time frame?
Short-range forecast: This forecast has a time span of up to 1 year but is generally less than 3 months. It is used for planning purchasing, job scheduling, workforce levels, job assignments, and production levels. Medium-range forecast: A medium-range, or intermediate, forecast generally spans from 3 months to 3 years. It is useful in sales planning, production planning and budgeting, cash budgeting, and analysis of various operating plans. Long-range forecast: Generally 3 years or more in time span, long-range forecasts are used in planning for new products, capital expenditures, facility location or expansion, and research and development.
Define Supply Chain Management
Supply chain management describes the coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer. Thus, a supply chain includes suppliers; manufacturers and/or service providers; and distributors, wholesalers, and/or retailers who deliver the product and/or service to the final customer. The objective of supply chain management is to structure the supply chain to maximize its competitive advantage and benefits to the ultimate consumer.
What are some roles and decisions that people in operations do and make?
Supply chain management: Decides how to integrate the supply chain into the firm's strategy, including decisions that determine what is to be purchased, from whom, and under what conditions.
What is sustainability?
Sustainability is often associated with corporate social responsibility. The term sustainability refers to meeting the needs of the present without compromising the ability of future generations to meet their needs. Many people who hear of sustainability for the first time think of green products or "going green"—recycling, global warming, and saving rainforests. This is certainly part of it. However, it is more than this. True sustainability involves thinking not only about environmental resources but also about employees, customers, community, and the company's reputation. Three concepts may be helpful as managers consider sustainability decisions: a systems view, the commons, and the triple bottom line.
What is the bullwhip affect?
The bullwhip effect occurs as orders are relayed from retailers, to distributors, to wholesalers, to manufacturers, with fluctuations increasing at each step in the sequence. The "bullwhip" fluctuations in the supply chain increase the costs associated with inventory, transportation, shipping, and receiving, while decreasing customer service and profitability.
State the strategic importance of location
The objective of location strategy is to maximize the benefit of location to the firm.
Define Quality
The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs.
Concisely define and describe Total Quality Management. What are the important concepts/elements that make up a TQM program (briefly explain each)?
Total quality management (TQM) refers to a quality emphasis that encompasses the entire organization, from supplier to customer. TQM stresses a commitment by management to have a continuing companywide drive toward excellence in all aspects of products and services that are important to the customer.
Name and explain four components of time series data. How would you identify these given a set of historical data?
Trend is the gradual upward or downward movement of the data over time. Changes in income, population, age distribution, or cultural views may account for movement in trend. Seasonality is a data pattern that repeats itself after a period of days, weeks, months, or quarters. There are six common seasonality patterns: Cycles are patterns in the data that occur every several years. They are usually tied into the business cycle and are of major importance in short-term business analysis and planning. Predicting business cycles is difficult because they may be affected by political events or by international turmoil. Random variations are "blips" in the data caused by chance and unusual situations. They follow no discernible pattern, so they cannot be predicted.
What is the difference between time series and associative forecasting models? What is the associative forecasting technique suggested in the text?
Unlike time-series forecasting, associative forecasting models usually consider several variables that are related to the quantity being predicted. Once these related variables have been found, a statistical model is built and used to forecast the item of interest. This approach is more powerful than the time-series methods that use only the historical values for the forecast variable. The most common quantitative associative forecasting model is linear-regression analysis.
What is the main strategy for location of services? What factors are given consideration in the location for a service business?
While the focus in industrial-sector location analysis is on minimizing cost, the focus in the service sector is on maximizing revenue. This is because manufacturing firms find that costs tend to vary substantially among locations, while service firms find that location often has more impact on revenue than cost. Therefore, the location focus for service firms should be on determining the volume of customers and revenue. There are eight major determinants of volume and revenue for the service firm: 1. Purchasing power of the customer-drawing area 2. Service and image compatibility with demographics of the customer-drawing area 3. Competition in the area 4. Quality of the competition 5. Uniqueness of the firm's and competitors' locations 6. Physical qualities of facilities and neighboring businesses 7. Operating policies of the firm 8. Quality of management
Why is SCM important to a business?
a huge part of a firm's revenue is typically spent on purchases, so supply chains are a good place to look for savings. Example 1 further illustrates the amount of leverage available to the operations manager through the supply chain. These percentages indicate the strong role that supply chains play in potential profitability. Effective cost cutting may help a firm reach its profit goals more easily than would an increased sales effort. As firms strive to increase their competitiveness via product customization, high quality, cost reductions, and speed to market, added emphasis is placed on the supply chain. Through long-term strategic relationships, suppliers become "partners" as they contribute to competitive advantage. To ensure that the supply chain supports a firm's strategy, managers need to consider the supply chain issues shown in Table 11.2. Activities of supply chain managers cut across the accounting, finance, marketing, and operations disciplines. Just as the OM function supports the firm's overall strategy, the supply chain must support the OM strategy. Strategies of low cost or rapid response demand different things from a supply chain than a strategy of differentiation. For instance, a low-cost strategy, as Table 11.2 indicates, requires suppliers be selected based primarily on cost. Such suppliers should have the ability to design low-cost products that meet the functional requirements, minimize inventory, and drive down lead times. However, if you want roses that are fresh, build a supply chain that focuses on response
• How does an operations manager play a role in service quality (see text pp. 225-226 AND consider the 5 dimensions of service quality)?
o Employee training o Employee appearance o Restaurant cleanliness o Inventory management o Effective scheduling
Explain each of David Garvin's 8 dimensions of product quality. Think of a product and explain how each of these dimensions applies to that product.
o Performance: Refers to a product's primary operating characteristics. This dimension of quality involves measurable attributes; brands can usually be ranked objectively on individual aspects of performance o Features: Features are additional characteristics that enhance the appeal of the product or service to the user o Reliability: Is the likelihood that a product will not fail within a specific time period. This is a key element for users who need the product to work without fail. o Conformance: The precision with which the product or service meets the specified standards o Durability: Measures the length of a product's life. When the product can be repaired, estimating durability is more complicated. The item will be used until it is no longer economical to operate it. This happens when the repair rate and the associated costs increase significantly o Serviceability: Is the speed with which the product can be put into service when it breaks down, as well as the competence and the behavior of the serviceperson. o Aesthetics: is the subjective dimension indicating the kind of response a user has to a product. It represents the individual's personal preference. o Perceived Quality: Is the quality attributed to a good or service based on indirect measures.
• What are the 5 dimensions of service quality per PZB? Explain each.
o Tangibles The tangible Service Quality Dimension refers to the appearance of the physical surroundings and facilities, equipment, personnel and the way of communication. In other words, the tangible dimension is about creating first hand impressions. A company should want all their customers to get a unique positive and never forgetting first hand impression, this would make them more likely to return in the future. o Reliability The reliability Service Quality Dimension refers to how the company are performing and completing their promised service, quality and accuracy within the given set requirements between the company and the customer. Reliability is just as important as a good first hand impression, because every customer want to know if their supplier is reliable and fulfill the set requirements with satisfaction. o Responsiveness The responsiveness Service Quality Dimension refers to the willingness of the company to help its customers in providing them with a good, quality and fast service. This is also a very important dimension, because every customer feels more valued if they get the best possible quality in the service. o Assurance The assurance Service Quality Dimension refers to the company's employees. Are the employees skilled workers which are able to gain the trust and confidence of the customers? If the customers are not comfortable with the employees, there are a rather large chance that the customers will not return to do further business with the company. o Empathy The empathy Service Quality Dimension refers to how the company cares and gives individualized attention to their customers, to make the customers feeling extra valued and special. The fifth dimension are actually combining the second, third and fourth dimension to a higher level, even though the really cannot be compared as individuals. If the customers feel they get individualized and quality attention there is a very big chance that they will return to the company and do business, there again. o Be able to give an example of each or to explain each in context of a commonly used service that I give you.
