Operations Management Exam 1

bill of materials threshold

Minimum acceptable is 98% accuracy

Appropriation requests

Most companies have a formal capital planning format to seek approval of a project investment

Business plan metric

Only one that can go over, goal is accuracy

Planning and execution ratio

Operations is 80% planning and 20% execution

Operations and coordination

Operations is coordinating things to happen when they need to, parts in pieces need to be in the right place at the right time and you need to plan all of it

External sources of operations and supply capacity

Outsourcing Sharing capacity Temporary workers

Most important aspect of operations

PLANNING

Decoupling point

Point in the process where inventory is buffered to allow variation in the next process

Inventory risks mitigation

Pool inventory, safety stock

Profitability indicator

Poor operational performance metric

Porter's 5 Forces

Potential new entrants, buyer power, supplier power, threat of substitutes, rivalry

Competitive dimensions

(1) cost or price (2) quality (3) delivery speed (4) delivery reliability (5) coping with changes in demand (6) flexibility and new-product introduction speed

Service capacity

- Capacity must be available when service is needed - cannot be stored - Service must be available at customer demand point - Much higher volatility is typical

Maturity

-ATO and MTS -peak sales -cost per customer lowest -profits high -mass market -stable number of competitors

Speed

-Ability to deliver services or products quickly -capability to react to changes in customer needs or dates

Order winners

-Attributes that differentiate a company's products -ex: fuel efficiency in a car, or leather seats in a car

Manufacturing in most supply chains examples

-CPA firms: forms and office equipment -service repair firms: products and parts -restaurants: appliances and food processing and packaging

SCOR model- Deliver

-Describes the activities associated with the creation, maintenance, and fulfillment of customer orders -includes receiving, validating, and creating customer orders, scheduling order deliveries, picking, packing, and shipping, and invoicing customers

ERP concepts

-ERP is not just a computer system to manage a company -it is a process of planning and execution involving integrated functions within the business -the ERP computer system is a tool to more easily accomplish the erp system integration

Introduction

-ETO -low sales -high cost per customer -financial losses -innovative customers -few competitors

Risk management program

-Firms operations should have a risk management program that can anticipate variation -should work closely with their suppliers to safeguard their supply chains against future supply chain failures

Main tools beyond market insight

-Flexibility and responsiveness (speed) -buffer capacity for agility -buffer inventory for responsiveness

IoT

-Internet of Things -often associated with industry 4.0 -looks at processes, data analysis, people interaction and decision making

Capital budget

-Is about prioritizing projects to accomplish the overall planning process of the company -determine whether investments such as new machinery etc are worth investing in -annual process

Growth

-MTO -increasing sales -cost per customer falls -profits rise -increasing number of customers -more competitors

Decline

-MTO and ETO -falling sales -cost per customer low -profits fall -customer base contracts -number of competitors fall

Barometric measures

-Metrics that are the same in every business -should never go away

Hoshin Kanri strategic planning

-Mission to senior management to middle management to workers -emphasis on feedback loop, employee involvement, regular reviews, doable goals

The functional fields of business are

-Operations and Supply Chain Management -Marketing -Finance -Sales

Goods and service continuum

-Products are typically neither purely service- or purely goods-based -goods and services exist on a spectrum where some percentage is a good and some percentage is a service

SCOR model- source

-Sourcing is the process of identifying the suppliers that provide the materials and services needed for the supply chain to deliver the finished product(s) desired by the customer(s). -This phase involves not only identifying reliable suppliers but also building a strong relationship with those suppliers. -Supply chain managers must also develop pricing, shipping, delivery, and payment processes with suppliers and create metrics for monitoring and improving the performance

Decision tree

-a schematic model of the sequence of steps in a problem and the conditions and consequences of each step -help analysts understand the problem and assist in identifying the best solution

KPI for operational strategy

-accuracy of cost per plan facility -accuracy of revenue plan per facility and overall -accuracy of profit plan

Inventory strategy

-all manufacturers have demand differences in units offered -strategy to build and hold inventory in these categories is key

Production planning metric

-capacity (build rates) by product family

Rules for determining product families

-common constraint in the process such as product line -common components -common manufacturing or inventory strategy -product types -product characteristics -product size -product volume (huge ones can be a family of its own, smaller volume can be combined) -market segment -distribution channel -customer

Planning hierarchy

-company -markets -product families -product

Natural disaster risk mitigation strategy

-contingency planning -alternate sites -insurance -dual vs single sourcing in different regions

Blockchain effects on the supply chain

-creating smarter and safer food system -increased supply chain transparency -streamlined supplier on boarding -container logistics (building trust between partners through verification and visibility) -supplier management (digital identity verification)

Relationship between service capacity utilization and service quality

-critical and directly linked -service requires a lower capacity utilization plan to assure higher levels of service

Level 1 of SCOR

-defining scope -geographies, segments, context

Two main sides to business

-demand -fulfillment

Operations management planning includes

-demand planning and production planning feeding into master production scheduling -MPS feeds into materials planning -data accuracy

SCOR model- plan

-describe the activities associated with developing plans to operate the supply chain -determining requirements, gathering info about available resources, balancing requirements and resources to plan for gaps in demand or resources, and actions to correct gaps

SCOR model- Enable

-describe the activities associated with the management of the supply chain -includes business rules management, performance management, data management, resource management, facilities management, contract management etc

SCOR model- Return

-describes the activities associated with the reverse flow of goods -identifying items that need to be returned, deciding on the proper method of disposition, scheduling the return, and shipping and receiving returned goods -repair, recycling, and refurbishment and remanufacturing are not included in returns (Make)

Product families graph

-detail and accuracy intersect -middle is target which is product family

Timeline of SCOR

-developed by consulting firm -endorsed by supply chain counsel -supply chain counsel acquired by APICS -APICS is now a part of ASCM

Operations management

-everything you brought to class this morning was managed by operations management -involved in every business you have will work in during your career -even personal life: planning and scheduling, education, vacations, careers

Supply chain flows

-flows represent the direction and purposes of process sequences -supply chain management includes both directions (up and down stream)

Enable hierarchy

-for each level 1 process, there is often 2 or three more differentiating level 2 processes supporting it -each level 2 process contains level 3 process elements -these hierarchical relationships provide process classification

Demand planning metric

-forecasted bookings by product family -accuracy of each product family forecast -should be posted for all employees to see -reviewed at S&OP meeting

High performance requires 2 things

-good plan -good execution

Product families

-groups of products that have similar processing requirements -general recommendation is to manage the product families to a total of 6-12 families per S&OP process -all products within a product family must be stated in the same unit of measure

Blue Ocean Strategy

-highly competitive markets are known as red oceans -companies are encouraged to reinvent their markets by creating a blue ocean strategy where new elements of competitive advantage are introduced into existing markets

Implementing an ERP system

-huge undertaking -culture, process design, discipline, and accountability is required

Theory of constraints- resolving

-identify the most pressing constraint (could be internal or external) -change the operation to achieve maximum benefit (exploit) -make sure the other portions of the process are supportive of the constraint (place buffers at the beginning, at the constraint, and at finished goods) -explore and evaluate ways to overcome the constraint (increase capacity by investment of supplementing) -repeat until constraint levels are acceptable

4 life cycle stages of product

-introduction -growth -maturity -decline

Optimal levels of utilization

-low rates are appropriate when degree of uncertainty is high or stakes are high -higher rates are possible for predictable services or those without extensive customer contact

4 types of businesses

-low volume high margin (Michael kors) -low volume low margin -high volume high margin (apple, Tesla) -high volume low margin (Walmart, Amazon)

Shop floor metric

-manufactured parts completed on time -percent of work orders completed on the day scheduled -first time quality

Categories of constraints

-market -resource -material -financial -knowledge -policy

Product Flows in the Supply Chain

-materials -flows downstream -can go in both directions in terms of returns

Materials planning metric

-materials ordered on time, manufactured and purchased -percent of purchase orders left with less than full lead time -percent of assembly pick sheets picked complete on time

Operations execution includes

-materials planning feeds into procurement process and shop floor process, which feed into logistics, distribution, and customer service -procurement process leads to supply chain management

Diagnostic measures

-metrics that change as problem solving evolves -when these measures show good performance and the process is trusted, these can go away

Order qualifiers

-necessary attributes that allow a firm to enter into and compete in a market; a firm's strategy must account for these necessities -quality is generally an order qualifier in today's markets: if you don't have it, you don't get to play the game -ex: kia motors had to increase safety standards to compete in markets

Why product families

-not unusual to have a million SKUs in a business -top management is not going to want to spend time regularly reviewing every SKU -includes final assemblies, subassemblies, fabrications, purchased components, and raw materials

Success depends on

-operations related strategy -processes to deliver products and services (making sure the capacity and materials are available) -analytics to support the decisions needed

ERP excellence

-overall performance -top management planning -operations management planning -data accuracy -execution of plans -management of human capital

Data accuracy metric

-percent of accurate data compared to amount of data sampled

Customer service measurements

-percentage of complete orders shipped on the original promise date -percentage of orders shipped on the customer requested date -percentage of stocked orders shipping within 24 hours from receipt of order -percentage of orders shipped complete -percentage of retention of customers year to year -percentage of sales returned to store or business -warrantee as a percentage of sales

Each of 6 areas of ERP excellence must show

-process design (does the process resemble a process to accomplish the company's goals?) -accountability infrastructure (if the process design is reasonable, is there a management system to drive discipline and accountability to the goals) -performance (are metrics in place and are they at or near performance goals)

Level 3 of SCOR

-process element details -identifies key business activities within the chain

Operations and supply chain management involves specialists in

-product and process design -purchasing -manufacturing and subcontract -service operations (food and cleaning service) -logistics -distribution

Procurement metric

-purchased parts received on time -percent of purchase orders received on day required -percent of suppliers certified

Industry 4.0

-started with a German focus on system integration using more automation from evolving technologies -industrial revolution -mass production -computers and automation -systems integration

Fulfillment or supply

-taking care of customer needs -operations and supply chain management -finance and accounting are for managing funding, cost data and score keeping -engineering sustains innovation and new products and services

Sustainability

-the ability to meet current resource needs without compromising the ability of future generations to meet their needs -means really doing something to assure future generations will have resources, not just marketing hype

What is operations and supply chain management

-the design, operation, and improvement of the systems that create and deliver the firm's primary products and services

Supply chain risk

-the likelihood of a disruption that would impact the ability of a company to continuously supply products or services

SCOR model- make

-the series of operations performed to convert materials into a finished product -finished product is manufactured, tested, packaged, and scheduled for delivery -quality management is an important aspect of the manufacturing process -this is the most metric-intensive portion of the supply chain where companies are able to measure quality levels, production output, and worker productivity

Variation in operations management

-there is an enormous amount of variation in operations management -customer demand variation, competition and associated variation, technology and associated variation -manufacturing and service process variation

Master scheduling metric

-weekly SKU level schedule accuracy by product line

SCOR and Enable cont

-when conducting a SCOR project, SCOR users may decide to move some lower level processes into other process sections -SCOR can serve as a flexible and customizable model that can be applied to multiple industries and situations, so the framework process locations are not rigid -if processes are moved, SCOR users should be careful not to duplicate processes

Vilfredo Pareto 80/20

20% of the inventory produce 80% of the profits, while 80% of the inventory produces only 20% of the profits

Inventory accuracy metric

Accuracy of system perpetual inventory location balances compared to actual inventory location balances

Detailed capacity planning

Also called CRP (Capacity Requirements Planning) - short range - usually less than 2 months - gets very inaccurate quickly as the horizon increases

What factors can cause higher cost

Also high inventory or very flexible capacity

Plant within a plant (PWP)

An area in a larger facility that is dedicated to a specific production objective (for example, product group). This can be used to operationalize the focused factory concept.

Top management planning includes

Business objectives, which go into demand planninf and production planning

Social Responsibility

Business practices should be fair to labor, community, and the region where the firm conducts business

Major quality failure mitigation

Careful selection and monitoring of suppliers

Monetary Flows in the Supply Chain

Cash generally flows from customers to suppliers, the exception is refunds

Uncertainty in the environment

Causes supply chain planners to evaluate the relative riskiness of their operations and strategies

drum-buffer-rope (DBR)

Central principle of bottleneck scheduling, evoking the bottleneck (drum) ideally protected by a buffer of waiting work produced by upstream work centers whose activities are constrained to the bottleneck's pace (rope).

Flexibility and New-Product Introduction Speed

Change it (offer a wide variety of existing products and introduce new products quickly)

Coping with changes in demand

Change its volume, scalability

Level 2 of SCOR

Configuration of the supply chain

Value add

Conversion to salable goods and or services

What is the second most important operational performance metric in business

Cost

Frequency of Capacity Additions

Cost of upgrading too frequently or infrequently

Demand

Customer needs, sales and marketing

What is the most important operational performance measure in business

Customer service

Single sourcing

Decision to buy from only one supplier

Delivery reliability

Deliver it when promised, delivery fidelity

Reality of capacity planning

Demonstrated or actual capacity is generally the capacity to be used in current planning for rough cut capacity planning unless some action is taken *what the actual output has been is what reality is*

Firms sustainability stragegh

Describes how it will create and sustain value for its current shareholders

What does ERP stand for

Enterprise Resource Planning

Flexible processes

Flexible manufacturing systems Simple, easily set up equipment

Focused factory

Focused on a product or process, not many different products or processes

Output

Goods and or services

Manufacturing capacity

Goods can be stored for later use Goods can be shipped to other locations Volatility of demand is relatively low

Country risks mitigation strategy

Hedge currency, produce or source locally

What factors can support high customer service

High inventory or very flexible capacity

Demonstrated Capacity

How much actual capacity that has been demonstrated recently

economies of scale

Idea that as the plant gets larger and volume increases, the average cost per unit drops

Customer Relationship Management (CRM)

Improving customer relations through the use of data

Measuring capacity

In units that do not require updating

Quality of life

Influenced by economic power

Wealth creation

Input to value-add to output (where output is more than the sum of the resources)

Theft and vandalism mitigation

Insurance, security precautions, knowledge of likely risks

Resource capacity planning

Intermediate or medium range - done at S&OP level at least 12-rolling months

Rough cut capacity planning

Intermediate range with emphasis on current constraints, done at MPS level same horizon as S&OP *focus is on theory of constraints*

What are metrics also referred to as

KPIs, or key performance indicators

Strategic capacity planning

Long range

Corporate strategy

Long term direction of the company

Quality

Make a great product or deliver a great service (options are discretionary and features must choose one)

Cost or price

Make the product or deliver the service at the appropriate cost or price

Processes to Support Objectives/Imperatives

Process design with capability to achieve the objectives (for example growth or speed)

Sole sourcing

Product only available from one place

Productivity and economic power

Productivity builds economic power

Flexibility

Quick response to short term changes in demand or supply

Input

Raw materials, capital, resources

logistics failure mitigation strategy

Safety stock, detailed tracking, alternate suppliers

Loss of customers mitigation

Service or product innovation

System balance

Similar capacities at each operation are desired Manage bottleneck operations

Examples of low level processes

Sourcing, delivery, procurement

SKU

Stock Keeping Unit = unique identification number that defines an item for ordering or inventory purposes.

Upstream to downstream supply chain flows

Suppliers -> manufacturers -> wholesalers -> consumers

Other Product-Specific Criteria

Support it (technical assistance, meeting launch dates, after-sale support, environmental impact)

Network provider failures mitigation

Support of redundant digital networks

Business imperatives

Tactical objectives that MUST BE DONE in the next 12 months for competitive advantage

Information flows in the supply chain

Technical data, ideas, schedules, and communication move both upstream (towards supplier) and downstream (toward customer)

Frequency of Capacity Reductions

Temporary reductions Permanent reductions

Best operating level

The level of capacity for which the process was designed and the volume of output at which average unit cost is minimized.

Theoretical capacity

The maximum output capability an operation, process, or facility is designed for

First time quality

The percentage of an operation or process that is completed correctly first time with no adjustments

Goal of sustainability meaning

The scope of the firms strategy must focus on three areas: social responsibility, economic prosperity, and environmental stewardship

Effective capacity

Theoretical capacity minus allowances such as personal time and maintenance

Goal of Strategic Capacity Planning

To achieve a match between the long-term supply capabilities of an organization and the predicted level of long-term demand

DHS Version of Hierarchical Planning

Top to bottom -mission -goals -strategic planning and financial plans -business imperatives -operations objectives -core processes to support direction

Triple bottom line

Triangle between economic prosperity (stakeholder value), social responsibility (community value), and environmental stewardship (earth value)

Dual sourcing

Two sources

Multiple sourcing

Typically commodity product

Regulatory risk mitigation

Up front and continuing research, good legal advice, compliance

One of the most important management systems in the high performance business model

Weekly performance review *critical for good process and results*

Goal of flexible plants

Zero changeover time

SCOR Model

a framework that focuses on a basic supply chain of plan, source, make, deliver, and return processes, repeated again and again along the supply chain

capacity utilization rate

a measure of how close the firm is to its best possible operating level

ATO

assemble to order, subassemblies

Supply chain coordination risk

associated with the day to day management of the supply chain

diseconomies of scale

at some point, the plant becomes too large and average cost per unit begins to increase

Disruption risks

caused by natural or manmade disasters

Decision tree components

decision nodes (squares), chance events (circles), branches (links between nodes)

ETO

engineer to order, engineering knowledge and resource

long range capacity planning

greater than one year, 3-5 years

Shareholders

individuals or organizations that own one or more shares of stock in a public company

Stakeholders

individuals or organizations who are directly or indirectly influenced by the actions of the firm

short range capacity planning

less than one month or so

Delivery speed

make the product or deliver the service quickly, short customer lead time

MTO

make-to-order, key components and raw materials

MTS

make-to-stock, finished goods

Intermediate range capacity planning

monthly or quarterly plans for the next 6 to 18 months (best to have 12 rolling)

Flexible workers

multiple skills and have the ability to switch easily from one kind of task to another

Supplier failures Risk Mitigation Strategy

multiple suppliers

Commodity price risks mitigation

multisource, commodity hedging

Over capacity

operating costs that are too high

SCOR Model steps

plan, source, make, deliver, return, enable

Economic prosperity

shareholders must be compensated via a competitive return

Constraint

something that limits the performance of a process or system in achieving its goals

Under capacity

strained resources and possible loss of customers

Capacity flexibility

the ability to rapidly increase or decrease product levels or the ability to shift rapidly from one product or service to another

Environmental stewardship

the company should protect the environment as much as possible, and protect environmental resources for future generations

Capacity focus

the idea that a production facility works best when it is concentrated on a limited set of production objectives

What is OSCM concerned with?

the management of the entire production/service delivery system

Balanced Scorecard

vision and strategy is circled by financial, customer, learning and growth, and internal business processes

operations objectives

yearly objectives to support the Business Imperatives and longer term Strategy