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Operations and Supply Chain Management (OSCM)
The design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.
Process
One or more activities that transform inputs into outputs.
Planning, sourcing, making, delivering, and returning.
Planning
The processes needed to operate an existing supply chain strategically. Here a firm must determine how anticipated demand will be met with available resources.
Sourcing
Involves the selection of suppliers that will deliver the goods and services needed to create the firm’s product.
Making
Is where the major product is produced or the service provided.
Delivering
Move products to warehouses and customers.
Returning
Processes for receiving worn-out, defective, and excess products back from customers and support for customers who have problems with delivered products.
Service
Is an intangible process that cannot be weighed or measured.
The Goods–Services Continuum
Pure Goods (IFood products, Chemicals, Mining)
Core Goods (Appliances, Automobiles, Data storage systems)
Core Services (Hotels, Airlines, Internet service providers)
Pure Services (University, Medical, Investment)
Product–service bundling
When a firm builds service activities into its product offerings to create additional value for the customer.
Manufacturing strategy
Emphasizes how a factory’s capabilities could be used strategically to gain advantage over a competing company.
Just-in-time (JIT)
An integrated set of activities designed to achieve high-volume production using minimal inventories of parts that arrive exactly when they are needed.
Total quality control (TQC)
Aggressively seeks to eliminate causes of production defects.
Lean manufacturing
To achieve high customer service with minimum levels of inventory investment. An approach that combines TQM and JIT.
Total quality management (TQM)
Managing the entire organization so it excels in all dimensions of products and services important to the customer.
Business process reengineering (BPR)
An approach to improving business processes that seeks to make revolutionary changes as opposed to evolutionary (small) changes.
Six Sigma
A statistical term to describe the quality goal of no more than 3.4 defects out of every million units. Also refers to a quality improvement philosophy and program.
Mass customization
The ability to produce a unique product exactly to a particular customer’s requirements.
Electronic commerce
The use of the Internet as an essential element of business activity.
Sustainability
The ability to meet current resource needs without compromising the ability of future generations to meet their needs.
Triple bottom line
A business strategy that includes social, economic, and environmental criteria.
Business analytics
The use of current business data to solve business problems using mathematical analysis.
Efficiency
A ratio of the actual output of a process relative to some standard. Also, being “efficient” means doing something at the lowest possible cost.
Effectiveness
Doing the things that will create the most value for the customer.
Value
The attractiveness of a product relative to its price.
Benchmarking
When one company studies the processes of another company to identify best practices.
Contract manufacturer
An organization that performs manufacturing and/or purchasing needed to produce a product or device not for itself, but as a service to another firm.
Core competency
The one thing that a firm can do better than its competitors. The goal is to have a core competency that yields a long-term competitive advantage to the company
Concurrent engineering
Emphasizes crossfunctional integration and concurrent development of a product and its associated processes.
Quality function deployment (QFD)
A process that helps a company determine the product characteristics important to the consumer and to evaluate its own product in relation to others.
House of quality
A matrix that helps a product design team translate customer requirements into operating and engineering goals.
Value analysis/value engineering (VA/VE)
Analysis with the purpose of simplifying products and processes by achieving equivalent or better performance at a lower cost.
Design for Manufacturing and Assembly (DFMA)
A is oriented toward the engineering of the product with an emphasis on reducing production cost. The greatest improvements from this arise from simplification of the product by reducing the number of separate parts.
Ecodesign
The incorporation of environmental considerations into the design and development of products or services. These concerns relate to the entire life cycle, including materials, manufacturing, distribution, and the eventual disposal of waste.
Time-to-market
A measure of product development success. There are two measures here: the frequency of new product introductions, and the time from initial concept to market introduction.
Productivity
A measure of how well resources are used. According to Goldratt’s definition, all the actions that bring a company closer to its goals.
Quality
Is the degree to which a product or service meets customer expectations, performs as intended, and is free from defects, ensuring consistent and efficient performance.
Conformance quality
The degree to which the product or service design specifications are met.
Design quality
The inherent value of the product in the marketplace.
Defects per million opportunities (DPMO)
A metric used to describe the variability of a process.
Strategic capacity planning
Finding the overall capacity level of capital-intensive resources to best support the firm’s long-term strategy.
Capacity
The output that a system is capable of achieving over a period of time.
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.
Capacity utilization rate
Measure of how close the firm’s current output rate is to its best operating level (percent).
Economies of scale
Idea that as the plant gets larger and volume increases, the average cost per unit drops. At some point, the plant gets too large and cost per unit increases.
Focused factory
A facility designed around a limited set of production objectives. Typically, the focus would relate to a specific product or product group.
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.
Capacity Flexibility
Having the ability to rapidly increase or decrease production levels, or to shift production capacity quickly from one product or service to another.
Economies of scope
When multiple products can be produced at lower cost in combination than they can be separately.
Flexible Workers
Workers that have multiple skills and the ability to switch easily from one kind of task to another.
Capacity cushion
Capacity in excess of expected demand.
Decision tree
Is a schematic model of the sequence of steps in a problem and the conditions and consequences of each step.
Arrival rate
Refers to the average number of customers that come to a facility during a specific period of time.
Service rate
Is the average number of customers that can be processed over the same period of time when the facility is operating at maximum capacity.
Learning curve
A line displaying the relationship between unit production time and the cumulative number of units produced.
Individual learning
Improvement that results when people repeat a process and gain skill or efficiency from their own experience.
Organizational learning
Improvement that comes both from experience and from changes in administration, equipment, and product design.
Straight line
The resulting plot of a learning curve when logarithmic scales are used.
Highly automated systems
Systems that have this characteristic usually have near-zero learning.
Cycle time
The average time between completions of successive units in a process (this is the definition used in this book).
Utilization
The ratio of the time that a resource is actually activated relative to the time that it is available for use.
Buffer
A storage area between stages where the output of a stage is placed prior to being used in a downstream stage.
Blocking
The activities in the stage must stop because there is no place to deposit the item just completed.
Starving
The activities in a stage must stop because there is no work.
Bottleneck
A resource that limits the capacity or maximum output of the process.
Make-to-order
A production environment where the product is built directly from raw materials and components in response to a specific customer order.
Make-to-stock
A production environment where the customer is served "on-demand" from finished goods inventory.
Hybrid
Combines the features of both make-to-order and make-to-stock.
Pacing
Movement of items through a process is coordinated through a timing mechanism.
Run time
The time required to produce a batch of parts.
Setup time
The time required to prepare a machine to make a particular item.
Operation time
The sum of the setup time and run time for a batch of parts that are run on a machine.
Flow time
The average time it takes a unit to move through an entire process.
Throughput rate
The output rate that the process is expected to produce over a period of time.
Process velocity (throughput ratio)
The ratio of the valueadded time to the flow time.
Value-added time
The time in which useful work is actually being done on the unit.
Total average value of inventory
The total average investment in raw material, work-in-process, and finished goods inventory.
Inventory turn
A measure of the expected number of times inventory is replaced over a year.
Days-of-supply
The number of days of inventory of an item.
Little’s law
States a mathematical relationship between throughput rate, flow time, and the amount of work-in process inventory.
Job design
Specification of the work activities of an individual or group.
Specialization of labor
Simple, repetitive jobs are assigned to each worker.
Job enrichment
Specialized work is made more interesting by giving the worker a greater variety of tasks.
Work measurement
Setting time standards for a job.
Lead time
The time needed to respond to a customer order.
Customer order decoupling point
Where inventory is positioned in the supply chain.
Assemble-to-order
A production environment where preassembled components, subassemblies, and modules are put together in response to a specific customer order.
Engineer-to-order
Here the firm works with the customer to design the product, which is then made from purchased material, parts, and components.
Project layout
A setup in which the product remains at one location, and equipment is moved to the product.
Workcenter
Often referred to as a job shop, a process structure suited for low-volume production of a great variety of nonstandard products. Workcenters sometimes are referred to as departments and are focused on a particular type of operation
Manufacturing cell
Dedicated area where a group of similar products are produced.
Assembly line
A setup in which an item is produced through a fixed sequence of workstations, designed to achieve a specific production rate.
Continuous process
A process that converts raw materials into finished product in one contiguous process.
Product–process matrix
A framework depicting when the different production process types are typically used, depending on product volume and how standardized the product is.
