Chapters on Product Development, Inventory, and SCM

Product Development

how quickly (thus how frequently) a company introduces its products to markets. Differs from Ops. Management by making PD processes organized, effective, efficient, comparative and profitable.

Product Decision

the objective of the product decision is to develop and implement a product strategy that meets the requirements of the marketplace with a competitive advantage.

Service Design

service typically includes direct interaction with the customer. Cost and quality are still determined at the design stage.

Product Life Cycle

May be any length from a few hours to decades.

Life Cycle Strategy

Customers are bored by old products (shape, color, size, feature, technology) and competition.

Opportunities in Product Development

Understanding the customer, Economic change, Sociological and demographic change, Technological change, Political/legal change.

Value Analysis

helps management evaluate alternative strategies by looking at highest annual contribution.

Organizing for Product Development

Department - distinct groups; Champion - driven by director who controls everything; Team - Cross functional - representatives from all disciplines, most popular; Japan - 'whole organization' approach - no division.

Time-based Competition

Developing new products faster can result in a competitive advantage.

Product Development Continuum

Includes External Development (Alliances, Joint ventures, merger & acquisition) and Internal Development (Migrations of existing products, Enhancements to existing products, New internally developed products).

Service Efficiency vs. Customer Interaction

Service Design - Designing more efficient services (Increased opportunity for customization, Reduced productivity, Delay customization, Modularization, Reduce customer interaction).

Moments of Truth

Critical moments between the customer and the organization that determine customer satisfaction; opportunities to gain or lose business.

Inventory Management Overview

Originally intended to be a 'virtual' retailer with no inventory, no warehouses, no overhead; growth has forced Amazon.com to become a world leader in warehousing and inventory management.

Basic Economic Order Quantity (EOQ) Model

an inventory-control technique that minimizes the total of ordering and holding costs.

Objective of Inventory Models

To minimize total costs.

Setup Cost

The cost incurred to prepare a machine or process for manufacturing an order.

Holding Cost

The costs of holding or 'carrying' inventory over time, generally greater than 15%, with some high-tech items having costs greater than 40%.

EOQ Model

Answers the 'how much' question in inventory management.

Reorder Point (ROP)

Indicates 'when' to order inventory.

Safety Stock (SS)

Involves adding a number of units as a buffer to the reorder point, depending on the cost of stockouts and the cost of holding extra inventory.

Importance of Inventory

Operations managers must balance inventory cost (investment) and customer service, as inventory can represent as much as 50% of total invested capital.

Types of Inventories

Includes raw material, work-in-process, maintenance/repair/operating (MRO), and finished goods.

Class A Inventory

High annual dollar volume inventory.

Class B Inventory

Medium annual dollar volume inventory.

Class C Inventory

Low annual dollar volume inventory.

Inventory Management Policies

May include more emphasis on supplier development for A items, tighter physical inventory control for A items, and more care in forecasting A items.

Definition of Supply Chain Management (SCM)

The integration of activities that procure materials and services, transform them into intermediate goods and final products, and deliver them through a distribution system to end customers.

SCM Strategic Importance

The objective is to build a chain of suppliers that maximizes value to the ultimate customer in terms of price and quality.

Competitive Advantage in SCM

Achieved through superior supply chain management.

Annual Spending on Supply Chains

Over 1.5 billion spent annually in supply chains by Red Lobster.

Forecasting and Balance Checking

Part of the ordering cost process in inventory management.

Supplier Survey and Negotiation

A step in the ordering cost process.

Purchasing Requisite and Approval

A step in the ordering cost process.

Shipper, Shipping Mode, Insurance

Components of the ordering cost process.

Receiving, Inspecting, Restocking

Steps involved in the ordering cost process.

Invoice Processing and Payment

Final step in the ordering cost process.

Make-or-buy

Choosing products and services that can be advantageously obtained externally as opposed to produced internally.

Outsourcing

Transfers traditional internal activities and resources of a firm to outside vendors.

Core competencies

A set of outstanding skills, talents, and capabilities that differentiates an organization from its competition.

Strategic planning

Sets the overall direction and priorities for the organization, guiding resource allocation and decision-making.

Risk of outsourcing

Includes loss of control (quality, delivery), increased logistics and inventory costs, potential creation of future competition, negative impact on employees, and risks that may not manifest themselves for years.

Vertical Integration

Developing the ability to produce goods or services previously purchased.

Forward External Integration

Integration towards the customer.

Backward External Integration

Integration towards the supplier.

Project scheduling

Identifying precedence relationships, sequencing activities, determining activity times and costs, determining critical activities, and estimating material and worker requirements.

Project Organization

Often a temporary structure that uses specialists from the entire company and is headed by a project manager.

Matrix organization

A permanent structure used in project management.

Critical Path Method

A project management technique that uses only one time factor per activity.

Forward pass

A process that identifies all the early times in project scheduling.

Backward pass

An activity that finds all the late start and late finish times.

Slack time

Refers to the amount of time that a task can be delayed without causing a delay to subsequent tasks or the overall project completion date.

Critical Path

The computed longest time path(s) through a project network which determines the minimum project duration.

Work Breakdown Structure

A hierarchical decomposition of a project into major tasks, subtasks, and activities to be completed.

PERT

Uses a probability distribution for activity times to allow for variability.

CPM

Assumes we know a fixed time estimate for each activity and there is no variability in activity times.

Project management phases

Includes planning, scheduling, and controlling.

Project manager responsibilities

Ensures all necessary activities are finished in order and on time, the project comes in within budget, meets quality goals, and that the team receives motivation, direction, and information.

Crashing costs

Costs associated with reducing the project duration by accelerating certain activities.

Precedence relationships

The order in which tasks must be completed in a project.

Interdependencies

The relationships between tasks that affect their scheduling and completion.