Operations & Supply Chain Management

Operations

The process used to acquire inputs, such as people, capital, and material, and transform them into outputs, such as products and services.

Operations Manager

They allocate resources

Capital

Facilities and equipment

Competitive Advantage

Developing capabilities that customers value, can be sustained over the long-term, and competitors find difficult to replicate.

Inseparability

The process of separating production from consumption; cannot be done for services because they are produced and consumed simultaneously.

Technology

The application of knowledge, tools, processes, and procedures to solve problems.

Product Design

The characteristics, features, and performance of the product; how the product functions; does not fundamentally change the product. Example: changing Coca-Cola's beverage containers from glass to aluminum.

Product Technology

\
The application of knowledge to improve the product.

Process

\
How to accomplish a task.

Process Design

How a product is made; can fundamentally alter the nature of the product. Example: changing the taste of Coca-Cola.

Process Technology

The application of knowledge to improve a process.

Cross-Functionality

When individuals with different expertise work towards a common goal; this is an essential business process.

Concurrent Engineering

Completing product design and process design simultaneously.

Functional Areas

\
Subsystems within an organization, such as marketing, finance, and accounting, that are linked together by a common organizational goal.

Strategy

Consists of the organizational goals and the methods of implementing the goals; every element of the SWOT analysis should be considered when developing strategies.

Key Policies

Main goals of an organization.

Organizational Structure

The formal relationships among different functional areas that aids in communication.

Relative Advantage

Where one entity has an advantage over another; will often trade their specialized products for those that they do not produce; companies with a relative advantage are able to produce products at a lower cost than their competitors.

North American Free Trade Agreement (NAFTA)

A free trade agreement between the United State, Mexico, and Canada to reduce tariffs and other trade restrictions.

General Agreement on Tariffs and Trade (GATT)

A trade agreement designed to reduce tariffs and other trade restrictions.

Sustainability

Balancing the interconnected obligations to economic viability, society, and the environment (the triple bottom line).

What is the percentage of businesses that operate within the service sector?

88%

Supporting Goods

Supplies and equipment that aid in the development of products and services.

Market Share

The percentage of sales in a particular market.

VIRAL

Analyzing the internal (strengths and weaknesses) and external (opportunities and threats) environments.

SWOT Analysis

Analyzing the internal (strengths and weaknesses) and external (opportunities and threats) environments.

Requirements for developing competitive advantage

SWOT, business process, competitive capabilities, and customer requirements.

Learning Curve

Continuously improving a product to make it better and cheaper.

Synergy

Teamwork where the whole is greater than the sum of its parts.

Key Processes

Strategy development, product development, system development, and order fulfillment.

System

The process of producing goods and system.

Matching

Matching strengths to opportunities.

Converting

Converting weaknesses or threats into strengths or opportunities.

Productivity

\
Output / Input; the goal is achieving more output given the amount of inputs, thus saving money and reducing production costs.

The First Revolution

Starting in the late 1800s, increases in manufacturing productivity reduced the need for physical labor and enabled a shift towards service-based jobs.

The Second Revolution

\
Productivity and efficiency improvements in manufacturing freed resources for the rapid expansion of the service industry.

Reliability

The ability to perform dependably and accurately.

The Third Revolution

Also known as the post-industrial era, this revolution began in the 1950s with the development of computers. This technology has allowed fewer people to do more work.

Assurance

Knowledge and courtesy of employees and their ability to convey trust and confidence.

Process Redesign

The complete overhaul of a process to improve performance.

Percent Change in Productivity

\[(New Productivity - Old Productivity)/Old Productivity\] \* 100

Quality (internal)

\
How quality is defined by the business; often measured as the amount of a desired attribute; objective.

Quality (external)

How quality is defined by the customer and the product's fitness for use; meets customer's needs and expectations; subjective.

\

Questions for Customers when Improving Products

Ask what they value (not just what they want), how do they work, what makes them happy, and feedback on specific product attributes.

Costs of Quality

\
Failure costs, appraisal costs, and prevention costs.

Failure Costs

Costs accrued by the organization or customer as the result of a failure of the product.

Appraisal Costs

Investments in measuring quality and assessing customer satisfaction.

Prevention Costs

\
Investments designed to prevent defects from occurring.

Poka-yoke

Mistake proofing; an approach to prevent defects, such as color-coding parts so that customers assemble the product correctly.

Design for Manufacture and Assembly (DFMA)

Products should be designed so that they are simple and inexpensive to produce.

Design for Operations (DFO)

Services should be simple and inexpensive.

Statistical Process Control (SPC)

The use of statistical methods to determine when a process that produces goods is getting close to producing too many defects.

W. Edwards Deming

The most influential individual within the specialty of quality; After World War II, he went to Japan to help rebuild their economy, and he was heralded for his influence. He went on to lecture in the United States in the 1980s; he developed his 14 Points for the Transformation of Management.

Deming's 14 Points for the Transformation of Management

The system, not employees, cause defects; management is responsible for changing the system, and they must take responsibility instead of blaming employees; Deming also stressed the use of Statistical Process Control (SPC) and encouraged training in its use. Other highlights include creating purpose, reduce fear, provide training and leadership, break down barriers between departments, and eliminate slogans, work standards, and quotas.

Joseph M. Juran

He defined quality as "fitness for use", from the customer's perspective; he emphasized the need for continuous improvement and stressed that quality must be built on quality planning, quality control, and quality improvement.

Quality Planning

The development of products that appeal to the changing wants and needs of customers.

Quality Control

\
Ensure that the product fits the customer's perception of fitness for use.

Quality Improvement

Leadership ought to lead efforts to eliminate waste and errors.

Philip Crosby

Wrote Quality is Free; he emphasized the complete elimination of failures to save money, as most firms underestimate their failure costs and should evaluate all costs of quality; "Do it right the first time".

Genichi Taguchi

He helped develop Japan's telephone system post-World War II. He designed experiments to extract more data from each test. He argues for "robust design", designs that guarantee high quality despite variations, such as employee errors, that may occur during the processes that produce the product; quality must, therefore, be built into the product.

Kaoru Ishikawa

He developed the Ishikawa/Fishbone diagram and quality circles.

Ishikawa/Fishbone Diagram

Helps establish cause-and-effect by identifying factors that contribute to outcomes or problems; the factors are categories as People, Machines, Methods, Measurements, Materials, and Environment and include intentional and unintentional consequences and influence quality performance.

Quality Circles

A team from all levels who meet to discuss, analyze, and eliminate quality issues using Deming's 14 points; a senior manager overseas their progress and approves their changes.

Total Quality Management (TQM)

An organization-wide philosophy that calls for 1) focusing on the customer, 2) quality function deployment, 3) responsibility for quality, 4) team problem-solving, 5) employee training, and 6) fact-based management.

Voice of the Customer

Describes what customers want and what they like and dislike; can get to know customers, hold focus groups, and request improvement suggestions; the business can also use their knowledge of how the customer would benefit from a new technology that they are not familiar with to create a future need on behalf of the customer.

Quality Function Deployment (QFD)

Relating customer needs and expectations to specific design characteristics through a series of grids or matrices.

House of Quality

The matrix used in Quality Function Deployment (QFD); lists customer needs (WHATs), design characteristics related to these needs (HOWs), the nature of the relationship between each customer's need and design characteristic (WHAT versus HOW), the reasons for WHATs (WHYs), and performance comparisons on design characteristics against competitors (HOW MUCH).

Quality Control Department

Where quality control obligations traditionally fell; now, it is up to everyone to ensure quality.

Standardization

Developing a preset procedure.

Documentation

The act of putting a procedure into writing.

ISO 9000

2000: An international quality standard.

Plan-Do-Check-Act Cycle/Deming Wheel/Shewhart Cycle

A cycle of continuous improvement that is repeated indefinitely. Planning involves using appropriate tools to identify problems or improvement opportunities. Doing involves acting upon the plan. Checking involves analyzing the actions performed to ensure that goals were achieved. Acting involves standardizing and documenting the changes, communicating changes to other, and determining why goals were not achieved.

Seven Tools of Statistical Process Control (SPC)

Fishbone diagrams, check sheets, control charts, histograms, Pareto charts, scatter diagrams, and control charts (classified as flow/run charts).

Check Sheets

Used to record data points in real-time at the site where the data is generated; raw data is collected without interpretation and then depicted using a different statistical tool.

Histogram/Box Chart

Shows the frequency of data observations within a preset range of values.

Scatter Plot

Displays data as a relationship between two variables; correlations can be drawn based upon the data. The controlled variable is the independent variable.

Pareto Chart

A bar chart that reflects data values in a descending order.

Control Chart

A graphical depiction of process outputs where the raw data is plotted in real-time within upper control limits (UCL) and lower control limits (LCL); this allows one to determine if a process is stable or trending towards instability and take corrective action before variations result in non-conforming products (see Page 30 for example).

Run Chart

Another form of a control chart for processes that have common features, a common scale, or a central tendency; an optimal line is drawn horizontally across the chart to gauge the central tendency (see Page 30 for example).

Six Sigma

Relates to the firm's ability to produce error-free products; uses six standard deviations rather than three, which translates to 3.4 defects per 1 million units (99.99966% error-free). Uses the DMAIC (Define, Measure, Analyze, Improve, and Control) process; uses quantitative and qualitative techniques.

Project Charter

Used in the Six Sigma "define" stage to include all aspects of a project to ensure optimal success, including the project scope, problem statement, time frame, boundaries, and team members.

DMAIC

The "define, measure, analyze, improve, and control" process of Six Sigma.

Value Stream Mapping

Provides an overview of an entire process.

SIPOC Chart

Defines the supplier-input-process-output-customer relationships in a process.

Failure Modes and Effects Analysis (FMEA)

Used to identify potential causes of defects, errors, breakdowns, or failures.

Measurement System Analysis

Determines the accuracy and repeatability of the measurement methods and devices used to control variation in the process.

Design of Experiments (DOE)

Real-time solving of problems within complex systems with many different factors that are difficult to isolate.

Kaizen Teams

A team that can make rapid changes using ideas from those involved in the process.

5S Methodology

Sort, straighten, shine, standardize, and sustain; used to create visual control of the workplace.

DMADV/Design for Six Sigma (DFSS)

Define, measure, analyze, design, and verify; this method is like Six Sigma, but it is used specifically for new products and processes.

Black Belts/Green Belts

When using Six Sigma, these specialists are developed within an organization who are experts in specific methods.

Problem Statement

A concise verbal statement of the problem, based upon the organization's expectations.

Supply Chain

Products throughout their development cycle, from raw material through the final consumer product.

Focal Firm

The organization that directs the flow of information, and has the most influence and control, across the supply chain; Apple doesn't manufacturer, but the product design and marketing-focused firm is focal because it's brand dominants the market; also, the companies that own the oil fields and refineries are the focal firms because they control the key resource in the supply chain.

Vertical Integration

Owning multiple assets in a supply chain.

Tier # Suppliers

A manufacturer purchases components from tier 1 suppliers. When they produce these components, they may purchase components from tier 2 suppliers, and so on.

Logistics

Managing the movement of materials, components, and information along the supply chain.

Supply Chain Management

Taking actions to have all members of the supply chain coordinate their activities and share information.

Reverse Logistics

The process of returning defective products and efforts to reuse and recycle materials.

Insourced

When goods are provided from within the organization.