BUSN Ch.17 Operations Management: Putting It All Together

Operations Management

Managing activities to create and distribute goods and services, adding value.

Efficiency

Producing output or achieving a goal at the lowest cost.

Effectiveness

Providing goods and services with a strong ratio of price to perceived benefits.

Goods

Tangible products.

Services

Intangible products.

Process

A set of related activities that transform inputs into outputs, thus adding value.

Inventory

Stocks of goods or other items held by organizations.

Product Layout

Organizes resources according to the specific sequence of operations for standardized, high-volume goods.

Process Layout

Arranges equipment by task type, used for small batches requiring customization.

Cellular Layout

Groups different types of machinery into self-contained cells to produce families of similar parts.

Fixed Position Layout

Used for bulky or site-specific goods where employees and equipment are brought to the product.

Flow-shop Processes

Used by services providing a high volume of relatively standardized products.

Smoother Production Schedules

Holding excess inventory to meet demand surges without investing in extra production capacity.

Protection against Stock-Outs

Reducing the chance of lost sales due to supply disruptions or unexpected demand surges.

Reduced Ordering Costs

Lowering paperwork and handling costs by making fewer orders through larger average inventories.

Tied-Up Funds

Capital tied up in unsold inventory that could be better used elsewhere within the organization.

Additional Holding Costs

Extra costs for storage space, heating, cooling, taxes, and insurance.

Increased Risk of Inventory

Exposure to losses from spoilage, depreciation, and obsolescence.

Critical Path Method (CPM)

A project-management tool that illustrates the relationships among all the activities involved in completing a project and identifies the sequence of activities likely to take the longest to complete.

Immediate Predecessors

Activities in a project that must be completed before some other specified activity can begin.

Critical Path

The sequence of activities in a project that is expected to take the longest to complete.

Value Chain

The network of relationships that channels the flow of inputs, information, and financial resources through all of the processes directly or indirectly involved in producing goods and services and distributing them to customers.

Vertical Integration

Performance of processes internally that were previously performed by other organizations in a supply chain.

Outsourcing

Arranging for other organizations to perform supply chain functions that were previously performed internally.

Offshoring

Moving production or support processes to foreign countries.

Enterprise Resource Planning (ERP)

Software-based approach to integrate an organization's (and in the sophisticated versions, a value chain's) information flows.

Servicescape

The environment in which a customer and service provider interact.

Automation

Replacing human operation and control of machinery and equipment with some form of programmed control.

Robot

A reprogrammable machine that is capable of manipulating materials, tools, parts, and specialized devices in order to perform a variety of tasks.

Computer-Aided Design (CAD)

Drawing and drafting software that enables users to create and edit blueprints and design drawings quickly and easily.

Computer-Aided Engineering (CAE)

Software that enables users to test, analyze, and optimize their designs.

Computer-Aided Manufacturing (CAM)

Software that takes the electronic design for a product and creates the programmed instructions that robots must follow to produce that product as efficiently as possible.

Computer-Aided Design/Computer-Aided Manufacturing (CAD/CAM)

A combination of software that can be used to design output and send instructions to automated equipment to perform the steps needed to produce this output.

Computer-Integrated Manufacturing (CIM)

A combination of CAD/CAM software with flexible manufacturing systems to automate almost all steps involved in designing, testing, and producing a product.

Inventory Differences (Goods vs. Services)

Goods can be stored in an inventory, whereas services must be consumed when they are produced.

Shipping Differences (Goods vs. Services)

Goods can be shipped, whereas services must be consumed where they are provided.

Customer Involvement (Goods vs. Services)

Goods are produced independently of the consumer, whereas services often require the customer to be actively involved in their production.

Quality Determination (Goods vs. Services)

Goods quality can be determined objectively by measuring defects, while service quality is based mainly on customer perceptions.

Ambience (Servicescapes)

Refers to factors such as decor, background music, lighting, noise levels, and even scents.

Functionality (Servicescapes)

Involves how easy it is for the customers to move through the facility and find what they are looking for.

Signs, Symbols, and Artifacts (Servicescapes)

Elements that convey information to customers and create impressions.

total quality management (TQM)

An approach to quality improvement that calls for everyone within an organization to take responsibility for improving quality and emphasizes the need for a long-term commitment to continuous improvement.

poka-yokes

Simple methods incorporated into a production process designed to eliminate or greatly reduce errors.

Six Sigma

An approach to quality improvement characterized by very ambitious quality goals, extensive training of employees, and a long-term commitment to working on quality-related issues.

Baldrige National Quality Program

A national program to encourage American firms to focus on quality improvement.

ISO 9000

A family of generic standards for quality management systems established by the International Organization for Standardization.

Lean production

An approach to production that emphasizes the elimination of waste in all aspects of production processes.

just-in-time (JIT) production

A production system that emphasizes the production of goods to meet actual current demand, thus minimizing the need to hold inventories of finished goods and work in process at each stage of the supply chain.

ISO 14000

A family of generic standards for environmental management established by the International Organization for Standardization.