Principles of Operations Management

Operations management

management of the conversion process which transforms inputs such as raw material and labor into outputs in the form of finished goods and services. 

Economic Prosperity

the firm is obligated to compensate shareholders who provide capital.

Social responsibility

fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business. 

Environmental stewarship

the firm’s impact on the environment.

Efficiency

doing something at the lowest possible cost. 

Effectiveness

doing the right things to create the most value for your customer.

Value

the attractiveness of a product relative to its cost.

Competitiveness

How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. 

Order qualifiers

The basic criteria that permits the firms products to be considered as candidates for purchase by customers. 

Order winners

The criteria that differentiates the products and services of one firm from another.

Trade-offs

occur when activities are incompatible so that more of one thing necessitates to another. 

Capacity

the ability to hold, receive, store or accommodate.

Long-range planning

Focuses on strategic issues relation to capacity, process, selection, and plant location

Intermediate-range planning

Focuses on tactical issues pertaining to aggregate workforce and material requirements for the coming year.

Short-range planning

Addresses day-to-day issues of scheduling workers on jobs at assigned work stations. 

Best Operating level

The capacity (production volume) for which the average unit cost of output is at a minimum. 

Economies of scale

The output range in which average unit costs decrease as unit production volume increase

Diseconomies of scale

The output range in which average costs rise due to added costs incurred at operating levels exceeding the best operating level. 

Capacity Flexibility

The ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another. 

Aggregate Production Planning

The process for determining the most cost effective way to match supply and demand up to the next 18 months

Master Production Scheduling (MPS)

A time-phased production plan that specifies how many of, and when to build, each end item (individual model).

Rough-Cut/Resource Capacity Planning

Determining that adequate production capacity and warehousing are available to meet demand. 

Production Rate

The capacity of output per unit of time (such as units per day or units per week)

Workforce level

Number of workers required to provide a specified level of production

Inventory on Hand

The surplus of units that results when production exceeds demand in a given time period.

Backorder (or stockout)

The deficit in units that results when demand exceeds the number of units produced in a given time period

Chase strategy

Matching the production rate to exactly meet the order rate by hiring and laying off workers as the order rate varies. 

Stable workforce

 variable work hours: Varying output by varying the number of hours worked through flexible schedules or overtime. 

Level Strategy

Maintain a stable workforce working at constant output rate. Absorb demand variations with inventory, backlogs, or lost sales

Pure Strategy

Either a chase strategy when product exactly matches demand or a level strategy when production remains constant over a specified number of periods. 

Mixed Strategy

A combination of chase and level strategies to match supply and demand

Basic Production Costs

The fixed and variable costs incurred in producing a given product type in a given time period. 

Material Requirements Planning (MRP)

Determines the number of subassemblies, components, and raw materials required and their build dates to complete a given number of end products by a specific date. 

Time Fences

Periods of time with each period having some specified level of opportunity for the customer to make changes.

Bill of Material (BOM) File

A list of subassemblies, components, and raw materials, and their respective quantities required to produce specific end items. Also, called a product structure or product tree file.

Scheduled Receipts 

Subassemblies or parts that have been previously ordered by are not scheduled for delivery until a future date. 

Lot sizing

Lot sizes are the part quantities issued in the planned order receipt and the planned order release sections of an MRP schedule.

Least total cost method (LTC)

a dynamic lot-sizing technique that calculates the order quantity by comparing the inventory carrying cost and the setup ordering costs for various lot sizes and then selects the lot in which these are most nearly equal. 

Least unit cost method

a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost

Center of Gravity Method

Used to determine the optimal location of a facility based on minimizing the transportation costs between where the goods are produced and where they are sold or redistributed.

Facility Layout 

the process of determining placement of departments, workgroups within departments, workstations, machines, and stock-holding points within a facility.

Servicescape

The aspects of the physical surroundings in a service operation that can affect a customer’s perception of the service received.

Systematic layout planning approach

Select the most effective physical arrangement of facilities to produce products or provide services.