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Production
Creation of goods and services.
Operations management
Set of activities that creates value by transforming inputs into outputs.
Input
Resources used to produce goods or services.
Output
The final product or service created from a process.
Productivity
Measure of process involvement, calculated as output relative to input.
Single-factor productivity
Measured as output per unit of a single input, such as labor, material, or energy.
output/material or energy
Multifactor productivity
Measured as output divided by the sum of multiple inputs, like labor, material, capital.
output/ labour+material+energy+capital+miscellaneous
Efficiency
Doing the thing right at the lowest cost, shortest time, and highest quality.
Effectiveness
Doing the right thing that adds value, focused on important objectives.
Forecasting
Predicting future trends or values based on historical data.
Quantitative forecasting
Forecasting based on numerical data and statistical methods.
Qualitative forecasting
Forecasting that relies on expert opinions and non-numerical data.
Mean absolute deviation (MAD)
The average of the absolute errors between predicted and observed values.
Weighted moving average
A forecast method that applies different weights to past observations.
Exponential smoothing
A forecasting technique that adjusts predictions based on previous forecast errors.
Supply chain management
Management of flows of goods, services, information, and finances in a supply chain.
Make/Buy considerations
Deciding whether to produce in-house or purchase from external suppliers.
Purchase requisition
An internal document requesting the purchasing department to buy goods or services.
Purchase order (PO)
A document issued to a supplier to order goods or services.
RFQ (Request for Quotation)
A document requesting suppliers to provide a price for goods or services.
RFP (Request For Proposal)
A document inviting suppliers to submit proposals for providing goods or services.
Just-in-Time (JIT) inventory
Inventory management strategy where materials are ordered just as needed in production.
ABC analysis
Inventory classification method categorizing inventory into three classes based on value.
Inventory turns
A measure of how often inventory is sold or used over a period.
Economic Order Quantity (EOQ)
The optimal number of units to order that minimizes total inventory costs.
Stock-out
A situation where inventory is insufficient to meet demand.
Bullwhip effect
Fluctuations in demand becoming larger up the supply chain.
Outsourcing
Procuring goods or services from external suppliers.
Advantages of outsourcing
Includes cost savings, gaining outside expertise, and focusing on core competencies.
Disadvantages of outsourcing
Includes loss of control, increased transportation costs, and potential quality issues.
Inventory holding costs
Costs associated with storing unsold goods.
Ordering costs
Costs incurred in ordering inventory and receiving supplies.
Cycle counting
A method of auditing inventory through regular physical counts.
Re-order point
The inventory level at which new stock must be ordered.
Stock-out cost
The cost resulting from running out of stock, which can affect sales and customer satisfaction.
Delphi method
A forecasting technique using expert opinions to reach a consensus.
Factors affecting mission
Elements such as customers, environment, values, profitability, and public image influencing an organization's direction.
Main strategies of competitive advantage
Differentiation, cost leadership, and quick response strategies.
Characteristics of service
Intangible, produced and consumed at the same time, often requiring high customer interaction.
Types of holding costs
Include storage costs, insurance, spoilage costs, and opportunity costs associated with unsold inventory.
Types of ordering costs
Include costs incurred during the process of ordering inventory, such as supplier communication costs, delivery charges, inspection and handling costs, and administrative expenses tied to placing the order.
