Operations Management Vocabulary

Flashcards for vocabulary terms from Operations Management lecture notes.

Heavy-manufacturing facilities

Large, require a lot of space, and are expensive; Factors include construction costs, land costs, raw materials & finished goods shipment modes, proximity to raw materials, utilities, waste disposal, and labor availability.

Light-industry facilities

Smaller, cleaner plants and usually less costly; Factors include land costs, transportation costs, and proximity to markets, depending on delivery requirements.

Retail and service facilities

Smallest and least costly; Factors include proximity to customers, as location is everything.

Global Supply Chain Factors

Include government stability, regulations, political & economic systems, economic stability & growth, exchange rates, culture, export/import regulations, raw material availability, climate, suppliers, transportation, labor cost & education, technology, commercial travel, expertise, trade regulations, and group trade agreements.

Location Incentives

Include tax credits, relaxed government regulation, job training, infrastructure improvement, and money.

Location factor rating

Identify important factors, weight factors (0.00 - 1.00), subjectively score each factor (0 - 100), and sum weighted scores to determine site selection.

Center-of-gravity technique

Locate facility at center of movement in geographic area, based on weight and distance traveled; establish grid map of area and identify coordinates and weights shipped for each location.

Load-distance

Compute (Load x Distance) for each site, choose a site with the lowest (Load x Distance); Distance can be actual or straight-line.

Project

Has unique purpose, is not repetitive, has relatively short period of time, one-time operational activity, and draws resources from multiple departments.

Scope statement

A document that provides an understanding, justification, and expected result of a project

Statement of work

Written description of objectives of a project

Work Breakdown Structure (WBS)

Organizes the work in a project, breaks project into components, subcomponents, activities, and tasks; Start at the top and work down, brainstorm project activities.

Organizational breakdown Structure (OBS)

A chart that shows which organizational units are responsible for work items

Responsibility Assignment Matrix (RAM)

Shows who is responsible for the work in a project

Gantt Chart

Graph or bar chart, bars represent the time for each task, bars also indicate status of tasks, provides visual display of project schedule, shows precedence - sequence of tasks; includes Slack

Critical Path Method (CPM)

Deterministic task times, Activity-on-node network construction

Project Evaluation and Review Technique (PERT)

Probabilistic task time estimates, Activity-on-arrow network construction

Agile Project Management

Approach that focuses on adaptability to rapid and unexpected change, used in software or IT development, uses interactive and incremental approach to respond to change rather than following a plan, breaks down tasks into small increments with minimal planning.

Activity-on-node (AON)

Nodes represent activities, arrows shows precedence relationships

Activity-on-arrow (AOA)

Arrows represent activities, nodes are events for points in time

Event

Completion or beginning of an activity in a project

Concurrent Activities

Add dummy activity to show correct precedence when two or more activities cannot share same start and end nodes

Earliest start time (ES)

Earliest time an activity can start, ES= maximum EF of immediate predecessors

Forward Pass

Starts at beginning of CPM/PERT network to determine earliest activity times

Earliest finish time (EF)

Earliest time an activity can finish, Earliest start time plus activity time , EF = ES + t

Latest start time (LS)

Latest time an activity can start without delaying critical path time, LS = LF - t

Latest finish time (LF)

Latest time an activity can be completed without delaying critical path time, LF = minimum LS of immediate predecessors

Backward Pass

Determines latest activity times by starting at the end of CPM/PERT network and working backward

Crashing

Reducing project time by expending additional resources

Crash time

An amount of time an activity is reduced

Crash cost

Cost of reducing time

Supply Chain

The facilities, functions, and activities involved in producing and delivering a product or service from suppliers to customers; An integrated group of processes to “source”, “make”, and “deliver” products.

Supply Chain Management (SCM)

Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs

The Bullwhip Effect

Occurs when slight demand variability is magnified as information moves back upstream

Risk Pooling

Risks are aggregated to reduce the impact of individual risks.

Supply Chain Sustainability

“Going Green”; Meeting present needs without compromising the ability of future generations to meet their needs; Sustaining human and social resources; It can be cost effective and profitable; Can provide impetus for product and process innovations; Impetus comes from downstream in the supply chain and moves upstream to suppliers.

Electronic data interchange (EDI)

A computer-to-computer exchange of business documents

Radio frequency identification (RFID)

Technology can send product data from an item to a reader via radio waves

Blockchain

A digital distributed ledger that can be programmed to record financial and other transactions that is incorruptible and secure.

Collaborative Planning, Forecasting and Replenishment (CPFR)

Two or more companies in a supply chain to synchronize their demand forecasts into a single plan to meet customer demand

Enterprise resource planning (ERP)

Software that integrates the components of a company by sharing and organizing information and data

Procurement

The purchase of goods and services from suppliers

Outsourcing

Purchase of goods and services from an outside supplier

E-Procurement

Direct purchase from suppliers over the Internet, by using software packages or through e-marketplace, e-hubs, and trading exchanges

E-marketplace (e-hubs)

Websites where companies and suppliers conduct business-to-business activities

E-auction

Process used by e-marketplaces for buyers to purchase items; company posts orders on the Internet for suppliers to bid on

Spend Analysis

Formal process to analyze spending data

Order fulfillment

Process of ensuring on-time delivery of an order

Logistics

Transportation and distribution of goods and services

Distribution Centers (DC)

Receive, handle, store, package, and ship products

Postponement

Final assembly and product configuration may be done at the DC

Warehouse Management Systems (WMS)

Automated system that runs day-to-day operations of a DC; Controls item putaway, picking, packing, and shipping

Vendor-Managed Inventory

Manufacturers, rather than vendors, generate orders; Stocking information is accessed using EDI; A first step towards supply chain collaboration; Increased speed, reduced errors, and improved service

Landed Cost

Total cost of producing, storing, and transporting a product to the site of consumption or another port

Value added tax (VAT)

An indirect tax assessed on the increase in value of a good at any stage of production process from raw material to final product

Clicker shock

Occurs when an order is placed with a company that does not have the capability to calculate landed cost

Forcasting

Predicting the future

Qualitative forecast methods

Subjective

Quantitative forecast methods

Based on mathematical formulas

Time frame

Indicates how far into the future is forecast

Time series

Statistical techniques that use historical demand data to predict future demand

Regression methods

Attempt to develop a mathematical relationship between demand and factors that causeits behavior

Qualitative

Use management judgement, expertise, and opinion to predict future demand; Delphi method

Naive forecast

Demand in current period is used as next period’s forecast

Simple moving average

Use average demand for a fixed sequence of periods; Good for stable demand with no pronounced behavioral patterns

Weighted moving average

Weights are assigned to most recent data

Exponential Smoothing

Averaging method; Weights most recent data more strongly; Reacts more to recent changes; Widely used, accurate methos

Smoothing constant

Applied to most recent data in exponential smoothing

Forecast error

Difference between forecast and actual demand

Time Series

Include naive forecast, moving average, weighted Average, exponential smoothing , linear trend line

What is Inventory?

Stock of items kept to meet internal or external demand

Carrying cost

Cost of holding an item in inventory

Ordering cost

Cost of replenishing inventory

Shortage cost

Temporary or permanent loss of sales when demand cannot be met

Continuous system (fixed-order-quantity)

Constant amount ordered when inventory declines to predetermined level

Periodic system (fixed-time-period)

Order placed for variable amount after fixed passage of time

Economic Order Quantity (EOQ)

Continuous inventory system; Optimal order quantity that will minimize total inventory costs

Basic EOQ model

Demand is known with certainty and is constant over time; No shortages are allowed; Lead time for the receipt of orders is constant; Order quantity is received all at once

Order cycle

The time between receipt of orders in an inventory system

Production quality model

Order is received gradually, as inventory is simultaneously being depleted

Reorder Point

Inventory level at which a new order is placed

Safety Stock

Buffer added to on-hand inventory during lead time

Stockout

An inventory shortage

Service level

Probability that the inventory available during lead time will meet demand

Sales and Operations Planning Process

Determines resource capacity to meet demand over an intermediate time horizon

Level production

Producing at a constant rate and using inventory to absorb fluctuations in demand

Chase demand

Hiring and firing workers to match demand

Peak demand

Maintainng resources for high-demnad levels

Disaggregation

Breaking an aggregate plan into more detailed plans; Create Master Production Schedule for Material Requirements Planning

Available-to-Promise (ATP)

Quantity of items that can be promised to customer; Difference between production and customer order already received

Cable-to-promise

Quantity of items that can be produced and made available at a later date

Material Requirements Planning (MRP)

Computerized inventory control and production planning system

Cumulative lead time

Total length of time needed to manufacture a product

Time fence

Management-specified date within which no changes are allowed in the MPS

Bill of Material

List of all materials, parts, and assemblies needed to make an item; Includes quantities, parent-component relationships, and order quantities

Netting out the inventory

The process of subtracting on-hand quantities and scheduled receipts from gross requirements to produce net requirements

Lot sizing

Determining the quantities in which items are usually made or purchased

Capacity Requirements Planning (CRP)

Creates a load profile; Identifies under-loads and over-loads; Inputs include planned order releases, routing file , open orders file

Rated capacity

Theoretical output that could be attained if a process were operating at full speed without interruption, exceptions, or downtime

Effective capacity

Takes into account the efficiency with which a particular product or customer can be processed and the utilization of the scheduled hours or work