MGT 385 Exam 1

What is operations management? Make sure you can identify what operations management entails in an example.

the design, development, & maintenance of systems that transform resources (or inputs) into value-added products/services to meet customers’ needs

What is productivity?

a measure of efficiency; the ratio of outputs (goods and services) to inputs (resources such as labor & capital)
- Equation: Outputs/Inputs

What are the different types of productivity?

- Single-Factor (Inputs): Only 1 input measure is used
- Multi-Factor (Inputs): 2 or more inputs are used (ex. labor and materials)
- Total Factor (Inputs): All input measures are used

Multi-Factor Productivity Equation

Outputs/Cost of (labor + energy + materials)

- Use all dollar inputs in the denominator

What are the challenges affecting productivity measurement?

-Retrenching: productivity is increasing, but both output and input decrease with input decreasing at a faster rate.

-Assumption that more input would cause output to increase at the same rate:

-Very difficult to include certain measures such as quality or timeliness and make international comparisons when computing productivity.

What is a core competency? How can an organization achieve a competitive edge?

Any skill that a company has that other companies struggle to do. An organization can achieve a competitive advantage by focusing on being cheaper, better, or faster.

What are Key Performance Indicators (KPI)? Examples of KPI in operations?

Set of measures to help managers evaluate performance in each of the four critical areas of the balanced scorecard (Customers: Sales Revenue, Processes: Inventory Turnover, Learning & Growing: Number of Training Hours, Finances: ROI).

What key strategic decisions do operations managers have to take? Know all the key areas of OM. What key strategic decisions do operations managers have to take? Know all the key areas of OM.

Strategy: How can operations provide competitive edge?
Products/Services: What products/services do we produce? How do we design them?
Processes/Technology: What process type is best suited for products/services?
Facilities: How many do we need and where do we locate them?
Quality: What is the target level of quality for our products and services?

What is the Purchasing Manager's Index? What factors are weighted in the ISM's PMI?

Completed by equally weighting new orders, production, employment, and supplier deliveries & inventories.
- Released every month

How does PMI reflect an expanding (or contracting) economy? [review the diagram involving consumer confidence].

Consumer Confidence Increases -> New Orders Increase -> Mgt. Outputs increase -> Hiring, Supplier Order, and Raw Materials Increase (Slower Deliveries)

What is the purpose of a balanced scorecard? What are its components? Which of its components is directly associated with operations?

Measuring more than just financial performance:

- Customers, Processes, Learning & Growing, and Finances

What are the various product quality dimensions?

Dimensions:
- Performance: basic operating characteristics of a product
- Features: secondary aspect of performance
- Reliability: odds of operating properly
- Conformance: ability to meet standards
- Durability: how long before replacement
- Serviceability: ease of getting repair
- Aesthetics: how it looks, fells, sounds, etc.
- Safety: assurance of no harm or injury
- Perceptions: reputation, brand name

What are the various service quality dimensions?

Dimensions:
- Tangible: physical appearance
- Service Reliability: ability to perform
- Responsiveness: willingness to be helpful and prompt
- Assurance: knowledge & courtesy of employees to help truthfully
- Empathy: individual customer attention given by firm

What are the costs associated with prevention, appraisal, internal & external failure?

Cost of Good Quality:
Prevention: cost of preventing defects and errors
Appraisal: cost of measuring/monitoring quality
Cost of Poor Quality:
Internal Failure: cost of fixing issues before customer delivery
External Failure: cost of fixing issues after customers own/use the product

Baldrige Award

Given by the U.S. President to outstanding companies in 7 areas (leadership, strategic planning, customers, operations, workforce, measurement, & results,)

Deming Prize

The highest quality award in Japan; it is much more focused on use of Statistical Quality Control (SQC) & quality assurance.

European Quality Award

Emphasis is on employees (e.g., career planning & development, job security, working environment) & community development.

ISO 9000 vs ISO 14000

ISO 9000: Focus on management
ISO 14000: Focus on the environment

What do control charts measure? Why do we use them?

Control charts measure process variation and track how a process changes over time. We use them to monitor and improve the stability and predictability of a process, identifying when it is out of control and in need of corrective action.

What is the difference between assignable and natural variation? Which variation causes poor quality?

Natural Variation: minor variation; no fix needed
Assignable Variation: excessive variation; causes poor quality

What are the differences between continuous and discrete data? Which type of data are better suited for quantitative or statistical analyses?

Continuous: Decimals (No specific range of numbers); better for quantitative or statistical analysis
Discrete: Limited range of numbers (Ex. only whole numbers)

Attribute

Characteristic that is evaluated with a discrete response such as good/bad; yes/no (e.g., smell, texture, taste, cleanliness, color, etc).

Variable

Characteristic that is evaluated on a continuous scale (e.g., length, weight, height, temperature, time, speed, etc).

What charts measure variables?

x-bar and R control charts measure continuous data

What charts measure attributes?

p or c control charts measure dicrete data

How are quality defects measured & monitored in services?

Histograms

What are the benefits of SPC tools?

-Improved product/service performance (e.g., Sheraton Hotels takes care of service issues within 15 minutes of guests' requests; Bank of America improved deposit processing by more than 48%).

-Lesser need to inspect each and every unit/transaction

-Potentially millions of dollars of savings due to reduced "costs of bad quality" (e.g., GE & Honeywell saved billions while Bechtel Co. saved $215 million).

-Improved customer satisfaction and higher market share from improved quality.

What is the difference between x-bar and R-chart? Why should we use x-bar and R-charts together?

The x-bar measures change only in the process mean
The R-chart measures changes only in the process dispersion

In a p-chart that measures defects, are defects below the LCL an indicator of poor quality?

No, it could suggest an improvement in the process or that the process is performing better than expected in terms of producing non-defective items

Three Sigma

99.73% accuracy

Six Sigma

99.9997% accuracy

DMAIC

Define: Identify project & team.
Measure: Identify key process variables
Analyze: Analyze data and identify root causes of problems
Improve: Identify potential solutions
Control: Implement Poke-Yoke

process stability vs process capability

stability refers to consistency of the process with respect to important process characteristics whereas capability refers to the ability of the process to meet customer specifications

Are specification limits the same as control limits? Which one is statistically computed and which one is given by the customer?

Specification limits are set by customer or standards, while control limits are statistically computed from process data. Specification limits define acceptable product ranges; control limits monitor process stability.

Histogram

Used to identify the frequency of quality defect occurences and display quality performance

Pareto Analysis

Separates the vital few causes from the trivial many causes. 80% of quality issues can be traced back to 20% of causes

Fishbone Diagram

diagram designed to help employees focus on the causes of a problem rather than the symptoms.

Scatter Diagram

Graph showing the relationship or correlation between 2 variables

Flowchart

Visualize steps in a process. Trace flow of customers, materials, info, equipment. Identify the non-value-adding steps to customers.
- Value Stream Mapping