Operations Management FINAL

Reasons for location decisions

Addition of facilities, market expansion, growth in demand, depletion of inputs, shift in markets, high operating costs at current location

Importance of location decisions

Affect costs, revenues, competitive advantage, supply chain strategy, capacity, flexibility, and involve long-term commitment

Four location planning options

Expand existing facility, add new facility, relocate, do nothing

Benefits of global locations

Access to markets, lower costs, favorable regulations, financial benefits

Disadvantages of global locations

Transportation costs, security costs, unskilled labor, import restrictions, productivity issues

Risks of global locations

Intellectual property theft, political instability, terrorism, economic instability, legal regulations, ethical concerns, cultural differences, quality issues

Factors facilitating globalization

Trade agreements and technology

Location decision procedure

Determine evaluation criteria, identify important factors, develop location alternatives, evaluate alternatives and make a selection

Regional factors

Raw materials, markets, labor, climate, taxes

Community factors

Quality of life, services, attitudes, taxes, utilities, development support

Site factors

Land, transportation, zoning restrictions

Service location focus

Revenue maximization and customer access

Manufacturing location focus

Cost minimization

Service location factors

Customer access, demographics, competition, traffic patterns

Manufacturing location factors

Transportation costs, labor costs, energy costs

Product Plant Strategy

Each plant produces one product for the entire market

Market Area Plant Strategy

Each plant serves a specific geographic region

Process Plant Strategy

Each plant performs one stage of production

General Purpose Plant Strategy

Flexible plants capable of producing many products

Most important factor for retail and service locations

Customer access

Location evaluation techniques

Factor Rating Method, Cost-Profit-Volume Analysis, Center of Gravity Method, Transportation Model

Factor Rating Method

Location evaluation technique that assigns weights and scores to factors and chooses the highest total score

Cost-Profit-Volume Analysis

Location evaluation technique comparing costs and volumes to determine the most economical location

Center of Gravity Method

Technique used to determine the best location for a distribution center based on coordinates and shipment quantities

Quality definition

Ability to consistently meet or exceed customer expectations

Quality management approaches

TQM, Six Sigma, QMS, QFD

Product Quality Dimensions mnemonic

PASCRDSPC

Performance

Primary operating characteristics or main function of a product

Aesthetics

Appearance, smell, feel, taste, or look of a product

Special Features

Additional characteristics that supplement basic functioning

Conformance

Degree to which a product meets specifications

Reliability

Probability of performing consistently over time

Durability

Useful life of a product

Serviceability

Ease and speed of repair

Perceived Quality

Customer perception of quality based on reputation and image

Consistency

Lack of variation in performance

Service Quality Dimensions

Convenience, Reliability, Responsiveness, Time, Assurance, Courtesy, Tangibles, Consistency, Expectancy

Convenience

Availability and ease of obtaining service

Reliability (service)

Ability to perform service dependably and accurately

Responsiveness

Willingness to help customers promptly

Time

Speed of service delivery

Assurance

Knowledge, courtesy, and ability to inspire trust

Courtesy

Respect and politeness shown to customers

Tangibles

Physical facilities, equipment, and appearance of personnel

Consistency (service)

Providing the same quality level repeatedly

Expectancy

Meeting customer expectations

SERVQUAL

Measures the gap between customer expectations and customer perceptions

SERVQUAL formula

Service Quality = Perception − Expectation

Determinants of quality

Quality of design, quality of conformance, ease of use, after-sale service

Quality of design

Intentionally designing a product or service to meet customer needs

Quality of conformance

Producing according to design specifications

Ease of use

How easy the product is for customers to use

After-sale service

Support provided after the purchase

Benefits of good quality

Customer satisfaction, customer loyalty, improved reputation, premium prices, higher market share, lower liability costs, fewer production problems, lower production costs, higher profitability

Consequences of poor quality

Loss of business, liability, lower productivity, poor service, higher costs, legal problems, financial losses

Process quality

Producing goods and services according to design specifications with minimal variation

Costs of quality categories

Prevention costs, appraisal costs, internal failure costs, external failure costs

Prevention costs

Costs incurred to prevent defects before they occur

Examples of prevention costs

Training, planning, process improvement

Appraisal costs

Costs incurred to identify defects

Examples of appraisal costs

Inspection, testing, audits

Internal failure costs

Defects found before reaching the customer

Examples of internal failure costs

Scrap and rework

External failure costs

Defects found after reaching the customer

Examples of external failure costs

Warranty claims, recalls, returns, lawsuits

TQM definition

Company-wide continuous improvement focused on customer satisfaction

TQM principles

Customer focus, continuous improvement, employee involvement, process-centered approach, fact-based decisions

QMS definition

Formal documented system used to ensure consistent quality

QMS standard

ISO 9001

ISO 9001 focus

Consistent quality through documented processes and continuous improvement

QFD definition

Converts customer needs into design requirements

QFD tool

House of Quality

Six Sigma goal

Reduce defects and process variation

DMAIC

Define, Measure, Analyze, Improve, Control

Define (DMAIC)

Identify the problem and customer requirements

Measure (DMAIC)

Collect data and measure current performance

Analyze (DMAIC)

Determine root causes of problems

Improve (DMAIC)

Implement solutions to eliminate causes

Control (DMAIC)

Maintain improvements over time

Pareto Analysis

Quality tool based on the 80/20 rule that focuses on the few causes responsible for most problems

80/20 Rule

A small number of causes often create the majority of problems

Brainstorming

Quality improvement technique encouraging unrestricted idea generation

Supply chain definition

Sequence of organizations, facilities, functions, and activities involved in producing and delivering a product or service

Supply chain stages

Supplier, Manufacturer, Distributor, Retailer, Customer

Logistics

Movement of goods, services, information, and cash

Supply chain facilities

Warehouses, factories, processing centers, distribution centers, retail outlets, offices

Supply chain functions

Forecasting, purchasing, inventory management, information management, quality assurance, scheduling, production and delivery, customer service

Supply chain integration

Strategic coordination of business functions to match supply and demand

Benefits of supply chain integration

Improved efficiency, lower costs, better customer service, improved responsiveness

Three supply chain flows

Product and service flow, information flow, financial flow

Product and service flow

Movement of products and services through the supply chain

Information flow

Sharing orders, forecasts, inventory data, and other information

Financial flow

Movement of payments, credit, and financial information

Procurement

Obtaining goods and services from suppliers

Outsourcing

Using external organizations to perform activities previously done internally

Benefits of outsourcing

Lower cost, access to expertise, focus on core activities

Risks of outsourcing

Loss of control, intellectual property risk, longer lead times, transportation costs

Blockchain in supply chains

Improves transparency, traceability, security, trust, and reduces fraud

Supply chain risks

Natural disasters, political instability, supplier failures, transportation disruptions, economic uncertainty, cybersecurity threats

Ethics in supply chains

Child labor, unsafe working conditions, environmental damage, corruption, bribery, fair treatment of workers