Operations Test 1 Terms

Operations

The part of an organization that is responsible for producing physical goods or delivering services

Operations Management

The management of systems and processes that create goods or deliver services

Transformation Process

Operations turns inputs (land, labor, capital, info, raw materials) into outputs (goods/services) through conversion and processing activities; system is regulated by Control (measurement and feedback)

Value Added

Difference between cost of inputs and value or price of final outputs

Goods (Tangible)

Physical products

Services (Intangible)

Activities that provide time, location, form, or psychological value

Goods Service Continuum

Most real world offerings blur the line and combine both (Ex. Restaurant produces food - Goods & Tangible, and delivers a dining experience - Service & Intangible)

Four Operations Priorities

Cost, Quality, Time, Flexibility (These often trade off, KEY is to find balance)

System Design Decisions (Long Term Strategic)

Foundational choices that are hard and costly to reverse (Ex. product/service design, process selection, capacity planning, facility location, facility layout, work system design)

System Operation Decisions (Day to Day/Tactical)

Daily operational choices that are ongoing and adjustable (Ex. staffing, scheduling, inventory management, quality control, sourcing, logistics)

Supply Chain

Sequence of organizations delivering a product or service, from raw material suppliers to manufacturers, distributors, retailers, and final customers

Reverse Logistics

Backward flow of materials after customer use including product returns, recycling, refurbishment, repairs, and disposal

Competitiveness

Measures how well an organization meets wants and needs of customers relative to rival firms offering similar things

Marketing v. Operations

Competitiveness requires a strong connection between ops and marketing; Marketing identifies consumer wants and defines value ("What do customers want?"), Ops designs processes and delivers on those promises ("How do we satisfy it?")

Customer Focus v. Competitors

Textbook defines competitiveness as a scoreboard measured relative to competitors; Jeff Bezos says competitiveness should be obsessive customer focus to satisfy them

Why Organizations Fail

Companies lose competitiveness when ops strategy drifts from org goals to short term financial goals over R&D, product design over process design, or ignoring customer feedback

Hierarchical Planning (Mission -> Strategy -> Tactics)

Business planning cascades down in strict hierarchy: Mission -> Goals -> Organizational Strategy -> Operations Strategy -> Tactics and Operations

Mission

Core reason for org existence (Ex. Walmart saves people money)

Goals

Specific targets detailing what the mission will accomplish

Organizational Strategy

Overall plan for reaching goals across the business

Operations / Functional Strategy

Guides operational choices (capacity, facility, layout, inventory, quality) needed to support organizational strategies

Tactics and Operations

Day to day methods and actions used to execute strategies

Three Basic Business Strategies

Firms choose 1 of 3 primary competitive strategies to gain an edge that aligns with their Core Competencies: Low Cost, Responsiveness, Differentiation

Core Competencies

Unique internal strengths

Low Cost Strategy

Focuses on low cost operations, efficiency, and scale to compete on price

Responsiveness Strategy

Focuses on fast processing time, flexibility, and reliable delivery

Differentiation Strategy

Focuses on high performance, superior quality, innovation, and wide variety

Order Qualifiers

Minimum baseline standards a product or service must meet just to be considered by customers or make buyers shortlist; meeting qualifiers is necessary but not the end all be all (Ex. Safety and basic flight capabilities)

Order Winners

Specific characteristics or strengths that cause customers to choose your firm over competitors (Ex. Industry low prices)

Key to Qualifiers and Winners

They shift over time; today's winner can become tomorrow's qualifier

Why Design Matters

Design shapes cost, quality, speed to market, and customer experience; it's about how a product works and satisfies a need, not just how it looks

Make or Buy Decision

Companies must decide which functions to keep in house and which to outsource; keep core competencies in house and outsource the rest

Core Competency Traits

Provides access to wide variety of markets, increases customer benefits in end product, and is difficult for rival companies to imitate

Contract Manufacturing

Organization that performs manufacturing and/or purchasing as a service to another firm; non-core competencies are assigned to contract manufacturers

Product Development Process

Generic six phases to get ideas to a product on the shelf: Phase 0 Planning -> Phase 1 Concept Development -> Phase 2 System Level Design -> Phase 3 Design Detail -> Phase 4 Testing and Refinement -> Phase 5 Production Ramp Up

Phase 0 Planning

Before formal project approval; begins with corporate strategy, assesses tech, and outputs project mission statement

Phase 1 Concept Development

Identifies target market needs, generates alternative concepts, and selects one or more for further development

Phase 2 System Level Design

Defines the product architecture and decomposes it into subsystems and components

Phase 3 Design Detail

Complete specification of geometry, materials, and tolerances for all parts

Phase 4 Testing and Refinement

Builds and evaluates multiple pre-production prototypes to verify performance

Phase 5 Production Ramp Up

Makes units using actual intended production system; workers are trained and remaining issues resolved before full production

Process Variants

Not all products follow same market pull path: Technology Push (finds market for tech), Platform Products (built on technological subsystem like computers), Process Intensive (process shapes properties), Quick Build / High Risk / Customized (software/pharma/motors)

Quality Function Deployment (QFD)

Structured process using cross functional teams (marketing, engineering, manufacturing) to translate customer wants into specific technical targets

House of Quality Matrix

Left: Customer requirements & importance rating (1-7); Top: Engineering/technical characteristics; Middle: Relationship strength; Roof: Technical trade offs/correlations; Bottom: Calculated importance weights & target engineering values

Value Analysis / Value Engineering (VA/VE)

Simplifies products and processes to get equal or better performance at lower cost without missing necessary customer functions

Design Manufacture and Assembly (DFMA)

Focuses on minimizing component counts and fasteners to lower costs, shorten assembly time, and raise quality

Concurrent Engineering

Cross functional teams work together on design and manufacturing process choices (replaces traditional over the wall hand offs)

Ecodesign

Integrates environmental impact across the entire product life cycle (raw materials, production, use, and disposal)

Designing Services

Customers are directly involved in service delivery; services must manage variability using Complexity and Divergence

Complexity

Total number of steps in service process

Divergence

Number of ways a customer/provider interaction can vary at each step

Service Fit Check

New service must satisfy Service Experience Fit (customer expectations), Operational Fit (infrastructure in place), and Financial Justification (investment justified)

Base Case Model

Used at Go/No-Go milestones and for evaluating design choices by estimating project cash flows, computing Net Present Value (NPV), and running sensitivity analysis (What-if testing)

Reliability

Mathematical probability that product, part, or system will perform its intended function under specified conditions for given time (value between 0 and 1)

Infant Mortality

Early failures due to manufacturing defects; high initial failure rate drops rapidly (managed via burn-in testing)

Useful Life (Random Failures)

Low, constant failure rate; modeled using Negative Exponential Distribution

Wear Out

Increasing failure rate as components age; modeled using Normal Distribution

Process Selection Types

Make-to-Stock (MTS), Make-to-Order (MTO), and Assemble-to-Order / Hybrid (ATO) (Ex. McDonald's)

Flowchart Symbols

Rectangles (tasks/operations), Diamonds (decisions), Triangles (storage/WIP queues), and Line of Visibility (separating front-office customer activities from back-office activities)

Process Structures

Single-stage vs. Multi-stage, Serial flow, Parallel flow, and Logistics

Process Dynamics

Buffering (storage between stages), Blocking (upstream stops because downstream buffer is full), and Starving (downstream stops because upstream hasn't delivered work)

Bottleneck Rules

The station with the lowest capacity / longest processing time limits total output; adding capacity to non-bottleneck stations yields zero increase in total output

Performance Definitions

Processing Time, Flow Time, Cycle Time, Throughput, Utilization, and Takt Time

Rework Impact

Items failing inspection consume capacity twice, dropping effective output below nameplate capacity

Three Levers to Cut Flow Time

Perform activities in parallel; Change sequence of activities (resequence so rework/approvals happen early); Reduce interruptions and queue waiting time

Horizontal Enrichment

Giving workers a greater variety of tasks at the same level

Vertical Enrichment

Giving a worker managerial responsibilities such as planning, organizing, and inspecting their own work

Process Velocity

Measures how much of a unit's journey is spent doing work vs queues

Work Measurement Methods

Time Study (stopwatch), Work Sampling (random interval sampling), Predetermined motion time data, and Elemental Data