Chapter 8 - Operations Management

What is Operations Management?

Managing the process of converting resources into goods and services, aligning with business strategy as efficiently and effectively as possible.

How does Operations Management vary by company?

The nature of Operations Management depends on the products/services in a company's portfolio and their manufacturing methods.

What is manufacturing (industrial definition)?

Processing raw materials or components into finished products by means of large-scale industrial operations (mass production).

How is Manufacturing Management defined?

Managing all processes, equipment, personnel, inventory, and warehouses involved in manufacturing.

What is LEAN?

A philosophy focused on waste reduction and value enhancement throughout the manufacturing process.

What is Six Sigma?

A disciplined, statistical, data-driven methodology for identifying/removing causes of defects and minimizing process variability.

How do LEAN and Six Sigma complement each other?

LEAN improves flow by eliminating waste; Six Sigma improves process by reducing defects/variability. Together they create a smooth, steady supply chain.

What is the purpose of developing a manufacturing strategy?

To align how a company manufactures products with the product type, customer expectations, and company strengths for an effective supply chain.

Name the four major manufacturing strategies.

Make-to-Stock (MTS), Make-to-Order (MTO), Assemble-to-Order (ATO), Engineer-to-Order (ETO).

What is Make-to-Stock (MTS)?

Manufacturing goods for inventory based on demand forecast (push system); efficient for standard products but risks excess inventory.

What is the main risk in MTS?

Holding too much inventory due to inaccurate forecasts, leading to high carrying costs or stockouts.

What is Make-to-Order (MTO)?

Manufacturing starts only after a customer order is received; allows customization but has additional wait time for customers.

Who is MTO best for?

Highly configured or very expensive products not suitable for holding in inventory (e.g., aircraft, bridges).

What is Assemble-to-Order (ATO)?

Basic parts are pre-made; final assembly and some customization happens once customer order arrives, for quicker fulfillment.

How does ATO combine MTS and MTO?

It allows short lead times through pre-manufactured components while enabling some customization at low inventory costs.

What is Engineer-to-Order (ETO)?

Product is designed, engineered, and built from scratch to the customer's specifications after the order is received.

What makes ETO risky?

Each product is unique—costs from poor quality, warranty, or rework can deeply affect profitability.

How do manufacturing strategies affect customer lead time?

MTS has the shortest lead time; ETO the longest. Strategy sets the delivery time customers experience.

What are the two major categories of manufacturing processes?

Intermittent (high variety, low volume) and Repetitive (low variety, high volume).

What is Job Shop/Project Production?

Creates custom or one-off products per customer specs; high customization, low volume—like custom homes or ships.

What is Batch Production?

Small fixed quantities are produced per run; improves equipment use for lower-volume products (e.g., bakeries, furniture).

What is Line Flow (Mass Production)?

Standardized products made in high volume, consistently, on assembly lines (e.g., cars, cell phones).

What is Continuous Flow Production?

Very high volume, standardized, highly automated, runs 24/7 (e.g., oil refining, cement).

How do process types relate to variety and volume?

Job shop: high variety/low volume; Continuous: low variety/high volume.

What does the Manufacturing Strategy vs Performance Cycle chart show?

It maps how lead times and processes change for each strategy, from MTS (shortest) to ETO (longest).

What is Total Cost of Manufacturing (TCM)?

The complete cost (fixed and variable) of producing, storing, and delivering products, including manufacturing, procurement, inventory, warehousing, and transport.

How does volume impact TCM components?

Higher volume lowers unit manufacturing/procurement but increases inventory/warehousing; transport costs eventually level out.

What happened in the history of LEAN?

Henry Ford's assembly line (1910s), Toyota Production System (1940s), "LEAN" term (1988 and 1990), and supply chain concepts in the 1990s.

What are "Quick Response," "Efficient Consumer Response," "JIT," and "Keiretsu"?

Supply chain concepts related to LEAN: rapid replenishment, consumer service cooperation, just-in-time inventory, and long-term supplier networks.

What is LEAN's main goal?

Eliminate all waste (non-value-adding activities) and minimize resource use.

What is LEAN NOT?

Not just layoffs, cutting costs, automating, offshoring, or using tools—it's a culture and philosophy change.

How does LEAN facilitate culture change?

Requires altering behaviors, attitudes, and company culture to continually pursue waste elimination.

How is value defined in LEAN?

Value is what the customer is willing to pay for; value-added activities directly increase market/form/function.

What is the difference between Value-Added and Non-Value-Added activities?

Value-added: transforms materials/info the customer will pay for; Non-value-added: takes time/resources but doesn't add worth.

What are the main elements of LEAN Manufacturing?

Reducing waste, LEAN layouts, reduced setup/changeover times, small batch scheduling, supply chain partnerships, workforce empowerment, and continuous improvement.

What does DOWNTIME stand for in LEAN waste?

Defects, Overproduction, Waiting, Non-utilized talent, Transportation, Inventory, Motion, Extra-processing.

How does reducing waste benefit organizations?

Shorter cycle times, higher throughput, better productivity, improved quality, lower costs, and competitive advantage.

What is a LEAN Layout?

Arranging people/materials as needed, with open visibility, often using U-shaped cells—to support fast, efficient flow.

What does "Respect for People" mean in LEAN?

Empowering employees and building collaborative, cross-functional teams for improvement and accountability.

What is the worker's role in LEAN?

Perform tasks, actively improve processes, correct problems, work in teams (quality circles).

What is the manager's role in LEAN?

Cultivate LEAN culture, empower teams, provide cooperation, and recognize/reward improvement.

What is the supplier's role in LEAN?

Develop long-term partnerships, improve quality, and limit the number of high-quality suppliers.

How does a LEAN sandwich shop example illustrate principles?

It visually demonstrates removing unnecessary steps and waste for efficient workflow.

What is workplace organization under 5S?

Sort, Set in order, Shine, Standardize, Sustain—a methodical way to maintain an efficient, clean workspace.

How do the 5S's support LEAN?

Makes problems and waste visible; enables standard work and easy detection of issues.

What is the foundation of Six Sigma?

Customer-defined quality, use of technical tools (statistics), and involvement of every person involved.

How is "quality" defined in Six Sigma?

Quality is whatever the customer says it is—reliable, functional, durable, well-designed, and value for money.

What are some technical tools in Six Sigma and TQM?

Check sheets, flow diagrams, Pareto analysis, cause-and-effect diagrams (fishbone), control charts, histograms, scatter diagrams.

What does the 5 Whys technique do?

Identifies the root cause of a problem by repeatedly asking "Why?" until the true underlying reason emerges.

What does the 5 Hows technique do?

Drills down into how to solve a root problem, clarifying the steps for a robust solution.

What is DMADV?

Define, Measure, Analyze, Design, Verify—a Six Sigma method for designing new products/processes.

What is DMAIC?

Define, Measure, Analyze, Improve, Control—the Six Sigma approach for improving existing processes/products.

What is Total Quality Management (TQM)?

A management philosophy committing all employees to continuous quality improvement in every aspect.

Who are major quality experts?

W. Edwards Deming (Plan-Do-Check-Act), Philip Crosby (zero defects, quality is free), Joseph Juran (fitness for use, cost of quality), Kaoru Ishikawa (fishbone diagrams).

How did McDonald's adapt LEAN?

Its "Speedee Service System" created a fast-food LEAN layout, influencing efficient workflow in the food industry.

What is the point of the McDonald's before/after LEAN layout example?

Demonstrates the tangible impact of applying LEAN layout principles to real-life service operations.