Introduction to Managing Operations Across the Supply Chain Flashcards

A Comprehensive collection of vocabulary terms and definitions covering the fundamentals of Operations Management, Supply Chain Strategy, Quality Control, Inventory Management, Logistics, and Demand Planning based on the provided lecture notes.

Operations Management

The management of processes used to design, supply, produce, and deliver valuable goods and services to customers.

Supply Chain

The global network of organizations and activities involved in designing, transforming, consuming, and disposing of goods and services.

Dematerialization

The process of turning a tangible good into an intangible service, such as a digital textbook.

Process

A system of activities that transforms inputs into valuable outputs using resources like energy and labor.

Lean Operation

An operation that produces maximum efficiency and effectiveness using a minimal amount of resources.

Core Capabilities

Unique sets of skills that create a competitive advantage for firms.

Supply Chain Management

The design and execution of relationships and flows that connect the parties and processes across a supply chain.

Upstream Product Suppliers

Suppliers that provide raw materials, services, and components directly related to the manufacturing or service production process.

Downstream Product Suppliers

Suppliers that provide enhancements to finished goods such as assembly, packaging, transportation, and storage.

Resource and Technology Suppliers

Suppliers that provide equipment, labor, product and process designs, and other resources needed to support a firm’s processes.

Aftermarket Suppliers

Suppliers that provide services and support like maintenance, repair, and disposal.

Stakeholders

People who have an interest in the financial well-being of an operation.

Customer Management

The management of the customer interface, including distribution, sales, order fulfillment, and customer service.

Supply Management

The management of processes used to identify, acquire, and administer inputs to the firm, including purchasing and sourcing.

Logistics Management

The management of the movement of materials and information within, into, and out of the firm.

Tier

A step in the upstream supply chain.

Echelon

A step in the downstream supply chain.

Operations Strategy

A set of competitive priorities and design choices intended to create capabilities that support value propositions for key customers.

Corporate Strategy

Determines the overall mission of the firm, the businesses it enters, and its long-term values and goals.

Business Model

The combination of choices determining target customers, value propositions, and the supply chain capabilities employed.

Functional Strategy

The most detailed level of strategic planning that determines how a specific function will support the overall business unit strategy.

Order Winners

Product traits that cause customers to choose a product over competitors, such as better performance or lower price.

Order Qualifiers

Product traits that must meet a certain level for a customer to even consider the product, such as availability or price.

Order Losers

Traits where poor performance, such as late delivery or poor quality, can cause the loss of business.

Value Proposition

Product and service features that are attractive to customers and differentiated from competitors.

Fit

The extent of alignment between a firm’s operational capabilities, its value proposition, and the desires of its critical customers.

Process Thinking

A way of viewing activities in an organization as processes rather than departments or functions.

Juran’s Law

The principle that $15\%$ of operational problems are from human error and $85\%$ are from systematic errors.

Operation

Any activity in a process that transforms an input; a major source of value creation.

Transportation

An activity that moves an input from one place to another without changing its other characteristics.

Inspection

An activity in a process that checks or verifies another activity.

Delay

When the flow of an input is unintentionally stopped as a result of interference.

Storage

An activity where items are inventoried under formal control.

Economies of Scale

The phenomenon where unit costs decrease as production volume increases due to lower fixed costs and the learning curve.

Maximum Capacity

The highest level of output a process can achieve under ideal conditions in the short term, also called design capacity.

Effective Capacity

The level of capacity a process is expected to produce under normal conditions; what management plans for.

Utilization of Maximum Capacity

The percentage calculated as $\frac{\text{Actual Capacity}}{\text{Maximum Capacity}} \times 100$.

Yield Rate

The percentage of units successfully produced as a percentage of inputs, calculated as $\frac{\text{Successful Units}}{\text{Total Units}} \times 100$.

Theory of Constraints

A management system that improves performance by identifying and managing constraints or bottlenecks.

Bottleneck

An activity or resource that limits or constrains the output of a process.

Little’s Law

The formula for flow time: $F = \frac{I}{TH}$, where $F$ is flow time, $I$ is inventory, and $TH$ is throughput rate.

Cycle Time

The time it takes to complete one step in a process.

Wait Time Formula

$\text{wait time} = \left( \frac{c_a^2 + c_p^2}{2} \right) \left( \frac{u}{1 - u} \right) t_p$, where variability and utilization levels impact wait time nonlinearly.

Product Life Cycle

A pattern of sales growth and decline categorized into Launch, Growth, Maturity, and Decline stages.

Open Innovation

The organizational effort to capture ideas and resources from sources outside the firm for use in innovation.

Crowdsourcing

Obtaining ideas by soliciting contributions from large groups of people, typically online.

Early Supplier Involvement (ESI)

A co-development approach where suppliers participate directly in product design activities.

Stage-gate Process

A disciplined approach defining specific criteria for each project stage that must be completed before moving to the next.

Concurrent Engineering

The simultaneous design and development of all processes and information needed for a product.

Voice of the Customer

Research that gathers customer wants, needs, likes, and dislikes regarding product features.

Quality Function Deployment (QFD)

A tool for translating customer needs into engineering language, often involving the House of Quality.

Failure Modes and Effects Analysis (FMEA)

A procedure for identifying and correcting potential quality problems, resulting in a Risk Priority Number (RPN).

Risk Priority Number (RPN)

$\text{RPN} = \text{occurrence rating} \times \text{severity} \times \text{undetectability}$.

Design for Manufacture

Methods and tools that focus on improving product producibility.

Project Process Structure

A process structure for unique, one-of-a-kind outputs like custom homes or yachts.

Job Shop

A process structure where customized outputs are produced in low volumes, such as at a salon.

Batch Processing

A process structure where goods are produced in groups and not continuous streams, such as at a bakery.

Continuous Process

A single-flow process for high-volume, standardized, non-discrete products like gasoline or laundry detergent.

Cellular Manufacturing

The production of products with similar process characteristics on small assembly lines called cells.

Engineer to Order (ETO)

A market orientation for unique, customized products.

Make to Stock (MTS)

A market orientation where finished goods are held in inventory in advance of customer orders.

Service Factory

A service process offering standard services to customers who value low prices, such as airlines or hotels.

Service Shop

A service process with a high degree of capital intensity and customer interaction, such as hospitals or car repair shops.

Line Balancing

The process of assigning tasks so that idle time and the number of workstations are minimized.

Takt Time

The maximum allowable cycle time at each workstation based on customer demand, calculated as $T = \frac{\text{Available Production Time}}{\text{Output Needed}}$.

Bounded Rationality

Limitations on decision-making caused by cost, human abilities, time, technology, and information availability.

Maximin

A decision rule for uncertainty where the alternative with the best of the worst possible payoffs is chosen.

Minimax Regret

A decision rule for uncertainty where the alternative with the least of the worst regrets is chosen.

Expected Monetary Value (EMV)

A criterion for decision-making under risk choosing the best expected value among alternatives.

Expected Value of Perfect Information (EVPI)

$\text{EVPI} = \text{expected payoff under certainty} - \text{expected payoff under risk}$.

Conformance Quality

A measure of whether or not a delivered product meets its design specifications.

Total Quality Management (TQM)

An integrated strategy aimed at embedding quality awareness in all organizational processes and involving all employees.

Cost of Quality (COQ)

A framework for quantifying costs related to prevention, appraisal, internal failure, and external failure.

DMAIC

The Six Sigma improvement process: Define, Measure, Analyze, Improve, and Control.

Pareto Analysis

A technique based on the assumption that $80\%$ of problems come from $20\%$ of causes, separating the 'critical few' from the 'trivial many'.

Process Capability Index (Cpk)

A tool for assessing a process's ability to meet design specifications, adjusting for a lack of centering.

X-r Chart

A control chart used to monitor the sample mean ($X$) and range ($r$) for variable data.

Cycle Stocks

Inventory repeatedly produced or ordered to fill demand in normal replenishment cycles.

Buffer Stock

Extra inventory held to guard against uncertainty in supply or demand, also known as safety stock.

Speculative Stock

Stock purchased to hedge against future price increases or shortages.

Inventory Turnover

The ratio of sales to average inventory: $\text{Inventory Turnover} = \frac{\text{COGS}}{\text{average inventory @ cost}}$.

Days of Supply

$\text{Days of Supply} = \frac{\text{current inventory}}{\text{expected daily rate of demand}}$.

Economic Order Quantity (EOQ)

The order quantity that minimizes the sum of annual carrying costs and annual ordering costs.

Total Acquisition Cost (TAC)

$\text{TAC} = C_o \left( \frac{D}{Q} \right) + U C_i \left( \frac{Q}{2} \right)$, representing the sum of all relevant annual inventory costs.

Reorder Point (ROP)

The minimum level of inventory that triggers the need to order more.

Total Cost of Ownership (TCO)

All the costs incurred before, during, and after a purchase.

Spend Analysis

A process for identifying purchases throughout an organization to develop supply management strategies.

Strategic Purchases

Purchases characterized by high spend and high risk, which are unique and critical to core performance.

Electronic Data Interchange (EDI)

The structured, secure electronic transmission of data between companies for order processing.

Intermodal Transportation

A transportation method that combines two or more modes, such as truck and rail, to use their respective advantages.

Cross-docking

A logistics activity that combines break-bulk and warehouse consolidation activities to move goods directly from receiving to shipping.

Autocorrelation

The relationship between current and past demand patterns.

Delphi Method

A judgement-based forecasting technique asking a panel of experts to individually and repeatedly answer questions.

Exponential Smoothing

A forecasting model that applies exponentially decreasing weights to demand occurring farther back in time.

Mean Absolute Deviation (MAD)

The primary measure for the average size of forecast errors, irrespective of their directions.

Tracking Signal

The ratio of the running total of forecast error to MAD, used to indicate significant changes in error patterns.