Operations Management: Concepts, Processes, and Strategies

Vocabulary practice cards reviewing essential terminology, strategic processes, quality management frameworks, lean principles, and constraint theory.

Operations Management

The direction and control of the processes that transform inputs into products and services.

Process

Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for customers.

Core Process

A set of activities that delivers value to external customers.

Customer Relationship Process

A core process that facilitates the placement of orders and identifies, attracts, and builds relationships with external customers.

Internet of Things (IoT)

An environment of interconnected objects, such as sensors, that can automate the collection and exchange of data over a network.

Preventive Maintenance

An operations management practice that utilizes sensor and operational data to detect deteriorating machine components prior to equipment or product failure.

Variable Cost

The portion of total cost that varies directly with the volume of output.

Fixed Cost

The portion of total cost that remains constant regardless of changes in levels of output.

Sensitivity Analysis

A technique for systematically changing parameters in a model to determine the effects of such changes.

Preference Matrix

A quantitative evaluation table that allows a manager to rate an alternative according to several performance criteria.

Maximax

An optimistic decision rule under uncertainty that selects the alternative offering the "best of the best" payoffs.

Minimax Regret

A decision-making criterion under uncertainty that selects the alternative that minimizes the maximum lost-opportunity costs (regret).

Decision Tree

A schematic model of alternatives available to the decision maker, along with their possible consequences and probabilities, typically used for decision making under risk.

Drop Shipping

The practice of using manufacturers and distributors to ship products directly to customers to avoid carrying inventory at the retailer.

Core Competencies

The collective learning of an organization, especially how to coordinate diverse production skills and integrate technologies.

Market Segmentation

The process of identifying groups of customers with common characteristics to tailor goods and services to their needs.

Competitive Priorities

The critical operational dimensions that a process or supply chain must possess to satisfy internal or external customers, such as low cost, quality, delivery speed, or flexibility.

Competitive Capabilities

The measured ability of a process or supply chain to achieve its assigned competitive priorities.

Order Qualifier

The demonstrated level of performance required for a firm to do business or be considered by customers in a particular market segment.

Concurrent Engineering

A design philosophy that brings product engineers, process engineers, marketers, and procurement specialists together to avoid costly mismatches between design and production.

Quality Function Deployment (QFD)

A structured method and tool (House of Quality) used to translate customer requirements into appropriate technical and engineering requirements at each stage of product development.

Front Office

A service process characterized by high customer contact, high divergence, flexible workflows, and an emphasis on top quality and customization.

Back Office

A service process characterized by low customer contact, standardized workflows, routine work, and an emphasis on low-cost operations and consistent quality.

Product-Process Matrix

A conceptual framework that analyzes manufacturing operations by linking volume, product customization, and process characteristics.

Mass Production

A manufacturing environment that pairs a line process with a make-to-stock inventory strategy.

Assemble-to-Order Strategy

A production and inventory strategy that produces standard subassemblies and components to stock, then customizes the final assembly upon receiving a customer order, competing on delivery speed and variety.

Cross-Functional Team

A group consisting of members from each functional area affected by a process change, formed to prevent a silo mentality during process redesign.

DMAIC

The five-step Six Sigma process improvement methodology comprising Define, Measure, Analyze, Improve, and Control.

Service Blueprint

A visual flowchart of a service process that explicitly identifies which process steps have high customer contact.

Learning Curve

A line showing the relationship between processing time per unit and the cumulative quantity of a product or service produced.

Pareto Concept

The principle that roughly $80\%$ of an activity's effects or process complaints arise from roughly $20\%$ of the causes or customers.

Scatter Diagram

A graphical technique that displays pairs of numerical data to show whether two variables may be related.

Fishbone Diagram

A cause-and-effect diagram that systematically organizes and relates a key performance defect or problem to its potential root causes.

Process Chart

An organized recording format that documents all activities performed in a process, using standard classifications: operation, inspection, delay, transportation, and storage.

Prevention Costs

Costs associated with preventing defects and errors before they happen, such as worker training and process redesign.

Appraisal Costs

Costs incurred when a firm assesses and inspects products, incoming materials, or services to verify conformance to performance standards.

Internal Failure Costs

Costs resulting from defects that are discovered before a product or service is delivered to the customer, including scrap and rework.

External Failure Costs

Costs that arise when a defect is discovered after the customer receives the product or service, including warranty claims, recalls, customer returns, and lost goodwill.

Quality at the Source

A quality philosophy where defects are caught and corrected immediately where they are created, by the workers who make them.

Acceptance Sampling

The application of statistical techniques to determine whether a whole batch or lot of incoming materials should be accepted or rejected based on sample testing.

Statistical Process Control (SPC)

The application of statistical techniques to monitor process behavior and determine whether a process is delivering what the customer wants over time.

Type I Error

An error on a control chart that occurs when an employee concludes that a process is out of statistical control when it is actually in control.

Type II Error

An error on a control chart that occurs when an employee concludes that a process is in statistical control when it is actually out of control.

Common Causes of Variation

Random, unavoidable, and purely unidentifiable sources of variation that are inherent to a process operating as designed.

Process Capability

The ability of an in-control process to consistently produce goods or services within established engineering or customer tolerance specifications.

Just-in-Time (JIT) Philosophy

The belief that cutting inventory and eliminating non-value-added activities across operations eliminates waste.

Pull Method

A workflow method in which customer demand directly activates the production and replenishment of an item or service.

Poka-Yoke

Mistake-proofing methods aimed at designing fail-safe systems, procedures, or equipment that prevent human error.

Takt Time

The cycle time needed to match the rate of production to the rate of customer consumption or demand.

Group Technology

A manufacturing philosophy in which parts or products with similar geometric or processing characteristics are grouped into families and produced on dedicated equipment.

Kanban

A visual signal or card used in lean production systems to authorize the production or movement of materials from one workstation to another.

Capacity Cushion

The amount of reserve capacity a firm maintains to handle sudden increases in demand or temporary losses of production capacity.

Setup Time

The time required to change a machine or process line from making one product or service to the next.

Bottleneck

An operation or workstation that has the lowest effective capacity of any operation in a process, thereby limiting the total output rate.

Constraint

Any factor that limits the performance of an entire system and restricts its output rate.

Theory of Constraints (TOC)

A systematic management philosophy (also called the drum-buffer-rope method) that focuses on identifying and actively managing bottlenecks that restrict system output.

Line Balancing

The assignment of work elements to stations in a line process to achieve the desired output rate with the smallest possible number of workstations.

Balance Delay

The percentage by which workstation efficiency falls short of $100\%$ due to unequal workloads across workstations.