OM Final Exam

Customer Relationship Process

addresses the interface between the firm and its customer downstream in the supply chain (marketing, order placement, customer service processes)

Centralized Placement

keeping all the inventory of a product at a single location such as a firm’s manufacturing plant or a warehouse and shipping directly to each of its customers (benefits from inventory pooling, disadvantage is cost of shipping, uneconomical quantities directly to customers)

3 Inventory Measures of Supply chain Performance

Average Aggregate Inventory Value, Weeks of Supply, Inventory Turnover

Exponential smoothing

a sophisticated weighted moving average that calculates the average of a time series by implicitly giving recent demands more weight than earlier demands (good for smoothing, will lag)

How do you calculate forecast error

Forecast Error= actual demand- forecast (positive means it was under forecast and negative means overforecast)

Job Process

creates flexibility needed to produe a wide varietky of products in significant quantities, with considerable divergence in the steps performed (customization high and volume low)

Process Analysis

Documentation and detailed understanding of how work is performed and how it can be redesigned

Productivity

Basic measure of performance for economies, industries, firms, and processes. Outputs divided by inputs

Operations Management

The systematic design, direction, and control of processes that transform inputs into services and products for both internal and external customers

Supply Chain

interrelated series of processes within and across firms that produces a service or product to the satisfaction of customers

3 mainline functions that are a part of every business

Finance, marketing, and operations

Process

Has its own set of objectives, involves a workflow that cuts across departmental boundaries, and requires resources from several departments. Has inputs and outputs

Core Processes

set of activities that deliver value to external customers (managers of these processes interact with external customers and build relationships with them, develop new products and services, interact with external suppliers

Support Processes

a process that provides vital resources and inputs to the core processes and inputs to the core processes and therefore is essential to the management of the business

4 Core Processes

Supplier Relationship, new service/ product development, order fulfillment, customer relationship process

Supplier Relationship Process

a process that selects the suppliers of services, materials, and information and facilitates the timely and efficient flow of these items into the firm

new Service/Product Development

process that designs and develops new services or products from inputs received from external customer specifications or from the market in general

Order Fulfillment

a process that includes the activities required to produce and deliver the service or product to the external customer

Customer Relationship Process

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

Operations Strategy

means by which operations implements corporate strategy and helps to build a customer-driven firm

Corporate Strategy

provides an overall direction that serves as the framework for carrying out all the organization’s functions. Specifies the business the company will pursue, isolates new opportunities and threats in the environment and identifies growth objectives

Core Competency

Unique resources and strengths that an organization’s management considers when formulating strategy

Competitive Priority

critical dimensions that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future

Competitive capability

the cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver

Order Winner

a criterion that customers use to differentiate the services or products of one firm from those of another

Order Qualifier

Minimal level required from a set of criteria for a firm to do business in a particular market segment

What do People in Operations Management roles do

Basic measure of performance for economies, industries, firms, and processes. Outputs divided by input

Service

tend to have a higher degree of customer contact

Manufacturing

tend to have less customer contact

Low-Cost Operations

delivering a service or product at the lowest possible cost to the satisfaction of external or internal customers of the process or supply chain

Top Quality

delivering an outstanding service or product

Consistent Quality

producing services or products that meet design specifications on a consistent basis

Delivery Speed

Quickly filling a customer’s order

on-time Delivery

meeting delivery-time promises

Development Speed

introducing a new service or a product

Customization

Satisfying the unique needs of each customer by changing service or product designs

Variety

handling a wide assortment of services or products efficiently

Volume Flexibility

accelerating or decelerating the rate of production of services or products quickly to handle large fluctuations in demand

Process structure

The pattern of decisions made in managing processes so that they will achieve their competitive priorities

3 parts of process strategy decision

Customer Involvement, Resource Flexibility, Capital Intensity

Customer Involvement

reflects the ways in which customers become part of the process and the extent of their participation

Resource Flexibility

the ease with which employees and equipment can handle a wide variety of products, output levels, duties and functions

Capital Intensity

mix of equipment and human skills in a process

3 positions on the Customer-Contact Matrix

Front office, hybrid office, Back office

Front Office

Process with high customer contact where the service provider interacts directly with the internal or external customer (workflows are flexible)

Hybrid Office

process with moderate levels of customer contact and standard services with some options available

Back Office

process has low customer contact and little service customization (work is standardized and routine

5 positions on the product-process matrix

Job process, batch process, line process, continuous flow process

Batch Process

volumes are higher, production lots are handled in larger quantities than with job processes

Line process

volumes high and products standardized. Minimal in process or line flows

Continuous flow process

the extreme end of high-volume standardized production, with righid line flows (lpetroleum refining, processing making steel, etc

4 production and inventory strategies for manufacturing

Design to order strategy, Make to order Strategy, Assemble order Strategy, Make-to-Stock

Design to order strategy

used when a firm designs new products that do not currently exist, then manufacture them to meet unique customer specifications. (job process is typically used for this)

Make to Order Strategy

used by manufacturers that make products to customer specifications in low volumes

Assemble to Order Strategy

an approach to producing a wide variety of products from relatively few subassemblies and components after the customer orders are received (often involves a line process for assemblu and batch process for fabrications)

Make-to-Stock Strategy

involves holding items in stock for immediate delivery, thereby minimizing delivery times (feasible for standardized products with high volumes and accurate forecasts, line or continuous flows)

Identify the sages of the Six Sigma Improvement Model (DMAIC)

Define, Measure, analyze, Improve, Control

Process Analysis

the documentation and detailed understanding of how work is performed and how it can be redesigned

Demand Management

Process of changing demand patterns using one or more options so that demand better matches a company’s supply

Options Available for Managing Demand

Complementary Products, Promotional Pricing, Prescheduled appointments, Reservations, Revenue Management, Backorders and stockouts 63.05

5 possible demand patterns that can be part of time series data

Horizontal, trend, seasonal, cyclical, random

horizontal

Fluctuation of data around a constant mean

Trend

the systematic increase or decrease in the mean of the series over time

Seasonal

a repeatable pattern of increases or decreases in demand, depending on the time of day, week, month, or season

cyclical

less predictable gradual increases or decreases in demand over longer periods of time

Random

unforecastable variation in demand

3 major categories of forecasting methods

judgement, causal, time series

How does CFE measure bias

calculates the sum of all errors to see if there is underlying bias

How would you determine the best smoothing constant (α) to use when trying to develop a forecast method using exponential smoothing?

Larger a are used to emphasize recent levels of demand and result in forecast being more responsive. Smaller values treat past demand more uniformly

Purpose of Tracking Signals

Indicates whether a method of forecasting is accurately predicting actual changes in demand

Naive Forecasting

Forecast for next period is set to actual demand from current period. (most responsive to changes in demand and does nothing to smooth the random fluctuations in demand)

Simple Moving Average

forecast for next period is the average of the most recent periods (the more periods, the less responsive to changes, will lag)

Weighted Moving Average

the forecast for next period use the most recent periods, but gives more importance to recent data by incorporating a numerical weight (applicable to horizontal patterns to smooth fluctuations, will lag)

Supply Chain Management

Synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services, and information with customer demand

Average Aggregate Inventory Value

total average value of all items held in inventory by firm

Weeks of Supply

inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost

Inventory Turnover

an inventory measure obtained by dividing annual sales at cost by the average aggregate inventory value maintained during the year

How can supply chain performance be captured using ROA? How does supply chain management affect the constituent elements of ROA?

Reducing aggregate inventory investment and fixed investments, or increasing net income by better cost management, will increase ROA

Efficient Supply chains

works best in environments where demand is highly predictable, focuses on cost and availability, appropriate when demand is high and products/services are standardized (make to stock)

Responsive supply Chain

designed to react quickly to hedge against uncertainties in demand, work best when firms offer a great variety of services or products and demand predictability is low, (assemble to order, make to order, design to order)

Mass customization

strategy where a firm’s highly divergent processes generate a wide variety of customized services or products at reasonably low costs (assemble to order, flexibility, lower cost)

Make TO Order

product is based on a standard design; however component production and manufacture of the final product is linked to the customer’s specifications (custom-made clothing, predesigned houses)

Make to Stock

build product to forecast and send to FG inventory, using forecast is a stable production schedule which enables productivity and efficiency, readily available to customer

Define outsourcing and explain the benefits and disadvantages

Paying suppliers and distributors to perform processes and provide needed services and materials (another firm can better perform outsourced process, disadvantages is the firm can lose skills and knowledge needed to do the process, when process is critical)

Vertical Integration

Firm purchases or develops the process that it needs so that it does the process instead of another firm doing it

Backward Integration

company performed a process to supply itself materials or services thus eliminating the need for external supplier

Forward Integration

means that the firm acquires more channels of distribution, such as its own distribution centers

Factors to be considered when making location manufacturers for services

Proximity to Customers, Transportation and proximity to Markets, Location of Competitors

Preference Matrix

quantitative method for evaluating a wide variety of objective and subjective factors (often referred to as factor rating)

Center of Gravity

Identifies a geographic location of facility that attempts to minimize transportation costs (good for locating distribution centers and other types of service centers)

Load-distance Scores

Evaluates locations based on proximity factors

Forward Placing

locating stock closer to customers at a warehouse, DC, wholesale, or retailer

GIS

System of computer software, hardware, and data that the firm’s personnel can use to manipulate, analyze, and present information relevant to a location decision

Supply Chain Integration

Effective coordination of supply chain process throught the seamless flow of information up and down the supply chain

Bullwhip Effect

Phenomenon in supply chains where ordering patterns experience increasing variance as you proceed upstream in the chain, can be costly

New Product Design Process

Defines the nature of the materials, services, and information flows the supply chin must support (design, analysis, development, full launch)

Supplier Relationship Process

focuses on the interaction of the firm with upstream suppliers (Sourcing, Design collaboration, negotiation, buying, and information exchange

Order Fulfillment Process

produces and delivers the service or product to the firm’s customers (customer demand planning, supply planning, production, and logistics)

Project

an interrelated set of activities with a definite starting and ending point results in an unique outcome for a specific allocation of resources