Operations Exam/Final

Operations Management

the process of managing resources and activities efficiently to produce goods and services that meet customer needs.

Supply Chain

Coordinating everything needed to get a product from the supplier → company → customer efficiently.

Tangible

something you can physically touch or see. Usually a good/product.
Examples: car, phone, shoes, food.

Intangible

something you cannot physically touch. Usually a service.
Examples: haircut, education, insurance, banking.

Order Qualifiers

the minimum requirements a product or service must meet for customers to even consider buying it. (Gets you to the table)

Order Winners

the factors that make the customer choose one company over competitors.
Example: The restaurant has amazing food and super-fast service, so you choose it over others. (Decision Maker)

Triple Bottom Line

a way of measuring a company’s success using three areas, not just profit:

(People, Planet, Profit)

Efficency

Doing things at the lowest cost

Effectiveness

Doing things to meet requirements (Quality)

Value

Highest quality relative to cost

Productivity

Highest outputs relative to inputs

Output / Input

Productivity Ratio:

Output / Labor

Partial Measures Ratio:

Output / (Labor + Capital + Materials)

Multifactor Measure Ratio:

Role of Operations

Managing a company’s resources and capabilities to create value and help the company compete.

Market Priorities

What customers care about when deciding what to buy, including order qualifiers and order winners.

Process

A set of activities that transforms inputs into outputs to create a product or service.

Product-Process Matrix:

A model that shows how the type of production process a company uses should match the volume and variety of the products it produces.

Customer-Contact Matrix:

A model that shows how a service process should be designed based on how much contact and interaction the customer has with the business.

break-even analysis

The point where total revenue equals total costs, meaning there is no profit or loss.

Manufacturing Processes

The methods used to physically produce goods based on volume and variety.

(Job shop → Batch → Line → Continuous Flow.)

Production and Inventory Strategies

Deciding when products should be made and how much inventory should be kept.

Make-to-order

make it after the customer orders

Assemble-to-order

parts are ready, but assemble after the order

Make-to-stock

make it ahead of time and keep it in inventory

Service Processes

Processes designed around how much interaction the customer has with the company.

Process Strategy

The overall plan for how a company will produce its goods or services.

Capacity

The maximum amount of output a process can produce in a certain amount of time.

Capacity Cushion

The extra capacity a company keeps available above what it normally needs.

Capacity Utilization

The percentage of a process’s maximum capacity that is actually being used.

Strategic capacity management

Planning how much capacity a company will need in the future to meet demand.

Capacity Planning

Deciding how much capacity a company needs to meet demand.
Think: How much can/should we produce?

Capacity Measures

Ways to measure how much of a company’s available capacity is being used.

Long-Term Capacity

Decisions about capacity far into the future, such as expanding factories or buying equipment.

Aggressive Expansion

Adding capacity early because you expect demand to grow.
Think: Expand before demand arrives.

Wait-and-See Strategy

Waiting for demand to increase before adding more capacity.

Short-Term Capacity

Temporarily adjusting capacity using things like workers, overtime, inventory, or subcontracting.

Capacity Requirements

Calculating how much capacity is needed to produce the expected demand.

Theory of Constraints

A management approach that focuses on finding and improving the bottleneck that limits the entire process.

Operational excellence

Continuously improving a company’s processes to make them more efficient, effective, and valuable to customers.

Constraint

Anything that limits or slows down a process’s ability to produce more output.

Bottleneck

The step in a process with the lowest capacity that limits the output of the entire process.

1. Identify

2. Exploit

3. Subordinate

4. Elevate

5. Repeat

5 Steps of Theory of Constraint

Manufacturing

The process of turning raw materials into finished physical products.

Throughput time

The total time it takes for one unit to move through the entire process from start to finish.

Process capacity

The maximum amount of output an entire process can produce in a certain amount of time.

Inventory Management

The process of deciding how much inventory to keep and when to order more.

Inventory Tradeoff

Balancing the cost of having too much inventory with the risk of having too little.

Economic Order Quantity (EOQ)

The order quantity that minimizes total ordering and holding costs. (Best amount to order each time.)

Ordering Cost

The cost of placing and receiving an order.

Holding Cost

The cost of keeping inventory in storage.

Safety Stock

Extra inventory kept to protect against unexpected demand or delays.
Think: Backup inventory.

ABC System

A method that ranks inventory based on its importance and dollar usage.

Q System

Inventory is continuously monitored, and a fixed quantity is ordered when inventory reaches the reorder point.

P System

Inventory is checked at set time intervals, and enough is ordered to reach a target inventory level.

Reorder Point

The inventory level that tells a company when it’s time to place a new order.

Complexity

what is the enemy of efficiency?

Supply Chain Design

Planning how a supply chain is organized to meet customer demand efficiently.

Outsourcing

moving some of a firm’s internal activities and decision responsibilities to outside providers (Hand all responsibility over)

Offshoring

Moving business operations or production to another country, often to reduce costs. (Remain in control but move overseas)

Mass customization

Producing customized products for individual customers while maintaining the efficiency of mass production.

Average Aggregate Inventory Value (AAIV)

The average total dollar value of all inventory a company has on hand.

Think: How much is all our inventory worth?

Weeks of Supply (WOS)

The number of weeks a company’s current inventory can support sales before running out.

Think: How many weeks until we run out?

Inventory Turnover

The number of times a company sells and replaces its average inventory during a year.

Think: How many times do we sell through our inventory each year?

Strategy	Customer lead time	Inventory investment
Make-to-Stock	Shortest	Highest
Assemble-to-Order	Short	Moderate
Make-to-Order	Long	Lower

Customer lead time and Inventory investment for each strategy:

Efficient Supply Chain

A supply chain focused on minimizing costs and delivering products efficiently when demand is stable.

Think: Stable demand → low costs and efficiency. (Less capacity cushion)

Responsive Supply Chain

A supply chain focused on quickly adapting to changing or unpredictable customer demand.

Think: Unpredictable demand → speed and flexibility. (More capacity cushion)

Supply Chain Analytics

Using data to analyze and improve supply chain performance and decision-making.

Supply Chain Networks

A network of companies connected through the flow of goods, services, information, and money.

(Supply chain materials and services flow downstream toward the customer as information and money flow upstream)

Bullwhip Effect

When small changes in customer demand cause increasingly larger changes in orders as you move up the supply chain.

Think: Small demand change → bigger and bigger orders.

Raw materials + WIP + Finished Goods

AAIV equals what?