Exam 1 - Ch. 1-5

Chapter 1

operations management: the business function responsible for planning, coordinating, controlling, and leading the resources needed to produce a company’s products and or services

operations has the responsibility to coordinate human capital, equipment, technology, raw materials, and information to produce a product or service effectively and efficiently

• quantity demanded

• quality required in timely manner

• at lowest cost

customer Is the center of all business focus

operations management tranforms inputs into value added outputs

inputs: human capital, buildings, processes, various technologies, and raw materials

outputs: the products and services sold

what is the goal of the transformation process? to add customer value in order for the company to make a profit

transformation process: coverts inputs into outputs with the intent of adding value to the customer and making a profit

physical transformation: manufacturing - rubber to tires

exchange transformation: retail sales - warehouse stores to local stores

locational transformation: transportation and distribution - car manufactuing and then to dealerships

informational transformation: sharing and communication - internet

physiological transformation: a human physical change - surgery

pyschologial transformation: state of mind - entertainment providing enjoyment

service operations transformation process: Include intangible products, few or no inventories, higher customer interactions, labor intensive, shorter response times to customer satisfaction

manufacturing operations transformation process: physical product, inventories, lower customer contact, capital intensive, longer response time

strategic decisions: establish the broad direction of the company and are heneral in scope with long-term hhorizon

tactical decisions: must be coordinated to facilitate the strategic decisions, are more short term in nature and more specific with operational objectives

James Watt: 1764 - inventor of steam engine

Adam Smith: 1776 - inventor of division of labors

Eli Whitney: 1790 - inventor of interchangeable parts

Henry Ford: Inventor of moving assembly line

W. Edwards Deming: Developed concepts of quality Improvement in Japan and America

Taiichi Ohno: Developed first lean system, toyota manufacturing

flexibility: greater variety of product and service choices on a mass scale (mass customization)

time based competition: developing new product designs and delivering customer orders quicker than competitors

supply chain management: cooperating with suppliers and customers to reduce overall costs of teh supply chain and increase responsiveness to customers

lean management: continually working to reduce costs and eliminate waste while increasing customer value and profits

Chapter 2

what is the overall goal of a business strategy? to make money

what are the four competitive priorities of a business? cost, quality, time, and flexibility

cost: pricing below or above competitors for a better profit or market share

quality: performance and consistency = price premium

time: faster and consistent delivery = price premium

flexibility: product volume flexibility = price premium

competing on cost: eliminate waste, efficient process, limited customization, automation

competing on quality: design quality, process quality, luxury goods

competing on time: rapid delivery, lead time, consistency, on time delivery,

competing on flexibility: production flexibility, easy changeover, easy customization, volume flexibility

productivity: measures the amount of output compared to the level of inputs used

productivity equation: (outputs/ inputs)

• How can you increase productivity?

  • increase outputs, decreasing inputs

  • decrease inputs, same outputs

  • increase outputs same inputs

  • increase outputs faster

productivity growth rate equation: (P2-P1)/P1

Chapter 3

• Steps in the forecasting process

  • decided what to forecast

  • evaluate and analyze data

  • select and test forecasting model

  • generate the forecast

  • monitor forecast accuracy over time

forecasting is a critical business strategy that involves strategic and tactical business decisions

most basic forecasting models are formula driven

Basic forecasting principles

1. forecasts are rarely perfect, they are a scientific and educated guess

2. grouped forecasts are moer accurate than individual items

3. forecast accuracy is higher for shoerter

types of forecasting methods

qualitative methods: forecasts are generated subjectively by the forecaster

strengths of qualitative methods: incorporates inside information; particularly useful when teh future is expected to be very different than the past

weaknesses of qualitative methods: forecasters bias can reduce the accuracy of the forecast

qualitative forecast types: executive opinion, market research, delphi method

characteristics of executive opinion: a group of managers meet to come up with a forecast

strengths of executive opinion: good for strategic or new product forecasting

weaknesses of executive opinion: one persons opinion can dominate the forecast

characteristics of market research: users surveys and interviews to identify customer preferences

strengths of market research: good determinant of customer preference

weaknesses of market research: It can be difficult to develop a reliable questionnaire

characteristics of delphi method: seeks to gain consensus among a group of experts

strengths of delphi method: excellent for forecasting long term product demand and technological change

weaknesses of delphi method: It can be a very time consuming process

quantitative methods: forecasts generated through mathematical modeling; time series and casual models

time series models: assumes to future will follow the same patterns as the past

casual models: explores cause and effect relationships, often using leading indicators to predict the future

time series models

naive: the forecast is equal to the actual value observed during the last period; useful when historical data is very stable at the same level or as if there is no historical data; assumption is that what just happened is likely to happen again

simple mean: the forecast is the average of all available data; this method is a relatively conservative in the absence of a consistent pattern in the data

moving average: the forecast is the average value over a set time period, where each new forecast drops the oldest data point and adds teh most recent observation; this method places all teh emphasis on a preset number of recent data periods, appropriate choice whne shifts in data occur, equals emphasis on the specified number of time periods

weighted moving average: the forecast is the average value over a set time period, where each new forecast drops the oldest data point and adds the most recent observation, but each time period can have a different weight, providing the possibility of emphasizing one or more time periods over others; all weights but add to 100%, allows forecaster to emphasize one period over others as more influential in forecasting demand

exponetial smoothing: adjusts the next forecast by some proportion of the previous forecast error; the forcast quality is highly dependent on selection of the smoothing constant, alpha; low alpha values generate more stable forecasts, responding slowly to changes in the data; high alpha values create forecasts that respond quickyl to data changes; issues arise when recent changes reflect random variation or some other pattern

low alpha values: results in more stable forecasts, responds slowly to changes in data

high alpha values: create forecasts that respond quickly to changes in data

tracking forecast errors:

Chapter 4

what are the stages of a product life cycle? Introduction, growth, and maturity

product process development step 1: Idea development procedures and methods

brainstorming: soliciting many ideas without prejudice hoping for synergy of ideas, success rate is low, often done through surveys and focus groups

benchmarking: study “best in class” companies (even from other industries) and compare practices and performances

reverse engineering: disassembling/ analysing a competitors product or service for design ideas, solicites ideas from customers, suppliers, and emplyees, and routinesly examine technical advances, industry magazines, journals and conferences

product process development step 2: product screening for selecting a potential product or service

role of marketing in development: how large is the market niche, what is long term potential for market, is market growing or declining or emerging, what are expected demands in next years, would trademark or patent be feasible

role of operations in development: do we have or can we acquire required labor skills and raw materials needed, do we have enough existing capacity, what would be the eliminated costs of production, what is the breakeven point

role of finance in development: what is the expected return on investments, what is the necessary capital outlay, what risk would the capital of the company face

product process development step 3: preliminary design and testing; develop a prototype with function before form to begin translating general performance characteristics into technical specifications, perform some test marketing where bugs are worked out and designs are refined

product process development step 4: final design; specifications are set and then used to develop, guide, outline, negotiate, and then they are ready to begin production and service provisions

Out of 100 patents granted, only 10% ever make it to developmental stage, and only 1 out of 10 are profitable.

contribution margin formula: selling price - variable price

total cost formula: fixed costs + (variable costs * quantity)

total revenue formula: selling price * quantity

profit formula: total revenue - total cost

breakeven point formula: fixed costs / contribution margin

breakeven point with profit formula: (fixed costs + profit) / contribution margin

design for manufacture (DFM): the lean KISS - keep it simple stupid; use the minimun number of parts or steps, use standardized parts or steps, avoid the need for tools, simplify all operations

value engineering: each decisions and components should add value (market shares or unit selling price) or reduce fixed or unit variable costs

benefits from DMF: lower costs, lower inventories, less labor required, higher quality, simple easy to make products means fewer opportunities to make mistakes, improves functional performance, quality robust design is integrated into the process and product

concurrent engineering: multifuntional teams simaltaneously desing teh product and process to reduce design time by considering cost and design trade offs

remanufacturing: reusing of old compoonents and developing them into new products

indifference point between products which process to use: If the demand is higher than the amount produced, choose the process with the higher contribution margin

automated equipment which yields increased consistency and efficiency at increased fixed cost and loss of flexibility

intermittent processes: processes that are capable of producing large variety of product design In relatively low volumes, advantage is flexibility while disadvantages include material handling and high unit variable costs

continuous process: processes that are capable of producing one or few standardized designs in very high volume, advanatages include high efficiency in producing large numbers, while disadvantages inclide inflexibility to design changes, component failure, and high fixed costs for capital equipment

project process: Involves one at a time products made exactly to customer specifications

batch process: Involves processes that make small batches of product with high level of customizations

line process: are used for relatively high volumes with little customization

continuous process: are used for very high volume and standardized products

SOP: standardized operating process - very detailed instructions or tutorials for a specific process that must be completed in specific order

Chapter 5

lean management: deals with the elimination and reduction of many types of non value added activities, often referred to as waste

principle 1 of lean: accurately specify value from customer’s perspective for both services and products

principle 2 of lean: Identify the value stream for products and services and remove non value added waste along the value system

principle 3 of lean: make the products and services flow without interruption across value stream

principle 4 of lean: authorize production of products and services based on the pull by the customer

principle 5 of lean: strive for perfection by constantly removing layers of waste

benefits of lean thinking and implementation

capacity : 20% increase

inventory turns: 33% Increase

lead time: 50% decrease

throughput time: decrease

prod. development time : decrease

space in use: decrease

scrap : decrease

delivery performance: decrease

lean tools and concepts

value stream mapping: what we can change, make it better, rearrange

poka-yoke: prevent human errors by dummy proofing, visuals

point of use storage: store things where they are needed

one piece flow production: toyota production - no WIP

total preventative maintenance: focus on equipment and labor to prevent breakdowns

level model mix production: assembly line making difference things on the same line

kanban systems: a signal to start producing more

demand pull system: being lean, not made until demand is there (JIT)

failure mode and effects analysis: where could failure occur and have contingency to fix it

quick changeover kaizen: blitz, group of employees to solve a problem from all departments to keep everyone on same page

standard work/standard operating procedures: SOP - step by step instructions

six sigma: lots of experience, training, and knowledge in lean manufacturing - black belt

things that are not lean

push systems: making lots in hope the demand is there to sell

material requirements planning: what do we need now and this week, short term material planning

end product inspection and acceptance sampling: waiting till the end to make sure its built right

Just in time Philosophy: stocking technique, not as lean as some but still saves themselves, often cuts too close on not having enough and in time

what are the basic building blocks of a lean system? kanbans and pull production, quick setups and small lots, uniform plant loading, flexible resources, efficient facility layouts

kanban formula: N = DT/C

internal set up time: must be done while machine is not running, have to shut down assembly line to fix, inside the machine

external set up time: can be done while machine is still running, everything you can do before the turnover

jidoka: authority to stop the like, anyone has the power to stop the line for any reason

poka - yoke: fool-proofing the process, involving mechanical or electrical sensors

total productive maintenance: 5S, inspections and service and repairs, keeping ahead of problems that may arise

Chapter 5A

Sort: differentiate between necessary and unnecessary - we dont need what we cant or dont use, remove all items from the workplace not needed for current operations, throwing junk away

set in order: a place for everything and everthing in its place, needed items in an easily accesible place, label things so its easy to find

shine: keep everything in a clean and orderly manner while you are working, leave things clean, personal and professional, pinpoint cause of dirt and eliminate

standardize: create a consistent way that tasks and procedures are done - SOPs, establish standards to measure by and practice simple visual management

sustain: make it a habit and responsibility to follow workplace rules, everyones responsibility, motivate through procedures to standardize and measure performance