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5 Differences between Goods and Services
- 1. Service is an intangible process
- 2. Service requires interaction with the customer
- 3. Service is heterogeneous, vary from day to day
- 4. Service can't be stored
- 5. Service specifications are defined and evaluated as a package of features that affect the five senses (supporting facility, facilitating goods, explicit services, implicit services)
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Goods/Service Categories
- Pure goods
- Core goods
- Core services
- Pure services
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Servitization
building service activities into a company's product offering for current users
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Efficiency, effectiveness, value
- Efficiency: doing something at the lowest possible cost
- Effectiveness: doing things to creat the most value for the company
- Value: Quality/Price
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Productivity Ratio
outputs/inputs = productivity
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Productivity Measures
- Partial measure = all output/one input
- Multifactor measure = all output/multiple inputs
- total measure = all output/all input
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Triple bottom line
- economic: prosperity, shareholders
- social: responsibility, fair labor, community
- environmental: stewardship, natural resources, etc.
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Competitive dimensions
- Cost or price: make the product or deliver service cheap (only one per competitive market)
- Quality: make a great product or great service (design quality-set of features, process quality-reliability/defect free)
- Delivery speed
- Delivery Reliability
- Coping with changes in demand
- Flexibility and new-product introduction speed
- Other product-specific criteria: technical support, meeting launch date, supplier support, environment
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Straddling
occurs when a compnay seeks to match the benefits of a successful position while maintaining its existing position
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Order winner
a criterion that differentiates the products or services, what makes the product win the purchase
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Order qualifier
a screening criterion that permits a product to be considered as a possible candidate for purchase
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Illicit - What percent of global trade is illicit?
10%
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Illicit - Macro drivers in illicit trade
- money/greed
- influence and power
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Illicit - micro drivers in illicit trade
Maslow's hierarchy of needs
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Capacity Utilization Rate
- how close a firm is to its best operating level
- capacity used / best operating level
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Focus factory
plant within plant
- focus factory - production facility works best when it focuses on a fairly limited set of production objectives or competitive dimensions (cost, quality, delivery, etc.)
- Plant within a plant - focused factory may have several PWPs. Stand-alone factories within the entire factory as a whole
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Capacity flexibility
- having the ability to rapidly increase or decrease production levels, or to shift production capacity quickly from one product or service to another
- Flexible Plants (easy to install, tear down and move) (think of the circus)
- Flexible processes (Flexible equipment) (economies of scope - exist when multiple products can be produced from same process at a lower cost than separately)
- Flexible Workers - workers are cross-trained
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Planning service capacity
- more time- and location-dependent than manufacturing
- Time: Services cannot be stored; time is a supplier
- Location: Service must be at customer demand point (in a convenient location)
- Volatility of Demand
- --Inventory cannot smooth demand because you can’t store services
- --Customers needs differ. May require multiple transactions.
- --Directly affected by consumer behavior
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WIP calculation
- Little's Law
- LT relationship between the inventory, throughput, and flow time of a production system in steady state
- Inventory = throughput rate * flow time (aka units/time * time)
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Total inventory calculation
Total Average Value of Inventory = sum of raw materials, WIP, and finished goods at cost (FMV)
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inventory turns
COGS/ Average inventory value
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Flowtime Calculation
- Time it takes a unit to flow through the process from beginning to end
- inventory / throughput
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Lean Manufacturing
attempt to achieve high customer service with minimum levels of inventory investment
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Project Layout
Product (like a house) remains in a fixed location and manufacturing equipment is moved to the product
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Workcenter
sometimes called a job shop, similar equipment or functions are grouped together. A part being worked on travels according to the established sequence from work center to work center
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Manufacturing Cell
A single product or similar group of products are processed in a dedicated area
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Assembly Line
Work processes are arranged according to progressive steps the product must go through. Creates discrete products
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Continuous Process
Processes are organized by the sequence of steps like an assembly line, but the flow is continuous. Usually highly automated, and may operate 24 hours / day
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Splitting tasks
- Split the task - complete units processed in two workstations
- Share the task - adjacent workstation does part of the work
- Parallel workstations - two different workstations operate in parallel
- More skilled worker
- Work overtime
- Redesign (if it takes more than one of the above, you should generally redesign the process)
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Three regions of process domain
- Independent Interaction - acting on entity’s owned/controlled resources
- Surrogate Interaction - acting on customer or supplier resources
- Direct Interaction - with the customer or supplier
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Deming’s 14 points
- Create a constant purpose towards improvement
- Adopt the new philosophy
- Stop depending on inspections
- Use a single supplier for any one item
- Improve constantly and forever
- Use training on the job
- Implement leadership
- Eliminate fear
- Get rid of unclear slogans
- Break down between departments
- Eliminate management by objectives
- Remove barriers to pride of workmanship
- Implement education and self improvement
- Make “transformation” everyone’s job
- **focus on process, not people
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Total Quality Management TQM (pg 134)
- Managing the entire organization so it excels on all dimensions of products and services that are important to the customer
- Two fundamental operational goals:
- 1. Careful design of the product or service
- 2. Ensuring the organization’s systems can consistently produce the design
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Dimensions of Design Quality
- Performance: Primary product or service characteristics
- Features: Added touches, bells and whistles, secondary characteristics
- Reliability/durability: Consistency of performance over time, probability of failing, useful life
- Serviceability: Ease of repair
- Aesthetics: Sensory characteristics (sound, feel, look...)
- Perceived quality: Past performance and reputation
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Six Sigma DMAIC
- Define
- Measure
- Analyze
- Improve
- Control
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Structuring projects
- Pure Project: A team (composed of people from any functional group) work on a single project full-time until it is completedGreatest challenge: organizational goals and policies are ignored, the individuals on the team are removed (physically and psychologically) from headquarters, individuals become pigeon-holed
- Functional Project: A single functional group is in charge of running one or more projects in their entirety, Greatest limitation: little to no cross utilization of resources
- Matrix Project: Each project utilizes people from functional groups as needed and availableGreatest challenge: Agreement on the strength of the relationship or who owns the human resource. People have to report to two bosses - one for the project and one for the functional group.
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EVM
- Technique for measuring project progress in an objective manner
- Has ability to combine measurements of scope, schedule and cost in a project
- Provides method for evaluating relative success of project in a point of time
- Does NOT measure Quality
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CPM
- no need early start schedule and late start schedule
- critical path is the longest
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P-chart
- Step1: p = total defectives / total observations
- Step 2: standard deviation SQRT(((P value)(1 - P value))/n)
- Step 3: UCL, LCL = p +/- z*s (z=3)
- Step 4: plot
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