BADM 301 - Operation Management

  1. Operation management
    is the science and art of ensuring that goods and services are created and delivered successfully to customers.

    −Design of goods, services, and the processes that create them.

    −Day-to-day management of those processes.

    −Continual improvement of these goods, services, and processes.
  2. Core of Operation management
    Efficiency, cost, and quality
  3. What do operations managers do?
    Forecasting, supply chain management, quality management, etc.
  4. Good
    • a physical product that you can see, touch, or possibly consume.
    • Examples of goods include: oranges, flowers, televisions, soap, fish, furniture, etc.
  5. Durable good
    • A product that typically lasts at least 3 years.
    • For example, vehicles, dishwashers, and furniture.
  6. non-durable good
    • is perishable and generally lasts for less than three years.
    • For examples, toothpaste, shoes, fruits, etc.
  7. Service
    any primary or complementary activity that does not directly produce a physical product.
  8. What are some of the different between goods and services?
    Goods are tangible while services are intangible.

    The demand for services is more difficult to predict than the demand for goods.
  9. Service management
    integrates marketing, human resources, and operations functions to plan, create, and deliver goods and services,  and their associated service encounters.
  10. Service encounter
    is an interaction between the customer and the service provider.
  11. customer benefit package
    is a clearly defined set of tangible (goods-content) and intangible (service-content) features that the customer recognizes, pays for, uses, or experiences. 

    a combination of goods and services configured in a certain way to provide value to customers
  12. Primary good or service
    the “core” offering that attracts customers and responds to their basic needs.  For example, the primary service of a personal checking account is the capability to do convenient financial transactions.
  13. Peripheral goods or services
    are those that are not essential to the primary good or service, but enhance it.

    Examples for a personal checking account:

    −online access and bill payment

    −debit card

    −designer checks

    −paper or electronic account statement
  14. Variant
    a Customer Benefit Package attribute that departs from the standard CBP and is normally location- or firm-specific.


    −a fishing pond or pool at an automobile dealership where kids can fish while the parents shop for vehicles
  15. Biztainment
    is the practice of adding entertainment content to a bundle of goods and services in order to gain a competitive advantage.
  16. Process
    is a sequence of activities that is intended to create a certain result.
  17. sustainability
    refers to an organization’s ability to strategically address current business needs and successfully develop a long-term strategy that embraces opportunities and manages risk for all products, systems, supply chains, and processes to preserve resources for future generations.
  18. Make-to-stock
    are made according to a fixed design, and the customer has no options from which to choose.

    Examples are appliances, shoes, sporting goods, credit cards, online Web-based courses, and bus service.
  19. Assemble-to-order
    are configurations of standard parts, subassemblies, or services that can be selected by customers from a limited set.

    Examples are Dell computers, Subway sandwiches, machine tools, and travel agent services.
  20. Make-to-order
    are generally produced and delivered as one-of-a-kind or in small quantities, and are designed to meet specific customers’ specifications.

    Examples include ships, weddings, certain jewelry, estate plans, buildings, and surgery.
  21. Project charter
    -  is a statement of the scope, objectives, and participants in a project. It provides a preliminary delineation of roles and responsibilities, outlines the project objectives, identifies the main stakeholders, and defines the authority of the project manager. It serves as a reference of authority for the future of the project.
  22. Pert diagram (Project evaluation and review technique)
    developed to handle uncertainties in activity completion times

    • Three PERT estimates are obtained for each activity:
    • - Optimistic time (a): Activity time under ideal conditions.
    • - Most probable time (m): Most likely activity time under normal conditions.
    • - Pessimistic time (b):  Activity time if breakdowns or serious delays occur.
  23. Critical path
    is the sequence of activities that takes the longest time and defines the total project completion time.
  24. Quality management
    refers to systematic policies, methods, and procedures used to ensure that goods and services are produced with appropriate levels of quality to meet the needs of customers.

    Quality management deals with key issues relating to how goods and services are designed, created, and delivered to meet customer expectations.
  25. Fitness for use
    the ability of a good or service to meet customer needs
  26. quality of conformance
    is the extent to which a process is able to deliver output that confirms to design specification
  27. Specification
    are targets and tolerances determined by designers of goods and services
  28. Principles of total quality
    1.A focus on customers and stakeholders.

    2.A process focus supported by continuous improvement and learning.

    3.Participation and teamwork by everyone in the organization.
  29. The Deming cycle
    Image Upload 1
  30. Six Sigma
    is a business improvement approach that seeks to find and eliminate causes of defects and errors in manufacturing and service processes by focusing on outputs that are critical to customers and results in a clear financial return for the organization.
  31. cost of quality
    refers to the costs associated with avoiding poor quality or those incurred as a result of poor quality.

    -Better communication between operations managers and senior-level managers.

    -Identify and justify major improvement opportunities.

    -Evaluate the importance of quality and improvement in operations.
  32. Prevention costs
    are those expended to keep nonconforming goods and services from being made and reaching the customer
  33. Appraisal costs
    are those expended on ascertaining quality levels through measurement and analysis of data to detect and correct problems
  34. Internal failure costs
    are costs incurred as a result of unsatisfactory quality that is found before delivery of good or service to the customer
  35. External failure costs
    External failure costs are incurred after poor-quality goods or services reach the customer
  36. Mass customization
    is being able to make whatever goods and services the customer wants, at any volume, at any time for anybody, and for a global organization, from any place in the world.
  37. business strategy
    1.defines the focus for SBUs.  The major decisions involve which markets to pursue and how best to compete in those markets; that is, what competitive priorities the firm should pursue.
  38. functional strategy
    is the set of decisions that each functional area—marketing, finance, operations, research and development, engineering, and so on—develops to support its particular business strategy
  39. operations strategy
    defines how an organization will execute its chosen business strategies.

    Developing an operations strategy involves translating competitive priorities into operational capabilities by making a variety of choices and trade-offs for design and operating decisions.
  40. Capacity
    is the capability of a manufacturing or service resource such as a facility, process, workstation, or piece of equipment to accomplish its purpose over a specified time period.

    determine by the resources available to the company
  41. Economies of scale
    are achieved when the average unit cost of a good or service decreases as the capacity and/or volume of throughput increases.
  42. Diseconomies of scale
    occur when the average unit cost of the good or service begins to increase as the capacity and/or volume of throughput increases.
  43. focused factory
    is a way to achieve economies of scale without extensive investments in facilities and capacity by focusing on a narrow range of goods or services, target market segments, and/or dedicated processes to maximize efficiency and effectiveness.
  44. Safety capacity (often called the capacity cushion)
    is an amount of capacity reserved for unanticipated events, such as demand surges, materials shortages, and equipment breakdowns.

    Average safety capacity (%) = 100% − Average resource utilization %
  45. Theory of Constraints
    is a set of principles that focuses on increasing total process throughput by maximizing the utilization of all bottleneck work activities and workstations.

    • Throughput: Amount of money generated per time period through actual sales.
    • Constraint: Anything that limits an organization from moving toward or achieving its goal.
  46. physical constraint
    is associated with the capacity of a resource (e.g., machine, employee).
  47. bottleneck work activity
    is one that effectively limits capacity of the entire process.
  48. nonbottleneck work activity
    is one in which idle capacity exists.
  49. nonphysical constraint
    is environmental or organizational (e.g., low product demand or an inefficient management policy or procedure).
  50. Effectiveness
    the degree to which something is successful in producing a desired result; success.
  51. Mean absolute percentage error (MAPE)
    is a measure of prediction accuracy of a forecasting method in statistics, for example in trend estimation
Card Set
BADM 301 - Operation Management
Operation management