Operations Management: Blue Definitions (Final exam)

  1. 1. Cost (Competitive Priorities and Operating Advantages)
    a. Low Cost Operations
  2. 2. Quality (Competitive Priorities and Operating Advantages)
    • a. Top Quality
    • b. Consistent Quality
  3. 3. Time (Competitive Priorities and Operating Advantages)
    • a. Delivery Speed
    • b. On-time Delivery
    • c. Development Speed
  4. 4. Flexibility (Competitive Priorities and Operating Advantages)
    • a. Customization
    • b. Variety
    • c. Volume Flexibility
  5. Defect
    Any instance when a process fails to satisfy its customer
  6. Prevention Costs
    Costs associated with preventing defects before they happen (redesigning processes, training employees, working with suppliers)
  7. Appraisal Costs
    Costs incurred when the firm assesses the performance level of its processes (inspections, search for causes, audits, statistical quality control programs)
  8. Internal Failure Costs
    Costs resulting from defects that are discovered during the production of a service or product (Yield losses if defect is scrapped, rework if rerouted to earlier phase)
  9. External Failure Costs
    Costs that arise when a defect is discovered after the customer receives the service or product (Warranty work, recalls, bad PR, rectifying, litigation)
  10. Warranty
    A written guarantee that the producer will replace or repair defective parts or perform the service to the customer's satisfaction
  11. Total Quality Management (TQM)
    A philosophy that stresses three principles for achieving high levels of performance and quality: customer satisfaction, employee involvement, and continuous improvement in performance
  12. Quality
    • A term used by customers to describe their general satisfaction with a service or product
    • *Conformance to expectations (e.g. handle time)
    • *Value (how well serves purpose)
    • *Fitness for use (appearance, style, durability, reliability, craftsmanship, serviceability)
    • * Psychological impressions
  13. Quality at the source
    A philosophy whereby defects are caught and corrected where they were created
  14. Teams
    small groups of people who have a common purpose, set their own performance goals and approaches, and hold themselves accountable for success
  15. Employee Empowerment
    An approach to teamwork that moves responsibility for decisions further down the organizational chart - to the level of the employee actually doing the job
  16. Quality Circles
    Another name for problem-solving teams; small groups of supervisors and employees who meet to identify, analyze, and solve process and quality problems
  17. Special-Purpose Teams
    Groups that address issues of paramount concern to management, labor, or both
  18. Self-Managed Team
    A small group of employees who work together to produce a major portion, or sometimes all, of a service or product
  19. Continuous Improvement
    The philosophy of continually seeking ways to improve processes based on a Japanese concept called kaizen
  20. Plan-Do-Study-Act Cycle
    A cycle, also called the Deming Wheel, used by firms actively engaged in continuous improvement to train their work teams in problem solving
  21. Six Sigma
    A comprehensive and flexible system for achieving, sustaining, and maximizing business success by minimizing defects and variability in processes
  22. Green Belt
    An employee who achieved the first level of training in a Six Sigma program and spends part of his or her time teaching and helping teams with their projects
  23. Black Belt
    An employee who reached the highest level of training in a Six Sigma program and spends all of his or her time teaching and leading teams involved in Six Sigma projects
  24. Master Black Belt
    Full-time teachers and mentors to several Black Belts
  25. Acceptance Sampling
    The application of statistical techniques to determine whether a quantity of material should be accepted or rejected based on the inspection or test of a sample
  26. Statistical Process Control
    The application of statistical techniques to determine whether a process is delivering what the customer wants
  27. Variables
    Service or product characteristics, such as weight, length, volume, or time, that can be measured.
  28. Attributes
    Service or product characteristics that can be quickly counted for acceptable performance
  29. Sampling Plan
    A plan that specifies a sample size, the time between successive samples, and decision rules that determine when action should be taken
  30. Sample Size
    A quantity of randomly selected observations of process outputs
  31. Common causes of variation
    The purely random, unidentifiable sources of variation that are unavoidable with the current process
  32. Assignable Causes of Variation
    Any variation-causing factors that can be identified and eliminated
  33. Control Chart
    A time-ordered diagram that is used to determine whether observed variations are abnormal
  34. Type I error
    An error that occurs when the employee concludes that the process is out of control based on a sample result that falls outside the control limits, when in fact it was due to pure randomness
  35. Type II error
    An error that occurs when the employee concludes that the process is in control and only randomness is present, when in fact the process is out of statistical control
  36. R-chart
    A chart used to monitor process variablility
  37. X-bar Chart
    A chart used to see whether the process is generating output, on average, consistent with a target value set by management for the process or whether its current performance, with respect to the average of the performance measure, is consistent with past performance.
  38. P-chart
    A chart used for controlling the proportion of defective services or products generated by the process
  39. C-Chart
    A chart used for controlling the number of defects when more than one defect can be present in a service or product
  40. Process Capability
    The ability of the process to meet the design specifications for a service or product
  41. Nominal Value
    A target for design specifications
  42. Tolerance
    An allowance above or below the nominal value
  43. Process Capability Index, Cpk
    An index that measures the potential for a process to generate defective outputs relative to either upper or lower specifications
  44. Process Capability Ratio, Cp
    The tolerance width divided by 6 standard deviations
  45. Quality Engineering
    An approach originated by Genichi Taguchi that involves combining engineering and statistical methods to reduce costs and improve quality by optimizing product design and manufacturing processes
  46. Quality Loss Function
    The rationale that a service or product that barely conforms to the specifications is more like a defective service or product than a perfect one
  47. ISO 9000:2000
    A set of standards governing documentation of a quality program
  48. ISO 14000:2004
    Documentation standards that require participating companies to keep track of their raw materials use and their generation, treatment, and disposal of hazardous wastes
  49. Malcolm Baldrige National Quality Award
    An award named for the late secretary of commerce, who was a strong proponent of enhancing quality as a means of reducing the trade deficit; the award promotes, recognizes, and publicizes quality strategies and achievments
  50. Capacity
    The maximum rate of output of a process or a system
  51. Untilization
    The degree to which equipment, space, or the workforce is currently being used, and is measured as the ratio of average output to the maximum capacity (expressed as a percentage)
  52. Economies of Scale
    A concept that states that the average unit cost of a service or good can be reduced by increasing its output rate
  53. Diseconomies of Scale
    Occurs when the average cost per unit increases as the facility's size increases.
  54. Capacity Cushion
    The amount of reserve capacity a process uses to handle sudden or temporary losses of production capacity; it measures the amount by which the average utilization (in terms of total capacity) falls below 100 percent
  55. Capacity Requirement
    What a process's capacity should be for some future time period to meet the demand of customers (external or internal), given the firm's desired capacity cushion
  56. Planning Horizon
    The set of consecutive time periods considered for planning purposes
  57. Setup Time
    The time required to change a process or an operation from making one service or product to another
  58. Capacity Gap
    Positive or negative difference between projected demand and current capacity
  59. Base Case
    The act of doing nothing and losing orders from any demand that exceeds current capacity, or incur costs because capacity is too large
  60. Cash Flow
    The difference between the flows of funds into and out of an organization over a period of time, including revenues, costs, and changes in assets and liabilities
  61. Waiting Line
    One or more "customers" waiting for service
  62. Customer Population
    An input that generates potential customers
  63. Service Facility
    A person (or crew), a machine (or group of machines), or both necessary to perform the service for the customer
  64. Priority Rule
    A rule that selects the next customer to be served by the service facility
  65. Service System
    The number of lines and the arrangement of the facilities
  66. Preemptive Discipline
    A rule that allows a customer of higher priority to interrupt the service of another customer
  67. Interarrival Times
    The time between customer arrivals
  68. Little's Law
    A fundamental law that relates the number of customers in a waiting-line system to the arrival rate and waiting time of customers
  69. Constraint
    Any factor that limits the performance of a system and restricts its outputs
  70. Bottleneck
    A capacity constraint resource (CCR) whose available capacity limits the organization's ability to meet the product volume, product mix, or demand fluctuation required by the marketplace.
  71. Theory of Constraints
    A systematic management approach that focuses on actively managing those constraints that impede a firm's progress toward its goal
  72. 1. Identify the System Bottlenecks (Seven key principles of TOC)
    Focus on balancing line flow, not on balancing capacity
  73. 2. Exploit the Bottleneck(s) (Seven key principles of TOC)
    Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system
  74. 3. Subordinate all Other Decisions to step 2: exploit the bottlenecks (Seven key principles of TOC)
    An hour lost ot a bottleneck or a constrained resource is an hour lost for the whole system
  75. 4. Elevate the Bottlenecks (Seven key principles of TOC)
    Inventory is needed only in front of the bottlenecks in order to prevent them from sitting idle, and in front of assembly and shipping points in order to protect customer schedules. Building inventories elsewhere should be avoided.
  76. 5. Do not Let inertia set in (Seven key principles of TOC)
    Work, which can be materials, information to be processed, documents, or customers, should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to market demand. (Minimize inventory and operating expenses)
  77. 6. Do not activate a non-bottleneck resource (Seven key principles of TOC)
    It can not increase throughput
  78. 7. Every capital investment must be viewed from perspective of global impact (Seven key principles of TOC)
    ...impact on overall throughput, inventory, and operating expense
  79. Throughput Time
    Total elapsed time from the start to the finish of a job or a customer being processed at one time or more workcenters
  80. Drum-Buffer-Rope (DBR)
    A planning and control system that regulates the flow of work-in-process materials at the bottleneck or the capacity constrained resource (CCR) in a productive system
  81. Line Balancing
    The assignment of work to stations in a line so as to achieve the desired output rate with the smallest number of workstations
  82. Work Elements
    The smallest units of work that can be performed independently
  83. Immediate Predecessors
    Work elements that must be done before the next element can begin
  84. Precedence Diagram
    A diagram that allows one to visualize immediate predecessors better; work elements are denoted by circles, with the time required to perform the work shown below each circle
  85. Cycle Time
    The maximum time allowed for work on a unit at each station
  86. Theoretical Minimum (TM)
    A benchmark or goal for the smallest number of stations possible, where the total time required to assemble each unit (the sum of all work-element standard times) is divided by the cycle time
  87. Balance Delay
    The amount by which efficiency falls short of 100 percent
  88. Pacing
    The movement of product from one station to the next as soon as the cycle time has elapsed
  89. Mixed-Model Line
    A production line that produces several items belonging to the same family
  90. Just-in-time (JIT) Philosophy
    The belief that waste can be eliminated by cutting unnecessary capacity or inventory and removing non-value-added activities in operations
  91. JIT system
    A system that organizes the resources, information flows, and decision rules that enable a firm to realize the benefits of JIT principles
  92. 1. Overproduction (Eight types of Waste or MUDA)
    Manufacturing an item before it is needed, making it difficult to detect defects and creating excessive lead times and inventory
  93. 2. Inappropriate Processing (Eight types of Waste or MUDA)
    Using expensive high precision equipment when simpler machines would suffice. It leads to over utilization of expensive capital assets. Investment in smaller flexible equipment, immaculately maintained older machines, and combining process steps where appropriate reduce the waste associated with inappropriate processing.
  94. 3. Waiting (Eight types of Waste or MUDA)
    Wasteful time incurred when product is not being moved or processed. Long production runs, poor material flows, and processes that are not tightly linked to one another can cause over 90 percent of a product's lead time to be spent waiting.
  95. 4. Transportation (Eight types of Waste or MUDA)
    Excessive movement and material handling of product between processes, which can cause damage and deterioration of product quality without adding any significant customer value.
  96. 5. Motion (Eight types of Waste or MUDA)
    Unnecessary effort related to the ergonomics of bending, stretching, reaching, lifting, and walking. Jobs with excessive motion should be redesigned.
  97. 6. Inventory (Eight types of Waste or MUDA)
    Excess inventory hides problems on the shop floor, consumes space, increases lead times, and inhibits communication. Work-in-process inventory is a direct result of overproduction and waiting.
  98. 7. Defects (Eight types of Waste or MUDA)
    Quality defects result in rework and scrap, and add wasteful costs to the system in the form of lost capacity, rescheduling effort, increased inspection, and loss of customer good will.
  99. 8. Underutilization of employees (Eight types of Waste or MUDA)
    Failure of the firm to learn from and capitalize on its employees' knowledge and creativity impedes long-term efforts to eliminate waste.
  100. Lot
    A quality of items that are processed together
  101. Single-Digit Setup
    The goal of having a setup time of less than 10 minutes
  102. Push Method
    A method in which production of the item begins in advance of customer needs
  103. Pull Method
    A method in which customer demand activates production of the service or item
  104. Jidoka
    Automatically stopping the process when something is wrong and then fixing the problems on the line itself as they occur
  105. Poka-Yoke
    Mistake-proofing methods aimed at designing fail-safe systems that minimize human error
  106. Takt Time
    Cycle time needed to match the rate of production to the rate of sales or consumption
  107. Heijunka
    The leveling of production lead by both volume and product mix
  108. Mixed-Model Assembly
    A type of assembly that produces a mix of models in smaller lots
  109. Five S (5S)
    A methodology consisting of five workplace practices - sorting, straightening, shining, standardizing, and sustaining - that are conducive to visual controls and lean production
  110. 1. Sort (5S Defined)
    Separate needed items from unneeded items (including tools, parts, materials, and paperwork), and discard the unneeded.
  111. 2. Straighten (5S Defined)
    Neatly arrange what is left, with a place for everything and and everything in its place. Organize the work area so that it is easy to find what is needed.
  112. 3. Shine (5S Defined)
    Clean and wash the work area and make it shine
  113. 4. Standardize (5S Defined)
    Establish schedules and methods of performing the cleaning and sorting. Formalize the cleanliness that results from regularly doing the first three S practices so that perpetual cleanliness and a state of readiness are maintained
  114. 5. Sustain (5S Defined)
    Create discipline to perform the first 4 S practices, whereby everyone understands, obeys, and practices the rules when on the plant. Implement mechanisms to sustain the gains by involving people and recognizing them through a performance measurement system.
  115. One-Worker, Multiple-Machines (OWMM) cell
    A one-person cell in which a worker operates several different machines simultaneously to achieve a line flow
  116. Group Technology (GT)
    An option for achieving line-flow layouts with low volume processes; this technique creates cells not limited to just one worker and has a unique way of selecting work to be done by the cell
  117. Kanban
    A Japanese word meaning "card" or "visible record" that refers to cards used to control the flow of production through a factory
  118. Value Stream Mapping (VSM)
    A quantitative lean tool for eliminating waste or MUDA that involves a current state drawing, a future state drawing and an implementation plan
  119. Supply Chain Design
    Designing a firm's supply chain to meet the competitive priorities of the firm's operations strategy
  120. Inventory
    A stock of materials used to satisfy customer demand or to support the production of services or goods
  121. Inventory Holding Cost
    The sum of the cost of capital and the variable costs of keeping items on hand, such as storage and handling, taxes, insurance, and shrinkage
  122. Stockout
    An order that cannot be satisfied, resulting in a loss of the sale
  123. Backorder
    A customer order that cannot be filled when promised or demanded but is filled later
  124. Ordering Cost
    The cost of preparing a purchase order for a supplier or a production oder for manufacturing
  125. Setup Cost
    The cost involved in changing over a machine or workspace to produce a different item
  126. Quantity Discount
    A drop in the price per unit when an order is sufficiently large
  127. Raw Materials (RM)
    The inventories needed for the production of services or goods
  128. Work-in-Process (WIP)
    Items, such as components or assemblies, needed to produce a final product in manufacturing
  129. Finished Goods (FG)
    The items in manufacturing plants, warehouses, and retail outlets that are sold to the firm's customers.
  130. Cycle Inventory
    The portion of total inventory that varies directly with lot size
  131. Lot Sizing
    The determination of how frequently and in what quantity to order inventory
  132. Safety Stock Inventory
    Surplus inventory that a company holds to protect against uncertainties in demand, lead time, and supply changes.
  133. Anticipation Inventory
    Inventory used to absorb uneven rates of demand or supply
  134. Pipeline Inventory
    Inventory that is created when an order for an item is issued but not yet placed in inventory
  135. Repeatability
    The degree to which the same work can be done again
  136. 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
  137. Inventory Pooling
    A reduction in inventory and safety stock because of merging of variable demands form customers
  138. Forward Placement
    Locating stock closer to customers at a warehouse, DC, wholesaler, or retailer
  139. Average Aggregate Inventory Value
    The total average value of all items held in inventory for a firm
  140. Weeks of Supply
    An inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost
  141. Inventory Turnover
    An inventory measure obtained by dividing annual sales at cost by the average aggregate inventory value maintained during the year
  142. Channel Assembly
    The process of using members of the distribution channel as if they were assembly stations in the factory
  143. Outsourcing
    Paying suppliers and distributors to perform processes and provide needed services and materials
  144. Make-or-Buy Decision
    A managerial choice between whether to outsource a process or do it in-house
  145. Backward Integration
    A firm's movement upstream toward the sources of raw materials, parts, and services through acquisitions
  146. Forward Integration
    Acquiring more channels of distribution, such as distribution centers (warehouses) and retail stores, or even business customers
  147. Offshoring
    A supply chain that involves moving processes to another country
  148. Bullwhip effect
    The phenomenon in supply chains whereby ordering patterns experience increasing variance as you proceed upstream in the chain
  149. SCOR model
    A framework that focuses on a basic supply chain of plan, source, make, deliver, and return processes, repeated again and again along the supply chain.
  150. Concurrent Engineering
    A concept that brings product engineers, process engineers, marketers, buyers, information specialists, quality specialists, and suppliers together to design a product and the processes that will meet customer expectations
  151. Purchasing
    The activity that decides which suppliers to use, negotiates contracts, and determines whether to buy locally
  152. Green Purchasing
    The process of identifying, assessing, and managing the flow of environmental waste and finding ways to reduce it and minimize its impact on the environment
  153. Early Supplier Involvement
    A program that includes suppliers in the design phase of a service or product
  154. Presourcing
    A level of supplier involvement in which suppliers are selected early in a product's concept development stage and are given significant, if not total, responsibility for the design of certain components or systems of the product
  155. Value Analysis
    A systematic effort to reduce the cost or improve the performance of services or products, either purchased or produced
  156. Competitive Orientation
    A supplier relation that views negotiations between buyer and seller as a zero-sum game: Whatever one side loses, the other side gains, and short-term advantages are prized over long-term commitements
  157. Cooperative Orientation
    A supplier relation in which the buyer and seller are partners, each helping the other as much as possible
  158. Sole Sourcing
    The awarding of a contract for a service or item to only one supplier
  159. Electronic Data Interchange (EDI)
    A technology that enables the transmission of routine business documents having a standard format from computer to computer over telephone or direct leased lines
  160. Catalog Hubs
    A system whereby suppliers post their catalog of items in the Internet and buyers select what they need and purchase them electronically
  161. Exchange
    An electronic marketplace where buying firms and selling firms come together to do business
  162. Auction
    A marketplace where firms place competitive bids to buy something
  163. Radio Frequency Identification (RFID)
    A method for identifying items through the use of radio signals from a tag attached to the item
  164. Vendor-managed Inventories (VMI)
    A system in which the supplier has access to the customer's inventory data and is responsible for maintaining the inventory on the customer's site
  165. Cross-Docking
    The packing of products on incoming shipments so that they can easily sorted at intermediary warehouses for outgoing shipments based on their final destinations; the items care carried from the incoming-vehicle docking point without being stored inventory at the warehouse
  166. Electronic Commerce (e-commerce)
    The application of information and communication technology anywhere along the supply chain of a business process
  167. Sustianability
    A characteristic of processes that are meeting humanity's needs without harming future generations
  168. Reverse Logistics
    The process of planning, implementing, and controlling the efficient, cost effective flow of products, materials, and information from the point of consumption back to the point of origin for returns, repairs, remanufacture, or recycling
  169. 1. Close Supplier Ties (Lean System Characteristics)
    Smaller # of suppliers, higher level of service
  170. 2. Small lot sizes (Lean System Characteristics)
    "Single digit setup" = small # of units processed together (batch = one setup)
  171. 3. "Pull Method" (Lean System Characteristics)
    Produced to meet specific demand or order, not forecast
  172. 4. "Quality at the Source" (Lean System Characteristics)
    Individual workers are responsible for not passing on defects
  173. 5. "Consistent Quality" (Lean System Characteristics)
    Is a competitive priority
  174. 6. Uniform workstation loads (Lean System Characteristics)
    not a lot of bottlenecks
  175. 7. Standardized components & procedures (Lean System Characteristics)
  176. 8. Flexible workforce (Lean System Characteristics)
    Well-trained, cross-trained, smart, involved
  177. 9. Automation available (Lean System Characteristics)
    Automation is useful and affordable
  178. 10. Line Flows (Lean System Characteristics)
    On at least part of operations - doesn't have to be purely linear, can be circle or horseshoe
  179. 11. Five S's (Lean System Characteristics)
    • Sort, Straighten, Shine, Standardize, Sustain
    • (preventative maintenance, clean & orderly factory suited for lean systems)
  180. 12. Total Preventative Maintenance (Lean System Characteristics)
    (lean systems are designed to provide better outcome for customer)
Card Set
Operations Management: Blue Definitions (Final exam)
Operations Management: Final exam Review Text by Krajewski Ritzman Malhotra 9th Edition