Operations Management: Blue Definitions (Final exam)

a. Low Cost Operations

• a. Top Quality
• b. Consistent Quality

• a. Delivery Speed
• b. On-time Delivery
• c. Development Speed

• a. Customization
• b. Variety
• c. Volume Flexibility

Any instance when a process fails to satisfy its customer

Costs associated with preventing defects before they happen (redesigning processes, training employees, working with suppliers)

Costs incurred when the firm assesses the performance level of its processes (inspections, search for causes, audits, statistical quality control programs)

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)

Costs that arise when a defect is discovered after the customer receives the service or product (Warranty work, recalls, bad PR, rectifying, litigation)

A written guarantee that the producer will replace or repair defective parts or perform the service to the customer's satisfaction

A philosophy that stresses three principles for achieving high levels of performance and quality: customer satisfaction, employee involvement, and continuous improvement in performance

• 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

A philosophy whereby defects are caught and corrected where they were created

small groups of people who have a common purpose, set their own performance goals and approaches, and hold themselves accountable for success

An approach to teamwork that moves responsibility for decisions further down the organizational chart - to the level of the employee actually doing the job

Another name for problem-solving teams; small groups of supervisors and employees who meet to identify, analyze, and solve process and quality problems

Groups that address issues of paramount concern to management, labor, or both

A small group of employees who work together to produce a major portion, or sometimes all, of a service or product

The philosophy of continually seeking ways to improve processes based on a Japanese concept called kaizen

A cycle, also called the Deming Wheel, used by firms actively engaged in continuous improvement to train their work teams in problem solving

A comprehensive and flexible system for achieving, sustaining, and maximizing business success by minimizing defects and variability in processes

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

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

Full-time teachers and mentors to several Black Belts

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

The application of statistical techniques to determine whether a process is delivering what the customer wants

Service or product characteristics, such as weight, length, volume, or time, that can be measured.

Service or product characteristics that can be quickly counted for acceptable performance

A plan that specifies a sample size, the time between successive samples, and decision rules that determine when action should be taken

A quantity of randomly selected observations of process outputs

The purely random, unidentifiable sources of variation that are unavoidable with the current process

Any variation-causing factors that can be identified and eliminated

A time-ordered diagram that is used to determine whether observed variations are abnormal

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

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

A chart used to monitor process variablility

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.

A chart used for controlling the proportion of defective services or products generated by the process

A chart used for controlling the number of defects when more than one defect can be present in a service or product

The ability of the process to meet the design specifications for a service or product

A target for design specifications

An allowance above or below the nominal value

An index that measures the potential for a process to generate defective outputs relative to either upper or lower specifications

The tolerance width divided by 6 standard deviations

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

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

A set of standards governing documentation of a quality program

Documentation standards that require participating companies to keep track of their raw materials use and their generation, treatment, and disposal of hazardous wastes

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

The maximum rate of output of a process or a system

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)

A concept that states that the average unit cost of a service or good can be reduced by increasing its output rate

Occurs when the average cost per unit increases as the facility's size increases.

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

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

The set of consecutive time periods considered for planning purposes

The time required to change a process or an operation from making one service or product to another

Positive or negative difference between projected demand and current capacity

The act of doing nothing and losing orders from any demand that exceeds current capacity, or incur costs because capacity is too large

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

One or more "customers" waiting for service

An input that generates potential customers

A person (or crew), a machine (or group of machines), or both necessary to perform the service for the customer

A rule that selects the next customer to be served by the service facility

The number of lines and the arrangement of the facilities

A rule that allows a customer of higher priority to interrupt the service of another customer

The time between customer arrivals

A fundamental law that relates the number of customers in a waiting-line system to the arrival rate and waiting time of customers

Any factor that limits the performance of a system and restricts its outputs

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.

A systematic management approach that focuses on actively managing those constraints that impede a firm's progress toward its goal

Focus on balancing line flow, not on balancing capacity

Maximizing the output and efficiency of every resource may not maximize the throughput of the entire system

An hour lost ot a bottleneck or a constrained resource is an hour lost for the whole system

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.

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)

It can not increase throughput

...impact on overall throughput, inventory, and operating expense

Total elapsed time from the start to the finish of a job or a customer being processed at one time or more workcenters

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

The assignment of work to stations in a line so as to achieve the desired output rate with the smallest number of workstations

The smallest units of work that can be performed independently

Work elements that must be done before the next element can begin

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

The maximum time allowed for work on a unit at each station

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

The amount by which efficiency falls short of 100 percent

The movement of product from one station to the next as soon as the cycle time has elapsed

A production line that produces several items belonging to the same family

The belief that waste can be eliminated by cutting unnecessary capacity or inventory and removing non-value-added activities in operations

A system that organizes the resources, information flows, and decision rules that enable a firm to realize the benefits of JIT principles

Manufacturing an item before it is needed, making it difficult to detect defects and creating excessive lead times and inventory

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.

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.

Excessive movement and material handling of product between processes, which can cause damage and deterioration of product quality without adding any significant customer value.

Unnecessary effort related to the ergonomics of bending, stretching, reaching, lifting, and walking. Jobs with excessive motion should be redesigned.

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.

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.

Failure of the firm to learn from and capitalize on its employees' knowledge and creativity impedes long-term efforts to eliminate waste.

A quality of items that are processed together

The goal of having a setup time of less than 10 minutes

A method in which production of the item begins in advance of customer needs

A method in which customer demand activates production of the service or item

Automatically stopping the process when something is wrong and then fixing the problems on the line itself as they occur

Mistake-proofing methods aimed at designing fail-safe systems that minimize human error

Cycle time needed to match the rate of production to the rate of sales or consumption

The leveling of production lead by both volume and product mix

A type of assembly that produces a mix of models in smaller lots

A methodology consisting of five workplace practices - sorting, straightening, shining, standardizing, and sustaining - that are conducive to visual controls and lean production

Separate needed items from unneeded items (including tools, parts, materials, and paperwork), and discard the unneeded.

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.

Clean and wash the work area and make it shine

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

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.

A one-person cell in which a worker operates several different machines simultaneously to achieve a line flow

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

A Japanese word meaning "card" or "visible record" that refers to cards used to control the flow of production through a factory

A quantitative lean tool for eliminating waste or MUDA that involves a current state drawing, a future state drawing and an implementation plan

Designing a firm's supply chain to meet the competitive priorities of the firm's operations strategy

A stock of materials used to satisfy customer demand or to support the production of services or goods

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

An order that cannot be satisfied, resulting in a loss of the sale

A customer order that cannot be filled when promised or demanded but is filled later

The cost of preparing a purchase order for a supplier or a production oder for manufacturing

The cost involved in changing over a machine or workspace to produce a different item

A drop in the price per unit when an order is sufficiently large

The inventories needed for the production of services or goods

Items, such as components or assemblies, needed to produce a final product in manufacturing

The items in manufacturing plants, warehouses, and retail outlets that are sold to the firm's customers.

The portion of total inventory that varies directly with lot size

The determination of how frequently and in what quantity to order inventory

Surplus inventory that a company holds to protect against uncertainties in demand, lead time, and supply changes.

Inventory used to absorb uneven rates of demand or supply

Inventory that is created when an order for an item is issued but not yet placed in inventory

The degree to which the same work can be done again

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

A reduction in inventory and safety stock because of merging of variable demands form customers

Locating stock closer to customers at a warehouse, DC, wholesaler, or retailer

The total average value of all items held in inventory for a firm

An inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost

An inventory measure obtained by dividing annual sales at cost by the average aggregate inventory value maintained during the year

The process of using members of the distribution channel as if they were assembly stations in the factory

Paying suppliers and distributors to perform processes and provide needed services and materials

A managerial choice between whether to outsource a process or do it in-house

A firm's movement upstream toward the sources of raw materials, parts, and services through acquisitions

Acquiring more channels of distribution, such as distribution centers (warehouses) and retail stores, or even business customers

A supply chain that involves moving processes to another country

The phenomenon in supply chains whereby ordering patterns experience increasing variance as you proceed upstream in the chain

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.

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

The activity that decides which suppliers to use, negotiates contracts, and determines whether to buy locally

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

A program that includes suppliers in the design phase of a service or product

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

A systematic effort to reduce the cost or improve the performance of services or products, either purchased or produced

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

A supplier relation in which the buyer and seller are partners, each helping the other as much as possible

The awarding of a contract for a service or item to only one supplier

A technology that enables the transmission of routine business documents having a standard format from computer to computer over telephone or direct leased lines

A system whereby suppliers post their catalog of items in the Internet and buyers select what they need and purchase them electronically

An electronic marketplace where buying firms and selling firms come together to do business

A marketplace where firms place competitive bids to buy something

A method for identifying items through the use of radio signals from a tag attached to the item

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

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

The application of information and communication technology anywhere along the supply chain of a business process

A characteristic of processes that are meeting humanity's needs without harming future generations

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

Smaller # of suppliers, higher level of service

"Single digit setup" = small # of units processed together (batch = one setup)

Produced to meet specific demand or order, not forecast

Individual workers are responsible for not passing on defects

Is a competitive priority

not a lot of bottlenecks

(streamlined)

Well-trained, cross-trained, smart, involved

Automation is useful and affordable

On at least part of operations - doesn't have to be purely linear, can be circle or horseshoe

• Sort, Straighten, Shine, Standardize, Sustain
• (preventative maintenance, clean & orderly factory suited for lean systems)

(lean systems are designed to provide better outcome for customer)