Supply Chain Management Test 1 Flashcards

Terms Definitions
What is Operations Management
the business function responsible for planning, coordinating, and controlling the resources needed to produce a company's products and services
Operations management is the ____________ of every company
central core
Operational management involves managing
people, equipment, technology, information, and other resources
Transformation process
a user of resources to transform inputs into some desired outputs
In business today, it's not so much on what you make, but on.......
how you do business
Operations practice apply to both the....
production of goods and the creation and delivery of services
Services produce...
intangible products that cannot be produced ahead of time
Services include
intangible products
Products that cannot be inventoried
high customer contact
short response time
labor intensive
the net increase created during the transformation of inputs into final outputs
Manufactured products are the _______ of services
Ex. customer doesn't have direct contact with the operation
Companies compete by what two services?
value-added and core
What are core services?
Companies compete by differentiating their value-added services from those provided by.....
their competitors
Ex. problem solving, field support, sales support, and information
Consequences for OM
o   Quality, flexibility, speed, and price (or cost reduction)
What are some of the similarites between services and products?
o   Use technology
o   Have quality, productivity, and response issues
o   Must forecast demand
o   Have capacity, layout, and location issues
o   Have customers and suppliers
o   Have schedule and staffing issues
What are some challenges for OM today?
o   Customers expect better, faster quality
o   Increased cost functional decision making
o   Better management of information using ERP and CRM
o   Inability of people within the organization to understand the OM function
o   The optimizing of the global supplier, production, and distribution networks
§  ERP: enterprise resource planning
   Large, sophisticated software programs for identifying and planning the enterprise-wide resources needed to coordinate all activities involved in producing and delivering products to customers
§  CRM: customer relationship management
·         Software solutions that enable the firm to collect customer specific data
Lean systems
a concept that takes a total system approach to creating efficient operations
Business Strategy
the long-range plan of a business, designed to provide and sustain shareholder value
The role of business strategy
o   Looks at long range plan to be able to be in the competition
o   Helps to differentiate the firm from the competitors
o   Focuses on doing the right task
Inputs of a business strategy
Environmental scanning, Mission, Core Competencies
o   Environmental scanning: (SWOT)
§  Monitors the business environment for market trends, threats, and opportunities
§  Statement that defines what is our business
Core Competencies
§  Unique strengths that can help us win in the market
Operations Strategy
a long-range plan for the operations function that specifies the design and use of resources to support the business strategy
·         The four important operations questions? (core services)
o   Competing on Cost?

o   Competing on Quality?

o   Competing on Time?

o   Competing on Flexibility?
o   Competing on Cost?
§  Businesses competing on cost usually cut costs on labor, materials, and facilities
·         Used on high volume products
·         Often late in the product life cycle
·         Limited product range and customization
·         Can use lower labor skills
 High-performance design
o   Focusing on the aspects of quality such as superior features, close tolerances, high durability, and excellent customer service
Goods and Services Consistency
o   Measures how often the goods or services meet the exact design specifications
The two dimensions on competing on quality
high performance design
goods and services consistency
Rapid delivery (fast):
§  refers to how quickly an order is received
·         Shorter time between order placement and delivery
On-time delivery:
refers to how often deliveries are made on time
Development speed
§  the time needed to take an idea to the marketplace
·         Use concurrent processes to shorten the product development time
what are the two dimensions to competing on flexibility?
Product Flexibility
Volume Flexibility
Product flexibility:
·         the ability to offer a wide variety of goods or services and customize them to the unique needs of clients
o   Can quickly add new products that may be important to customers or easily drop a product that is not doing well
o   EX. Dell or Panasonic
Volume flexibility
·         the ability to rapidly increase or decrease the amount produced in order to accommodate changes in the demand
o   EX. McDonalds
  Companies that compete based on flexibility often cannot compete based on____________
·         They also don’t compete based on cost
acceptable quality level

o   Old view

o   Stated that it’s okay to have some proportion of a bad product
Order Winners
o   the competitive priorities that win orders in the marketplace
§  Basically the unique characteristics
§  Eventually an order winner becomes an industry standard (qualifier)
Order Qualifiers
o   competitive priorities that must be met for a company to qualify as a competitor in the marketplace
§  Ex. The low price of a fast-food restaurant
§  If companies don’t meet the minimum standard for order qualifiers, they won’t be able to compete or succeed
o   Operations decisions related to the design of the production process, such as facilities, technology, and the flow of goods and services through the facility
operations decisions related to the planning and control systems of the operation, such as organization of operations, the skills and pay of workers, and quality measures
o   Service Strategy Capacity Capabilities are:
process based
systems based
organization based
Process Based
capacities that transforms material or information and provide advantages on dimensions on cost and quality
Systems based
capacities that are broad –based involving the entire operating system and provide advantages of short lead times and customize on demand
Organization based
capacities that are difficult to replicate and provide abilities to master new technologies
o   a measure of how efficiently an organization converts inputs into outputs
Total productivity
productivity computed as a ratio of output to all organizational inputs
Partial productivity
§  productivity computed as a ratio of output to only one input (e.g. labor, materials, machines)
Multifactor Productivity
§  productivity computed as a ratio of output to several, but not all, inputs
About the great nuclear fizzle at old B & W
·         When the company entered the nuclear power business, everything seemed to go wrong. The aftermath brought delivery delays, strikes, lawsuits, red ink and a bizarre suicide. B&W even managed to create new competitors in a market niche they had previously owned outright.
The problems at B & W’s trouble was involved in the single product
nuclear power vessels
·         Most of the nuclear pressure vessels at Mount Vernon was behind schedule by as much as ______________
17 months
The middle man of B & W was...
President George G. Zipf

o   Zipf’s predecessor was Chairman Morris Neilson, who was the man who bared the main onus of responsibility
         Mount Vernon didn’t have a pool of skilled labor
They tried to fix it through
automation and massive training
·         John Paul Craven
o   Vice president in charge of the power generation division at Barberton
o   Directly responsible for the Mount Vernon Plant
o   The number 3 man in the company
o   He stepped down and gave George Zipf the title
o   Committed suicide in a dry bathtub        
o   Eventually a Westinghouse man became vice president in charge of the power generation division
·         Westinghouse took B & W to court when they couldn’t reach top management because of their unfinished vessels
o   They won a temporary restraining order to prevent B & W from taking the vessels back to Mount Vernon
·         Nuclear pressure vessels
o   Winning criteria: nuclear experience, few competitors, Mount Vernon as a purpose-built manufacturing capability
o   Qualifying criteria: quality, price, delivery reliability
o   Organizational style was decentralized
o   Labor had to be high skilled
·         Fossil Fuel Boilers
o   Winning criteria was price
o   Qualifying criteria was quality, established supplier, delivery reliability
o   Organizational style was centralized :tight cost controls
o   Supervision was less
the totality of features and characteristics of a product or service that bear on its ability to satisfy given needs
Judgmental Criteria:
·         to rise above or extend beyond ordinary limits
o   You know what it is when you see it
·         Product-based criteria
o   Quality is a function of a specific measurable criteria
o   Quality differences reflected in differences in the quantity of some attribute
·         User- Based Criteria
o   Quality is determined by what the customer wants
§  Customers have different requirements (jeep vs Cadillac)
·         Value- Based Criteria
o   Define quality based on value-the relationship between utility and price
o   Businesses seek to satisfy customer needs at lower prices
·         Manufacturing- Based Criteria
o   Conformance to specifications
§  BUT, specifications are meaningless unless they reflect attributes that are deemed important to the consumer
·         Reliability
o   The probability of a product’s surviving over a specified period of time under stated conditions of use
·         Conformance
o   The degree to which physical and performance characteristics of a product meet pre-established standards
§  Ex. Service at McDonalds
·         Durability
o   The amount of use one gets from a product before it physically deteriorates to the point at which it is more economical to replace it than to repair it
§  Ex. Used car
·         Serviceability
o   Speed, courtesy, and competence of repair
·         Aesthetics
o   How the product looks, feels, sounds, tastes, or smells
o   Ex. Leather in a new Jag
·         Perceived Quality
o   Subjective assessment of quality resulting from image, advertising, or brand names
·         Dimensions of Service Quality
o   Time, timeliness, completeness, courtesy, consistency accessibility and convenience, accuracy, and responsiveness
a problem the customer is trying to solve or something the customer is trying to achieve
created by the customer based on experience with a particular product or service
Types of customers
o   Internal: other people in your organization who use your products and services
o   External: people outside your organization who use your products and services
§  Can be direct and indirect
·         Direct customers: people outside your organization who receive the products and services your organization products
·         Indirect customers: those outside your organization who have some kind of stake in the work it does but are not the primary reason for its existence
Quality systems
Designed to ensure the continued repeatability of a set of product or service characteristics that have been explicitly or implicitly agreed to by a customer and a supplier
o   Benefits of a documented quality system
§  Forces agreement and clarity of policies, procedures, and work instructions
§  Useful for training and reference
§  Provides a basis for changes and improvements
§  Auditable internally and by customers and accreditation body
·         Four quality systems
Statistical Process Control
Quality Insurance
o   characterized by a formal progression through recognized levels of experience and expertise
§  Apprentice
Quality assurance
o   the activity of providing the evidence needed to establish confidence that the quality function is being performed adequately
·         Characteristics of a prevention-oriented approach
o   Change in philosophy, in focus, in responsibility
o   Use of statistics and on-going improvements
·         Documentation Hierarchy
o   Level 1: Quality manual
o   Level 2: Procedures
o   Level 3: Instructions
o   Level 4: Database of records
Prevention Costs
·         any cost incurred in an effort to prevent a failure in meeting requirements
o   Ex. Applicant screening, vendor evaluation, training
Appraisal Costs
·          any cost incurred in an effort to detect a failure in meeting requirements
o   Ex. Audits, final inspection, receiving inspection
Internal Failure Costs
·         any cost incurred for products that don’t meet requirements and haven’t been transferred to the customer
o   Ex. Sorting, premium freight, overtime, retesting
External Failure Costs
·         any cost incurred for products that don’t meet requirements and have been transferred to the customer
o   Ex. Warranty costs, loss of market share, customer dissatisfaction
What could trainers learn from the "Right the First Time" video ? (8 points)
                1. The power of team problem solving
                 2. Using control charts to solve quality problems
o   Use of SPC (statistical process control)
o   Capability and analysis (bad head)
o   Developed by Walter Shueheart 1930s
                 3. Quality costs
                 4. Continuous improvement
                 5. Employee involvement
                 6. Communication
                 7. Importance of Deming’s 14 points
                8. Power of Juran’s project system
statistical process control

o   Developed by Walter Shueheart 1930s
In, Right the First Time, they became interested in quality because
o   Competition
o   Parallel with automotive industry in the late 70s
o   Quality improvement must be proactive initiative
o   Customers’ expectations set by best provider
o   “Quality is every body’s business:
o   “A quality effort never ends”
o   Old view: “more inspections to improve quality”
New view?
§  New view: “ prevention, not inspection”
·         Quality is free (Crosby)

old view?
o   Higher quality = higher costs (old view)
The elimination of incoming inspection was the result of...
"right the first time"
adversarial relationship between companies and their suppliers
·         Crosby – Absolutes of Quality Management
o   Definition: conformance to requirements
o   System: Prevention
o   Performance Standard: ZERO DEFECTS
o   Measurement: The price of Nonconformance
Absolutes of Quality Management definition
o   conformance to requirements
Absolutes of Quality Management

Absolutes of Quality Management

zero defects
Absolutes of Quality Management

: The price of Nonconformance
total quality management
o   Meeting quality expectations as defined by the customer
o   Designed to improve quality process at every business level
·         5 ways to define quality
conformance to specifications
fitness for use
support services
value for price paid
Conformance to specifications
o   how well a product or service meets the targets and tolerances determined by its designers
§  Does it meet targets defined by the designer
Fitness for use
o   evaluates how well the product performs for its intended use
§  Usefulness vs. price paid
Support services
o   the support provided after the product or service is purchased
§  Quality of support after the sale
Value for price paid
o   product or service usefulness for the price paid
§  Evaluation of usefulness vs price paid
o   focuses on judgmental evaluations of what constitutes product or service excellence
§  Ambiance, prestige, friendly staff
4 dimensions of quality
o   Quality of design
o   Quality of conformance to design
o   Ease of use
o   Post-sale service
o   Walter A. Shewhart
§  Developed the concept of statistical control charts
§  Contributed to the understanding of process variability
o   W. Edwards Deming
§  Developed “14 points” to guide companies in quality improvement
§  1900-93
§  Was introduced to Walter Shewhard
§  Only talked to top management
o   Philip B. Crosby
§  “quality is free”
Introduced concept of zero defects
·         Plan-Do-Study-Act Cycle (PDSA)
o   A diagram that describes the activities that need to be performed to incorporate continuous improvement into the operation
o   Also called the “Deming Wheel”
o   Circular, never ending problem solving process
o   Plan
§  Evaluate current process
§  Collect information
§  Develop plan
o   Do
§  Implement the plan
o   Study
§  Collect data and evaluate against objectives
o   Act
§  Communicate the results from trial
·         Quality Function Deployment
o   Used to translate customer preferences to design
·         Seven tools of quality control
o   Cause and effect diagrams

o   Flowcharts
o   Checklist

o   Control charts

o   Scatter Diagrams

o   Pareto Analysis

o   Histograms
o   Cause and effect diagrams
§  A chart that identifies potential causes of particular quality problems
§  Fishbone diagram
§  The sequence of steps involved in an operation or process
Used to document the detailed steps in a process
o   Checklist
§  A list of common defects and the number of observed occurrences of these defects
§  Simple data check-off sheet designed to identify type of quality problems at each work station
Control charts
§  Used to evaluate whether a process is operating within set expectations
§  Important tool used in STATISICAL PROCESS CONTROL
§  The UCL and LCL are calculated limits used to show when process is in or out of control
o   Scatter Diagrams
§  Graphs that show how two variables are related to each other
o   Pareto Analysis
§  A technique used to identify quality problems based on their degree of importance
§  Named after the 19th century Italian economist
§  Often called the 80 -20 rule
·         Principle is that quality problems are the result of only a few problems (80% of the problems are caused by 20% of causes)
§  You can look at frequency of occurrence or length of occurrence
·         Same data could be looked at in different ways
o   Histograms
§  A chart that shows the frequency distribution of observed values of a variable
·         Ex. Service time at a bank drive up window
§  Displays whether the distribution is symmetrical (normal) or skewed
§  You want to see a bell shaped curve
·         X-axis quantities
·         Y-axis currencies
·         Force field Analysis
o   First there is a recommendation
o   Then find the driving force
o   Identify restraining force
o   Then find a strategy of implementation (specification)
·         Problem of sub optimization
o   The greater the interdependence between the components, the greater the need for communication and cooperation between them. Any attempt to improve the system without taking this fully into account is, at best, sub optimization
Examples of the problems of sub optimization
·         Purchasing materials at the lowest cost
·         Maximizing sales
·         Minimize cost of manufacture or design
·         Minimizing cost of incoming supplies, without taking into account other stages of production and sales
Common cause variation
o   The variation inherent in the process itself. The result of management’s design of the system
o   Is said to be stable or predictable
o   If you have a stable system, there is no use in specifying a numerical goal or target
·         Special cause variation
o   Unpredictable and random variation arising from external sources that are not inherent in the process
o   Must be  removed before a process can be considered to be stable
o   If you don’t have a stable system, there is no point in setting a numerical goal
o   To react to an outcome as if it came from special cause when it actually came from common cause and vise-versa
Demings 14 points
1.       Create and publish the mission statement of your business for your employees
2.       Learn the new philosophy, top management, everybody
3.       Understand the purpose of inspection, for improvement of processes and reduction of cost
4.       End the practice of awarding business on the basis of price tag alone
5.       Improve constantly and forever the system of production and service
6.       Institute training
7.       Teach and institute leadership
8.       Drive out fear, create trust. Create a climate for innovation
9.       Optimize toward the aims and purposes of the company the efforts of teams, groups, and staff areas
10.   Eliminate exhortations for the work force
11.   Eliminated numerical quotas for production, Eliminate M.B.O.
12.   Remove barriers that robe people of pride of workmanship
13.   Encourage education and self-improvement for everyone
14.   Take action to accomplish the transformation
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