CHAPTER 1: INTRO TO OPERATIONS MANAGEMENT - 4 operations objectives may be ways to compete through

operations:
Definition
i. Competing through quality
Transformation processes: inputs of raw materials, energy, labor
ii. Low-cost objective
and capital are transformed into finished goods. iii. Delivery time
iv. Flexibility of operations
Framework
Linking strategies
1. Process
a. Type of equipment and technology • Operations strategy should be linked to business strategy and to
b. Process flows marketing and financial strategies
c. Layout of the facility • When asked to evaluate operations, consider immediately the
d. Job design business strategy as well as the mission and objectives of
e. Workforce policies operations.
2. Quality - standards must be set, people trained and
product/service inspected i. Product imitator (operational excellence)
3. Capacity ii. Product innovation (product leadership)
a. Function of size of the physical facilities,
suppliers – long range Operations competence
b. Subcontracting, extra shifts, rental – short range
c. Staffing • Distinctive competence:
d. Scheduling people, equipment and facilities i. the basis for competitive strategy
4. Inventory – determine what to order, how much to order, ii. the resources/capabilities unique relative to competitors
when to order iii. must be difficult to imitate or copy
a. How much inventory is needed
b. Where to locate the inventory, etc. • Resources or capabilities that are difficult to imitate:
i. skills of managers and employees
Cross-functional decision-making ii. patents
iii. continuous learning and improvement at a rapid pace
1. Marketing iv. partnerships with customers or suppliers over time
2. Finance & Accounting v. Advantageous location of facilities
3. Human Resources vi. Organizational knowledge
4. Information Technology vii. Unique information and control systems

Contemporary Operations Theme • Not purchased from the market, but often built up by the
- Services and manufacturing organization over time
- Customer-directed operations
- Lean operations CHAPTER 3: PRODUCT DESIGN
- Integration of operations with other functions
- Environmental concerns Strategies for new-product introduction:
- Supply chain management • Market pull – market is the primary basis for determining the
- Globalization of operations products with little regard to existing technology
• Technological push – products are pushed in the market;
CHAPTER 2: OPERATIONS & SUPPLY CHAIN STRATEGY marketing job’s to create demand for these superior products.
• Interfunctional – should not only fit the market needs but have
Operations strategy model a technical advantage as well.
- Operations should be fully connected to business strategy
Four elements of operations strategy model: New-product development process
a. Mission • Concept development
b. Distinctive competence • Product design
c. Objectives –the mission in measure terms like: • Pilot production/testing
-Cost
-Quality Cross-functional product design
-Delivery • Technology misalignment happens when the product designed by
-Flexibility engineering cannot be made by operations.
d. Policies • Sequential process:
- Corporate strategy: what business to pursue; where to compete i. Technology is transferred in stages, as a handoff between
- Business strategy – how to compete: marketing, engineering and operations.
a. Customer intimacy ii. Each function completes its work before the next one starts.
b. Product leadership • Concurrent engineering:
c. Operational excellence i. All functions are involved from the beginning.
1. First stage: marketing effort
Emphasis on operations objectives 2. Product design phase: engineering
3. Final stage: operations – new product testing & launch
ii. To do more in less time with limited resources.
Quality function deployment

• Uses:
i. Tool for linking customer requirements as defined by the
customer to technical specifications.
ii. Translates the ordinary language obtained from the customers
to technical requirements understood by engineers.
iii. Facilitates interfunctional cooperation between marketing,
engineering and manufacturing.
• Customer attributes
• Engineering characteristics
• House of quality neatly connects the market requirements, which
the customer values with the design characteristics that engineers
must consider.

Value analysis / Design for Manufacturing (DFM)

– method of improving the usefulness of a product without
increasing its cost or reducing the cost without reducing the
usefulness of the product.

CHAPETER 4: PROCESS SELECTION

Product-flow characteristics
• Determine the type of process used to make the product or
service.
• Includes the volume of the product and whether the product is
standardized or customized.
• Types of product-flow:
i. Line flow
1. linear sequence of operations like assembly line
2. mass production/continuous flow
3. requires high-volume & standardized products
4. Marketing = mass appeal and high-volume product
ii. Batch
1. Production of product in batches or lots
2. Can be used to make many different types of products
3. Use general-purpose equipment (not specialized)
4. Offers equipment flexibility; labor highly skilled and flexible
5. Configured to handle low-volume orders.
iii. Project flows
1. Used for unique or creative products.
Classification by type of customer order
• Made-to-order (MTO)
• Made-to-stock (MTS)
• Assemble-to-order (ATO)
-Hybrid process of MTS and MTO.
-Subassemblies are made to stock, final assembly is made to order.
4 factors in Process selection decisions
• Market conditions
• Capital requirements
• Labor
• technology
Product-Process strategy
• Product-process matrix represents the strategic choices available
to firms in both product and process dimensions.
It begins with a very flexible process that is not very cost efficient
process becomes more standardized, mechanized, automated.
Similarly, products go through life cycle stages which is illustrated by
a product-process matrix which represents the interaction of the
product and process lifecycles.
Focused operations
• Service/production should have well-defined mission such as low
cost or product innovation, not both.
• Lack of focus in mfg plants & services have resulted from excessive
attention to economies of scale.
• In the name of efficiency due to economies of scale, different
missions are being served by the same operation.
• Plant-within-a-plant (PWP) – may sacrifice some economies of
scale while doing a better job of meeting market requirements and
improving profitability.
• Type of focus:
i. Product focus ii. Process type
iii. Technology iv. Volume of sales
v. MTO and MTS vi. New products and mature products
• Operating off the diagonal of the matrix – lack of focus
Mass customization
• Economies of scale – high volume standardized product with few
options; common product
• Economies of scope – common process; high variety from a single
process
• 4 forms of mass customization:
i. Mass-customized services
ii. Modular production assemble-to-order (ATO)
iii. Fast changeover (zero setup time between orders)
iv. Postponement of options
Cross-functional decision making
• Rapidly changing markets, to deal with:
• Critical role of marketing: estimating and managing future
demand; to manage risk inherent in making process choices with the
associated capital investment; Stimulating demand
• Finance – capital investment required
• HR – providing the human capital consistent with the process
selected; job shops and batch skills of employees are higher than for
assembly lines.
• Information systems and accounting professionals
CHAPTER 10: SUPPLY CHAIN MANAGEMENT
Definitions
• Rationale:
i. To reduce total supply chain cycle time  reduce inventory,
increase flexibility, reduce costs & better deliveries.
ii. Consider relations with customers and suppliers
iii. Supply chain thinking is a systems thinking
• Supply chain – sequence of processes from suppliers  consumer
• Supply chain management – planning, design and control of the
flow of information and materials along supply chain in order to
meet customer requirements efficiently
• Distribution channel – route from the producer to the distributors
to the customer.
• Demand management – demand can be managed through
mechanisms such as product, pricing, promotion and distribution
• Logistics management – inbound transportation and outbound
distribution; a subset of supply chain management
System interactions
• The supply chain is a highly interactive system. Decisions in each
part of the supply chain affect the other parts.
• The accelerator effect of demand changes. Bullwhip
effect/accelerator effect – the demand change is magnified the
further back you go in the supply chain; overshooting the true
demand;
• The best way to improve the supply chain is to reduce the total
replenishment time and to feed back actual demand information at
all levels. Time lags create fluctuations in orders and inventories;
increase coordination within and between organizations.
Coordination in the supply chain
• Close parallel between supply chains and quality improvement.
Quality improvement requires coordination across organizational
boundaries and recognition of systems interactions.
Measuring supply chain performance
• Delivery – on-time delivery
• Quality – customer satisfaction; customer loyalty
• Time – total replenishment time
• Flexibility – time it takes to change volume
• Cost – total delivered costs typical cost measure
Supply chain strategies
• Before making improvements to supply chains, a company should
sort its products into 2 categories (functional or innovation) & then
apply supply chain strategies that fit the nature of these products.
Structural improvement
• 2 basic ways to improve supply chains changing:
1. Structure - bricks and mortar
2. Infrastructure - people and systems
– both should reduce uncertainty & replenishment time from the
supply chain.
• 5 forms of structural change:
i. Forward and backward integration – forward (manufacturer
buys the wholesale firm); backward (manufacturer buys the
supplier); entire chain – total vertical integration – control of supply
chain, reap the profits of supplier or distributors. Drawback: loss of
flexibility to changing technology or loss of economies of scale
ii. Major process simplification – business process reengineering;
processes are designed from scratch without regard for the existing
processes; conceptual changes in how business is conducted, major
information systems changes.
iii. Changing the configuration of factories, warehouses, or retail
locations – too many suppliers;
iv. Major product redesign – product lines are trimmed and
redesigned to be more modular in nature.
v. Outsourcing logistics to a third party – national semiconductor
Improvement in infrastructure
• People, information systems, organization, production and
inventory control, quality control systems.
• Cross-functional teams – without functional team, the functional
silos are very effective in destroying any semblance of a master
schedule that everyone can implement.
• Partnerships – with suppliers and customers
• Setup time reduction
• Information systems – obtaining sales data from final customer
and feeding this information back through the supply chain
• Cross-docking – wal mart; supplier’s shipments from various docks
are transferred directly to walmart truck at another dock – do not
spend time in the warehouse inventory
Internet and supply chains
Virtual supply chains
CHAPTER 8: QUALITY MANAGEMENT
Quality Definitions
• Continuous improvement
i. A never-ending process driven by knowledge & problem solving.
ii. Via better consumer understanding & availability of technology.
• Quality of design
i. Determined before the product is produced done by a cross-
functional product design team
ii. Determined by market research, design concept and
specifications
• Quality of conformance – producing a product to meet the
specifications
• The “abilities”
i. Availability – the continuity of service to the customer
ii. Reliability – length of time a product can be used before it fails
iii. Maintainability – restoration of the a product once it has failed
• Field service – represents warranty or repair or replacement of the
product after it has been sold
• Quality is more than just good product design; it extends to quality
control of production, quality over the life of the product and quality
of field service after the sale
Service Quality
• SERVQUAL – most popular measure of service quality; measured
by a customer questionnaire based on 5 perceptual measures of
service:
i. Tangibles – appearance of the company’s physical facilities,
equipment and personnel
ii. Reliability – ability of the company to perform the promised
service dependably and accurately without errors
iii. Responsiveness – willingness to provide service that is prompt
and helpful to the customer
iv. Assurance – knowledge and courtesy of the company’s
employees and their ability to convey trust and confidence
v. Empathy – the caring & attention given to customers
Quality Planning, Control and Improvement
• Quality Cycle – process of quality planning, control and
improvement requires a continuous interaction
between the customer, operations and other parts of the
organization
• Steps to implement quality cycle:
i. Define quality attributes on the basis of customer needs
ii. Decide how to measure each attribute
iii. Set quality standards
iv. Establish appropriate tests for each standard
v. Find and correct causes of poor quality
vi. Continue to make improvements
The Quality Gurus
• Deming – emphasized the role that management should take in
quality improvement
• Juran – originated the idea of the quality trilogy: planning, control
and improvement of quality
• Crosby – seek to produce zero defects or to “make it right the first
time”
ISO 9000 Standards
• International organization for standardization – an international
body consisting of members from 155 countries
• Meant to describe how a company should go about ensuring
quality whether the company is large or small, whether the product
is complex or simple
• Specify a company must have:
i. Quality system in place – procedures, policies, and training
ii. Quality manual and careful record keeping/documentation
iii. Process flowcharts, instructions, inspection and testing methods
iv. Job descriptions, org charts, measures of customer satisfaction
and continuous improvement processes
Malcolm Baldrige Award
• Became a de facto standard for “best quality practice” in America
• Baldrige criteria:
i. Leadership
ii. Strategic planning
iii. Customer and market focus
iv. Measurement, analysis and knowledge management
v. Human resource focus
vi. Process management
vii. Business results
Quality and Financial Performance
• Cost of quality – quality and financial performance are intimately
related; relationship between quality and cost; includes prevention,
appraisal, internal failure and external failure categories – costs of
not doing things right the first time (except prevention)
• 2 components:
i. Control costs – related to activities that remove defects from the
production stream; can be done by prevention and appraisal
- Prevention include quality planning, new-product reviews,
training and engineering analysis
- Occur prior to production and are aimed at preventing defects
before they occur
ii. Failure costs – appraisal or inspection aimed at eliminating
defects after they occur but before the products reach the customer
- Incurred either during production process (internal) or after the
product is shipped (external)
• Examples per Category of Costs of Quality:
i. Prevention costs: quality planning, new-product review,
training, process planning, quality data, improvement projects
ii. Appraisal costs – incoming materials inspection, process
inspection, final goods inspection, quality laboratories
iii. Internal failure costs – scrap, rework, downgrading, retest,
downtime
iv. External failure costs – warranty, returned merchandise,
complaints, allowances
CHAPTER 17: JIT SYSTEMS & LEAN THINKING
Introduction
• Goes far beyond inventory control and encompasses the entire
system of production
• An approach that seeks to eliminate all sources of waste in
production activities by providing the right part at the right place at
the right time
• Results in much less inventory, lower costs and better quality than
the just in case (JIC) approach
Philosophy of JIT
• The roots of JIT system can probably be traced to the Japanese
environment – owing to a lack of space and natural resources
• Also believe that inventory storage wastes space and ties up
valuable materials
• Utilizing the full capability of the worker; greater responsibility for
production:
i. Workers in the JIT system are charged with producing quality
parts just in time to support the next production process.
ii. Workers are also charged with improving the production
process – through quality teams, suggestion systems, other forms of
participation, workers offer improvement to the process of
production
iii. Capabilities of workers are used to a much greater extent in the
JIT system than in traditional production approaches
• Objective – to improve profits and ROI through cost reductions,
inventory reductions, and quality improvements
• To achieve this:
i. Eliminate waste
ii. Involve workers in the production process
• Has its roots in repetitive manufacturing, same as mass production
Elements of JIT System
• JIT Master Schedule or final assembly schedule
• Emphasis on quick changeovers and smaller lots – multifunction
workers are required
• Quality is absolutely essential with a JIT system. A JIT system is
designed to expose errors and get them corrected rather than
covering them up with inventory.
• Supplier relations are radically changed.
• JIT affects every aspect of plant operations:
• Return on Investment Objective:
i. Increases by revenues, costs reductions, less investment
ii. Increase revenue by improving quality/giving better delivery
service
iii. Better service – by shorter lead times, allow faster response to
customer needs and better conformance to schedule commitments
iv. Cost reductions: in materials (less scrap and rework), labor
v. Investment is reduced by less inventory (root of all evil) and
greater throughput of PPE
• Problem-solving activities by management and workers drive the
whole system
• Built on constant improvement
• Problem-solving approach is the heart of JIT