Which of the following is least likely to affect the cost an organization incurs in producing its

products or services?
A. price
B. productivity
C. location
D. quality
E. inventory management
A. price
Relative to the other choices, price is least likely to affect cost.
Where a firm locates would typically not affect that firm's:
A. costs.
B. convenience for customers.
C. delivery times.
D. strategy.
E. transportation costs.
D. strategy.
Typically, strategy dictates where firms will locate, rather than location dictating strategy.
Which of the following is not among the chief reasons organizations fail?
A. overemphasis on short-term financial performance
B. emphasizing labor productivity in labor-intensive environments
C. poor internal communications
D. not investing in capital and human resources
E. overemphasis on product (or service) design
B. emphasizing labor productivity in labor-intensive environments
In labor-intensive environments, emphasizing labor productivity is a good idea.
The key to successfully competing is understanding what customers want and then
__________ satisfy those wants.
A. training production workers to
B. finding suppliers who can
C. finding the best way to
D. designing products and services that
E. hiring enough workers to
C. finding the best way to
To successfully compete, two basic issues must be addressed: What do the customers
want? What is the best way to satisfy those wants?
An organization's mission statement serves as the basis for:

A. environmental scanning.
B. core competencies.
C. operating procedures.
D. distinctiveness.
E. organizational goals.
E. organizational goals.
Organizations' missions serve as the broad underpinning for their goals.
Which of the following would be least important in the pursuit of a time-based strategy?
A. cost minimization
B. quick changeover times
C. operational agility
D. reduced complaint resolution times
E. flexible technology
A. cost minimization
Many means for minimizing cost would have the effect of making a time-based strategy less
feasible.
Competitiveness doesn't include:

A. productivity.
B. effectiveness.
C. profitability.
D. operations strategy.
E. operations management.
C. profitability.
A company can be competitive relative to similar companies and still be unprofitable if the
competitive environment is inherently unprofitable.
Product design and choice of location are examples of _______ decisions.
A. strategic
B. tactical
C. operational
D. customer-focused
E. design
A. strategic
These decisions are made high in the hierarchy.
Scheduling personnel is an example of an operations management:
A. mission implementation.
B. operational decision.
C. organizational strategy.
D. functional strategy.
E. tactical decision.
B. operational decision.
Staffing-level decisions are made low in the hierarchy.
Productivity is expressed as:
.A. output plus input.
B. output minus input.
C. output times input.
D. output divided by input.
E. input divided by output.
D. output divided by input.
Productivity is the ratio of outputs to inputs.

In the 1970s and early 1980s in the United States, organizations concentrated on:

A. operations strategies.
B. improving quality.
C. marketing and financial strategies.
D. revising mission statements.
E. environmental issues.
C. marketing and financial strategies.
This led to U.S. firms being not very competitive with regard to their operations.
Which of the following is not a factor that affects productivity?
A. computer viruses
B. design of the workspace
C. use of the Internet
D. standardizing processes
E. product price
E. product price
These don't lead to fundamental changes in operations.

Which of these factors would be least likely to affect productivity?

A. methods and technology
B. workers
C. management
D. product mix
E. advertising
E. advertising
Advertising could increase the value of the outputs, but it is less likely to affect productivity
than these other factors.
Which of the following is not a key step toward improving productivity?
A. developing productivity measures for all operations
B. improving the bottleneck operations
C. establishing reasonable goals for improvement
D. considering incentives to reward workers
E. converting bond debt to stock ownership
E. converting bond debt to stock ownership
A firm's productivity is independent of its capital structure.
For an organization to grow its market share, it must:
A. advertise using multimedia.
B. reduce prices.
C. exceed minimum standards of acceptability for its products or services.
D. establish an Internet Web site.
E. broaden its mission statement.
C. exceed minimum standards of acceptability for its products or services.
Only by exceeding standards can an organization grow its market share.
The ratio of good output to quantity of raw material input is called
A. nondefective productivity.
B. process yield.
C. worker quality measurement.
D. total quality productivity.
E. quantity/quality ratio.
B. process yield.
This is sometimes a useful productivity measure in service industries.
The fundamental purpose for the existence of any organization is described by its:
A. policies.
B. procedures.
C. corporate charter.
D. mission statement.
E. bylaws.
D. mission statement.
A mission statement is the organization's attempt to justify its existence.
A productivity increase in one operation that does not improve overall productivity of the
business is not
A. worthwhile.
B. trivial.
C. competence-destroying.
D. an order winner.
E. an order qualifier.
A. worthwhile.
Only system-wide productivity improvement makes the organization more productive.
Value added can be calculated by:
A. average productivity gains over time.
B. inputs divided by the outputs.
C. outputs divided by the inputs.
D. input plus output divided by two.
E. outputs minus inputs.
E. outputs minus inputs.
Value added represents the change in value of the original inputs.
Which of the following is true?

A. Corporate strategy is shaped by functional strategies.

B. Corporate mission is shaped by corporate strategy.
C. Functional strategies are shaped by corporate strategy.
D. External conditions are shaped by corporate mission.
E. Corporate mission is shaped by functional strategies.
C. Functional strategies are shaped by corporate strategy.
Corporate strategy shapes strategies at lower levels.
Core competencies in organizations generally do not relate to:
A. cost.
B. quality.
C. time.
D. flexibility.
E. sales price.
E. sales price.
What a firm charges for its outputs is not a core competency. What it can charge, however,
is potentially related to a core competency.

With regard to operations strategy, organization strategy should, ideally, take into account:
A. Remove communications barriers within organizations.
B. Minimize attention to the operations function.
C. Put less emphasis on short-term financial results.
D. Recognize labor as a valuable asset and act to develop it.
E. Improve quality.
A. operations' strengths and weaknesses.
Formulation of organization strategy should take into account the realities of operations'
strengths and weaknesses, capitalizing on strengths and dealing with weaknesses.
Which of the following is not typically considered a cure for poor competitiveness?
A. Remove communications barriers within organizations.
B. Minimize attention to the operations function.
C. Put less emphasis on short-term financial results.
D. Recognize labor as a valuable asset and act to develop it.
E. Improve quality.
B. Minimize attention to the operations function.
Operations is a prime area for improving competitiveness.
Time-based approaches of business organizations focus on reducing the time to
accomplish certain necessary activities. Time reductions seldom apply to:
A. product/service design time.
B. processing time.
C. delivery time.
D. response time for complaints.
E. internal audits.
E. internal audits.
Internal audits have little to do with core value-adding efforts.
The external elements of SWOT analysis are:
A. strengths and weaknesses.
B. strengths and threats.
C. opportunities and threats.
D. weaknesses and opportunities.
E. strengths and opportunities.
C. opportunities and threats.
Opportunities and threats relate to the organization and its external environment.
In an assembly operation at a furniture factory, six employees assembled an average of 450
standard dining chairs per five-day week. What is the labor productivity of this operation?

A. 90 chairs/worker/day
B. 20 chairs/worker/day
C. 15 chairs/worker/day
D. 75 chairs/worker/day
E. 60 chairs/worker/day
C. 15 chairs/worker/day
Divide the output of 450 chairs by the inputs of 30 worker-days.
Which of the following is not a reason for poor performance of our organization in the
marketplace?
A. placing too much emphasis on product/service design and too little on process design
B. failing to take into account customer wants and needs
C. putting too much emphasis on short-term financial performance
D. taking advantage of strengths/opportunities, and recognizing competitive threats
E. failing to monitor the external environment
D. taking advantage of strengths/opportunities, and recognizing competitive threats
Taking advantage of strengths/opportunities and recognizing competitive threats would
enable good performance.
Terms in this set (116)
OriginalAlphabetical
long

The Delphi method and executive opinion methods are often used for ___-range planning.

short

Moving averages and exponential smoothing are essentially ___-range techniques, since they produce
forecasts for the next period.

relatives indexes

The seasonal percentages in the multiplicative model are referred to as seasonal ___ or seasonal ___.

Focus forecasting
Developed by Bernard T. Smith. It involves the use of several forecasting methods all being
applied to the last few months of historical data after irregular variations are removed. The
method that has the highest accuracy is then used to make the forecast for the next month.
This process is used for each product or service, and is repeated monthly.
Naive
A forecast for any period that equals the previous period's actual value /or/ uses a single
previous value of a time series as the basis of a forecast.
Time series
Forecasts that project past experience, or patterns identified, into the future; assumption is
that the future will be like the past.
Forecast error
___ ___ is the difference between the value that occurs and the value that was predicted for
a given time period.
Monitor errors.
The 6 basic steps of forecasting: Determine purpose; Establish time horizon; Obtain, clean,
and analyze appropriate data; Select a forecasting technique; Make the forecast; ___ and
___ the forecast
Flexible
___ business organizations require a shorter forecasting horizon, benefiting from more
accurate short-range forecasts, than less flexible competitors using longer forecast
horizons.
accurate
Short-range forecasts must contend with fewer uncertainties than longer-range forecasts,
so they tend to be more ___.
accuracy
Two important aspects of forecasts are: 1. expected level of demand, 2. degree of ___ that
can be assigned to a forecast
Forcasting
A basic input in the decision processes of operations management because they provide
information on future demand.
supply
The primary goal of operations management is to match ___ to demand.
forecasts
Anticipated demand is derived from two possible sources, actual customer orders and ___.
Short
___-term forecasts pertain to ongoing operations.
Long
___-term forecasts pertain to new products or services, new equipment, new facilities, or
something else that will require a somewhat long lead time to develop, construct, or
otherwise implement.
yield
Forecasting is also an important component of ___ management, which relates to the
percentage of capacity being used.
use
The two uses for forecasts is to help managers plan the system, and the other is to help
them plan the ___ of the system.
Forecasting
___ techniques generally assume that the same underlying causal system that existed in
the past will continue to exist in the future.
accurate
Forecasts for groups of items tend to be more ___ than forecasts for individual items
because forecasting errors among items in a group usually have a canceling effect.
decreases
Forecast accuracy ___ as the time period covered by the forecast—the time horizon—
increases.
timely
Properly prepared forecasts should be ___, accurate, reliable, meaningful units (dependent
on user needs), in writing (consistent for everyone reading), simple (in understanding and
use), and cost effective (benefits outweighing costs).
accurate
Properly prepared forecasts should be timely, ___, reliable, meaningful units (dependent on
user needs), in writing (consistent for everyone reading), simple (in understanding and use),
and cost effective (benefits outweighing costs).
reliable
Properly prepared forecasts should be timely, accurate, ___, meaningful units (dependent
on user needs), in writing (consistent for everyone reading), simple (in understanding and
use), and cost effective (benefits outweighing costs).
meaningful units
Properly prepared forecasts should be timely, accurate, reliable, ___(dependent on user
needs), in writing (consistent for everyone reading), simple (in understanding and use), and
cost effective (benefits outweighing costs).
writing
Properly prepared forecasts should be timely, accurate, reliable, meaningful units
(dependent on user needs), in ___ (consistent for everyone reading), simple (in
understanding and use), and cost effective (benefits outweighing costs).
simple
Properly prepared forecasts should be timely, accurate, reliable, meaningful units
(dependent on user needs), in writing (consistent for everyone reading), ___ (in
understanding and use), and cost effective (benefits outweighing costs).
cost
Properly prepared forecasts should be timely, accurate, reliable, meaningful units
(dependent on user needs), in writing (consistent for everyone reading), simple (in
understanding and use), and ___ effective (benefits outweighing costs).
purpose
The 6 basic steps of forecasting: Determine ___; Establish time horizon; Obtain, clean, and
analyze appropriate data; Select a forecasting technique;Make the forecast; and Monitor the
forecast errors.
time horizon
The 6 basic steps of forecasting: Determine purpose; Establish ___ ___; Obtain, clean, and
analyze appropriate data; Select a forecasting technique;Make the forecast; and Monitor the
forecast errors.
appropriate data
The 6 basic steps of forecasting: Determine purpose; Establish time horizon; Obtain, clean,
and analyze ___ ___; Select a forecasting technique;Make the forecast; and Monitor the
forecast errors.
technique
The 6 basic steps of forecasting: Determine purpose; Establish time horizon; Obtain, clean,
and analyze appropriate data; Select a forecasting ___; Make the forecast; and Monitor the
forecast errors.
Make the forecast
The 6 basic steps of forecasting: Determine purpose; Establish time horizon; Obtain, clean,
and analyze appropriate data; Select a forecasting technique; ___ ___ ___; and Monitor the
forecast errors.
Error
___ = Actual − Forecast or:
et=At−Ft
t=given time period
Actual
Error = ___ − Forecast or:
et=At−Ft
t=given time period
Forecast
Error = Actual − ___ or:
et=At−Ft
t=given time period
mean absolute deviation (MAD)
___ ___ ___ is the average absolute error
mean squared error (MSE)
___ ___ ___ is the average of squared errors
mean absolute percent error (MAPE)
___ ___ ___ ___ is the average absolute percent error.
Mean Absolute Deviation (MAD)
___ ___ ___ =∑(Actual t−Forecast t) / n
Judgmental
Forecasts that use subjective inputs such as opinions from consumer surveys, sales staff,
managers, executives, and experts; providing insights not otherwise available.
Associative
___ models use equations that consist of one or more explanatory variables that can be
used to predict demand.
Executive Opinions
This qualitative forecasting technique has the advantage of bringing together the
considerable knowledge and talents of various managers; the risk that the view of one
person will prevail, and the possibility that diffusing responsibility for the forecast over the
entire group may result in less pressure to produce a good forecast.
Salesforce Opinions
This qualitative forecasting technique often has good sources of information because of
their direct contact with consumers; but these people are sometimes overly influenced by
recent experiences.
Consumer Surveys
This qualitative forecasting technique enables them to sample consumer opinions and
information that might not be available elsewhere; but requires considerable amount of skill
to construct, administer, and interpret results and must contend with the possibility of
irrational consumer behavior patterns.
Other Approaches
This qualitative forecasting technique is when a manager may solicit opinions from a
number of other managers, staff people, and occasionally outside experts (politics or foreign
economics). Also includes the Delphi Method.
Delphi Method
An iterative process in which managers and staff complete a series of questionnaires, each
developed from the previous one, to achieve a consensus forecast.
when
As a forecasting tool, the Delphi method is useful for technological forecasting, assessing
changes in technology and ___ they will have impact on an organization.
time series
A ___ ___ is a time-ordered sequence of observations taken at regular intervals
plotting
Analysis of time-series data requires the analyst to identify the underlying behavior of the
series, can often be accomplished by merely ___ the data and visually examining the plot.
Trend
A time series behavior or pattern called a ___ refers to a long-term upward or downward
movement in the data. Population shifts, changing incomes, and cultural changes often
account for such movements.
Seasonality
A time series behavior or pattern called ___ discribe short-term regular variations related to
the calendar, or time of day. Restaurants, supermarkets, and theaters experience weekly
and even daily "seasonal" variations.
Cycles
A time series behavior or pattern called ___ are wavelike variations of more than one year's
duration. These are often related to a variety of economic, political, and even agricultural
conditions.
Irregular
A time series behavior or pattern called ___ variations are due to unusual circumstances
such as severe weather conditions, strikes, or a major change in a product or service. They
do not reflect typical behavior, and their inclusion in the series can distort the overall picture.
These should be identified and removed from the data.
Random
A time series behavior or pattern called ___ variations are residual variations that remain
after all other behaviors have been accounted for.
stable
A ___ series have variations that are around an average.
stable
The naive approach can be used with a ___ series, with seasonal variations, or with trend.
seasonal
The naive approach can be used with a stable series, with ___ variations, or with trend.
trend
The naive approach can be used with a stable series, with seasonal variations, or with ___.
trend
For data with ___, the naive forecast is equal to the last value of the series plus or minus
the difference between the last two values of the series. For example, suppose the last two
values were 50 and 53. The next forecast would be 56
white noise
Random unpredictable variations within data are sometimes called ___ ___.
Averaging
___ techniques (Moving average, Weighted moving average, Exponential smoothing)
generate forecasts that reflect recent values of a time series (e.g., the average value over
the last several periods).
naive
One weakness of the ___ method is that the forecast just traces the actual data, with a lag
of one period; it does not smooth at all.
moving average
A ___ ___ forecast uses a number of the most recent actual data values in generating a
forecast

moving

In a ___ average the forecast is updated by adding the newest value and dropping the oldest and then
recomputing the average. Consequently, the forecast "moves" by reflecting only the most recent values.

sensitive (responsive)

The fewer the data points in an average, the more ___ the average tends to be.

lag

The more periods in a moving average, the greater the forecast will ___ changes in the data.

weighted

A ___ average is similar to a moving average, except that it typically assigns more weight to the most
recent values in a time series.

Exponential smoothing

A weighted averaging method where each new forecast is based on the previous forecast plus a
percentage of the difference between that forecast and the actual value of the series at that point.

less
In exponential smoothing the closer the value of α is to 1.00, the greater the responsiveness and the ___
the smoothing.

trend-adjusted exponential smoothing

A variation of simple exponential smoothing used when a time series exhibits a linear trend.
additive
In the ___ model, seasonality is expressed as a quantity, which is added to or subtracted
from the series average in order to incorporate seasonality.
multiplicative
In the ___ model, seasonality is expressed as a percentage of the average (or trend)
amount, which is then used to multiply the value of a series to incorporate seasonality.
20
Suppose that the seasonal relative for the quantity of toys sold in May at a store is 1.20.
This indicates that toy sales for that month are __% above the monthly average.
deseasonalize
Seasonal relatives are used in two different ways in forecasting: to ___ data; to incorporate
seasonality in a forecast.
centered moving average
a moving average positioned at the center of the data that were used to compute it
Cycles
___ are up-and-down movements similar to seasonal variations but of longer duration—say,
two to six years between peaks.
leading
Changes in the ___ variable precede changes in the variable of interest.
Regression
Technique for fitting a line to a set of points.
Predictor
Variables that can be used to predict values of the variable of interest.
Least squares line
Form of regression that minimizes the sum of the squared vertical deviations around the
line.
Standard error of estimate
A measure of the scatter of points around a regression line.
Correlation
___ measures the strength and direction of relationship between two variables.
0
A correlation close to __ indicates little linear relationship between two variables.
random variation
Use of simple regression analysis implies that certain assumptions have been satisfied: ___
___ ; normal distribution; Predictions are being made only within the range of observed
values.
normal distribution
Use of simple regression analysis implies that certain assumptions have been satisfied:
random variation; ___ ___; Predictions are being made only within the range of observed
values.
range observed
Use of simple regression analysis implies that certain assumptions have been satisfied:
random variation; normal distribution; Predictions are being made only within the ___ of ___
values.
one
A weakness of simple linear regression is it applies only to linear relationships with ___
independent variable.
data
A weakness of regression is needing a considerable amount of ___ to establish the
relationship—in practice, 20 or more observations.
equally
A weakness of regression is all observations are weighted ___.

historical
Several of the qualitative techniques are well suited to long-range forecasts because they
do not require ___ data.
reactive
A ___ approach views forecasts as probable future demand, and a manager reacts to meet
that demand.
proactive
A ___ approach seeks to actively influence demand (e.g., by means of advertising, pricing,
or product/service changes).
credibility
Better short-term forecasts will not only enhance profits through lower inventory levels,
fewer shortages, and improved customer service, they also will enhance forecasting ___
throughout the organization.
accurate
Forecasts that cover shorter time frames tend to be more ___ than longer-term forecasts.
Lean
___ systems are demand driven, they are far less dependent on short-term forecasts than
more traditional systems

efficiency performance
Commonly used criteria in assignment models include: costs, profits, ___, and ___.
Assignment
A special-purpose linear programming model for optimal assignment of tasks or other work
requirements to resources: assigning jobs to machines or workers, territories to
salespeople, and repair jobs to repair crews.
backlog
A key portion of an input/output report for a work center is the ___ of work waiting to be
processed; also reveals deviations-from-planned for both inputs and outputs
Input/output (I/O)
___ control: Managing and monitoring work flow and queues at work centers to keep them
in control.
update costs times
Gantt charts possess certain limitations: the need to repeatedly ___ to keep current; does
not directly reveal ___ associated with alternative loadings; complexity of variations in work
centers' processing ___
cost productivity
Effective scheduling can yield ___ savings, increases in ___, and other benefits.
final output
In the decision-making hierarchy, scheduling decisions are the ___ step in the
transformation process before actual ___ occurs.
Scheduling
Process of establishing timing for resource use including employees, equipment, and
facilities
every
Scheduling occurs in ___ organization, regardless of the nature of its activities.

conflicting goals
the objectives of scheduling are to achieve trade-offs among ___ ___, which include
efficient utilization of staff, equipment, and facilities, and minimization of customer waiting
time, inventories, and process times.
volume
Scheduling tasks are largely a function of the ___ of system output.
before
Many decisions about system design and operation have been made long ___ scheduling
decisions.
Job Shop
Scheduling used for operations with low volume of jobs and high variety of processing
requirements.
line balancing
A major aspect in the design of flow systems is ___ ___, which concerns allocating the
required tasks to workstations so that they satisfy technical (sequencing) constraints and
are balanced with respect to equal work times among stations.
narrow
scheduling decisions must be made within the constraints established by many other
decisions, making them fairly ___ in scope and latitude.
Loading (Job Shop)
Process of distributing or assigning jobs to work (processing) centers
Sequencing
Process of determining order in which jobs will be processed by resources or work centers
to: minimize job completion time, setup costs, processing costs and/or idle time
Gantt Charts
Visual time framework aid for loading, sequencing or scheduling jobs, task or activities

backlog
A key portion of an input/output report for a work center is the ___ of work waiting to be
processed; also reveals deviations-from-planned for both inputs and outputs
Input/output (I/O)
___ control: Managing and monitoring work flow and queues at work centers to keep them
in control.
update costs times
Gantt charts possess certain limitations: the need to repeatedly ___ to keep current; does
not directly reveal ___ associated with alternative loadings; complexity of variations in work
centers' processing ___
cost productivity
Effective scheduling can yield ___ savings, increases in ___, and other benefits.
final output
In the decision-making hierarchy, scheduling decisions are the ___ step in the
transformation process before actual ___ occurs.
Scheduling
Process of establishing timing for resource use including employees, equipment, and
facilities
every
Scheduling occurs in ___ organization, regardless of the nature of its activities.

conflicting goals
the objectives of scheduling are to achieve trade-offs among ___ ___, which include
efficient utilization of staff, equipment, and facilities, and minimization of customer waiting
time, inventories, and process times.
volume
Scheduling tasks are largely a function of the ___ of system output.
before
Many decisions about system design and operation have been made long ___ scheduling
decisions.
Job Shop
Scheduling used for operations with low volume of jobs and high variety of processing
requirements.
line balancing
A major aspect in the design of flow systems is ___ ___, which concerns allocating the
required tasks to workstations so that they satisfy technical (sequencing) constraints and
are balanced with respect to equal work times among stations.
narrow
scheduling decisions must be made within the constraints established by many other
decisions, making them fairly ___ in scope and latitude.
Loading (Job Shop)
Process of distributing or assigning jobs to work (processing) centers
Sequencing
Process of determining order in which jobs will be processed by resources or work centers
to: minimize job completion time, setup costs, processing costs and/or idle time
Gantt Charts
Visual time framework aid for loading, sequencing or scheduling jobs, task or activities
Finite (Loading)
Jobs assigned taking into account current capacity and job processing time, this can lead to
overloads in some time periods and underloads in others.
Infinite (Loading)
Jobs assigned without regard to capacity, , this can lead to overloads in some time periods
and underloads in others.

bottleneck
Local rules are particularly useful for ___ operations, but they are not limited to those
situations.
different
A major complication in global sequencing is that not all jobs require the same processing
or even the same order of processing; the set of jobs is ___ for different workstations.
global
___ priority rules take into account information pertaining to multiple workstations.
Makespan
Total time needed for group of jobs from beginning of first job to completion of last.
Average Number of Jobs
A measure of jobs that are considered to be work in process inventory
truncated
After waiting for a given time period, any remaining jobs are automatically moved to the
head of the line; This is known as the ___ SPT rule.

Line Balancing
Allocates tasks to work stations in a way that both meets sequencing requirements of
process and equalizes load of work stations
PM Repair
Success Factors for Flow Shop Scheduling:
Process + Product Design
Optimal Product Mixes
Minimization of Quality Problems
Reliability and Timing of Supplies
___ ___
Rapid ___
Intermediate-volume
Scheduling type used for operations with moderate volume of jobs with similar processing
requirements done in similar sequence of steps
Intermittent nature of processing requires scheduling to address three basic issues: job run
size, timing and sequence.
Challenges of Services Scheduling
Demand for services tends to be more random than demand for products
Services cannot be inventoried to meet demand
Job Run Size
Often determined by models, such as Economic production quality (EPQ)
Job (time)
Time needed for setup and processing of a job: usually includes setup and processing
times.
Job Sequence
Often involves scheduling jobs with similar requirements in sequence to minimize set up
costs
Demand
___ Management: Customers and Employees
Capacity
___ Management: Employees, Equipment, and Facilities
Appointed Systems
Control customer demand to minimize wait time and maximize resources use
Reservation Systems
Manage customer demand and generate estimate for resource scheduling
Cyclical Scheduling
Assigns employees to time slots/shifts and days off on cyclical basis
Multi-Resource Scheduling
Schedule multiple, interdependent resources on a coordinate basis
size timing sequence
The three basic issues in these systems are the run ___ of jobs, the ___ of jobs, and the
___ in which jobs should be processed.
Drum
___ is the schedule in this conception; it sets the pace of production. The goal is to
schedule to make maximum use of bottleneck resources.
co (change over)
Tactics for reducing ___ times include offline setups, snap-on parts, modular setups, and
flexible equipment designed to handle a variety of processing requirements.
used maximum
Theory of constraints five-step procedure:
Determine what is constraining the operation.
Exploit the constraint (i.e., make sure the constraining resource is ___ to its ___).
Subordinate everything to the constraint (i.e., focus on the constraint).
Determine how to overcome (eliminate) the constraint.
Repeat the process for the next highest constraint.
focus
Theory of constraints five-step procedure:
Determine what is constraining the operation.
Exploit the constraint (i.e., make sure the constraining resource is used to its maximum).
Subordinate everything to the constraint (i.e., ___ on the constraint).
Determine how to overcome (eliminate) the constraint.
Repeat the process for the next highest constraint.

Throughput
The rate at which the system generates money through sales (i.e., the contribution margin,
or sales revenue less variable costs; labor costs are considered to be part of operating
expense)
throughput inventory expense
The theory of constraints uses three metrics to assess the effectiveness of improvements:
___, ___, operations ___

process batch
The economical quantity to produce upon the activation of a given operation; the basic lot
size for a job that could be used during production to facilitate utilization of bottleneck
operations.
realistic bottlenecks lot
Minimizing Scheduling Difficulties: Setting due ___ dates; Focusing on ___; ___ splitting for
large jobs
transfer batch
The quantity to be transported from one operation to another, assumed to be smaller than
the first operation's process batch; a portion of the basic lot that could be used during
production to facilitate utilization of bottleneck operations.
Rope
___ represents the synchronizing of the sequence of operations to ensure effective use of
the bottleneck operations.
system
One of Goldratt's scheduling principles: The bottleneck operation determines the overall
capacity of the ___.
competition
Time-based ___ depends on good scheduling.
aggregate master
Scheduling decisions are made within constraints established by decisions on capacity,
product or service design, process selection and layout, ___ planning, and ___ scheduling.
variety
Scheduling problems are particularly complex for job shops (low volume) because of the
___ of jobs these systems are required to process.
scheduling
It is not enough to have good design, superior quality, and the other elements of a well-run
organization if ___ is done poorly
operations
Coordination of materials, equipment use, and employee time is an important function of
___ management.
cross
capacity can be adjusted by having ___-trained workers who can be temporarily assigned to
help out on bottleneck operations during periods of peak demand.
Yield (management)
The application of pricing strategies to allocate capacity among various categories of
demand with the goal of maximizing the revenue generated by the fixed capacity.
Reservation
___ systems are designed to enable service systems to formulate a fairly accurate estimate
of the demand on the system for a given time period and to minimize customer
disappointment generated by excessive waiting or inability to obtain service.
Appointment
___ systems are intended to control the timing of customer arrivals in order to minimize
customer waiting while achieving a high degree of capacity utilization.
service
Scheduling in ___ systems may involve scheduling (1) customers, (2) the workforce, and (3)
equipment.
services
In ___ the inefficiencies can be reduced if arrivals can be scheduled (e.g., appointments),
as in the case of doctors and dentists.
non
One of Goldratt's scheduling principles: Saving time through improvements of a
___bottleneck will not increase the ultimate output of the system.
useful
One of Goldratt's scheduling principles: Because a nonbottleneck operation is active does
not necessarily mean it is being ___.
idle completion time
When multiple jobs are to be processed and there are a number of work centers capable of
performing the required work, the operations manager needs some way of assigning jobs to
the centers that will: minimize processing and setup costs, minimize ___ time among work
centers, or minimize job ___ ___.
workstations
An area where one or a few workers and/or machines perform similar work.

In the area of product and service design, the acronym CAD refers to:

A. conceptually appropriate design.

B. computer-aided design.

C. commercial applications design.

D. competitive advantage design.

E. completely automated design.

B. computer-aided design.
Which of the following statements about CAD is not true?

A. It increases the productivity of designers.

B. It uses computer graphics.

C. It requires a good database.

D. Some systems permit engineering or cost analysis of proposed designs.

E. It is used successfully by all manufacturing companies.

E. It is used successfully by all manufacturing companies.

Not all manufacturers use CAD.

Which one of the following is not a factor of successful product and service design?

A. Be aware of what the competitors are doing.

B. Be aware of what customers want.

C. Know what government regulations are.

D. Use computerized design techniques.

E. Know what new technologies are available.

D. Use computerized design techniques.

Computerized design techniques don't necessarily lead to successful product and service
design.

A software company is weighing whether to release a new version of its software. The
company can go ahead and release the version now and correct flaws with subsequent
patches or upgrades, or it can wait until the new version is reasonably bug-free. This is an
example of:

A. life cycle analysis.

B. value analysis.

C. vaporware.

D. concurrent engineering.

E. design for production.

C. vaporware.
The assessment of the environmental impact of a product or service throughout its useful
life is called:

A. flow diagramming.

B. service blueprinting.

C. quality function deployment.

D. process mapping.

E. life cycle analysis.

E. life cycle analysis.

Life cycle analysis is also known as cradle-to-grave assessment.

The term "standardization" is closely associated with:

A. customization.

B. high cost.

C. longer lead times.

D. variety.

E. interchangeability.
E. interchangeability.

Modular designs depend on standardized parts that are interchangeable.

Service design generally differs from product design in which of the following ways?

A. Service design tends to focus on tangible factors.

B. There is less latitude in detecting and correcting errors prior to delivery.

C. There is a lesser requirement to be aware of competitors' offerings.

D. There is less visibility to customers.

E. There is no difference.
B. There is less latitude in detecting and correcting errors prior to delivery.

Often service design flaws are not discovered until some customers have been served.
The structural approach for integrating customer requirements into every aspect of product
development is known as:

A. total quality management.

B. customer satisfaction.

C. quality function deployment.

D. customer integration.

E. a product development team.

C. quality function deployment.

Quality function deployment brings the voice of the customer into the product development
process.
Making plans for how products that have reached the end of their useful lives will be dealt
with is the primary subject of:

A. cradle-to-grave assessment.

B. end-of-life programs.

C. life-cycle analysis.

D. three R's programs.

E. process mapping.
B. end-of-life programs.
One of these is not a characteristic of a well-designed service system:

A. user friendly
B. robust

C. distributed computer networks

D. cost effective

E. easy to sustain
C. distributed computer networks

Well-designed service systems tend to be user friendly, robust, cost-effective, and easy to
sustain.
A formal way to document customer requirements is:

A. consumer surveys.

B. quality function deployment.

C. focus groups.

D. the Delphi technique.

E. a sales/marketing matrix.
B. quality function deployment.

Which of the following is not true about remanufacturing?

A. Remanufactured products can be sold at lower cost.

B. The process requires mostly unskilled and semiskilled workers.

C. There is less depletion of natural resources.

D. It produces high-quality products easily.

E. Remanufacturing is mainly carried out by small and mid-sized companies.

D. It produces high-quality products easily.
Which of the following is not one of the phases of product design and development?

A. Specify product specifications.

B. Conduct market test.

C. Specify process specifications.

D. Conduct design review.

E. Perform applied research.

E. Perform applied research.

Product design and development begins after applied research has been done.
Elements of the service process in which there is little to no contact with the customer are
referred to as:

A. robust.

B. delayed differentiators.

C. back-of-the-house.

D. user-friendly.

E. mission-consistent.
C. back-of-the-house.

Those elements involving substantial contact with the customer are referred to as "front-of-
the-house" operations.

The research and development activity which starts after positive research results are
available and attempts to turn these results into useful commercial applications is:

A. basic research.

B. applied research.
C. development.

D. redesign.

E. commercial research.
C. development.

Development is the conversion of applied research into useful commercial applications.

Which of the following is not an advantage of standardization?

A. The opportunity to freeze design at a very early stage.

B. Fewer parts to deal with in inventory.

C. Reduced training cost and time.

D. Purchasing is more routine.

E. Inventory management is less complex.

A. The opportunity to freeze design at a very early stage.
Products or services with a high degree of similarity of features and components are called:

A. generic.

B. copy-cat.

C. rip-offs.

D. product families.

E. product/service matrix.
D. product families.
...
B. Kano

The Kano model is an alternative to "more is better" design approaches.

One possible disadvantage of modular design is that:
A. replacement and repair are more difficult.

B. failure diagnosis is more complex.

C. the number of configurations of modules decreases.

D. individual parts lose their identities.

E. inventory problems arise.

C. the number of configurations of modules decreases.

Modular designs do have the effect of reducing variety.

One step that is not part of service blueprinting is:

A. Eliminate boundaries for the service and decide on the level of interaction needed.

B. Identify and determine the sequence of customer and service actions and interactions.

C. Develop time estimates for each phase of the process.

D. Understand the time variability involved.

E. Identify potential failure points and develop a plan to minimize them.

A. Eliminate boundaries for the service and decide on the level of interaction needed.

Defining boundaries is a critical part of service blueprinting.

One way to increase reliability is to:

A. eliminate backup components.

B. improve preventive maintenance procedures.

C. increase mean repair time.

D. increase the number of independent components.

E. use a global supply chain.

B. improve preventive maintenance procedures.

Preventive maintenance leads to longer intervals between breakdowns.

Which of the following is not a reason for redesigning a product or service?

A. to reduce labor or material cost

B. to increase the level of employee satisfaction

C. to increase the level of customer satisfaction

D. to attract and increase customer demand

E. to increase quality
B. to increase the level of employee satisfaction

A product or service redesign does not necessarily involve improving employee satisfaction.
A disadvantage of global teams for product design is that:

A. customers may have different needs in different countries.

B. the product designed may have increased marketability and utility.

C. the diversity of an international team may be a detriment.

D. ease of face-to-face meetings is absent since members are located everywhere.

E. technology allows constant contact with team members.

D. ease of face-to-face meetings is absent since members are located everywhere.

If face-to-face interaction is required, global design teams might not be a viable option.
Mobile phones have evolved from devices intended to place and receive phone calls into
handheld multimedia communications devices, but in the eyes of some customers these
new features make the phones less desirable. This is an example of:
A. robust design.

B. creeping featurism.

C. sustainable design.

D. quality function deployment.

E. component commonality.
B. creeping featurism.

Customer satisfaction isn't strictly dependent on the number of features a product offers.

Which of these pairs of functions would tend to be affected most dramatically by a product
or service redesign?

A. Operations and Accounting

B. Marketing and Operations

C. Finance and Human Resources

D. Engineering and Accounting

E. Finance and Engineering

B. Marketing and Operations

Product and service design involves or affects nearly every functional area of an
organization. However, marketing and operations have major involvement.

Quality function deployment (QFD) is based on a set of standards which relate customer
requirements to company capabilities.
...
Which of the following is least likely to result in product innovations that have near-term
commercial application?
A. process blueprinting

B. development

C. applied research

D. quality function deployment

E. basic research
...
Which of the following is not one of the 3 Rs?

A. reuse

B. reduce

C. reposition

D. recycle
C. reposition
...
D. delayed differentiation

Delayed differentiation is a postponement tactic: the process of producing, but not quite
completing, a product or service, postponing completion until customer preferences or
specifications are known.
Which of the following questions is least appropriate during value analysis?

A. How can we reduce the cost of parts?

B. How can we improve the performance of the product?

C. How can we incorporate more cultural values in the design of our global system?

D. Can we find a way to use less energy in the production of our product?

E. Could a given component in our product be simplified or combined with another?

C. How can we incorporate more cultural values in the design of our global system?

In value analysis an attempt is made to reduce the cost and/or improve the performance of
the product.

Design Capacity
Maximum output rate or service capacity and operation, process, or facility is designed for
Effective capacity
Design capacity minus allowances such as personal time, maintenance, and scrap
Actual output
Rate of output actually achieved - cannot exceed effective capacity
Efficiency
Actual output/effective capacity
Utilization
Actual output/design capacity
Strategies
are typically based on assumptions and predictions about:
1) Long-term demand patterns
2) Technological change
3) Competitor behavior
Capacity Cushion
Extra capacity used to offset demand uncertainty
Capacity Cushion equation
100%-Utilization
overall
Long-term Forecasting Capacity Requirements considerations relate to ___ level of capacity
requirement
variations
Forecasting Capacity Requirements: Short Term considerations relate to probable ___ in
capacity requirement
capacity
planning challenges in ___:
1) The need to be near customers
2) The inability to store services
3) The degree of demand volatility
Demand Management Strategies
Strategies used to offset capacity limitations and that are intended to achieve a closer
match between
supply and demand
In house
Once capacity requirements are determined, the organization must decide whether to
produce a good or service itself (___ ___)or outsource
Outsource
___ Factors to Consider: 1) Available capacity. 2) Expertise. 3) Quality considerations. 4)
The nature of demand. 5) Cost. 6) Risks
Capacity
Developing ___ Alternatives: 1) Design flexibility systems
2) take stage of life cycle into account
3) Take "big picture" approach to capacity changes
4) Prepare to deal with capacity "chunks"
5) Attempt to smooth capacity requirements
6) Identify the optimal operating level
7) Choose a strategy if expansion is involved

Economic Alternatives
Have numbers
Non-economic
Public Opinion ("feeling")
Cost-volume analysis
Focuses on the relationship between cost, revenue, and volume of output
Break-Even Point (BEP)
The volume of output at which total cost and total revenue are equal
Cost-Volume Analysis
_______________ is a viable tool for comparing capacity alternatives if certain assumptions
are
satisfied
Cash flow
The difference between cash received from sales and other sources, and cash outflow for
labor, material,
overhead, and taxes
Present value
The sum, in current value, of all future cash flow of an investment proposal
employee
Capacity needs include equipment, space, and ___ skills.
capacity planning
Organizations can become involved in ___ ___ because of: changes in demand,
technology, or environment; perceived threats or opportunities.
capacity
___ decisions can be critical for an organization.
output
Capacity essentially limits the rate of ___ possible; 2005 Xbox shortage, flu vaccine
shortages
balance
Capacity decisions affect operating costs, attempting to ___ the costs of over- and
undercapacity.
competitiveness
Capacity decisions can affect ___. If a firm has excess capacity, or can quickly add
capacity, that may serve as a barrier to entry by other firms or have superior delivery speed,
which can be competitive advantages.
management
Having appropriate capacity makes ___ easier than when capacity is mismatched.
financial
Because capacity decisions often involve substantial ___ and other resources, it is
necessary to plan for them far in advance, but this increases the risk that the designated
amount of capacity will not match actual demand when available.
supply chain
Before increasing capacity, it is important to make sure and organizations ___ ___ can
handle the ramp up.
output
Capacity often refers to an upper limit on the rate of ___.
effective
Increasing productivity and also quality will result in increased ___ capacity.
Waiting line
___ ___ analysis can be useful for capacity design, especially for service systems.
what how much when
The analysis of needs for capacity planing are: ___, ___ ___, and ___
Payback time
=initial cost/annual savings
Break even point
=FC/(R-VC)
Required volume for profit
=(P+FC)/(R-VC)
Contribution margin
=R-VC
Decision theory
Financial analysis tool, Involves identifying a set of possible future conditions, alt courses of
actions, and developing a financial outcome for each combination
Waitingline analysis
Financial analysis tool, In service systems these are symptoms of bottleneck operations,
helps mangers choose capacity level most cost effective
capacity
A bottleneck operation is the step whose ___ is lower than other steps in the sequence of
operations.
Economies of scale
Perks of ___ ___ ___ are fixed costs are spread over more units, increased output reduces
unit costs, and increase in construction costs slows with increased facility size.
Capacity storage
The following are ways enhance the development of ___ ___: make provisions for future
expansion; account for acquisition acuity chunks; consider life cycle stage of product
Costvolume analysis
Assumptions for ___ ___ include: VC per unit does not change, FC can increase in steps, R
per unit exceeds VC, only one product
Simulation
Financial analysis Tool for evaluating "what if scenarios

process
___ layout disadvantages:
In-process inventory costs can be high if batch processing is used in manufacturing
systems.
Routing and scheduling pose continual challenges.
Equipment utilization rates are low.
Material handling is slow and inefficient, and more costly per unit.
Job complexities often reduce the span of supervision and result in higher supervisory
costs.
Special attention necessary for each product or customer (e.g., routing, scheduling,
machine setups) and low volumes result in higher unit costs.
Accounting, inventory control, and purchasing are much more involved.
Preventive
___ maintenance periodic inspection and replacement of worn parts or those with high
failure rates

effort commitments
layout decisions are important for three basic reasons: (1)require substantial investments of
money and ___; (2)involve long-term ___ making mistakes difficult to overcome;
(3)significant impact on the cost$ and efficiency of operations.
sustainability flow
Principles/Benefits of lean design are waste reduction/___; variance reduction to achieve
level production/improve process ___; reduced inventory/floor space; quicker
response/shorter lead times; reduced defects, rework, and scrap; increased productivity;
broad applications; frequently using using cellular layouts
Lowell
The ___ Center advocates designing and operating sustainable processes in ways that:
"Wastes and ecologically incompatible byproducts are reduced, eliminated or recycled on-
site;
Hazardous chemical substances or physical agents and conditions are eliminated;
energy and materials are conserved, and the forms of energy and Materials used are most
appropriate for the desired ends; and
Work spaces are designed to minimize or eliminate chemical, ergonomic and physical
hazard."
Repetitive
The standardized output of this process type means only slight flexibility of equipment is
needed, workers skill generally low. Can be used for mass customization. Examples include
production lines and assembly lines.
product processing information
Three aspects of technology can be factors in process selection and layout: ___ tech, ___
tech, and ___ tech.
Project
A nonrepetitive set of activities directed toward a unique goal within a limited time frame
Product or service profiling
linking key product or service requirements, to process capabilities; asking what range of
products or services that will be processed, expected order sizes, pricing strategies,
expected frequency of schedule changes, and order-winning requirements.
Technological innovation
the discovery and development of new or improved products, services, or processes for
producing or providing them
Technology
The application of scientific discoveries to the development and improvement of products
and services and operations processes

Automation
machinery that has sensing and control devices that enable it to operate automatically
computer-aided manufacturing (CAM)
the use of computers in process control
Numerically Controlled (N/C) Machines
machines that perform operations by following mathematical processing instructions
Flexible Manufacturing System (FMS)
a group of machines designed to handle intermittent processing requirements and produce
a variety of similar products
computer-integrated manufacturing (CIM)
a system for linking a broad range of manufacturing activities through an integrating
computer system
3D printing
a process that creates a three-dimensional object by adding successive layers of material
AKA: additive manufacturing
Product layout
Layout that uses standardized processing operations to achieve smooth, rapid, high-volume
flow
Production line
standardized layout arranged according to a fixed sequence of production tasks
Assembly line
standardized layout arranged according to a fixed sequence of assembly tasks

Process layouts
layouts that can handle varied processing requirements
Fixed-position layout
Layout in which the product or project remains stationary, and workers, materials, and
equipment are moved as needed
Cellular production
layout in which workstations are grouped into a cell that can process items that have similar
processing requirements
Group technology
the grouping into part families of items with similar design or manufacturing characteristics
Line balancing
the process of assigning tasks to workstations in such a way that the workstations have
approximately equal time requirements
Cycle time
the maximum time allowed at each workstation to complete its set of tasks on a unit
Precedence diagram
a diagram that shows elemental tasks and their precedence requirements
Balance delay
percentage of idle time of an assembly line
Intermittent processing
non repetitive processing
teamwork flexibility
An advantage of a U shaped production line is that it facilitates ___ and ___ in work
assignments.
Idle
Balance delay is another name for the percentage of ___ time and a product layout.
Intermittent
___ processing can take the form of batch processing or a job shop.
Job shop
High flexibility, general-purpose equipment, and skilled workers are important
characteristics; used when low volume with high-variety will be needed.
Continuous
___ production systems are very efficient for high volumes of non-discrete, standardized
output, but they are not very flexible and can be costly to change
Information
___ technology refers to both data and systems.
Processes
___ convert inputs into outputs.
changing
Once a process type is functioning, ___ it can be difficult, time consuming, and costly.
process
capacity and ___ selection are interrelated and affect facility and equipment choices, layout,
and work design.
layout work design
capacity and process selection are interrelated and affect facility and equipment choices,
___, and ___ ___.
strategy
An organization approaches process selection by considering the organization's process
___.
Capital intensity
Key aspects or process selection include: ___ ___, Process flexibility
Process flexibility
Key aspects or process selection include: Capital intensity, ___ ___
Capital intensity
The mix of equipment and labor that will be used by the organization; key aspect of process
selection
Process flexibility
The degree to which the system can be adjusted to changes in processing requirements
due to such factors as changes in product or service design, changes in volume processed,
and changes in technology; key aspect of process selection
demand
Process choice is ___ driven.
variety volume
The two key questions in process selection are: How much ___ and ___ will the process
need to be able to handle?
inversely
Usually, volume and variety are ___ related
Batch
___ processing is used when a moderate volume of goods or services is desired, and it can
handle a moderate variety in products or services.
Repetitive
This type of process is sometimes referred to as assembly.
continuous
When a very high volume of nondiscrete, highly standardized output is desired, a ___
system is used.
project
The work is often organized as a ___ when situations are not ongoing but are limited
duration; Equipment flexibility and worker skills can range from low to high:
putting on a play, consulting, making a motion picture, launching a new product or service,
publishing a book, building a dam, and building a bridge
hybrid
It is not unusual to find ___ processes, that have elements of other process types
embedded in them.
economic
___ considerations (initial cost, space, cash flow, maintenance, consultants)
integration
___ considerations (cost, time, resources)
automated
In order for ___ processing to be an option, job-processing requirements must be
standardized.
Fixed
___ automation is the least flexible; High-cost, specialized equipment for a fixed sequence
of operations; Low cost and high volume are its primary advantages; minimal variety and
the high cost of changes are its primary limitations

Programmable
___ automation involves the use of high-cost, general-purpose equipment controlled by a
computer program that provides the sequence of operations and specific details about each
operation; capability of economically producing a fairly wide variety of low-volume products
in small batches; Numerically controlled (N/C) machines and some robots are applications
of programmable automation
fixed programmable flexible.
there are three kinds of automation:
computerized numerical control (CNC)
Individual machines often have their own computer; this is referred to as
direct numerical control (DNC).
One computer may control a number of N/C machines, which is referred to as
Flexible
___ automation evolved from programmable automation; equipment that is more
customized than programmable automation; requires significantly less changeover time;
almost continuous operation of equipment and product variety without the need to produce
in batches.
FMS
___ also has certain limitations. One is that this type of system can handle a relatively
narrow range of part variety, so it must be used for a family of similar parts, which all require
similar machining; requires longer planning and development times than more conventional
processing equipment because of its increased complexity and cost; FMS represents a
sizable $ chunk of technology.
extrusion
the deformation of either metal or plastic forced under pressure through a die to create a
shape
sintering
using heat or pressure or both to form a solid material from powder without causing it to
liquefy
best
flexibility does not always offer the ___ choice in processing decisions.
variety uncertainty
decision makers choose flexible systems for either of two reasons: Demand ___ or ___.
Layout
___ refers to the configuration of departments, work centers, and equipment, with particular
emphasis on movement of work (customers or materials) through the system
product layout
___ ___advantages:
A high rate of output.
Low unit cost/high volume.
High cost of specialized equipment is spread over many units.
Labor specialization
Low material-handling cost per unit. Material handling is simplified, often automated.
High utilization of labor and equipment.
Routing and scheduling in the initial design of the system.
Fairly routine accounting, purchasing, and inventory control.
disadvantages
Product Layout ___:
Intensive division of labor usually creates dull, repetitive jobs that provide little opportunity
for advancement and may lead to morale problems and to repetitive stress injuries.
Poorly skilled workers may exhibit little interest in maintaining equipment or in the quality of
output.
Fairly inflexible in response to changes in the volume of output or changes in product or
process design.
Highly susceptible to shutdowns caused by equipment breakdowns or excessive
absenteeism because workstations are highly interdependent.
Preventive maintenance, the capacity for quick repairs, and spare-parts inventories are
necessary expenses.
Incentive plans tied to individual output are impractical since they would cause variations
among outputs of individual workers
disadvantages of process layouts include the following:

In-process inventory costs can be high if batch processing is used in manufacturing

systems.

Routing and scheduling pose continual challenges.

Equipment utilization rates are low.

Material handling is slow and inefficient, and more costly per unit than in product layouts.

Job complexities often reduce the span of supervision and result in higher supervisory costs
than with product layouts.

Special attention necessary for each product or customer (e.g., routing, scheduling,
machine setups) and low volumes result in higher unit costs than with product layouts.

Accounting, inventory control, and purchasing are much more involved than with product
layouts.
Right-sized
___ equipment is often smaller than equipment used in traditional process layouts, and
mobile, so that it can quickly be reconfigured into a different cellular layout in a different
location.
group
___ technology involves identifying items with similarities in either design characteristics or
manufacturing characteristics, and grouping them into part families.
Output rate
=Operating time per day/Cycle time
Cycle time
= Operating time per day/Desired output rate
Location Options
Expand an existing facility
Add new locations while retaining existing ones
Shut down at one location and move to another
Do nothing
2 Facilitating Factors
Trade Agreements
Technology Advances
Trade Agreement
an elimination of barriers to international trade such as tariffs and quotas (e.g. NAFTA,
FATT, US-China Trade Relations Act, EU)
Technology Advances
technological advances in communication and information (e.g. fax, email, cell phones,
teleconferencing, the Internet)
Benefits
Markets
Cost Savings
Legal & Regulatory
Financial
Disadvantages
Transportation Costs
Security Costs
Unskilled Labor
Import Restrictions
Criticisms
Productivity
Risks
Political
Terrorism
Economic
Legal
Ethical
Cultural
Quality
Microfactory
a small factory with a narrow product focus
located near major markets
Geographic Information System (GIS)
a computer-based too for collecting, storing, retrieving and displaying demographic data on
map
Businesses that use GIS
Logistics Companies
Publishers
Real Estate
Banks
Insurance Companies
Retailers
Clustering
SIMILAR types of businesses located near each other (e.g. all the car dealerships on
Cleveland, restaurants and stores near malls)
Locational Cost-Profit-Volume Analysis
the technique for evaluating location choices in economic terms (e.g. fixed, variable, and
total costs)
Factor Rating
a general approach for evaluating locations that includes QUANTITATIVE and
QUALITATIVE inputs
Center of Gravity Method
a method for locating a distribution center that minimizes distribution costs
not always located in the center of everything
Location options (3)
1. expanding an existing facility instead of moving
2. maintaining current sites while adding another facility elsewhere
3. closing existing facility and moving to another location
Industrial location decision
minimize costs
retail and professional service organizations decision
maximizing revenue
Warehouse location strategy
combination of cost and speed of delivery
Objective of location strategy
maximize benefit of location to the firm
When innovation is the focus, the overall competitiveness and innovation are affected by
- the presence of high-quality and specialized inputs such as scientific and technical talent
- an environment that encourages investment and intense rivalry
- pressure and insights gained from sophisticated local market
- local presence of related and supporting industries
Globalization has taken place because of
1. market economics
2. better international communications
3. more rapid, reliable travel and shipping
4. ease of capital flow between countries
5. high differences in labor costs
Key success Factors (Country Decision)
1. Political risks, government rules, attitudes, incentives
2. Cultural and economic issues
3. Location of markets
4. Labor talent, attitudes, productivity, costs
5. Availability of supplies, communications, energy
6. Exchange rates and currency risk
Key Success Factors (Region/Community)
1. Corporate desires
2. Attractiveness of region (culture, taxes, climate)
3. Labor availability, costs, attitudes toward unions
4. Cost and availability of utilities
5. Environmental regulations of state and town
6. Government incentives and fiscal policies
7. Proximity to raw materials and customers
8. Land / Construction costs
Key success factors (Site Decision)
1. Site size and cost
2. Air, rail, highway and waterway systems
3. Zoning restrictions
4. Proximity of services/ supplies needed
5. Environmental impact issues
Tangible costs
readily identifiable costs that can be measured with some precision
Examples of tangible costs
- Utilities
- Labor material
- Taxes
- Depreciation
Intangible costs
costs that cannot be easily quantified
Examples of Intangible costs
- Quality of education
- Public transportation facilities
- Community attitudes toward the industry and the company
- Quality and attitude of prospective employees
Political risk
governmental positions at the time a location decision is made may not be lasting once
Proximity to markets
- locating near customers
- primary factor for service organizations
- manufacturing firms can lower transportation costs
Proximity to suppliers
- Firms locate near their raw materials and suppliers because of :
1. perishability
2. transportation costs
3. bulk
Clustering (Proximity to competitors)
location of competing companies near each other, often because a critical mass of
information, talent, venture capital or natural resources
4 Methods for solving location problems
1. Factor-rating method
2. Locational cost-volume analysis
3. Center of gravity method
4. Transportational model
8 major determinants of volume and revenue for service firm
1. Purchasing power
2. Service and image compatibility
3. Competition in the area
4. Quality of competition
5. Uniqueness of the firm's and competitor's locations
6. Physical qualities of facilities and neighboring businesses
7. Operating policies of the firm
8. Quality of management
Geographic Information Systems
- stores and displays information that can be linked to a geographic location
- used to identify target markets by income, ethnicity, product usage, age
what are 3 factors affecting location decisions?
country, region, site
what is the objective of location strategy?
maximizing the benefit of location to the firm
location strategy has a significant impact on what?
fixed and variable
wage costs usually increase as a country ____?
industrializes
location is often a ____ decision
global
long term decisions are prominent in what strategy?
location
____ is not always the most important aspect of a strategic decision
cost
four key attributes when strategy is based on innovation
high quality and specialized inputs, an environment that encourages investment, a
sophisticated local market, related and supporting industries
6 key success factors in location decisions for COUNTRY?
political risks, gov reg, incentives, cultural and economic issues, location of markets, labor
talent/costs, availability of materials/comm/energy, exchange rates and currency risks
labor productivity is an important factor in what?
location decisions
wage rates are not the only cost; what else may increase total cost?
lower productivity
what is the equation for cost per unit?
labor cost per day/productivity (units per day)
the price of one currency in terms of another
exchange rate
exchange rates change over time which affect what 3 things?
costs, revenues, and profits
easily measure costs such as utilities, labor, materials, and taxes
tangible costs (mutl)
less easy to quantify and include education, public transportation, community, quality of life
intangible
8 key success factors in location decisions for REGION/COMMUNITY?
corporate needs, attractiveness of region, labor utility/costs, costs/availability of utilities,
environmental reg., gov incentives/fiscal policies, proximity to raw materials,
land/construction costs
5 key success factors in location decisions for SITE DECISION?
size/cost, air/rail/highway/waterway systems, zoning restrictions, proximity of
services/materials needed, environmental impact issues
proximity to markets is very important to what?
services
_______ may make proximity to markets important to manufacturers? 2
JIT systems or high transportation costs
proximity to competitors is called what?
clustering
what method is used when a wide variety of factors are included in the analysis?
factor rating method
what are the first 3 steps in the factor rating method?
develop a list of relevant factors called key success factors, assign a weight and develop a
scale for each factor
what are the last 3 steps in the factor rating method?
score each location for each factor, multiply score by weight for each factor for each
location, recommend the location with HIGHEST point score
4 variables in "how hotel chains select sites"
price, income levels, population, colleges
what are 3 assumptions of service/retail/professional location strategies?
location is major determinant of REVENUE, high customer-contact issues are critical, costs
are relatively constant for a given area
what are the 4 assumptions of good/producing location strategies?
location is a major determinant of COST, most major costs can be identified explicitly for
each site, low customer contact allows focus on identifiable costs, intangible costs can be
evaluated
what are tangible costs for goods/producing location?
transportation cost of RM, shipment costs of FG, energy/utility, labor, RM, taxes
what are intangible/future costs of goods/producing location?
attitude toward union, quality of lfie, education expenditures by state, quality of state/local
gov
volume/revenue aspect of service/retail location strategy?
drawing area, purchasing power, competition, advertising/pricing
physical quality aspect of service/retail location strategy?
parking/access, security/lighting, appearance/image
cost determinants of service/retail location strategy?
rent, mgmt caliber, operations policies (hrs, wages, rates)
Strategic Importance of Location
The objective is to maximize the event of the location to the firm
Location options
1. Expanding the firm
2. Maintaining existing and additional sites
3. Closing existing and relocating
Location and costs
Location decisions based on low cost require careful consideration
Once in place, location related costs are fixed in place and difficult to reduce
Determining optimal facility location is a good investment
Factors that affect location decision
Globalization adds to complexity
Market economics
Communication
Rapid, reliable transportation
Ease of capital flow
differing labor costs
Country Key Success factors
1. Political risks, gov't rules, attitudes, incentives
2. Cultural and economic issues
3. location of markets
4. labor talent, attitudes, productivity and costs
5. availability of supplies, communications, energy
6. exchange rates and currency risks
Region Key Success Factors
1. Corporate desires
2. Attractiveness of region
3. Labor availability and costs
4. costs and availability of utilities
5. environmental regulations
6. gov't incentives and fiscal decisions
7. proximity to raw materials and customers
8. land/construction costs
Site Decision Key success factors
1. Site Size and cost
2. Air, Rail, Highway, and waterway system
3. Zoning restriction
4. Proximity to services/supplies needed
5. Environmental impact issues
Labor productivity
Wage rates are not the only cost
Lower productivity may increase total cost
Cost per Unit =
labor cost per day/ productivity (units per day)
Exchange rates and currency risks
Can have significant impact on costs
Rates can change over time
Costs
Tangible
Intangible
Location decision based on costs alone can create difficult ethical situations
Proximity to markets
Very important to services
JIT systems or high transportation costs may make it important to manufacturers
Locational Costs- volume analysis
Economic Comparison of location alternatives
1. Determine fixed to variable costs for each location
2. Pot the cost for each location
3. Select location with lowest total cost for expected production volume
Center of gravity method
Finds locations of distribution center that minimizes distribution costs
Considers:
1. Location of markets
2. Volume of goods shipped to those markets
3. Shipping cost (or distance)
Economies of density
Sam Walton emphasized logistics, particularly locating stores within a day's drive proximity
to Walmart's regional warehouses, and distributed through its own trucking service
Transportation model
Finds amount to be shipped from several points of supply to several points of demand
Solution will minimize total production and shipping cost
How hotel chains select sites
Location is strategically important
4 variables in La Quinta's model
1. Price of the inn
2. Median income levels
3. State population per inn
4. Location of nearby colleges
Geographical Information Systems (GI's)
Important tool to help in location analysis
Enables more complex demographic analysis
Available date includes:
- Detailed census data
- Detailed maps
- Utilities
- Geographic features
- Locations of major services
Liability Productivity
Some of the major areas affected by poor quality are: Loss of business, ___, ___, Costs
satisfaction continuous
The driving force in total quality management(TQM) is customer ___; and a key philosophy
is ___ improvement.
Quality
the ability of a product or service to consistently meet or exceed customer expectations
Deming Prize
prize established by the Japanese and awarded annually to firms that distinguish
themselves with quality management programs
Quality of design
intention of designers to include or exclude features in a product or service
Quality of conformance
the degree to which goods or services conform to the intent of the designers
Appraisal costs
costs of activities designed to ensure quality or uncover defects
Prevention costs
costs of preventing defects from occurring
Failure costs
costs caused by defective parts or products or by faulty services
Internal failures
failures discovered during production
External failures
failures discovered after delivery to the customer
Return on quality
an approach that evaluates the financial return of investments in quality
ISO 9000
a set of international standards on quality management and quality assurance, critical to
international business
ISO 14000
a set of international standards for assessing a company's environmental performance
ISO 24700
a set of international standards that pertains to the quality and performance of office
equipment that contains reused components
Total quality management (TQM)
a philosophy, by W. Edwards Deming, that involves everyone in an organization in a
continual effort to improve quality and achieve customer satisfaction
Fail-safing
incorporating design elements that prevent incorrect procedures
Continuous improvement
philosophy that seeks to make never-ending improvements to the process of converting
inputs into outputs
Kaizen
Japanese term for continuous improvement

Quality at the source

the philosophy of making each worker responsible for the quality of his or her work

Plan-do-study-act (PDSA) cycle

a framework for problem solving and improvement activities

Process improvement
a systematic approach to improving a process

Six sigma

a business process for improving quality, reducing costs, and increasing customer satisfaction

Flowchart

a diagram of the steps in a process

Check sheet

a tool for recording and organizing data to identify a problem

Histogram

a chart of an empirical frequency distribution

Pareto analysis

technique for classifying problem areas according to degree of importance, and focusing on the most
important

Scatter diagram

a graph that shows the degree and direction of relationship between two variables

Control chart

a statistical chart of time-ordered values of a sample statistic

Cause-and-effect diagram

a diagram used to search for the cause(s) of a problem; aka fishbone diagram

Run chart

tool for tracking results over a period of time

Brainstorming

technique for generating a free flow of ideas in a group of people

Quality circles

groups of workers who meet to discuss ways of improving products or processes

Benchmarking

process of measuring performance against the best in the same or another industry

supply chain

Quality is the culmination of efforts of the entire organization and its ___ ___.

market share
The consequences of poor quality include loss of ___ ___, liability claims, a decrease in productivity, and
an increase in costs.

liability claims

The consequences of poor quality include loss of market share, ___ ___, a decrease in productivity, and
an increase in costs.

productivity costs

The consequences of poor quality include loss of market share, liability claims, a decrease in ___, and an
increase in ___.

prevention

Quality costs include costs related to ___, appraisal, and failure.

appraisal

Quality costs include costs related to prevention, ___, and failure.

failure

failure
Quality costs include costs related to prevention, appraisal, and ___.
service after delivery
Determinants of quality are design, conformance to design, ease of use, and ___ ___ ___.
design conformance
Determinants of quality are ___, ___ to design, ease of use, and service after delivery.
ease of use
Determinants of quality are design, conformance to design, ___ ___ ___, and service after
delivery.
preventing variation
Modern quality management is directed at ___ mistakes rather than finding them after they
occur and reducing process output ___.
everyone
Total quality management is a never-ending pursuit of quality that involves ___ in an
organization.
problem solving
Two major aspects of the TQM approach are ___ ___ and process improvement.
process improvement
Two major aspects of the TQM approach are problem solving and ___ ___.
customer
A working definition of quality is ___-dependent.
foremen
The responsibility in the Industrial Revolution for quality shifted to the ___.
statistical
___ quality control procedures were not widely used until World War II, when the U.S.
government began to require vendors to use them.
energy
An embargo on oil sales instituted by the Organization of Petroleum Exporting Countries
(OPEC) caused an increase in ___ costs, and automobile buyers became more interested
in fuel-efficient, lower-cost vehicles.
Walter Shewhart
___ ___ was a genuine pioneer in the field of quality control, and he became known as the
"father of statistical quality control."
Walter Shewhart
___ ___ developed control charts for analyzing the output of processes to determine when
corrective action was necessary.
W Edwards Deming
___ ___ a statistics professor at New York University in the 1940s, went to Japan after
World War II to assist the Japanese in improving quality and productivity.
W Edwards Deming
His message was that the cause of inefficiency and poor quality is the system, not the
employees.
W Edwards Deming
___ ___ felt that it was management's responsibility to correct the system to achieve the
desired results and stressed the need to reduce variation in output.
Deming's 14 points
Create constancy of purpose toward improvement of product and service.

Reduce levels of delays, mistakes, defective materials, and defective workmanship.

Cease dependence on mass inspection. (Prevent defects rather than detect defects.)
Eliminate suppliers that cannot qualify with statistical evidence of quality.

Find problems. It is management's job to work continually on system improvement.

Institute modern methods of training on the job.

7. Emphasize quality instead of volume alone. Management must prepare to take

immediate action on reports from foremen concerning barriers such as inherent defects,
machines not maintained, poor tools, and fuzzy operational definitions.

Drive out fear, so that everyone may work effectively for the company.

Break down barriers between departments. People in research, design, sales, and
production must work as a team.

Eliminate goals and slogans asking for new levels of productivity without providing methods.

Eliminate work standards that prescribe numerical quotas.

Remove barriers that stand between the hourly worker and his right to pride of
workmanship.

Institute a vigorous program of education and retraining.

Create a structure in top management that will push every day on the above 13 points.
dimensions of service quality
Convenience—the availability and accessibility of the service

Reliability—the ability to perform a service dependably, consistently, and accurately

Responsiveness—the willingness of service providers to help customers in unusual

situations and to deal with problems

Time—the speed with which service is delivered

Assurance—the knowledge exhibited by personnel who come into contact with a customer
and their ability to convey trust and confidence

Courtesy—the way customers are treated by employees who come into contact with them

Tangibles—the physical appearance of facilities, equipment, personnel, and communication

materials

Consistency—the ability to provide the same level of good quality repeatedly

Expectations—meet (or exceed) customer expectations
service
Challenges with ___ quality include the reality that customer expectations often change
over time and that different customers tend to have different expectations
SERVQUAL
A widely used tool for assessing service quality is ___ an instrument designed to obtain
feedback on an organization's ability to provide quality service to customers.
SERVQUAL
___ focuses on five of the previously mentioned service dimensions that influence
customers' perceptions of service quality: tangibles, reliability, responsiveness, assurance,
and empathy.
SERVQUAL
The results of this service quality audit help management identify service strengths and
weaknesses.
Design conforms
The degree to which a product or a service successfully satisfies its intended purpose has
four primary determinants: ___; How well the product or service ___ to the design; Ease of
use; Service after delivery
Ease Service
The degree to which a product or a service successfully satisfies its intended purpose has
four primary determinants: Design; How well the product or service conforms to the design;
___ of use; ___ after delivery
management
Top ___ has the ultimate responsibility for quality.
design
Quality products and services begin with ___, includes attention to the processes that will
be required to produce the products and/or the services that will be required to deliver the
service to customers.
procurement
The ___ department has responsibility for obtaining goods and services that will not detract
from the quality of the organization's goods and services.
conform
Production/operations has responsibility to ensure that processes yield products and
services that ___ to design specifications; Monitoring processes and finding and correcting
root causes of problems.
Quality assurance
___ ___ is responsible for gathering and analyzing data on problems and working with
operations to solve problems.
Packaging shipping
___ and ___ department must ensure that goods are not damaged in transit, that packages
are clearly labeled, that instructions are included, that all parts are included, and that
shipping occurs in a timely manner.
Marketing and sales
___ and ___ department has the responsibility to determine customer needs and to
communicate them to appropriate areas of the organization. In addition, it has the
responsibility to report any problems with products or services.
problems
Customer service is often the first department to learn of ___.
Customer service
has the responsibility to communicate that information to appropriate departments, deal in a
reasonable manner with customers, work to resolve problems, and follow up to confirm that
the situation has been effectively remedied.
increases
Poor quality ___ certain costs incurred by the organization.
reputation loyalty liability
Business organizations with good or excellent quality typically benefit in a variety of ways:
an enhanced ___, ability to command premium prices, increased market share, greater
customer ___, lower ___ costs, and fewer production or service problems—which yields
higher productivity, fewer complaints from customers, lower production costs, and higher
profits.
premium prices
Business organizations with good or excellent quality typically benefit in a variety of ways:
an enhanced reputation, ability to command ___ ___, increased market share, greater
customer loyalty, lower liability costs, and fewer production or service problems—which
yields higher productivity, fewer complaints from customers, lower production costs, and
higher profits.
problems complaints
Business organizations with good or excellent quality typically benefit in a variety of ways:
an enhanced reputation, ability to command premium prices, increased market share,
greater customer loyalty, lower liability costs, and fewer production or service ___—which
yields higher productivity, fewer ___ from customers, lower production costs, and higher
profits.
Loss of business
Some of the major areas affected by poor quality are: ___, Liability, Productivity, Costs
Customers
___ don't always report dissatisfaction to management, but do tend to voice their
dissatisfaction to friends and relatives.
International Organization for Standardization (ISO)
___ ___ ___ ___ promotes worldwide standards for the improvement of quality, productivity,
and operating efficiency through a series of standards and guidelines.
improve involvement satisfaction
There are three key philosophies in TQM (Total Quality Management) approach: never-
ending push to ___, which is referred to as continuous improvement; the second is the ___
of everyone in the organization; and the third is a goal of customer ___.
process
TQM expands the traditional view of quality—looking only at the quality of the final product
or services—to looking at the quality of every aspect of the ___ that produces the product or
service.
DMAIC
The steps of ___ are:
Define: Set the context and objectives for improvement.
Measure: Determine the baseline performance and capability of the process.
Analyze: Use data and tools to understand the cause-and-effect relationships of the
process.
Improve: Develop the modifications that lead to a validated improvement in the process.
Control: Establish plans and procedures to ensure that improvements are sustained.

collection analysis
Check sheets provide a format that enables users to record and organize data in a way that
facilitates ___ and ___; designed on the basis of what the users are attempting to learn by
collecting data.
histogram
A ___ can be useful in getting a sense of the distribution of observed values; one can see if
the distribution is symmetrical, what the range of values is, and if there are any unusual
values, among other things.

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.
defect (nonconformance)
is any mistake or error that is passed on to the customer.
unit of work
is the output of a process or an individual process step.
cost of quality
refers to the costs associated with avoiding poor quality or those incurred as a result of poor
quality.
Prevention costs
are those expended to keep nonconforming goods and services from being made and
reaching the customer. (example: training costs)
Appraisal costs
are those expended on ascertaining quality levels through measurement and analysis of
data to detect and correct problems. (example: test and inspection costs for incoming
material etc.)
Internal-failure costs
are costs incurred as a result of unsatisfactory quality that is found before delivery of good
or service to the customer. (example: scrap/rework)
External-failure costs
are incurred after poor-quality goods or services reach the customer. (example: product
liability costs)
Seven QC Tools
Designed to be simple and visual so that workers at all levels can use them easily and
provide a means of communication that is particularly well suited in group problem-solving
efforts
Flowcharts
process mapping to identify the sequence of activities or flow of materials/ information in a
process.
reorder perpetual
The ___ point occurs when the quantity on hand drops to a predetermined amount;
generally includes expected demand during lead time and safety stock; in order to know
when the reorder point has been reached, ___ inventory monitoring is required.
total cost Quantity Discounts
=Carrying cost+Ordering cost+Purchasing cost
=(Q/2)H+(D/Q)S+PD
Where:
Q=Order quantity
H=Holding cost per unit (usually annual)
D=Demand (usually annual)
S=Ordering cost
P=Unit price or cost
when how much
The two basic issues (decisions) for inventory management are ___ to order and ___ ___ to
order.
increases pipeline
Different types of inventories serve a number of functions: anticipation stocks; seasonal
inventories; buffers; safety stocks; economic lot sizes/order cycles; hedge against price ___;
___ inventory; economies of scale
return on investment (ROI)
profit after taxes divided by total assets
ABC Approach
Classifying inventory according to some measure of importance, and allocating control
efforts accordingly.
Cycle Counting
A physical count of items in inventory.
Cycle Stock
The amount of inventory needed to meet expected demand.
Economic Order Quantity (EOQ)
The order size that minimizes total annual cost.
Excess Cost
Difference between purchase cost and salvage value of items left over at the end of a
period.
Fill Rate
The percentage of demand filled by the stock on hand.
Fixed-Order-Interval (FOI) Model
Orders are placed at fixed time intervals.
Inventory Turnover
Ratio of annual cost of goods sold to average inventory investment.
Lead Time
Time interval between ordering and receiving the order.
Little's Law
The average amount of inventory in a system is equal to the product of the average demand
rate and the average time a unit is in the system.
Ordering Costs
Costs of ordering and receiving inventory.
Periodic System
Physical count of items in inventory made at periodic intervals (weekly, monthly).
Perpetual Inventory
System that keeps track of removals from inventory continuously, thus monitoring current
levels of each item.
Point-of-Sale (POS) System
Record items at time of sale.
Purchase Cost
The amount paid to buy the inventory.
Quantity Discounts
Price reductions for larger orders.
Reorder Point (ROP)
When the quantity on hand of an item drops to this amount, the item is reordered.
Safety Stock
Extra inventory carried to reduce the probability
of a stockout due to demand and/or lead time variability.
Service Level
Probability that demand will not exceed supply during lead time.
Setup Costs
The costs involved in preparing equipment for a job.
Shortage Costs
Costs resulting when demand exceeds the supply
of inventory; unrealized profit per unit.
Single-Period Model
Model for ordering of perishables and other items with limited useful lives.
Two-Bin System
Two containers of inventory; reorder when the first is empty.
Universal Product Code (UPC)
Bar code printed on a
label that has information about the item to which it is attached.
independent
___-demand items are ready to be sold or used.
dependent
___-demand items are components of finished products, rather than the finished products
themselves.
customer
Inventories are a vital part of business and also contribute to ___ satisfaction.
30 90
a typical firm probably has about __% of its current assets and perhaps as much as __% of
its working capital invested in inventory.
increase
a reduction of inventories can result in a significant ___ in ROI, but that benefit has to be
weighed against a risk of decrease in customer service.
health
The ratio of inventories to sales in the manufacturing, wholesale, and retail sectors is one
measure that is used to gauge the ___ of the U.S. economy.
for sale
in terms of dollars, the inventory of goods held ___ ___ is one of the largest assets of a
merchandising business
work in process (WIP)
The different kinds of inventories include the following:
Raw materials and purchased parts.
Partially completed goods, called ___ ___ ___.
Finished-goods inventories (manufacturing firms) or merchandise (retail stores).
Tools and supplies.
Maintenance and repairs (MRO) inventory.
Goods-in-transit to warehouses, distributors, or customers (pipeline inventory).
Tools supplies
The different kinds of inventories include the following:
Raw materials and purchased parts.
Partially completed goods, called work-in-process (WIP).
Finished-goods inventories (manufacturing firms) or merchandise (retail stores).
___ and ___.
Maintenance and repairs (MRO) inventory.
Goods-in-transit to warehouses, distributors, or customers (pipeline inventory).

When the quantity on hand of an item drops to this amount, the item is reordered.

Safety Stock

Extra inventory carried to reduce the probability

of a stockout due to demand and/or lead time variability.

Service Level

Probability that demand will not exceed supply during lead time.

Setup Costs

The costs involved in preparing equipment for a job.

Shortage Costs

Costs resulting when demand exceeds the supply

of inventory; unrealized profit per unit.
Single-Period Model

Model for ordering of perishables and other items with limited useful lives.

Two-Bin System

Two containers of inventory; reorder when the first is empty.

Universal Product Code (UPC)

Bar code printed on a

label that has information about the item to which it is attached.

independent

___-demand items are ready to be sold or used.

dependent

___-demand items are components of finished products, rather than the finished products themselves.

customer

Inventories are a vital part of business and also contribute to ___ satisfaction.

30 90

a typical firm probably has about __% of its current assets and perhaps as much as __% of its working
capital invested in inventory.

increase

a reduction of inventories can result in a significant ___ in ROI, but that benefit has to be weighed
against a risk of decrease in customer service.

time fence communication

Key elements in the success of the master scheduling process is strict adherence to ___
___ policies and rules, and organizational ___.
Early
___ changes to a master schedule can be disruptive; Typically, the further out in the future
a change is, the less the tendency to cause problems.
backlog
If insufficient inventory exists, a ___ equal to the shortage amount appears.

Finished uncommitted
Outputs of master scheduling are: ___ goods projected inventory, master production
schedule, ___ inventory
inventory orders
Inputs for Master Scheduling include: Beginning ___, forecast, customer ___
production insufficient
Master scheduler duties generally include:
1.Evaluating the impact of new orders
2.Providing delivery dates for orders
3.Dealing with problems:
a)Evaluating the impact of ___ delays or late deliveries of purchased goods
b)Revising the master schedule when necessary because of ___ supplies or capacity
c)Bringing instances of insufficient capacity to the attention of production and marketing
personnel so that they can participate in resolving conflicts
seasonal
Aggregate planning can accommodate ___ changes in demand.
new dates
Master scheduler duties generally include:
1.Evaluating the impact of ___ orders
2.Providing delivery ___ for orders
3.Dealing with problems:
a)Evaluating the impact of production delays or late deliveries of purchased goods
b)Revising the master schedule when necessary because of insufficient supplies or
capacity
c)Bringing instances of insufficient capacity to the attention of production and marketing
personnel so that they can participate in resolving conflicts
master schedule
The ___ is the heart of production planning and control; determining the quantities needed
to meet demand from all sources, and that governs key decisions and activities throughout
the organization.
adjust single
The main limitations of LP models are the assumptions of linear relationships among
variables, the inability to continuously ___ output rates, and specify only a ___ objective
(e.g., minimize costs).
linear
Cost (back order, inventory, subcontracting, etc.) is a ___ function composed of unit cost
and number of units. This often has a reasonable approximation to reality, although there
may be only narrow ranges over which this is true. Cost is sometimes more of a step
function.
quantity timing
Aggregate planners are concerned with the ___ and the ___ of expected demand.
output
An aggregate production plan is essentially the ___ of aggregate planning.
exceeds
The strategy to maintain a certain amount of excess capacity to handle increases in
demand makes sense when the opportunity cost of lost revenue greatly ___ the cost of
maintaining excess capacity.
costs employment
aggregate planning is important because it can help synchronize flow throughout the supply
chain; it affects ___, equipment utilization, ___ levels, and customer satisfaction.
capacity
Long-term decisions essentially establish the ___ constraints and relate to product and
service selection, facility size and location, equipment decisions, and layout of facilities.
sales finance operations
Sales and operations planning affects functions throughout the organization, prepared with
inputs from ___ (demand forecasts), ___ (financial constraints), and ___ (capacity
constraints).
inventory subcontracting
Planners must make decisions about grouped (aggregated) products on output rates,
employment levels and changes, ___ levels and changes, back orders, and ___ in or out.
Supply Management
___ ___ Strategies (reactive)
Level Production; Chase Production; Mixed Strategy
Aggregate Planning
Intermediate-range capacity planning, usually covering 2 to 12 months, although in some
companies it may extend to 18 months.
Proactive strategies
planning strategies that seek to alter demand to match capacity
Reactive strategies
planning strategies that seek to alter capacity to match demand
Mixed strategies
planning strategies that seek to alter both demand and capacity
Chase demand strategy
Matching capacity to demand; the planned output for a period is set at the expected
demand for that period
Level Capacity strategy
maintaining a steady rate of regular-time output while meeting variations in demand by a
combination of options
Sales and operations planning
intermediate-range decisions to balance supply and demand, integrating financial and
operations planning
Master production schedule
this schedule indicates the quantity and timing of planned completed production
Disaggregation
Process of breaking the aggregate capacity plan down into specific product or service
requirements over time
Rough-cut capacity planning
approximate balancing of capacity and demand to test the feasibility of a master schedule
time fences
points in time that separate phases of a master schedule planning horizon
Frozen
little or no change possible
Slushy
some change possible
liquid
major change possible
Purpose
Summary of aggregate planning: 1. ___
Decide on the combination of: Output rates; Employment levels; On-hand inventory levels
Objectives
Summary of aggregate planning: 2. ___
Minimize cost; Others, may include-Maintain a desirable level of customer service, Minimize
workforce fluctuations
Possible Strategies
Summary of aggregate planning: 3. ___ ___
A. Supply Management (reactive)
B. Demand Management (proactive)
Demand Management
___ ___ Strategy (proactive)
Influence demand through promotion, pricing, etc.
Produce goods or services that have complementary demand patterns
Managerial
___ Importance of Aggregate Planning:
Has an effect on; Costs; Equipment utilization; Customer satisfaction; Employment levels;
Synchronization of flow throughout the supply chain
intermediate
An aggregate plan is an ___-range plan for a collection of similar products or services that
sets the stage for shorter-range plans.
shorter
Master scheduling breaks an aggregate plan into specific ___-range output quantity and
timing requirements.
Roughcut
___ capacity planning tests the feasibility of a tentative master plan in terms of capacity.