Topic: Operations and Productivity Why study O.

M
- One of the 3 major functions (Accounting,
Operations management Marketing and Operations)
- discipline that applies to all industries
- production of goods and services
Accounting/Finance - tracks how well org is
Production
Marketing - generates demand
- creation of goods and services
- Managing the conversion Production/Operations - creates the product
The Heritage of Operations Management
Goods
● Division of labor (Adam Smith 1776 and Charles
- tangible; can be inventoried
Babbage 1852)
- consistent product definition
● Standardized parts (Whitney 1800)
- production usually separate from consumption
● Scientific Management (Taylor 1881)
- low customer interaction
● Coordinated assembly line (Ford/Sorenson/Avery
1913)
Services
● Gantt charts (Gantt 1916)
- intangible; often unique; frequently dispersed
● Motion study (Frank and Lillian Gilbreth 1922
- produced and consumed at the same time
● Quality control (Shewhart 1924; Deming 1950)
- inconsistent product definition
● Computer (Atanasoff 1938)
- high customer interaction
● CPM/PERT (DuPont 1957)
- often knowledge based
● Material requirements planning (Orlicky 1960)
● Computer aided design (CAD 1970)
● Flexible manufacturing system (FMS 1975)
Production management
● Baldrige Quality Awards (1980)
● Computer integrated manufacturing (1990)
E.S. Buffa
● Globalization(1992)
- decision making related to production processes’
● Internet (1995)
A.W.Field
Productivity challenge
- process of planning and regulating the operations

Productivity = Units produced/Input used

H.A.Harding
- process which convert the inputs into outputs Labor productivity
Productivity = Units produced/Labor hour used

3 main types of decisions Multi factor productivity

Productivity
Production planning = Outputs/Labor+Material+Energy+Capital+Misc.
- decide where, when, and how production
Production control
- decision-making process focuses on controlling
quality and costs, scheduling, and the actual
day-to-day operations
Improving production and operations.
- developing more efficient methods of producing the
firm’s goods or services.
Topic: Operations Strategy in a Global
Environment
A Global View of Operations
- deployment of facilities and operations around the
world
Prof Thomas Sewell - No great civilization has
developed in isolation
Globalization - growth of world trade, global capital
markets, and the international movement of people
6 reasons why domestic business operations
decide to change to some form of international
operation:
1) Reduce Costs
2) Improve the Supply Chain
3) Provided Better Goods and Services
4) Understand Markets
5) Learn to Improve Operations
6) Attract and Retain Global Talent
Missions and Strategies
Mission - states the purpose or rationale for
organization’s existence.
Strategy - organization’s action plan to achieve the
mission.
3 strategic approaches to competitive advantage
1. Differentiation
2. Cost leadership
3. Response
Ten Strategic OM Decisions
1) Goods and service design: Designing goods
and services defines much of the transformation
2.) Quality: The customer’s quality expectations
must be determined and policies and procedures
established to identify and achieve that quality.
3) Process and capacity design: Process options
are available for products and services.
4) Location selection: Facility location decisions for
both manufacturing and service organizations
may determine the firm’s ultimate success.
5) Layout design: Material flows, capacity needs,
personnel levels, technology decisions, and
inventory requirements influence layout.
6) Human resources and job design: People are
an integral and expensive part of the total system
design.
7) Supply-chain management: These decisions
determine what is to be made and what is
to be purchased.
8) Inventory: Inventory decisions can be optimized
only when customer satisfaction, suppliers,
production schedules, and human resource planning
are considered
.
9) Scheduling: Feasible and efficient schedules of
production must be developed; the demands
human resources and facilities must be determined
and controlled.
10) Maintenance: Decisions must be made
regarding desired levels of reliability and stability,
and systems must be established to maintain that
reliability and stability.
Issues in Operations Strategy
Resources view - evaluate the resources at their
disposal and manage or alter them to achieve
competitive challenge
Value-chain analysis - identify activities that
represent strengths, or potential strengths.
Five forces method - analyzing the five
forces-immediate rivals, potential entrants,
customers, suppliers, and substitute products, in the
competitive environment.
Strategy Development and Implementation
SWOT Analysis
Key Success Factors (KSF) - activities that are
necessary for a firm to achieve its goals.
Core competencies - set of unique skills, talents,
and capabilities that a firm does at a world-class
standard.
Global Operations Strategy Options
International business - any firm that engages in
international trade or investment (cross-border
transactions)
Multinational corporation (MNC) - firm with
extensive international business involvement
Operations managers of international and
multinational firms approach global opportunities
with one of four operations strategies:
1) International Strategy - a strategy in which
global markets are penetrated using exports and
licences
➢Least advantageous -- with little responsiveness
and little cost advantage
➢Little responsiveness because exporting or
licensing goods from the home country
➢Cost advantages are few because using the
existing production process at some distance
from the new market
➢Easiest strategy - exports require little change in
existing operations and licensing
agreements often leave much of the risk to the
licensee
2) Multidomestic Strategy - a strategy in which
operating decisions are decentralized to each
country
to enhance local responsiveness
➢Typically, subsidiaries, franchises, or joint ventures
with substantial independence
➢Advantage: maximizing a competitive response for
the local market
➢Little or no cost advantage
3) Global Strategy - a strategy in which operating
decisions are centralized and headquarters
coordinate the standardization and learning between
facilities.
➢Generates Economies of scale
➢Appropriate when the strategic focus is cost
reduction
➢Has little to recommend when the demand for
local responsiveness is high
4) Transnational Strategy - a strategy that
combines the benefits of global-scale efficiencies
with the
benefits of local responsiveness
➢exploits the economies of scale and learning, as
well as pressure for
responsiveness, by recognizing that core
competence does not reside in just the “home”
country
but can exist anywhere in the organization
Topic: Project Management
Project - series of related tasks directed toward
some major output
Structuring Projects
Pure Project - self-contained team works full time
on the project
Advantages
● Only the project manager has full authority over
the project.
● Team members report to only one boss.
● Lines of communication are shorter so that
decisions are quick.
● Team pride, motivation and commitment are high.
Disadvantages
● Resources are duplicated
● Team members are often both physically and
psychologically removed
● lags in its knowledge of new technology
● Team members have no functional area home,
Functional Project - housing the project within a
functional division
Advantages
● Team members can work on several projects.
● Technical expertise is maintained within the
functional area.
● There is a functional area
● creates synergistic solutions
Disadvantages
● Aspects of the project that are not directly related
to the functional area get shortchanged.
● Motivation of team members is often weak.
● Needs of the client are secondary and are
responded to slowly.
Matrix Project
- Blend the properties of functional and pure project
structures.
- Each project utilizes people from different
functional areas
- The project manager decides what tasks and
when they need to be performed but functional
managers control which people and technologies
are to be used.
Advantages
● Enhanced communication
● A project manager is held responsible for
successful completion of the project.
● Duplication of resources is minimized.
● Team members have a functional "home"
after project completion, so they are less
worried about life-after-project than if they
were a pure project organization.
● Policies of the parent organization are
followed by increasing support for the project.
Disadvantages
● There are two bosses. Who is listened to first,
the functional manager or the project
manager?
● Requires strong negotiating skills from the
project manager.
● Sub-optimization is a danger as project
managers might hoard resources for their
own project and consequently harming other
projects.
Project management 3. Controlling

- involves planning, directing and controlling - involves close monitoring of resources, cost,
resources (people, equipment and material) to meet quality, and budgets
the technical, cost and time constraints of the
project. Planning

Importance of Project Management Project Plan: Outlines the activities, tasks,

dependencies and timeframes.
1. Strategic Alignment. being delivered is right
and will deliver real value Resource Plan: Lists the labor, equipment and
2. Clear Focus and Objectives. Ensures there’s a materials required.
proper plan for executing on strategic goals.
Financial Plan: Identifying the labor, equipment and
3. Quality Control. the quality of whatever is being
materials costs.
delivered consistently hits the mark.
4. Leadership. Brings leadership and direction to
Quality Plan: Provide quality targets, assurance and
projects.
control measures.
5. Risk Management. Ensures risks are properly
managed and mitigated
Risk Plan: Highlight potential risks and actions
6. Orderly Process. Ensures proper project
taken to mitigate them.
process is followed
7. Subject Matter Expertise. Someone needs to
Acceptance Plan: List the criteria to be met to gain
be able to understand if everyone’s doing what
customer acceptance.
they should.
8. Continuous Oversight. Ensures a project’s
Communications Plan: List the information needed
progress is tracked and reported properly.
to inform stakeholders.
9. Managing and Learning from Failure and
Success. It learns from the successes and
Procurement Plan: Identify products to be sourced
failures of the past.
from suppliers.

Management of projects involves 3 phases.

1. Planning
- formed to make sure existing programs continue to
run smoothly on a day to day basis
The project organization works best when:
1. Defined with a specific goal and deadline.
2. Unique or somewhat unfamiliar
3. The work contains complex interrelated tasks
requiring specialized skills.
4. The project is temporary but critical to the
organization.
5. The project cuts across organizational lines.

2. Scheduling
- involves sequencing and allotting time to all project
activities
- Gantt charts are also used in scheduling.
Topic: Forecasting
Forecasting is the art and science of predicting
what will happen in the future. Sometimes that is
determined by a mathematical method; sometimes
it is based on the intuition of the operations
manager. Most forecasts and end decisions are a
combination of both.
Forecasting time horizons.
1. Short range forecast. While it can be up to one
year, this forecast is usually used for three months or
less. It is used for planning purchases, hiring, job
assignments, production levels, and the like.
2. Medium range forecast. This is generally three
months to three years. Medium range forecasts are
used for sales and production planning, budgeting,
and analysis of different operating plans.
3. Long range forecast. Generally three years or
more in time span, it is used for new products,
capital expenditures, facility expansion, relocation,
and research and development.
Types of Forecasts
1. Economic forecasts address the business cycle
by predicting housing starts, inflation rates, money
supplies, and other planning indicators.
2. Technological forecasts monitor rates of
technological progress.
3. Demand forecasts deal with the company's
products and estimate consumer demand. (sales
forecasts)
Strategic Importance of Forecasts
Two tools at their disposal by which to make
decisions:
1. Actual data
2. Forecasts
Human Resources.
Hiring, training, and laying off workers all depend on
anticipated demand.
If the human resources department hire additional
workers without warning, the amount of training
declines and the quality of the workforce suffers.
Capacity.
When capacity is inadequate, the resulting shortage
can lead to loss of customers and market share.
Supply-Chain Management.
Good supplier relations and the ensuing price
advantages for materials and parts depend on
accurate forecasts.
Forecasting System
These seven steps can generate forecasts.
1. Determine the use of the forecast
2. Select the items for the forecasted.
3. Determine the time horizon of the forecast.
4. Select the forecast model type.
5. Gather data to be input into the model.
6. Make the forecast.
7. Verify and implement the results
Forecasting Approaches
Two predominant approaches
1. Qualitative approach
2. Quantitative analysis.
Qualitative methods include:
1. Jury of executive opinion.
This is based on the inputs and decisions of
high-level experts or management.
2. Delphi method.
Decision makers, staff, and respondents all meet to
develop the forecast. Using a group process that
allows experts to make forecasts. Every shareholder
in the process provides input.
3. Sales force composite.
Each sales person provides an individual estimate
which is reviewed for realism by management, and
then combined for a big picture view.
4. Consumer market survey.
This is surveying the prospective customer base
to determine demand for existing products and can
also be used for new products.
Quantitative methods are in two categories.
1. Time-Series Models.
Time-series models attempt to predict
the future by using historical data.
This is based on a sequence of
evenly spaced (weekly, monthly, quarterly,
etc.) data points.
A. Naive approach is a forecasting technique
which assumes that demand in the next
period is equal to demand in the most
recent period.
B. Moving Average is a forecast technique that
uses a number of historical actual data
values to generate a forecast. This is
useful if we can assume that market
demands will stay fairly steady over time.
Example1. Donna’s garden Supply wants a 3-month
moving -average forecast, including a forecast for
next January, for shed sales.

Month Act 3-Month Moving

Average
January 10
February 12
March 13
April 16 (10 +12 + 13)/3 = 11.7
May 19 (12 +13 + 16)/3 = 13.7
June 23 (13 + 16 + 19)/3 = 16
July 26 (16 +19 + 23)/3 = 19.3
August 30 (19 + 23 + 26)/3 =
22.7
September 28 (23 + 26 + 30)/3 =
26.3
October 18 (26 + 30 +38)/3 = 28
November 16 (30 + 28 + 18)/3 =
25.3
December 14 (28 +18 +16)/3 = 20.7
January forecast = (18 + 16 + 14)/3 = 16

Weighted Moving Average.

When a detectable trend or pattern exists, weights
can be used to give more emphasis on recent
values. This practice makes forecasting techniques
more responsive to changes because more recent
periods may be more heavily weighted. A weighted
moving average may be expressed mathematically
as:
 Example: Donna’s Garden Supply wants to forecast storage shed sales by weighing the past 3 months, with
more weight given to recent data to make them more significant.
Month Act 3-Month Moving Average
January 10
February 12
March 13
April 16 [(10 x 1) +(12 x 2) + (13 x 3)]/6 = 12.2
May 19 [(12 x 1) + (13 x 2) + (16 x 3)]/6 = 14.3
June 23 [(13 x 1) + (16 x 2) + (19 x 3)]/6 = 17
July 26 [(16 x 1) + (19 x 2) + (23 x 3)]/6 = 20.5
August 30 [(19 x 1) + (23 x 2) + (26 x 3))/6 = 23.8
September 28 [(23 x 1) + (26 x 2) + (30 x 3)]/6 = 27.5
October 18 [(26 x 1) + (30 x 2) + (38 x 3)]/6 = 28.3
November 16 [(30 x 1)+ (28 x 2) + (18 x 3)]/6 = 23.3
December 14 [(28 x 1) + (18 x 2) +(16 x 3)]/6 = 18.7

Exponential Smoothing. A weighted-moving-average forecasting technique in which data points are weighted
by an exponential function. This involves very little record keeping of past data. The basic exponential
smoothing formula is as follows:

New forecast = Last period’s forecast + α(Last period’s actual demand - Last period’s forecast)
Ft = Ft-1 + α(At-1 - Ft-1)
Where α = smoothing constant (0 ≤ α ≥ 1)

Example1. In January, a car dealer predicted February demand for 142 Ford Mustang. Actual February
demand was 153 autos. Using a smoothing constant chosen by management of α = .20, find the forecast
March demand using the exponential smoothing model.

Solution: Ft = Ft-1 + α(At-1 - Ft-1)

FMarch = 142 + .2(153 - 142) = 144.2,
Hence the March demand forecast for Ford Mustang is 144.

Example2: During the past 8 quarters, the Port of Baltimore has unloaded large quantities of grain from ships.
The port’s operations manager wants to test the use of exponential smoothing to see how well the technique
works in predicting tonnage unloaded. He guesses that the forecast of grain loaded in the first quarter was 175
tons. Make a forecast using two values of α: α = .10 and α = .50.

Qarteru Actual Forecast Forecast

α = .10 α = .50
1 180 175 175
2 168 175.00 + .10(180 - 175) = 175.50 175.00 + .50(180 - 175.00) =
177.50
3 159 175.50 + .10(168 - 175.50) = 177.50 + .50(168 - 177.50) =
174.75 172.75
4 175 174.75 + .10(159 - 174.75) = 172.75 + .50(159 - 172.75) =
173.18 165.88
5 190 173.18 + .10(180 - 173.18) = 165.88 + .50(180 - 165.88) =
173.36 170.44
6 205 173.36 + .10(180 - 173.36) = 170.44 + .50(180 - 170.44) =
175.02 180.22
7 180 175.02 + .10(180 - 175.02) = 180.22 + .50(180 - 180.22) =
178.02 192.61
8 182 178.02 + .10(180 - 178.02) = 192.61 + .50(180 - 192.61) =
 178.22 186.30
9 ? 178.22 + .10(180 - 178.22) = 186.30 + .50(180 - 186.30) =
178.59 184.15

Trend Projection. Trend projection is a technique that fits a

trend line to a series of historical data points and then projects
the line into the future for medium to long-range forecasts. We
shall be using the least-squares method whose formula is as
follows:
Example: Using the previous example, determine the trend
equation and forecast actual tonnage unloaded on the first
quarter of 2020.

Solution
Time Period,
Quarter Actual Tonnage Unloaded, y x2 xy
x

2018, 1st 180 1 1 180

2nd 168 2 4 336

3rd 159 3 9 477

4th 175 4 16 700

2019, 1st 190 5 25 950

2nd 205 6 36 1230

3rd 180 7 49 1260

4th 182 8 64 1456

2020 1st

n=8 Σy = 1439 Σx = 36 Σx2 = 204 Σxy = 6589

1. It is the art and science of predicting future events Forecasting

2. A type of forecast that predicts inflation rates, money supplies, housing starts, and other planning
indicators. Economic forecast
3. A forecast technique that uses a group process that allows experts to make forecasts Delphi
method
4. A forecast that employs one or more mathematical models that rely on historical data and/or
causal variables to forecast demand Quantitative
5. A time series forecasting method that fits a trend line to a series of historical data points and
then projects the line into the future forecasts Trend projection
6. The weighting factor used in an exponential smoothing forecast, a number between 0 and 1.
Smoothing constant
7. A forecasting method that uses an average of the n most recent periods of data to forecast the
next period. Moving averages
8. A weighted-moving-average forecasting technique in which data points are weighted by an
exponential function. Exponential smoothing
9. A straight-line mathematical model to describe the functional relationships between independent
and dependent variables Linear-regression analysis
10. A measure of the strength of the relationship between two variables. Coefficient of correlation
11. A forecasting technique that uses a series of past data points to make a forecast. Time series
12. The average of the squared differences between the forecasted and observed values. Mean
squared error
13. Regular upward or downward movements in a time series that tie to recurring events. Seasonal
variations
14. A forecast that is consistently higher or consistently lower than actual values of a time series.
BiasA measure of the overall forecast error for a model. Mean absolute deviation
15.
16. Forecasts that incorporate such factors as the decision maker's intuition, emotions, personal
experiences, and value system. Qualitative forecasts
17. An associative forecasting method with more than one independent variable. Multiple
regression
18. A measure of the amount of variation in the dependent variable about its mean that is explained
by the regression equation. Coefficient of determination
19. Projections of a company's sales for each time period in the planning horizon. Demand
forecasts
20. Forecasting that tries a variety of computer models and selects the best one for a particular
application. Focus forecasting
21. A forecasting technique based on salespersons' estimates of expected sales Sales force
composite
22. An approach to exponential smoothing forecasting in which the smoothing constant is
automatically changed to keep errors to a minimum. Adaptive smoothing
23. A measure of variability around the regression line - it's standard deviation. Standard error of
the estimate
24. A forecasting method that solicits input from customers or potential customers regarding future
purchasing plans. Consumer market survey
25. The average of the absolute differences between the forecast and actual values, expressed as a
percent of actual values. Mean absolute percent error
26. A forecasting technique that assumes demand in the next period is equal to demand in the most
recent period. Naive approach
27. A forecasting technique that takes the opinion of a small group of high-level managers and
results in a group estimate of demand. Jury of executive opinion
28. Patterns in the data that occur every several years. Cycles
29. A measurement of how well the forecast is predicting actual values. Tracking signal
Topic: Design of Goods and Services
POLITICAL/LEGAL CHANGE Significant
Product selection is choosing the good or change in government surrounding leadership
service to provide customers or clients by and policies.
developing a competitive advantage OTHER CHANGES may be brought about
through market practice, professional standards,
PRODUCT STRATEGY OPTIONS suppliers, and distributors
1. Differentiation - Creating a product with a
unique, standout feature.
2. Low Cost - Creating the best product for the
lowest possible cost.
3. Rapid Response - is a marketing strategy
that leverages breaking news

Criteria of an Effective Product Strategy:

1. SELECTION OF GOODS AND SERVICES
a. Product Life Cycle
Products, just like human beings are born.
They live and die and are cast aside by a
changing society.
Four phases:
● INTRODUCTION
● GROWTH
● MATURITY
● DECLINE

PRODUCT-BY-VALUE
measure of a product’s ability to
meet and address customers’ needs

PRODUCT-BY-VALUE ANALYSIS
Lists products in descending
order of their individual dollar
contribution to the firm Lists the total
annual peso contribution of the product
Helps management evaluate alternative
strategies

2. GENERATING NEW PRODUCTS

BRAINSTORMING - One technique to generate
new product ideas

New Product Opportunities

UNDERSTANDING THE CUSTOMER
Premier issue in new-product development.
ECONOMIC CHANGE
Brings increasing levels of affluence in the
the long run but economic cycles and price
changes in the short run
SOCIOLOGICAL AND DEMOGRAPHIC
CHANGE People that change over time,
whereas social change is the evolution of
people's behaviours or cultural norms over time.
TECHNOLOGICAL CHANGE Increase in the
efficiency of a product or process that results in
an increase in output
STAGES OF PRODUCT DEVELOPMENT
PRODUCT DEVELOPMENT
Creation of products with new or different
characteristics
QFD House of Quality
a graphic technique for defining the
relationship between customer desires and
productMay involve modification of an existing
product or making an entirely different product
Stages of Product Development
Quality Function Deployment
process for determining customer
requirements(customer “ wants”) and translating
them into the attributes (the “hows”) that each
functional area can understand and act on.
ISSUES FOR PRODUCT DEVELOPMENT
ROBUST DESIGN
Design that can be produced to requirements
even with unfavorable conditions in the
production process
MODULAR DESIGN
Is a design in which parts or components of a
product are subdivided into modules that are
easily interchanged
COMPUTER-AIDED DESIGN (CAD)
is the use of computers to interactively design
products and prepare engineering
documentation
EXTENSION OF CAD
Design for Manufacturing and Assembly
(DFMA) Solve manufacturing problems during
the design stage
3d Object Modeling
Creation of 3-dimensional representation of an
Object using specialized softwares
COMPUTER-AIDED MANUFACTURING refers
to the use of specialized computer programs to
direct and control manufacturing equipment
BENEFITS OF CAD/CAM
● Product quality
● Shorter design time
● Production cost reductions
● Database availability
● New range of capabilities
VIRTUAL REALITY TECHNOLOGY
is a visual form of communication in which
images substitute for the real thing but still allow
the user to respond interactively
VALUE ANALYSIS
is a review of successful products that takes
place during the production process.
ETHICS, ENVIRONMENTALLY DESIGNS,
AND SUSTAINABILITY
● Develop safe and more environmentally
sound products.
● Minimize waste of raw materials and
energy.
● Reduce environmental liabilities
● Increase cost-effectiveness of complying
with environmental regulations.
● Be recognized as a good corporate
citizen
TIME-BASED COMPETITIONS
Product life cycle
DEFINING THE PRODUCT
1. A good/service is defined in terms of its
functions: what it is "to do"
2. The product is then designed, and the
firm determines how the functions are to
be achieved.
Product Documents
TYPE OF TECHNICAL DOCUMENTATION
THAT EXPLAINS ALMOST EVERYTHING
THERE IS TO KNOW
ABOUT A PRODUCT OR PIECE OF
SOFTWARE
1. Engineering Drawing - shows dimensions,
tolerances, materials, and finishes of a
component
2. Bill of Material
- list of components, quantities, and descriptions
required to make one unit of a product. Work Order
-shows product structure an instruction to make a given quantity of a
particular item on a given schedule.

Engineering Change Notices

MAKE-OR-BUY DECISION a modification or correction of an engineering
The choice between producing a component or drawing or bill of material
a service and purchasing it from an outside
source PRODUCT LIFE CYCLE MANAGEMENT
(PLM)
Documents for Production Software programs that tie together the phases
of product design and manufacture
ASSEMBLY DRAWING
Shows an exploded view of the product. SERVICE DESIGN

ASSEMBLY CHART DOCUMENTS FOR SERVICES

A graphic means of identifying how components
flow into subassemblies and final products MOMENTS OF TRUTH - customer and the
business comes into contact with one another
ROUTE CHART
A listing of the operations necessary to produce
a component with the material specified in the
bill of material
1. A product’s life cycle is divided into four phases, including:
A. Introduction
B. Maturity
C. Growth
D. All of the above
2. Product development systems include:
A. Bills of material
B. Routing charts
C. Product-by-values analysis
D. Functional specifications
3. A house of quality is
A. A schematic showing how a product is put together
B. A list of the operations necessary to produce a component
C. An introduction to make a given quantity of a particular item.
D. A matrix relating customer “wants” to the firm’s “how”
4. Time-based competition focuses on:
A. Reducing the life-cycle of a product
B. Linking QFD to PLM
C. Design database availability
D. Moving new products to market more quickly
5. Four techniques available when a service is designed are:
A. Recognize political or legal change, technological change, sociological demographic
change, and economic change.
B. Understand product introduction, growth, maturity, and decline.
C. Recognize functional specifications, product specifications, design review, and test
markets.

Product decision the selection, definition, and design of products.

Product-by-Value Analysis a list of products, in descending order of their individual dollar contribution
to the firm, as well as the total annual dollar contribution of the product.
Quality Function Deployment (QFD) a process for determining customer requirements and translating
them into the attributes (the how's) that each functional area can understand and act on.
House of Quality a part of the quality function deployment process that utilizes a planning matrix to
relate customer "wants" to "how" the firm is going to meet those "wants".
Product Development Teams charged with moving from market requirements for a product to
achieving product success.
Concurrent Engineering Simultaneous performance of the various stages of product development
Manufacturing and Value Engineering simultaneous performance of the various stages of product
development
Robust design design that can be produced to requirements even with unfavorable conditions in the
production process
Modular design design in which parts or components of a product are subdivided into modules that are
easily interchanged or replaced.
Computer-aided Design (CAD) interactive use of a computer to develop and document a product
Design for manufacture and assembly (DFMA) software that allows designers to look at the effect of
design on manufacturing of the product
Standard for the exchange of product data (STEP) standard that provides a format allowing the
electronic transmission of three-dimensional data.
Computer-aided Manufacturing (CAM) the use of info technology to control machinery
3-D Printing an extension of CAD that builds prototypes and small lots.
Virtual Reality visual form of communication in which images substitute for reality and typically Value
Analysis allow the user to respond interactively
review of successful products that takes place during the production during the production process
Time-based Competition competition based on time; rapidly developing products and moving them to
market
Joint Ventures Firms establishing joint ownership to pursue new products or markets
Alliances cooperative agreements that allow firms to remain independent, but pursue strategies
consistent with their individual missions
Engineering drawing shows the dimensions, tolerances, materials, and finishes of a component.
Bill of Material (BOM) list of the hierarchy of components, their description, and the quantity of each
required to make one unit of a product
Make-or-Buy Decision choice between producing a component or a service and purchasing it from an
outside source.
Assembly drawing an exploded view of the product
Group Technology product and component coding system that specifies the size, shape, and type of
processing; it allows similar products to be grouped.
Assembly chart product and component coding system that specifies the size, shape, and type of
processing; it allows similar products to be grouped.
Assembly chart graphic means of identifying how components flow into subassemblies and final
products
Route Chart listing of the operations necessary to produce a component with the material specified in
the bill of material.
Work Order an instruction to make a given quantity of a particular item.
Engineering Change Notice (ECN) correction or modification of an engineering drawing or bill of
material
Configuration Management system by which a product's planned and changing components are
accurately identified
Product Life-Cycle Management (PLM) software programs that tie together many phases of product
design and manufacture.
Process-Chain-Network (PCN) Analysis analysis that focuses on the ways in which processes can be
designed to optimize interaction between firms and their customers
Process Chain sequence of steps that accomplishes an identifiable purpose (of providing value to
process participants

A product strategy may focus on differentiation, low-cost, or rapid response.

True

Political/legal change and economic change are both factors influencing market opportunities for new
products.
True
In the maturity stage of the product life cycle, operations managers will be concerned with keeping
sufficient capacity available for the product.
False

Stryker illustrates ʺunderstanding the customerʺ by using its sales force as a de facto
research-and-development team
True

Computer-aided design (CAD) refers to the use of specialized computer programs to direct and control
manufacturing equipment
False

An assembly drawing lists the operations necessary to produce the component

False

The common criterion of a decision tree analysis is the expected monetary value of each course of
action
True

Decision trees are only applicable in evaluating product development scenarios.

False

Every decision tree must always have at least one decision node
True

There may be three type of nodes in a decision tree: decision node, probability node and conclusion
node
False

A product's life cycle is divided into four stages, which are Introduction, growth, maturity, and decline

The three major subdivisions of the product decision are selection, definition, and speed of response

QUALITY MANAGEMENT AND Implications of Quality

INTERNATIONAL STANDARDS 1. Company reputation - perceptions about the
firm's new products,
2. Product Liability - Consumer Product Safety
BENCHMARKING Act
process where you measure your 3. Global Implications - International concern
company's success against
competitors to discover how to improve Cost of Quality(COQ)
your performance. Four major categories of costs are associated
with quality. Called
JUST-IN-TIME the cost of quality (COQ), they are:
inventory system is a management strategy that
aligns raw-material orders from suppliers
directly with production schedules.
4 Major categories of Cost
Mark Twain "Always Do Right. 1. Prevention costs - costs associated with
This will gratify some people reducing the potential for defective parts or
and astonish most." services
2. Appraisal costs - costs related to evaluating
QUALITY AND STRATEGY products, processes, parts, and services
3. Internal failure - costs that result from
production of defective parts or services before 8 PRINCIPLES OF ISO 9000
delivery to customers
4. External costs - costs that occur after ● Customer Focus
delivery of defective parts or services ● Leadership
● People Involvement
Ethics And Quality Management ● Process Approach
Deliver healthy, safe, and quality products and ● Systematic Approach to Management
services to customers. ● Continual Improvement
● Factual Approach to Decision Making
INTERNATIONAL ORGANIZATION FOR ● Mutually Beneficial Supplier Relation
STANDARDIZATION (ISO)
International standard development organization ISO 14000 standards provide a guideline or
composed of representatives from the national framework for organizations that need to
standards organizations of member countries. systematize and improve their environmental
management efforts.
ISO 9000 is the only quality standard
with international recognition. ISO 400 Contains 5 Core Elements
Establish quality management procedures, 1. Environmental Management
through leadership, detailed documentation, 2. Auditing
work instructions, and recordkeeping.

3. Performance Evaluation
4. Labeling
5. Life Cycle Assessment

TOTAL QUALITY MANAGEMENT

Refers to a quality emphasis that encompasses the entire organization, from supplier to customer.

D r. W. Edwards Demings - 14 key principles of management

1. Create consistency on purpose

2. Lead to promote change
3. Build quality into the product; stop depending on inspections to
catch problems
4. Build long-term relationship based on performance instead of
awarding business on the basis of price
5. Continuously improve product,
6. Start training
7. Emphasize leadership
8. Drive out fear
9. Break down barriers between departments
10. Stop haranguing workers
11. Support, Help, Improve
12. Remove barriers to pride in work
13. Institute a vigorous program of education and self-improvement
14. Put everybody in the company to work on the transformation

PLAN-DO-CHECK-ACT
Proposed by Walter Shewart but eventually developed by William Deming
It is for constant improvement

SIX SIGMA
A program to save time, improve quality, and lower costs
Program designed to reduce defects
to help lower costs, save time, and improve customer satisfaction.
EMPLOYEE EMPOWERMENT
-involving employees in every step
of the production process.

BENCHMARKING - Involves selecting a

demonstrated standard of products, services, costs, or practices that represent the very best
performance for processes or activities very similar to your own
.
Quality Circle - a group of employees who meet regularly to solve work-related problems.

JUST-IN- TIME systems are designed to produce or deliver goods just as they needed.

TAGUCHI CONCEPTS
has provided three concepts aimed at improving both the product and process quality.

1. Quality Robustness produced uniformly and consistently in adverse manufacturing and

environmental conditions.
2. Quality Loss Function Identifies all costs connected with poor quality and shows how these costs
increase

TOOLS FOR GENERATING IDEA

CHECKSHEETS - "collected and tabulated."

SCATTER DIAGRAMS - shows the relationship between measurements

CAUSE-AND-EFFECT DIAGRAMS - Ishikawa Diagram or Fishbone Diagram, wherein each "bone"

represents a possible source of error.

PARETO CHARTS - A method of organizing errors, problems, or defects to help focus on problem
solving efforts

FLOWCHART - Block diagrams that

graphically describe a process or system

HISTOGRAM - values of a measurement

and the frequency with which each value occurs.

STATISTICAL PROCESS CONTROL - Monitors standards, makes measurements, and takes corrective
action as a product or service is being produced.

INSPECTION - ensuring that an operation

is producing at the quality level expected

SOURCE INSPECTION - controlling or monitoring at the point of production or purchase or at the

SOURCE.

total quality management Total quality control, total quality leadership, continuous quality
improvement, quality management science, industrial quality management.
total quality management views the organization as a support structure rather tha a command
structure.

Quality is defined as conformance to the requirements of users or customers and the satisfaction of
their needs and expectation

Cost of Quality - The cost of doing things wrong - that is, the price of nonconformance

ISO 9000 A set of quality standards developed by the International Organization for Standardization

ISO 14000 A series of environmental management standards established by the International

Organization for Standardization

PDCA A continuous improvement model of plan, do, check, act.

Six Sigma A program to save time, improve quality, and lower costs

Employee Empowerment Enlarging employee jobs so that the added responsibility and authority is
moved to the lowest level possible in the organization
Quality Circle A group of employees meeting regularly with a facilitator to solve work-related problems
in their work area

Benchmarking Selecting a demonstrated standard of performance that represents the very best
performance for a process or an activity

Quality Robust Products that are consistently built to meet customer needs in spite of adverse
conditions in the production process

Quality Loss Function A mathematical function that identifies all costs connected with poor quality and
shows how these cost increase as product quality moves from what the customer wants

Target Oriented Quality A philosophy of continuous improvement to bring a product exactly on target

Cause and Effect Diagram A schematic technique used to discover possible locations of quality
problems

Pareto Charts Graphics that identify the few critical items as opposed to many less important ones

Flowcharts Block diagrams that graphically describe a process or system

Statistical Process Control A process used to monitor standards, make measurements, and take
corrective action as a product or service is being produced

Control Charts Graphic presentations of process data over time, with predetermined control limits

Inspection A means of ensuring that an operation is producing at the quality level expected

Source Inspection Controlling or monitoring at the point of production or purchase - all the source

Poka-yoke Literally translated "foolproof"; it has come to mean a device or technique that ensures the
production of a good unit every time

Attribute Inspection An inspection that classifies items as being either good or detective

Variable Inspection Classifications of inspected items as falling on a continuum scale, such as

dimension, or strength
Service Recovery Training and empowering frontline workers to solve a problem immediately

Managing Quality Helps build successful strategies of differentiation, low cost, and response

2 Ways that Quality Improves Profitability

1. Sales gains via improved response, price flexibility, increased market share, and/or improved
reputation
2. Reduced costs via increased productivity, lower rework and scrap costs, and/or lower warranty costs

2 Most Well-Known Quality Awards

1. U.S.: Malcom Baldridge National Quality Award, named after a former secretary of commerce
2. Japan: Deming Prize, named after an American, Dr. W. Edwards Deming

4 Leaders in the Field of Quality Management

1. W. Edwards Deming
2. Joseph M. Juran
3. Armand Feigenbaum
4. Philip B. Crosby

7 Concepts for an Effective TQM Program Tools for Organizing the Data
1. Continuous improvement 1. Pareto Chart
2. Six Sigma 2. Flowchart
3. Employee empowerment
4. Benchmarking
5. Just-in-time (JIT) Tools for Identifying Problems
6. Taguchi concepts 1. Histogram (distribution showing the frequency
7. Knowledge of TQM tools of occurences of a variable)
2. Statistical process control chart
Philosophy behind Just-in-time
1. Continuing improvement and enforced
problem solving Determinants of Service Quality
2. Producing or delivering goods just as they are 1. Reliability
needed 2. Responsiveness
3 .Competence
TQM Tools that Generate Ideas 4. Access Courtesy
1. Check Sheet (organized method of recording 5. Communication
data) 6. Credibility
2. Scatter Diagram (graph of the value of one 7. Security
variable vs. another variable) 8. Understanding/knowing the customer
3. Cause and effect diagram 9. Tangibles