Operations Management
Process Selection & Facility Layout
Process selection refers to deciding on the way production of goods
or services will be organized.
Project, 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/used to avoid any
inconsistencies by identifying key product or service dimensions and
then selecting appropriate processes
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. The use of computers in process
control.
Numerically controlled machines, perform operations by following
mathematical processing instructions.
Flexible manufacturing system, group of machines designed to
handle intermittent processing requirements and produce a variety
of similar products
Computer-integrated manufacturing. 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.
Product layout, 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
Intermittent processing. Nonrepetitive processing
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 a line.
Work Design & Measurement
Job design. The act of specifying the contents and methods of jobs.
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Specialization. Work that concentrates on some aspect of a product
or service.
Job enlargement. Giving a worker a larger portion of the total task,
by horizontal loading.
Job rotation. Workers periodically exchange jobs.
Job enrichment. Increasing responsibility for planning and
coordination tasks, by vertical loading.
Self-directed teams. Groups empowered to make certain changes in
their work processes.
Ergonomics. Incorporation of human factors in the design of the
workplace.
OSHA. Occupational Safety and Health Administration, created by
the Occupational Safety and Health Act of 1970.
Time-based system Compensation, based on time an employee has
worked during a pay period.
Output-based (incentive) system Compensation, based on amount
of output an employee produced during a pay period.
Knowledge-based pay. Pay system used by organizations to reward
workers who undergo training that increases their skills.
Methods analysis. Analyzing how a job is done
Flow process chart. Chart used to examine the overall sequence of
an operation by focusing on movements of the operator or flow of
materials
Worker-machine chart. Chart used to determine portions of a work
cycle during which an operator and equipment are busy or idle
Motion study. Systematic study of the human motions used to
perform an operation. Frank Gilbreth
Motion study principles. Guidelines for designing motion efficient
work procedures.
Therbligs. Basic elemental motions that make up a job.
Micromotion study Use of motion pictures and slow motion to study
motions that otherwise would be too rapid to analyze
Work measurement Determining how long it should take to do a
job.
Standard time. The time it should take a fully trained and qualified
worker to complete a specific task, working at an efficient, yet
sustainable pace, using specific methods, tools and equipment, raw
materials, and workplace arrangement.
Stopwatch time study. Development of a time standard based on
observations of one worker taken over a number of cycles
Standard elemental times Time standards derived from a firm’s
historical time data.
Predetermined time standards. Published data based on extensive
research to determine standard elemental times.
Work sampling Technique for estimating the proportion of time that
a worker or machine spends on various activities and the idle time.
Random number table. Table consisting of unordered sequences of
numbers, used to determine random observation schedules.
Location Planning and Analysis
Microfactory. Small factory with a narrow product focus, located
near major markets.
Product Plant Strategy. entire products or product lines are
produced in separate plants, and each plant usually supplies the
entire domestic market.
Market Area Plant Strategy. With this strategy, plants are designed
to serve a particular geographic segment of a market
 Operations Management
Process Plant Strategy. With this strategy, different plants
concentrate on different aspects of a process
General-Purpose Plant Strategy. With this strategy, plants are
flexible and capable of handling a range of products
Geographic information system (GIS) is a computer-based tool for
collecting, storing, retrieving, and displaying demographic data on
maps.
Clustering Similar types of businesses locate near each other
Locational cost-profit-volume analysis Technique for evaluating
location choices in economic terms
Factor rating General approach to evaluating locations that includes
quantitative and qualitative inputs
Center of gravity method. Method for locating a distribution center
that minimizes distribution cost
Management of Quality
Quality The ability of a product or service to consistently meet or
exceed customer expectations
The Evolution of Quality Management:
➢ Prior to the Industrial Revolution, skilled craftsmen
performed all stages of production. One person or a small
group of people were responsible for an entire product.
➢ A division of labor accompanied the Industrial Revolution;
each worker was then responsible for only a small portion of
each product.
➢ Frederick Winslow Taylor, the “Father of Scientific
Management,” gave new emphasis to quality by including
product inspection and gauging in his list of fundamental
areas of manufacturing management.
➢ In 1924, Bell Telephone Laboratories introduced statistical
control charts that could be used to monitor production.
Around 1930, H. F. Dodge and H. G. Romig, also of Bell Labs,
introduced tables for sampling.
➢ World War II caused a dramatic increase in emphasis on
quality control. The U.S. Army refined sampling techniques
for dealing with large shipments of arms from many suppliers.
➢ During the 1950s, the quality movement evolved into quality
assurance. In the mid-1950s, total quality control efforts
enlarged the realm of quality efforts from its primary focus
on manufacturing to include product design and incoming
raw materials
➢ During the 1960s, the concept of “zero defects” gained favor.
This approach focused on employee motivation and
awareness, and the expectation of perfection from each
employee.
➢ In the 1970s, quality assurance methods gained increasing
emphasis in services including government operations, health
care, banking, and the travel industry
➢ 1970. An embargo on oil sales instituted by the Organization
of Petroleum Exporting Countries (OPEC) caused an increase
in energy costs, and automobile buyers became more
interested in fuel-efficient, lower-cost vehicles. Japanese
auto producers, who had been improving their products,
were poised to take advantage of these changes, and they
captured an increased share of the automobile market.
The Foundations of Modern Quality Management: The Gurus
➢ Shewhart Control charts; variance reduction
➢ Deming 14 points; special versus common causes of variation
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➢ Juran Quality is fitness-for-use; quality trilogy
➢ Feigenbaum Quality is a total field; the customer defines
quality Crosby Quality is free; zero defects
➢ Ishikawa Cause-and-effect diagrams; quality circles
➢ Taguchi Taguchi loss function
➢ Ohno and Shingo Continuous improvement
Deming Prize. Prize established by the Japanese and awarded
annually to firms that distinguish themselves with quality
management programs
Product Quality
➢ Performance—main characteristics of the product
➢ Aesthetics—appearance, feel, smell, taste
➢ Special features—extra characteristics
➢ Conformance—how well a product corresponds to design
specifications
➢ Reliability—dependable performance
➢ Durability—ability to perform over time
➢ Perceived quality—indirect evaluation of quality (e.g.,
reputation)
➢ Serviceability—handling of complaints or repairs
➢ Consistency—quality doesn’t vary
Service Quality. The dimensions of product quality don’t
adequately describe 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
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
Baldrige Award Annual award given by the U.S. government to
recognize quality achievements of U.S. companies. Named after
the late Malcolm Baldrige
European Quality Award European award for organizational
excellence.
ISO 9000 A set of international standards on quality management
and quality assurance, critical to international business.
 Operations Management
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 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 refers to the philosophy of making each
worker responsible for the quality of his or her work. The idea is
to “Do it right the first time.”
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; also called 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
Quality Control
Quality control A process that evaluates output relative to a
standard and takes corrective action when output doesn’t meet
standards.
Inspection Appraisal of goods or services.
Quality of conformance A product or service conforms to
specifications.
Statistical process control (SPC) Statistical evaluation of the
output of a process.
Random variation Natural variation in the output of a process,
created by countless minor factors
Assignable variation in process output, a variation whose cause
can be identified. A nonrandom variation.
Sampling distribution A theoretical distribution of sample
statistics.
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Central limit theorem the distribution of sample averages tends
to be normal regardless of the shape of the process distribution.
Control chart A visual tool for monitoring forecast errors.
Control limits the dividing lines between random and nonrandom
deviations from the mean of the distribution.
Variables Generate data that are measured.
Attributes Generate data that are counted.
Mean control chart Control chart used to monitor the central
tendency of a process.
Range control chart Control chart used to monitor process
dispersion.
p-chart Control chart for attributes, used to monitor the
proportion of defective items in a process
c-chart Control chart for attributes, used to monitor the number
of defects per unit.
Run test A test for patterns in a sequence
Run Sequence of observations with a certain characteristic
Specifications A range of acceptable values established by
engineering design or customer requirements
Process variability Natural or inherent variability in a process.
Process capability the inherent variability of process output
relative to the variation allowed by the design specification.
capability index Used to assess the ability of a process to meet
specifications.
Aggregate Planning and Master Scheduling
Aggregate planning Intermediate-range capacity planning,
usually covering 2 to 12 months.
Sales and operations planning Intermediate-range decisions to
balance supply and demand, integrating financial and operations
planning
Level capacity strategy Maintaining a steady rate of regular-time
output while meeting variations in demand by a combination of
options.
Chase demand strategy Matching capacity to demand; the
planned output for a period is set at the expected demand for that
period
Simulation models Computerized models that can be tested
under different scenarios to identify acceptable solutions to
problems
Yield management the application of pricing strategies to allocate
capacity among various categories of demand.
Master production schedule (MPS) This schedule indicates the
quantity and timing of planned completed production
Rough-cut capacity planning (RCCP) 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
Available-to-promise (ATP) inventory Uncommitted inventory.
MRP and ERP
dependent demand Demand for items that are subassemblies or
component parts to be used in the production of finished goods.
Material Requirements Planning (MRP) A methodology that
translates master schedule requirements for end items into time-
phased requirements for subassemblies, components, and raw
materials.
 Operations Management
Master Schedule One of three primary inputs in MRP; states
which end items are to be produced, when these are needed, and
in what quantities
cumulative lead time the sum of the lead times that sequential
phases of a process require, from ordering of parts or raw
materials to completion of final assembly.
Bill Of Materials (BOM) One of the three primary inputs of MRP;
a listing of all of the raw materials, parts, subassemblies, and
assemblies needed to produce one unit of a product.
Product Structure Tree A visual depiction of the requirements in
a bill of materials, where all components are listed by levels
Low-Level Coding Restructuring the bill of materials so that
multiple occurrences of a component all coincide with the lowest
level at which the component occurs.
Inventory Records One of the three primary inputs in MRP;
includes information on the status of each item by time period
Gross Requirements Total expected demand for an item or raw
material in a time period
Scheduled Receipts Open orders scheduled to arrive from
vendors or elsewhere in the pipeline.
Projected On Hand Expected amount of inventory that will be on
hand at the beginning of each time period
Net Requirements The actual amount needed in each time period
Planned-Order Receipts Quantity expected to be received by the
beginning of the period in which it is shown.
Planned-Order Releases Planned amount to order in each time
period; planned order receipts offset by lead time
Pegging The process of identifying the parent items that have
generated a given set of material requirements for an item
Regenerative System Approach that updates MRP records
periodically.
Net-Change System Approach that updates MRP records
continuously.
Planned Orders Schedule indicating the amount and timing of
future orders.
Order Releases Authorization for the execution of planned orders.
Changes Revisions of due dates or order quantities, or
cancellations of orders.
Performance-Control Reports Evaluation of system operation,
including deviations from plans and cost information.
Planning Reports Data useful for assessing future material
requirements.
Exception Reports Data on any major discrepancies encountered
Backflushing Exploding an end item’s BOM to determine the
quantities of the components that were used to make the item
Manufacturing Resources Planning (MRP II) Expanded approach
to production resource planning, involving other areas of a firm in
the planning process and enabling capacity requirements planning
Capacity Requirements Planning The process of determining
short-range capacity requirements.
Time Fences Series of time intervals during which order changes
are allowed or restricted; the nearest fence is most restrictive to
change, the farthest is least restrictive.
Load Reports Department or work center reports that compare
known and expected future capacity requirements with projected
capacity availability
Distribution Resource Planning (DRP) A method used for planning
orders in a supply chain
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Enterprise Resource Planning (ERP) Integration of financial,
manufacturing, and human resources in a single database
Inventory Management
Inventory A stock or store of goods
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
Inventory turnover Ratio of annual cost of goods sold to average
inventory investment.
Periodic system Physical count of items in inventory made at
periodic intervals (weekly, monthly).
Perpetual inventory system System that keeps track of removals
from inventory continuously, thus monitoring current levels of
each item.
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
Point-of-sale (POS) systems Record items at time of sale.
Lead time Time interval between ordering and receiving the
order.
Purchase cost the amount paid to buy the inventory. Holding
(carrying) cost Cost to carry an item in inventory for a length of
time, usually a year
Ordering costs Costs of ordering and receiving inventory. Setup
costs The costs involved in preparing equipment for a job.
Shortage costs Costs resulting when demand exceeds the supply
of inventory; often unrealized profit per unit.
A-B-C 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.
Safety stock Extra inventory carried to reduce the probability of a
stockout due to demand and/or lead time variability.
Economic order quantity (EOQ) The order size that minimizes
total annual cost
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 Stock that is held in excess of expected demand due
to variable demand and/or lead time.
Service level Probability that demand will not exceed supply
during lead time
Single-period model Model for ordering of perishables and other
items with limited useful lives.
Shortage cost Generally, the unrealized profit per unit (i.e.,
profit/unit - cost per unit).
Excess cost Difference between purchase cost and salvage value
of items left over at the end of a period.
JIT and Lean Operations
The Toyota Approach:
➢ Lean operation A flexible system that uses minimal resources
and produces high quality goods or services.
➢ Just-in-time (JIT) A highly coordinated processing system in
which goods move through the system, and services are
performed, just as they are needed
 Operations Management
➢ Muda Waste and inefficiency.
➢ Kanban A manual system that signals the need for parts or
materials.
➢ Heijunka Workload leveling.
➢ Kaizen Continuous improvement of the system.
➢ Jidoka Quality at the source (autonomation).
Single-minute exchange of die (SMED) A system for reducing
changeover time
Autonomation Automatic detection of defects during production.
Takt time The cycle time needed to match customer demand for
final product
Poka-yoke Safeguards built into a process to reduce the possibility
of errors. Failsafing refers to building safeguards into a process to
reduce or eliminate the potential for errors during a process. The
term that was used initially was bakayoke, which meant
“foolproofing.” However, due to its offensive connotation, the
term was changed to poka-yoke, which means “mistake proofing.”
Andon System of lights used at each workstation to signal
problems or slowdowns.
Activity-based costing Allocation of overhead to specific jobs
based on their percentage of activities.
Push system Work is pushed to the next station as it is completed.
Pull system A workstation pulls output from the preceding station
as it is needed.
Kanban Card or other device that communicates demand for work
or materials from the preceding station.
Preventive maintenance Proactive approach; reducing
breakdowns through a program of lubrication, adjustment,
cleaning, inspection, and replacement of worn parts.
Housekeeping Maintaining a workplace that is clean and free of
unnecessary materials
Value stream mapping A visual tool to systematically examine the
flow of materials and information
5W2H approach A method of asking questions about a process
that includes what, why, where, when, who, how, and how much.
Maintenance
Maintenance All activities that maintain facilities and equipment
in good working order so that a system can perform as intended
Breakdown maintenance Reactive approach; dealing with
breakdowns or problems when they occur.
Preventive maintenance Proactive approach; reducing
breakdowns through a program of lubrication, adjustment,
cleaning, inspection, and replacement of worn parts
Predictive maintenance an attempt to determine when best to
perform preventive maintenance activities.
Total productive maintenance JIT approach where workers
perform maintenance on the machines they operate.
Supply Chain Management
Supply chain A sequence of organizations—their facilities,
functions, and activities—that are involved in producing and
delivering a product or service
Supply chain management the strategic coordination of the
supply chain for the purpose of integrating supply and demand
management.
Logistics The movement of goods, services, cash, and information
in a supply chain
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Resiliency The ability of a business to recover from an event that
negatively impacts the supply chain.
Supply chain visibility A major trading partner can connect to its
supply chain to access data in real time.
Event-response capability the ability to detect and respond to
unplanned events
Purchasing cycle Series of steps that begin with a request for
purchase and end with notification of shipment received in
satisfactory condition
Centralized purchasing Purchasing is handled by one special
department.
Decentralized purchasing Individual departments or separate
locations handle their own purchasing requirements.
E-business the use of electronic technology to facilitate business
transactions.
Vendor analysis Evaluating the sources of supply in terms of price,
quality, reputation, and service.
Strategic partnering Two or more business organizations that
have complementary products or services join so that each may
realize a strategic benefit.
Inventory velocity the speed at which goods move through a
supply chain.
Bullwhip effect Inventory oscillations become progressively larger
looking backward through the supply chain
Order fulfillment the processes involved in responding to
customer orders.
Logistics The movement of materials, services, cash, and
information in a supply chain.
Traffic management Overseeing the shipment of incoming and
outgoing goods.
Radio frequency identification (RFID) A technology that uses
radio waves to identify objects, such as goods in supply chains
Third-party logistics (3-PL) The outsourcing of logistics
management.
Strategic sourcing Analyzing the procurement process to lower
costs by reducing waste and non-value-added activities, increase
profits, reduce risks, and improve supplier performance
Information velocity the speed at which information is
communicated in a supply chain
Reverse logistics the process of transporting returned items.
Gatekeeping Screening returned goods to prevent incorrect
acceptance of goods.
Avoidance Finding ways to minimize the number of items that are
returned.
Closed-loop supply chain A manufacturer controls both the
forward and reverse shipment of product
Cross-docking A technique whereby goods arriving at a
warehouse from a supplier are unloaded from the supplier’s truck
and loaded onto outbound trucks, thereby avoiding warehouse
storage.
Delayed differentiation. Production of standard components and
subassemblies, which are held until late in the process to add
differentiating features. Disintermediation Reducing one or more
steps in a supply chain by cutting out one or more intermediaries.
Disintermediation Reducing one or more steps in a supply chain
by cutting out one or more intermediaries.
Scheduling
 Operations Management
Scheduling Establishing the timing of the use of equipment,
facilities, and human activities in an organization.
Flow system High–volume system in which jobs all follow the
same sequence.
Flow-shop scheduling Scheduling for flow systems
Job-shop scheduling Scheduling for low–volume systems with
many variations in requirements.
Loading The assignment of jobs to processing centers.
Gantt charts Chart used as visual aid for loading and scheduling
purposes
Load chart A Gantt chart that shows the loading and idle times for
a group of machines or list of departments
Infinite loading Jobs are assigned to work centers without regard
to the capacity of the work center.
Finite loading Jobs are assigned to work centers taking into
account the work center capacity and job processing times.
Forward scheduling Scheduling ahead from a point in time.
Backward scheduling Scheduling backward from a due date.
Schedule chart A Gantt chart that shows the orders or jobs in
progress and whether they are on schedule.
Input/output (I/O) control Managing work flow and queues at
work centers.
Assignment model A linear programming model for optimal
assignment of tasks and resources
Hungarian method Method of assigning jobs by a one-for one
matching to identify the lowest–cost solution
Sequencing Determining the order in which jobs at a work center
will be processed.
Workstation An area where one or a few workers and/ or
machines perform similar work.
Priority rules Simple heuristics used to select the order in which
jobs will be processed.
Job time Time needed for setup and processing of a job. Local
priority rules Focus on information pertaining to a single
workstation when establishing a job sequence.
Global priority rules Incorporate information from multiple
workstations when establishing a job sequence
Job flow time the amount of time from when a job arrives until it
is finished.
Job lateness the difference between the actual completion date
and the due date.
Makespan Total time needed to complete a group of jobs from
the beginning of the first job to the completion of the last job
Johnson’s rule Technique for minimizing makespan for a group of
jobs to be processed on two machines or at two work centers.
Process batch The economical quantity to produce upon the
activation of a given operation.
Transfer batch the quantity to be transported from one operation
to another, assumed to be smaller than the first operation’s
process batch.
Theory of constraints Production planning approach that
emphasizes balancing flow throughout a system, and pursues a
perpetual fivestep improvement process centered around the
system’s currently most restrictive constraint
Yield management the application of pricing strategies to allocate
capacity among various categories of demand.
Customer Focus
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Okyakusama means “customer” and “honorable guest”
Customer focus is the requirement of ISO 9000 – 2000.
Management Responsibility Section Top management shall
ensure that customer requirements are determined and are met
with the aim of enhancing customer satisfaction
Product Realization Section “The standards require that the
organization determine customer requirements, including
delivery and post-delivery activities, and any requirements not
stated by the customer but necessary for specified or intended
use.”
Measurement, Analysis and Improvement Section. The
standards require that the organization monitor customer
perceptions as to whether the organization has met customer
requirements – customer satisfaction.”
Customer Satisfaction “the result of delivering a product or
service that meets customer requirements.” It is vital to keeping
customers and growing a business. It drives profitability, “...65 %
of its business from existing customers, and it costs 5x more to
find a new one than to keep an existing one happy”
Customer Engagement. It refers to customers’ investment in a
commitment to a brand and product offerings. It is an important
outcome of a customer-focused culture and the organization’s
listening, learning and performance-excellence strategy. It is
influenced by an organization’s integrity and the relationship it
builds with its customers. It was introduced in the 2009-2010
Baldrige Criteria for Performance Excellence as a recognition of its
increasing importance that compete in a global marketplace and
in competitive local markets.
American Customer Satisfaction Index. It is an economic
indicator that measures customer satisfaction at the national
level. It is to raise the public’s perception and understanding of
quality, as do the consumer price index and other economic
indicators – that will help to interpret price and productivity
measures and promote customer-driven quality.
Customer Segmentation. Might be based on geography,
demographic factors, ways in which products are used, volumes,
or expected levels of service.
Kano Model of Customer Requirements. by Noriaki Kano,
suggested segmenting customer into three groups:
➢ Dissatisfiers (“must haves”): Basic requirements that
customers expected in a product or service.
➢ Satisfiers (“wants”): Requirements that customers expressly
say they want.
➢ Exciters delighters (“never thought”): New or innovative
features that customers do not expect or even anticipate
Voice Of the Customer, is customer’s requirements as expressed
in the customer’s own terms.
The quality dimension that were important to customers include:
➢ Customer Service Quality: reliability, responsiveness,
competence, courtesy, credibility, access, communication,
understanding the customer, collaboration, and continuous
improvement.
➢ Banking Service Product Quality: product variety/diverse
features
➢ Online Systems Quality: content, accuracy, ease of use,
timeliness, aesthetics and security.
Four Key Processes on Customer- Focused Organization
1. Making sincere commitments to customers
 Operations Management
2. Ensuring quality customer contact
3. Selecting and developing customer contact employees
4. Managing complaints and service recovery
Customer relationships can be fostered through strategic
partnership and alliances and using technology to facilitate better
communication with customers and linkages to internal
operations.
Customer-supplier partnership is a long term relationship
characterized by team work and mutual confidence that represent
an important strategic alliance in achieving excellence and
business success.
Technology is the key enabler of customer relationship
management (CRM) software which is designed to help
organizations increase customer loyalty, target their most
profitable customers and streamline customer communication
processes.
CRM system is a way to track and manage customer information,
customer interactions, and customer preferences. It helps to
make the whole customer service experience smoother while also
building increased revenue and a competitive advantage.
Workforce Focus
Workforce refers to everyone who is actively involved in
accomplishing the work of an organization.
Evolution of Workforce Management
➢ Frederick W. Taylor promulgated the departure from the
craftmanship concept and replace it by scientific
management. He separate planning from execution,
concluding that foremen and workers of those days lacked
the education necessary to plan their work.
➢ Frank and Lillian Gilbreth & Henry Gantt. refined Taylor
system through motion study, methods improvements,
scheduling and wage incentive systems.
On the other hand, Taylor system failed to exploit an
organization’s most important asset - the knowledge and
creativity of workforce.
Workforce Management (human resource management or HRM)
is the function performed in organization that facilitates the most
effective use of people (employees) to achieve organizational and
individual goals.
Performance is an extent to which an individual contributes to
achieving the goals and objectives of an organization.
High Performance Work is work approaches used to
systematically pursue ever-higher levels of overall organizational
and human performance. It is characterized by flexibility,
innovation, knowledge and skill sharing, alignment with
organizational directions, customer focus, and rapid response to
changing business needs and market place requirements.
Five Conditions of Collaboration by Kendall and Bodison.
1. Respect
2. Values
3. Purpose
4. Communication
5. Trust
Employee Involvement. refers to any activity by which employees
participate in work-related decisions and improvement activities
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Maintenance factors are conditions that employees have come to
expect, such as safe working environment, a reasonable level of
job security, supervision and even adequate pay.
Work Design refers to how employees are organized in formal and
informal units, such as departments and teams.
Job Design refers to responsibilities and tasks assigned to
individuals
Five Core Characteristics of Job Design
➢ Task Significance. The degree to which the job gives the
participants the feeling that they have substantial impact on
organization.
➢ Task Identity. Perceive the task as a whole, identifiable piece
of work from start to finish.
➢ Skill Variety. The degree to which the job requires the worker
to use a variety of skills and talents.
➢ Autonomy. The degree to which the task permits freedom,
independence, and personal control to be exercised over the
work.
➢ Feedback from job. The degree to which clear, timely
information about the effectiveness of performance of
individual is available.
Team is a group of people who work together and cooperate to
share work and responsibility.
Teamwork breaks down barriers among individuals, departments
and line and staff functions.
Natural work teams, self-managed teams, and quality circles are
Inter-organizational; that is members usually come from the
same department or function. Types of Teams:
➢ Management Teams.
➢ Natural work Teams. Perform entire jobs
➢ Self-Managed teams. Specially empowered work teams
“highly trained groups” Self-directed teams
➢ Virtual Teams. Teams communicate by computer, take turns
as a leader and jump in and out as necessary.
➢ Quality Circles. Teams of workers and supervisors that meet
regularly to address work-related problems involving quality
and productivity.
➢ Problem-Solving Teams. Teams who solve a specific problem
and then disband.
➢ Project Teams. Teams with a specific mission to develop
something new or to accomplish a complete task.
Compensation and recognition refer to all aspects of pay and
reward, including promotions, bonuses and recognition, either
monetary and non-monetary, individual and group.
Performance Appraisal is a process for subjectively evaluating the
quality of an employee’s work.