CHAPTER 1 Tangible items awaiting sale or use

Operations Stockpiling

A set of activities dedicated to the transformation of
inputs into outputs of greater value
Processes
activities that transform inputs into outputs
Producing or securing goods in advance of demand
Bill of materials
A description of all raw materials and intermediate
assemblies required to create a finished product

Value-added Supply chain

the difference between the total value of the outputs and A system consisting of all organizations that play some role
the total value of the inputs associated with an operation in supplying a particular product to a customer

Value creation Value chain

achieving positive value-added A system consisting of all functions within an organization

that play some role in adding value to the organization's
Productivity product
A measurement of value creation, calculated as a ratio of Local optimization
the values of output to input
Localized problem solving that ignores any larger problem
Sustainability of which the local decision is a component
The degree to which activity with immediate benefit does NGO
not incur greater costs in the long term
A nongovernmental organization, understood to be a
Biomimicry nonprofit organization as well
The imitation of natural processes and systems Scientific management
Green A methodology stressing the use of data collection and
Assures sustainability analysis to redesign processes and improve efficiency

Lean Project

operating without waste A unique collection of activities creating a particular

outcome
Responsibility
Incident
An obligation to perform
An unscheduled event requiring immediate resolution
Ethics
Iterative planning
Principles governing conduct, delineating good from bad
Deliberately adjusting plans at short intervals, to reflect
Tangibility new information

The degree of perceivable, physical essence of a product Strategy

Goods A methodology and resulting plan that identifies the long-

term goals of an organization
Tangible products
Planning horizon
Services
The farthest point in the future considered in decision
Intangible products making
Inventory Business analytics

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Continuous investigation of business performance using long-term plans for achieving organizational goals
large volumes of data -they provide focus for decision making
-the road maps to the goals of a company
Tactics -org. strategies: entire organization
Means to pursue strategic goals with available resources -functional strategies: each of the functional areas or
departments of an organization
CHAPTER 2
Tactics
Competitiveness
the methods and actions taken to accomplish strategies
how effectively an org. meets the wants and needs of -more specific than strategies
customers relative to others that offer similar goods or -short-term focused
services -provide guidance and direction for carrying out actual ops
-how to reach the destination, following the roadmap
How does marketing influence competitiveness?
What question should the mission statement answer?
1. Identifying consumer wants and/or needs
2. Price and Quality "What business are we in?"
3. Advertising and Promotion
3 Basic Business Strategies
How does operations influence competitiveness?
low cost
Product and Service Design responsiveness
Cost differentiation from competitors
Location
Quality Operations
Quick Response the actual "doing" part of the process
Flexibility
Inventory MGT What is the hierarchy of operations?
Supply Chain MGT
Service Mission
Managers and Workers Orgs goals
Organizational strategies
Why organizations fail? Functional goals
Finance Marketing Operations
-Neglecting ops strategy Tactics - Tactics - Tactics
-Failing to recognize the competition Operating procedures
-Putting emphasis on short-term financial performance
-Emphasis on product and service design and not enough Core Competencies
on process design and improvement
-Neglecting investments capital and human resources the special attributes or abilities that give an organization
-Not communicating and cooperating effectively a COMPETITIVE EDGE
-Failing to consider a consumer wants and needs SWOT Approach
Mission Analysis of strengths, weaknesses, opportunities, and
the reason for the existence of an org threats

Mission Statement T/F: SWOT Approach is the link b/w organizational

strategy and operations strategy
states the purpose of the organization
True, strengths and weaknesses of SWOT are internal and
Goals evaluated by operations people

provide more detail and scope of the mission Threats and opportunities are more external and
Strategies evaluated by marketing people

Order Qualifiers

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characteristics that customers perceive as MINIMUM
STANDARDS OF ACCECTABILITY to be considered as a
potential for purchase
Order Winners
characteristics of an org's goods or services that cause it to
be perceived as BETTER than the competition
Environmental Scanning
the monitoring of events and trends that present either
threats or opportunities for the organization
E.g. competitors' activities; changing consumer needs;
legal, economic, political and environmental issues;
potential for new markets
Tech change
Operations Strategy
the approach, consistent w/ the organization's strategy,
that is used to guide the operations functions
-narrower in scope than an organization's strategy
- why are productivity measures useful?
A key element of both organizational strategy and
operations strategy is...
strategy formulation
T/F: Operations does NOT have a major influence on the
competitiveness of an organization?
False, it does. If it's well-designed and executed, the
company will be successful and vice-versa
Quality-Based Strategy
strategy that focuses on quality in all phases of an org.
Time-Based Strategy
strategy that focuses on reduction of time needed to
accomplish tasks
-by reducing time, costs are generally less, productivity
higher, quality tends to be higher, innovations appear
sooner and customer service is improved
What 2 factors tend to have universal strategic
operations importance?
Quality and time
Productivity
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measures output of goods/services relative to the input
of labor, materials, energy, etc. used to produce it
P=Output/Input
What are productivity ratios used for?
use for PLANNING work-force req'ments, scheduling
equipment, financial analysis, and other tasks
Productivity Growth
PG=Current Productivity-Previous Productivity/ Previous
Productivity x 100
3 types when computing productivity
partial productivity (1), multi-factor productivity (>1
input), and total productivity (all inputs)
4 types of different input measures
Labor productivity
Machine productivity
Capital productivity
Energy productivity
used to track performance OVER TIME- where
improvements are needed
can be used to judge an entire industry or a country
(aggregate measures)
serve as score cards through the effective use of resources
T/F: Service productivity is difficult to measure?
True, it is difficult to measure and to manage effectively
b/c it involves intellectual activities and a high degree of
variability
Process yield
the ratio of output of good product to the quantity of raw
material input
General factors that affect productivity?
methods
capital-
quality
tech
management
Where have most productivity gains come from in the
past rather than just labor?
improvement in technology, but used in a wise and precise D. designing products and services that
way E. hiring enough workers to

Productivity v. Efficiency C. finding the best way to

To successfully compete, two basic issues must be
Efficiency: addressed: What do the customers want? What is the
narrower than productivity best way to satisfy those wants?
pertains to getting the most out of a fixed set of resources
An organization's mission statement serves as the basis
Productivity: for:
broader
pertains to the effective use of ALL resources A. environmental scanning.
B. core competencies.
STILL CHAPTER 2 C. operating procedures.
Which of the following is least likely to affect the cost an D. distinctiveness.
organization incurs in producing its products or services? E. organizational goals.
A. price E. organizational goals.
B. productivity Organizations' missions serve as the broad underpinning
C. location for their goals.
D. quality
E. inventory management Which of the following would be least important in the
pursuit of a time-based strategy?
A. price A. cost minimization
Relative to the other choices, price is least likely to affect B. quick changeover times
cost. C. operational agility
Where a firm locates would typically not affect that firm's: D. reduced complaint resolution times
A. costs. E. flexible technology
B. convenience for customers. A. cost minimization
C. delivery times. Many means for minimizing cost would have the effect of
D. strategy. making a time-based strategy less feasible.
E. transportation costs.
Competitiveness doesn't include:
D. strategy.
Typically, strategy dictates where firms will locate, rather A. productivity.
than location dictating strategy. B. effectiveness.
Which of the following is not among the chief reason’s C. profitability.
organizations fail? D. operations strategy.
A. overemphasis on short-term financial performance E. operations management.
B. emphasizing labor productivity in labor-intensive C. profitability.
environments A company can be competitive relative to similar
C. poor internal communications companies and still be unprofitable if the competitive
D. not investing in capital and human resources environment is inherently unprofitable.
E. overemphasis on product (or service) design
Product design and choice of location are examples of
B. emphasizing labor productivity in labor-intensive _______ decisions.
environments A. strategic
In labor-intensive environments, emphasizing labor B. tactical
productivity is a good idea. C. operational
The key to successfully competing is understanding what D. customer-focused
customers want and then __________ satisfy those wants. E. design
A. training production workers to A. strategic
B. finding suppliers who can These decisions are made high in the hierarchy.
C. finding the best way to

4|Page
Scheduling personnel is an example of an operations Which of the following is not a key step toward improving
management: productivity?
A. mission implementation. A. developing productivity measures for all operations
B. operational decision. B. improving the bottleneck operations
C. organizational strategy. C. establishing reasonable goals for improvement
D. functional strategy. D. considering incentives to reward workers
E. tactical decision. E. converting bond debt to stock ownership

B. operational decision. E. converting bond debt to stock ownership

Staffing-level decisions are made low in the hierarchy. A firm's productivity is independent of its capital
structure.
Productivity is expressed as:
.A. output plus input. For an organization to grow its market share, it must:
B. output minus input. A. advertise using multimedia.
C. output times input. B. reduce prices.
D. output divided by input. C. exceed minimum standards of acceptability for its
E. input divided by output. products or services.
D. establish an Internet Web site.
D. output divided by input. E. broaden its mission statement.
Productivity is the ratio of outputs to inputs.
C. exceed minimum standards of acceptability for its
In the 1970s and early 1980s in the United States, products or services.
organizations concentrated on: Only by exceeding standards can an organization grow its
market share.
A. operations strategies.
B. improving quality. The ratio of good output to quantity of raw material input
C. marketing and financial strategies. is called
D. revising mission statements. A. nondetective productivity.
E. environmental issues. B. process yield.
C. worker quality measurement.
C. marketing and financial strategies. D. total quality productivity.
This led to U.S. firms being not very competitive with E. quantity/quality ratio.
regard to their operations.
B. process yield.
Which of the following is not a factor that affects This is sometimes a useful productivity measure in
productivity? service industries.
A. computer viruses
B. design of the workspace The fundamental purpose for the existence of any
C. use of the Internet organization is described by its:
D. standardizing processes A. policies.
E. product price B. procedures.
C. corporate charter.
E. product price D. mission statement.
These don't lead to fundamental changes in operations. E. bylaws.
Which of these factors would be least likely to affect D. mission statement.
productivity? A mission statement is the organization's attempt to
A. methods and technology justify its existence.
B. workers
C. management A productivity increase in one operation that does not
D. product mix improve overall productivity of the business is not
E. advertising A. worthwhile.
B. trivial.
E. advertising C. competence-destroying.
Advertising could increase the value of the outputs, but it D. an order winner.
is less likely to affect productivity than these other E. an order qualifier.
factors.

5|Page
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 charge 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, consider:
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 consider 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.
6|Page
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 consider 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 A. 1.463
Taking advantage of strengths/opportunities and B. 1.457
recognizing competitive threats would enable good C. 1.431
performance.
B. 1.457
The manager of a carpet store is trying to determine the Calculate multifactor productivity for each week, then
best installation crew size. He has tried various crew sizes average the two.
with the results shown below. Based on productivity, what
crew size do you recommend? The Balanced Scorecard is a useful tool for helping
2 - 716 managers translate their strategy into action in the
4 - 1298 following areas:
3 - 1017
3 - 1002 A. Sustainability; Flexibility; Efficiency; Technology
4 - 1278 B. Customers; Financial; Internal Business Processes;
2 - 702 Learning and Growth
C. Customization; Standardization; Efficiency; Effectiveness
A. 2 D. The Environment; The Community; Suppliers; Other
B. 3 Stakeholders
C. 4 A. 2 E. Strategy; Tactics; Productivity; Profitability

A. 2 B. Customers; Financial; Internal Business Processes;

Crews of two workers are most productive. Learning and Growth
These are the four core areas addressed by the Balanced
Which of the following is not a key factor of Scorecard.
competitiveness?
A. price A firm pursuing a strategy based on customization and
B. product differentiation variety will tend to structure and manage its supply chain
C. flexibility to accommodate more _____________ than a firm
D. after-sale service pursuing a strategy based on low cost and high volume.
E. size of organization A. variation
B. streamlined flow
E. size of organization C. quality
Competitiveness often has nothing to do with D. capacity
organization size. E. productivity

Gourmet Pretzels bakes soft pretzels on an assembly line. A. variation

It currently bakes 800 pretzels each eight-hour shift. If the Customization and variety lead to variation that must be
production is increased to 1,200 pretzels each shift, then accommodated.
productivity will have increased by:
Unique attributes of firms that give them a competitive
A. 50 percent. edge are called:
B. 33 percent. A. functional strategies.
C. 25 percent. B. Balanced Scorecards.
D. 67 percent. C. supply chains.
D. core competencies.
A. 50 percent. E. sustainable initiatives.
Divide the difference in productivity by the original
productivity. D. core competencies.
Core competencies can be translated into competitive
The weekly output of a fabrication process is shown advantage.
below, together with data for labor and material inputs.
Standard selling price is $125 per unit. Overhead is Years ago, in the overnight delivery business, providing
charged weekly at the rate of $1,500 plus .5 times direct package tracking capability gave some firms a competitive
labor cost. Assume a 40-hour week and an hourly wage of advantage. Now, all firms must offer this capability simply
$16. Material cost is $10 per foot. What is the average to be in this line of business. This is an example of
multifactor productivity? ______________ becoming ____________ over time.

7|Page
A. tactical implications; strategic
B. strategic implications; tactical
C. order winners; order qualifiers
D. profitability factors; productivity factors
E. order qualifiers; order winners
C. order winners; order qualifiers
What is an order qualifier and what is an order winner
changes over time.
For firms competing in worldwide markets, conducting
______________ is more complex, since what works in
one country or region might not work in another.
A. productivity analysis
B. environmental analysis
C. strategy implementation
D. sustainability analysis
E. growth forecasting
B. environmental analysis
Environmental analysis considers the relevant factors in
the environment; there are more of these if there are
more markets to consider.
C. more inexperienced workers
More inexperienced workers tend to be less productive.
Suppose a country's productivity last year was 84. If this
country's productivity growth rate of 5% is to be
maintained, this means that this year's productivity will
have to be _______.
A. 88.2
Multiply 84 by 1.05 and then subtract 84 from this product
CHAPTER 3
What is a forecast?
Statement of a variables future value
What are the two critical elements of all forecasts
1. Accuracy
2. Reliability
What are other important elements of a forecasts? (5)

Increasing the service offered to the customer makes it 1. Easy to understand

more difficult to compete on the basis of: 2.Expressed in meaningful units
A. order qualifiers. 3. Available on a timely basis
B. customization. 4. Process is cost effective
C. quality. 5. Assumptions are documented
D. price.
E. flexibility. What are two general limitations of all forecast?

D. price. 1. As time horizon increases accuracy to forecast tend to

More extensive service can be costlier, and more costly decrease
outputs make price-based strategies more difficult. 2. Allowances must be made for forecast errors

__________ is generally used to facilitate an organization What are the six basic steps in the forecasting process?
strategy that emphasizes low cost.
1. Determine forecasts purpose
A. Speed to market
2. Establish time horizon for forecast
B. Flexibility
3. Obtain, clean, and analyze data
C. Customization
4. Selecting forecasting technique
D. Sustainability
5. Use data and techniques to make forecast
E. Standardization
6. Develop a feedback method to monitor results
E. Standardization
Which is more accurate, a forecast for an individual
Standardization is a powerful means of achieving low-
variable or for a group of variables
cost production.
Individual variable
Which of the following factors would tend to reduce
productivity? Qualitative Forecasting
A. improvements in workplace safety
B. reductions in labor turnover Techniques that rely on soft data
C. more inexperienced workers
Quantitative Forecasting
D. reductions in the scrap rate
E. less variety in the product mix Techniques that rely on hard data

8|Page
what are some commonly-used qualitative forecasting Translate customer wants and needs into product and
techniques (3) service requirements
Refine existing products and services
1. Consumer surveys Develop new products and services
2. Salesforce opinions Formulate quality goals
3. Executive opinions Formulate cost targets
In relation to qualitative forecasting, what is time series Construct and test prototypes
data Document specifications
Translate product and service specifications into process
Sequence of values based on observations taken at regular specifications
intervals of time
Reasons for design/re-design
What factors are considered when choosing or selecting a
forecasting technique (7) The driving forces for product and service design or
redesign are market opportunities or threats:
1. Forecast time horizon
2. Availability of historical data Economic
3. Ease of use of forecasting software Social and Demographic
4. Time needed to gather data Political, Liability, or Legal
5. Time required to analyze data Competitive
6. Time necessary to prepare forecast Cost or Availability
7. Accuracy VS cost trade-off Technological

What is a major limitation of basic averaging and Vocab

smoothing technique
Manufacturability - the capability of an organization to
Moving averages and simple exponential smoothing produce an item at an acceptable profit
techniques should not be used when values show any
evidence of seasonality trends or cycles Serviceability - the capability of an organization to provide
a service at an acceptable cost or profit
How are measurements of forecast accuracy used

1. Additive seasonality model Reverse Engineering - Dismantling and inspecting a

competitor's product to discover product improvements
2. Multiplicative seasonality model
3. Trend-adjusted exponential smoothing Idea Generation:
MAD Supply Chain Based (consumer, distributor, etc.)
Mean Absolute Deviation Competitor Based
Research Based
MSE
Design Considerations:
Mean Squared Error
Legal
MAPE Ethical
Sustainability
Mean Absolute Percent Error
Sustainability

Cradle to Grave Assessment- The assessment of the

CHAPTER 4
The essence of an organization is the goods and services it
offers
Every aspect of the organization is structured around them
Product and service design - or redesign - should be closely
tied to an organization's strategy
What does product and service design do?
environmental impact of a product or service throughout
its useful life
End of Life Programs - EOL programs deal with products
(business and consumer) that have reached the end of
their useful lives. The goal of such programs is to reduce
the dumping or incineration of products (e.g., electronics)
which may pose hazards to the environment

9|Page
Sustainability Basic quality - Refers to customer requirements that have
only limited effect on customer satisfaction if present, but
Reduce (Cost and Materials) lead to dissatisfaction if absent
Re-Use (Remanufacturing) Performance quality - Refers to customer requirements
Recycle that generate satisfaction or dissatisfaction in proportion
Other Design Considerations to their level of functionality and appeal
Excitement quality - Refers to a feature or attribute that
Strategies for product or service life stages was unexpected by the customer and causes excitement
Standardization
Product or service reliability Phases in Design & Development
Product or service robustness Feasibility analysis
Degree of newness Product specifications
Product Life Cycle Process specifications
Prototype development
THIS is what it looks like: Design review
http://www.quickmba.com/images/marketing/product/lif Market test
ecycle/plc.gif Product introduction
Follow-up evaluation
Standardization Advantages
Concurrent Engineering
Fewer parts to deal with in inventory and in manufacturing
Reduced training costs and time Bringing engineering design and manufacturing personnel
More routine purchasing, handling, and inspection together early in the design phase
procedures The purpose is to achieve product designs that reflect
Orders fillable from inventory customer wants as well as manufacturing capabilities
Opportunities for long production runs and automation
Need for fewer parts justifies expenditures on perfecting Production Requirements
designs and improving quality control procedures Production Capabilities
Standardization Disadvantages Equipment
Skills
Disadvantages Types of materials
Designs may be frozen with too many imperfections Schedules
remaining. Technologies
High cost of design changes increases resistance to Special abilities
improvements
Decreased variety results in less consumer appeal More Vocab

Design Service- Something that is done to, or for, a customer

Mass customization -A strategy of producing basically
standardized goods or services, but incorporating some
degree of customization in the final product or service
Facilitating Techniques
Delayed differentiation - The process of producing, but not
quite completing, a product or service until customer
preferences are known
Service delivery system -The facilities, processes, and skills
needed to provide a service
Product bundle - The combination of goods and services
provided to a customer
Service package - The physical resources needed to
perform the service, accompanying goods, and the explicit
(core features) and implicit (ancillary features) services
included
Differences Between Product & Service Design

Modular design - A form of standardization in which
component parts are grouped into modules that are easily
replaced or interchanged
Kano Model
Products are generally tangible, services intangible
Services are created and delivered at the same time
Services cannot be inventoried
Services are highly visible to consumers
Some services have low barriers to entry and exit
Location is often important to service design, with

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convenience as a major factor
Service systems range from those with little or no
customer contact to those that have a very high degree of
customer contact
Demand variability alternately creates waiting lines or idle
service resources
CHAPTER 5
Capacity
The upper limit on the workload that an operating unit can
handle. Capacity is usually measured as maximum
production rate or throughput. Alternatively, a major input
is used, e.g., size.
Strategic capacity planning
Systematic determination of facility and major
machine/equipment requirements to meet long-term
demand for goods and services.
Design capacity
The maximum output rate under ideal conditions.
Effective capacity
The maximum output rate that can be sustained given
work breaks, product mix, scheduling difficulties and
expected delays, machine/equipment maintenance, etc.
(also known as standard output rate).
Efficiency
The ratio of actual output rate to effective capacity.
Utilization
The ratio of uptime to available time.
Capacity cushion
The excess of capacity over the average demand.
Optimal operating level
The level of production that has the lowest average unit
cost.
Economies of scale
The economic conditions that favor larger plants and
machines/equipment by causing minimum average unit
cost to decrease as size increases.
Break-even point (BEP)
11 | P a g e
The quantity of output at which total cost and total
revenue are equal.
Capacity
- Maximum amount of work that an operation can do with
its current resources
Four Resources of capacity
1. People
2. Equipment
3. Facilities
4. Supply Chain
Why capacity planning is strategic?
1. Involves long term commitment of scarce resources
2. Determines enterprises startup & operating costs
3. Impacts enterprises to meet market demand
4. Impacts enterprises to become & remain competitive
5. Impacts enterprise to successfully manage operations
Strategic Capacity
- Process of matching long-term capacity with forecasted
long-term demand for products/services
Leading Strategy
- Add capacity in anticipation of future demand
Following Strategy
- Add capacity when demand exceeds capacting
Tracking Strategy
- Incrementally add capacity to meet demand
Economies of Scales
- Increasing operations output to the point
Diseconomies of Scale
- Increasing operations output beyond the point
Key questions in strategic capacity planning
1. What type of capacity is needed?
2. How much capacity is needed?
3. When is capacity needed?
Process for Strategic Capacity Planning
1. Develop detailed forecasts of market demand and
estimate capacity required to meet it
2. Evaluate current capacity and identify gaps between it &
future values
3. Identify alternatives to meet requirements and address
capacity gaps Capacity Cushion
4. Conduct financial analysis of alternatives
5. Assess qualitative aspects of alternatives - Extra capacity used to offset demand uncertainty
6. Select best long-term alternative Constraint
7. Implement selected alternative
8. Monitor results of implementation - Something that limits the performance of a process or
system in achieving its goals
Two Measurements of Capacity
CHAPTER 8
1. Design Capacity- the maximum rate of output of
operation based on its design Location Planning & Analysis
2. Effective Capacity- the maximum rate of output of an
operation after allowances for that negatively impact - Process of determining best place to grow & expand an
design capacity enterprise

Factors when deciding whether not to outsource Why are location designs strategic?

1. Available capacity - Involve long-term commitment

2. Required Expertise - Have long term impact of competitiveness
3. Impact of Quality Additional impacts on enterprises by locations
4. Nature of Demand
5. Additional Risks 1. competitive advantage
6. Total Cost 2. organizational strategies
3. enhancing needs
Cost Volume Analysis 4. capacity & flexibility
- evaluate capacity alternatives in terms of revenues & 5. operating costs & revenues
costs 6. operations & supply chains

Assumptions of Cost- Volume Analysis Drivers for location planning & analysis

1. Operation involves one product or service 1. Organizational strategies envision expansion into new
2. Everything produced is sold geographic markets
3. Fixed costs & revenue & variable cost per unit remain 2. Basic Inputs such as raw materials or labor have become
constant regardless of volume depleted at existing locations
4. Revenue per unit will always be greater than variable 3. Relocation of customers or suppliers requires changes in
cost per unit supply change
4. Transferring operations to a new location will lower
Allowances determining effective capacity operating costs
5. Increases in market demand cannot be met by
1. Facility Factors expanding existing facilities
2. Product/Service Factors
3. Process Factors General Process for location planning & analysis
4. Human Factors
5. Policy Factors - Identify factors
6. Operational Factors - Select Criteria
7. Supply Chain Factors - Develop one or more operational factors
8. External Factors - Evaluate location alternatives
- Select best location for criteria
Two measures of system effectiveness
Alternatives for meeting increased demand for products
1. Utilization or services
2. Efficiency
- expand existing facility
Bottleneck Operation - build new facility at new location & close existing facility
- Build new facility at new location & retain existing facility
- Operation in a sequence of operations whose capacity is - do nothing for foreseeable future
lower than that of the other operators
General purpose plant strategy

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- plants produce full line of products for all markets served - Impact on public image
- Impact of existing restrictions
Product Plant Strategy - Issues involving unskilled labor
- plants specialized in producing or more products for all - Increased logistic costs
markets - Increased security risks

Process Plant Strategy Geographic Information Systems (GIS)

- plants specialize in one part of process for producing - computer based tool for collected, storing, retrieving,
products and displaying demographic data on maps

Market Area Plant Strategy Micro Factory

- plants produce full line of products for just one - Small factory with a narrow product focus, located near
geographic market major markets

Location cost profile analysis CHAPTER 9

- Evaluates location alternatives in economic terms which Just in Time Management

are generally operating revenues & costs Getting the right quantity of goods to the right place,
Factor Rating Method exactly when needed. Created by Toyota.

- Evaluates location alternatives using both qualitative & Concept 1- Eliminate Waste
quantitative information waste is anything that DOESN'T add value for the
Process to factor rating method customer.

1. Determine relevant factors Concept 2- Broad View of Operations

2. Indicate relative importance
3. Decided on common scale to score factors
4. Set minimum acceptable score
5. Score factors for each location
6. Determine total score
7. Select location with highest score
Transportation Model
- Used to evaluate sites when cost or transportation of raw
materials, components, or finished product has major
impact on total operating cost
Center of gravity method
- Used to evaluate sites for distribution centers by finding
the site that minimizes total distribution costs
Clustering
- Tendency of similar service & retail businesses to locate
near each other
Opportunities when enterprises have global locations
Lean managers understand that operations is part of a
larger system where teamwork ensures success. The goal
is to optimize the system.
Concept 3- Simplicity
Find simpler ways of doing things right, since simpler
systems reduce the opportunity for mistakes and make
processes more efficient.
Concept 4- Continuous Improvement
Adopt a continuous improvement mentality with the
attitude of "If it's not perfect, make it better." Kaizen
blitzes and the kaizen philosophy of many small
improvements are necessary along with major
breakthroughs in improvement.
Concept 5- Visibility
waste can only be eliminated after it is discovered. 5S
workplaces reduce clutter that hides waste and ensures
good housekeeping

- Access to new markets Concept 6 - Flexibility

- Labor or logistic cost savings Must be engineered into the system to make volume
- Relaxed legal & regulatory environment changes and switch from one product to another without
- Minimize impact of currency flucations long changeover times even when a mix of products is
Challenges when enterprises have global locations normal.

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Lean Manufacturing Basic Building Blocks Product Family

A variety of specific systems constitute the actual a group of services or products that have similar demand
programs in lean manufacturing requirements and common processes, labor, and materials
requirements
Kanban System
Business Plan
insures that production is only begun in a given lot size
when a direct demand need arrives at the production a projected statement of income, costs, and profits
station.
Annual Plan (or Financial Plan)
Quick Setups and Small Lots
a plan for financial assessment used by a nonprofit service
How quickly you can change the production process from organization
one product to another.
Overtime
Uniform Plant Loading
the time that employees work that is longer than the
eliminates inventory waste and back orders, gets ride of regular workday or workweek for which they receive
"push system" additional pay

Flexible Resources Undertime

necessary to achieve the increasing variety of goods and
services demanded. Although such equipment may not be
as efficient per unit.
Efficient Facility layouts
reduce waste by placing workstations in close physical
proximity to reduce non-value-added transport and
movement., while simultaneously streamlining material
flow.
Jidoka
Employees are empowered to stop the production line so
that defects aren't pushed forward.
the situation that occurs when employees do not have
enough work for the regular-time workday or workweek
Chase Strategy
a strategy that involves hiring and laying off employees to
match the demand forecast
Level Strategy
a strategy that keeps the workforce constant, but varies its
utilization via overtime, undertime, and vacation planning
to match the demand forecast
Mixed Strategy

Poka-yoke a strategy that considers the full range of supply options

Fool proofing the process involves incorporating a variety Workforce Scheduling

of mechanical and/or electronic sensors to ensure that a type of scheduling that determines when employees
100% of the production is good, or to inspect 100% of work
production.
Rotating Schedule
Total productive maintenance (TPM)
a schedule that rotates employees through a series of
Productive maintenance programs ensure that machinery workdays or hours
is inspected daily and that regular servicing and potential
repairs are noted and corrected during scheduled Fixed Schedule
downtime periods
a schedule that calls for each employee to work the same
days and hours each week

CHAPTER 10 A Sequencing

Operations Planning and Scheduling determining the order in which jobs or customers are
processed in the waiting line at a workstation
the process of balancing supply with demand, from the
aggregate level down to the short-term scheduling level Priority Sequencing Rule

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a rule that specifies the job or customer processing -theme parks
sequence when several jobs are waiting in line at a -telecommunications systems
workstation -traffic management

First-Come, First-Served (FCFS) Why is there Waiting?

a priority sequencing rule that specifies that the job or
customer arriving at the workstation first has the highest
priority
Earliest Due Date (EDD)
a priority sequencing rule that specifies that the job or
customer with the earliest due date is the next job to be
processed
Expediting
the process of completing a job or finishing with a
customer sooner than would otherwise be done
Flow Time
the amount of time a job spends in the service or
manufacturing system
Past Due (Tardiness)
Variability - arrival and service rate are variable
Services cannot be completed ahead of time and stored
for later use
Why waiting lines cause concern:
1. The cost to provide waiting space
2. A possible loss of business when customers leave the
line before being served or refuse to wait at all
3. A possible loss of goodwill
4. A possible reduction in customer satisfaction
5. Resulting congestion may disrupt other business
operations and/or customers
Waiting Line Management
The goal is to minimize total costs
-costs associated with customers waiting for service
-capacity cost

The amount of time by which a job missed its due date Waiting Line Characteristics

Advanced Planning and Scheduling (APS) Systems 1. Population source

computer software systems that seeks to optimize
resources across the supply chain and align daily
operations with strategic goals
CHAPTER 10 B
Waiting Lines
-waiting lines occur in all sorts of service systems
2. Number of servers (channels)
3. Arrival and service patterns
4. Queue discipline
Population Source
Infinite source - customer arrivals are unrestricted
-the number of potential customers greatly exceeds
system capacity

-wait time is non-value added Finite source - the number of potential customers is
limited
Waiting time costs:
Channel
-lower productivity
-reduced competitiveness -a server in a service system
-wasted resources -it is assumed that each channel can handle one customer
-diminished quality of life at a time

Queuing Theory Phases

-the number of steps in a queuing system

Mathematical approach to the analysis of waiting lines
Arrival Pattern
Applicable to many environments:
-call centers Most commonly used models assume the arrival rate can
-banks be described by the Poisson distribution
-post offices -arrivals per unit of time
-restaurants

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Equivalently, interarrival times are assumed to follow the
negative exponential distribution
-the time between arrivals
Service Pattern
Service times are frequently assumed to follow a negative
exponential distribution
Queue Discipline
The order in which customers are processed
-most commonly encountered rule is that service is
provided on a first-come, first-served (FCFS) basis
-non FCFS applications do not treat all customer waiting
costs as the same
Waiting Line Metrics
Managers typically consider:
1. The average number of customers waiting (in line or in
the system)
2. The average time customers wait (in line or in the
system)
3. System utilization
4. The implied cost of a given level of capacity and its
related waiting line
5. The probability that an arrival will have to wait for
service
Four basic infinite source models:
All assume a Poisson arrival rate
1. Single server, exponential service time
2. Single server, constant service time
3. Multiple servers, exponential service time
4. Multiple priority service, exponential service time
Single Server, Constant Service Time
-if a system can reduce variability, it can shorten waiting
line noticeably
-for example, by making service time constant, the
average number of customers waiting in line can be cut in
half
-average time customers spend waiting in line is also cut
by half
-similar improvements can be made by smoothing arrival
rates (such as by use of appointments)
Multiple Servers
Assumptions:
-Poisson arrival rate and exponential service time
-servers all work at the same average rate
-customers form a single waiting line (in order to maintain
FCFS processing)
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Cost Analysis
Service system design reflects the desire of management
to balance the cost of capacity with the expected cost of
customers waiting in the system
Optimal capacity is one that minimizes the sum of
customers waiting costs and capacity or server costs
Maximum Line Length
An issue that often arises in service system design is how
much space should be allocated for waiting lines
Multiple Priority Model
Customers are processed according to some measure of
importance
Customers are assigned to one of several priority classes
according to some predetermined assignment method
-customers are then processed by class, highest class first
-within a class, customers are processed by FCFS
-exceptions occur only if a higher-priority customer arrives
(and that customer will be processed after the customer
currently being processed is done)
Finite-Source Model
Appropriate for cases in which the calling population is
limited to a relatively small number of potential calls
Arrival rates are required to be Poisson
-unlike the infinite-source models, the arrival rate is
affected by the length of the waiting line (arrival rate of
customers decreases as the length of the line increases)
Service times are required to be exponential
Finite-Source Model (continued)
Procedure:
1. Identify the values for
a. N, population size
b. M, the number of servers/channels
c. T, average service time
d. U, average time between calls for service
2. Compute the service factor, X=T/(T + U)
3. Locate the section of the finite-queuing tables for N
4. Using the value of X as the point of entry, find the values
of D and F that correspond to M
5. Use the values of N, M, X, D, and F as needed to
determine the values of the desired measures of system
performance
Constraint Management
Managers may be able to reduce waiting lines by actively managing one or more system constraints:
-fixed short-term constraints = facility size, number of servers
-short-term capacity options = use temporary workers, shift demand, standardize the service, look for a bottleneck

Psychology of Waiting

If those waiting in line have nothing else to occupy their thoughts, they often tend to focus on the fact they are waiting in line
-they will usually perceive the waiting time to be longer than the actual waiting time
-steps can be taken to make waiting more acceptable to customers
-occupy them while they wait
-make the waiting environment more comfortable
-provide customers information concerning their wait

Operations Strategy

Managers must carefully weigh the costs and benefits of service system capacity alternatives

Options for reducing wait times:

-work to increase processing rates, instead of increasing the number of servers
-use new processing equipment and/or methods
-reduce processing time variability through standardization
-shift demand

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