Topic: Operations and Productivity - One of the 3 major functions (Accounting,

Marketing and Operations)

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

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

Multi factor productivity

Productivity
3 main types of decisions
= Outputs/Labor+Material+Energy+Capital+Misc.
Production planning
- 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.

Why study O.M

Topic: Operations Strategy in a Global 4) Location selection: Facility location decisions for
Environment both manufacturing and service organizations
may determine the firm’s ultimate success.

5) Layout design: Material flows, capacity needs,

A Global View of Operations personnel levels, technology decisions, and
- deployment of facilities and operations around the inventory requirements influence layout.
world 6) Human resources and job design: People are
an integral and expensive part of the total system
Prof Thomas Sewell - No great civilization has design.
developed in isolation
7) Supply-chain management: These decisions
Globalization - growth of world trade, global capital determine what is to be made and what is
to be purchased.
markets, and the international movement of people
8) Inventory: Inventory decisions can be optimized
6 reasons why domestic business operations only when customer satisfaction, suppliers,
decide to change to some form of international production schedules, and human resource planning
operation: are considered
.
1) Reduce Costs 9) Scheduling: Feasible and efficient schedules of
production must be developed; the demands
2) Improve the Supply Chain human resources and facilities must be determined
and controlled.
3) Provided Better Goods and Services
4) Understand Markets 10) Maintenance: Decisions must be made
regarding desired levels of reliability and stability,
5) Learn to Improve Operations and systems must be established to maintain that
reliability and stability.
6) Attract and Retain Global Talent
Issues in Operations Strategy
Missions and Strategies Resources view - evaluate the resources at their
disposal and manage or alter them to achieve
Mission - states the purpose or rationale for competitive challenge
organization’s existence.
Value-chain analysis - identify activities that
Strategy - organization’s action plan to achieve the
represent strengths, or potential strengths.
mission.
Five forces method - analyzing the five forces-
immediate rivals, potential entrants, customers,
3 strategic approaches to competitive advantage suppliers, and substitute products, in the competitive
1. Differentiation environment.

2. Cost leadership
3. Response Strategy Development and Implementation

SWOT Analysis
Ten Strategic OM Decisions Key Success Factors (KSF) - activities that are
1) Goods and service design: Designing goods necessary for a firm to achieve its goals.
and services defines much of the transformation
Core competencies - set of unique skills, talents,
2.) Quality: The customer’s quality expectations and capabilities that a firm does at a world-class
must be determined and policies and procedures standard.
established to identify and achieve that quality.
3) Process and capacity design: Process options
are available for products and services.
Global Operations Strategy Options
2) Multidomestic Strategy - a strategy in which
International business - any firm that engages in operating decisions are decentralized to each
international trade or investment (cross-border country
to enhance local responsiveness
transactions) ➢Typically, subsidiaries, franchises, or joint ventures
with substantial independence
Multinational corporation (MNC) - firm with ➢Advantage: maximizing a competitive response for the
extensive international business involvement local market
➢Little or no cost advantage
Operations managers of international and
multinational firms approach global opportunities 3) Global Strategy - a strategy in which operating
decisions are centralized and headquarters
with one of four operations strategies:
coordinate the standardization and learning between
1) International Strategy - a strategy in which facilities.
global markets are penetrated using exports and ➢Generates Economies of scale
licences ➢Appropriate when the strategic focus is cost reduction
➢Least advantageous -- with little responsiveness and ➢Has little to recommend when the demand for local
little cost advantage responsiveness is high
➢Little responsiveness because exporting or licensing
goods from the home country 4) Transnational Strategy - a strategy that
➢Cost advantages are few because using the existing combines the benefits of global-scale efficiencies
production process at some distance with the
from the new market benefits of local responsiveness
➢Easiest strategy - exports require little change in ➢exploits the economies of scale and learning, as well as
existing operations and licensing pressure for
agreements often leave much of the risk to the responsiveness, by recognizing that core
licensee competence does not reside in just the “home”
country
but can exist anywhere in the organization
Topic: Project Management Matrix Project
- Blend the properties of functional and pure project
Project - series of related tasks directed toward structures.
some major output - Each project utilizes people from different
Structuring Projects functional areas
- The project manager decides what tasks and
Pure Project - self-contained team works full time when they need to be performed but functional
on the project managers control which people and technologies
are to be used.
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 Advantages
● Resources are duplicated ● Enhanced communication
● Team members are often both physically and ● A project manager is held responsible for
psychologically removed successful completion of the project.
● lags in its knowledge of new technology ● Duplication of resources is minimized.
● Team members have no functional area home, ● Team members have a functional "home"
after project completion, so they are less
worried about life-after-project than if they
Functional Project - housing the project within a were a pure project organization.
functional division ● 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.
Advantages
● Sub-optimization is a danger as project
● Team members can work on several projects. managers might hoard resources for their
● Technical expertise is maintained within the own project and consequently harming other
functional area. projects.
● 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.
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 Good supplier relations and the ensuing price
advantages for materials and parts depend on
Forecasting is the art and science of predicting accurate forecasts.
what will happen in the future. Sometimes that is
determined by a mathematical method; sometimes Forecasting System
it is based on the intuition of the operations These seven steps can generate forecasts.
manager. Most forecasts and end decisions are a 1. Determine the use of the forecast
combination of both. 2. Select the items for the forecasted.
3. Determine the time horizon of the forecast.
Forecasting time horizons. 4. Select the forecast model type.
1. Short range forecast. While it can be up to one 5. Gather data to be input into the model.
year, this forecast is usually used for three months 6. Make the forecast.
or less. It is used for planning purchases, hiring, job 7. Verify and implement the results
assignments, production levels, and the like.
Forecasting Approaches
2. Medium range forecast. This is generally three Two predominant approaches
months to three years. Medium range forecasts are 1. Qualitative approach
used for sales and production planning, budgeting, 2. Quantitative analysis.
and analysis of different operating plans.

3. Long range forecast. Generally three years or

more in time span, it is used for new products, Qualitative methods include:
capital expenditures, facility expansion, relocation, 1. Jury of executive opinion.
and research and development. This is based on the inputs and decisions of high-
level experts or management.
Types of Forecasts 2. Delphi method.
Decision makers, staff, and respondents all meet to
1. Economic forecasts address the business cycle develop the forecast. Using a group process that
by predicting housing starts, inflation rates, money allows experts to make forecasts. Every shareholder
supplies, and other planning indicators. in the process provides input.
3. Sales force composite.
2. Technological forecasts monitor rates of Each sales person provides an individual estimate
technological progress. which is reviewed for realism by management, and
then combined for a big picture view.
3. Demand forecasts deal with the company's 4. Consumer market survey.
products and estimate consumer demand. (sales This is surveying the prospective customer base
forecasts) to determine demand for existing products and can
also be used for new products.

Strategic Importance of Forecasts Quantitative methods are in two categories.

Two tools at their disposal by which to make 1. Time-Series Models.
decisions: Time-series models attempt to predict
1. Actual data the future by using historical data.
2. Forecasts This is based on a sequence of
evenly spaced (weekly, monthly, quarterly,
Human Resources. etc.) data points.
Hiring, training, and laying off workers all depend on
anticipated demand. A. Naive approach is a forecasting technique
If the human resources department hire additional which assumes that demand in the next
workers without warning, the amount of training period is equal to demand in the most
declines and the quality of the workforce suffers. recent period.

Capacity. B. Moving Average is a forecast technique that

When capacity is inadequate, the resulting shortage uses a number of historical actual data
can lead to loss of customers and market share. values to generate a forecast. This is
useful if we can assume that market
Supply-Chain Management. 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. Bias
15. A measure of the overall forecast error for a model. Mean absolute deviation
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
OTHER CHANGES may be brought about through
Product selection is choosing the good or service market practice, professional standards, suppliers,
to provide customers or clients by developing a and distributors
competitive advantage

PRODUCT STRATEGY OPTIONS

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
POLITICAL/LEGAL CHANGE Significant change in
government surrounding leadership and policies.
STAGES OF PRODUCT DEVELOPMENT Creation of 3-dimensional representation of an
Object using specialized softwares
PRODUCT DEVELOPMENT
Creation of products with new or different COMPUTER-AIDED MANUFACTURING refers to
characteristics the use of specialized computer programs to direct
QFD House of Quality and control manufacturing equipment
a graphic technique for defining the
relationship between customer desires and BENEFITS OF CAD/CAM
product. May involve modification of an existing ● Product quality
product or making an entirely different product ● Shorter design time
● Production cost reductions
Stages of Product Development ● 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.
Quality Function Deployment ● Minimize waste of raw materials and energy.
process for determining customer requirements ● Reduce environmental liabilities
(customer “wants”) and translating them into the ● Increase cost-effectiveness of complying with
attributes (the “hows”) that each functional area can environmental regulations.
understand and act on. ● Be recognized as a good corporate citizen

ISSUES FOR PRODUCT DEVELOPMENT TIME-BASED COMPETITIONS

 Product life cycle
ROBUST DESIGN  Competition based on time
Design that can be produced to requirements even
with unfavorable conditions in the production DEFINING THE PRODUCT
process 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.
MODULAR DESIGN
Is a design in which parts or components of a Product Documents
product are subdivided into modules that are easily Type of technical documentation that explains
interchanged almost everything there is to know about a product
or piece of software
COMPUTER-AIDED DESIGN (CAD)
is the use of computers to interactively design 1. Engineering Drawing - shows dimensions,
products and prepare engineering documentation tolerances, materials, and finishes of a component
2. Bill of Material
EXTENSION OF CAD - list of components, quantities, and descriptions
required to make one unit of a product.
Design for Manufacturing and Assembly (DFMA) -shows product structure
Solve manufacturing problems during the design
stage

3d Object Modeling MAKE-OR-BUY DECISION

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

ASSEMBLY CHART SERVICE DESIGN

A graphic means of identifying how components flow activity of planning and arranging people,
into subassemblies and final products infrastructure, communication and material
components of a service in order to improve its
ROUTE CHART quality, and the interaction between the service
A listing of the operations necessary to produce a provider and its users
component with the material specified in the bill of DOCUMENTS FOR SERVICES
material
MOMENTS OF TRUTH - customer and the business
Work Order comes into contact with one another
an instruction to make a given quantity of a particular
item on a given schedule.

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 INTERNATIONAL

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

3. Performance Evaluation 5. Life Cycle Assessment

4. Labeling

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