14 points for quality Total Quality Management (TQM) process was developed to stress

improvement by Dr Deming management’s responsibility for quality

A chase aggregate plan Aggregate plan is preferable when a company produces custom or
special purpose equipment, one-of-a-kind items, or highly
perishable products

o Produce what is needed for each week, month, and/or year

o used for products with large production requirements
o Disadvantages: can be expensive; constantly changing
short term capacity
o Example, how you are going to schedule labor?
Think about scheduling employees in a restaurant
during a busy weekend verses a non-busy
weekend or in the middle of the week.
o Produces exactly what is needed each period
o Sets labor/equipment capacity to satisfy period demands
o Good for make-to-order products
o Uses Capacity-Based Options

A company manufactures and When the company determines that distribution is no longer a core
distributes its own products. function
When should the company o You don’t want to tie up your resources (like money or
consider outsourcing its people) performing non-core functions.
distribution?
A company suddenly finds o Hire temporary workers
demand has increased to 140% o Subcontract a portion of production capacity
of its previous capacity. It has o These are short term options to solve an
been able to hire only a fraction immediate problem
of the employees previously laid
off, and a warehouse fire
destroyed 80% of its inventory.

Which two options does the

company have to rapidly meet
the new demand?
A hybrid aggregate plan o Combination of the level and chase strategies
o Take the best of the two
▪ Once you know which strategy you are
going to use, you must know your
production rate.
▪ You don’t want back orders
o Adjust your plan
▪ Look at your inventory and labor to
make sure everything is adequate
▪ Consider the type of service you are
giving to customers
▪ Are the people working for you?
▪ Can you offer them real jobs?
▪ Is your labor work stable or are you
utilizing temporary workers?

A level aggregate plan o Constant plan

o The average of the product is figured out and
used for stock products
 ▪ Example - items you would purchase at
Target Stores
o Disadvantage: you are forecasting demand, but
demand cannot be averages; demand can change
each week
o Maintains a constant workforce
o Sets capacity to accommodate average demand
o Often used for make-to-stock products like appliances
o Disadvantage- builds inventory and/or uses back
orders. Remember extra inventory is tying up
money that can be used for other purposes.

Actual output/standard output Example, a fast-food restaurant performing at, above, or below its
benchmark
o Indicates how many burgers are being made and what the
standard is for that restaurant
Assignable causes of variation • Causes that can be identified and resolved
• Examples: employees additional training, machine
that needs to repaired, poor material quality
• Out-of-control signals were found in the process.
These causes (process defects) are identified and
corrected
• Resolution: Eliminate the cause; for example, train
poor performing employee, repair the machine
Backward scheduling Scheduling method that determines when the job must be started to
be done on the due date. Always considers the due and does not
start immediately.
Batch process Process used to produce a small quantity of products in groups
(batches) based on customer orders or specifications. (Think of
making a batch of cookies).
Block plan Schematic (graph or chart) showing the placement of resources in a
facility
o Space requirements met
o Determine if more space is needed
Bottleneck in a flowchart The longest task in the process
o Remember, bottleneck represents anything in a process
that takes a long time (or the longest time)
o For example, in manufacturing cars, painting the car will
generally take a long time. This would be considered the
bottleneck
Budget projections Element of a financial plan
o A component from accounting
By reducing waste Just-in-time (JIT) and lean systems add value.
o Waste could be additional inventory or something sitting
around waiting for something else. The concept of waste is
if you are not using it now, it’s waste because it can’t be
used immediately; therefore, there is no immediate value.
C pk measure (Process Capability Measures how close one is to a target and how consistent one is
Index) with the average performance
Capacity focus Facilities that are small, specialized, and focused on a narrow set of
objectives
Capacity measurement at the When the average unit cost is minimized
best operating level
Capacity planning • Helps an organization identify and plan the actions
necessary to meet current and future customer demands
• An example of capacity planning: hospital is adding beds.
They don’t usually add one or two beds. This is usually
done in bulks.
• There is no real cut and dry way to measure capacity, but
it can be used to measure output.
• For example, a pizza shop may not be able to measure
how many pizzas it can make today but it can know how
many pizzas it didn’t make today.
• Remember for example, your capacity in the hospital
environment is your beds but your output is your patients.
o You have one patient for 2 days or one for 3 days
- that’s output
o You consider how many patients you have
interacted with; not how many beds you have.
o Another example, look at how many people that
are making pizzas and how many go out of the
door (are sold)

capacity requirements planning Method used to calculate the production capacity availability
(CRP) o Need to look at how much capacity is available
o Uses planned order releases from the MRP output to
calculate the workload. (Think about how much capacity
you need to make 100 cakes per day; Can you do this in
your home oven?)
Capacity utilization • Measures how much of the available capacity (%) is
actually being used
• Responds to the questions: Are you using less or more?
Are you using more workers? What are your resources?
• Measures effectiveness
• Use either effective or design capacity in denomination

Center-of-gravity approach Consider the following: A manufacturing company decides to open

a new distribution center location in order to minimize distribution
costs to warehouses or stores. What tool should the manufacturing
company use to determine where the new distribution center should
be located?
• Breakeven analysis - determines the units needed to
manufacture in order to breakeven
• Includes fixed costs (FC) and Variable cost (VC) or
changing costs, Transportation cost
• Center of gravity means placing yourself in the middle.
o For example, take all the people with whom you
do business and put yourself in the middle
(center) of it
• Below distance model tells how far the facility location is
from other stores
• Locate in the middle and circle around it
Checklist A list of common defects and the number of observed occurrences
of these defects.
Common causes or random • Causes that cannot identified
• These causes are unavoidable
 • They are caused by slight differences in processes

Compute Process Velocity Throughput time/value-added time

o Determines speed of process (how fast we are going)

Conception The first stage of the project life cycle

o Identifies the need for a project
▪ Example, A company decides to enter a new
market.
Conducting a location analysis • Proximity to sources of supply
• Site consideration
Control chart Graph that shows whether a sample of data falls within the
common or normal range of variation.
Design Capacity • Maximum output rate attainable under ideal conditions
• Example, a bakery can make 30 custom cakes per day
when pushed at holiday time

Difference between the Push and o Push moves the product forward in anticipation for
Pull processes demand
o Pull eliminates excessive inventory (you only take orders
based on what you can process not what is being forced or
pushed to you).
Duration of the change Duration represents length of stay
o How long does the change last or stay?
Effective capacity • A permanent measure used to achieve design capacity
• Lower than design capacity
• Maximum output rate under normal (realistic) conditions;
usually lower than design capacity
• Example, on average a bakery can make 20 custom cakes
per day

ERP (enterprise resource An information system designed to integrate internal and external
planning) members of the supply chain

o Software used to organize and manage processes through

information sharing
o Management control
o Decisions can be made quickly
o Systems can be replaced and eliminated resulting
in save money
o Reduction in inventory
o Reduction in number of staffs
o Increased production
o Better order management
o Reduce purchasing costs
o Better cash flow
o Reduction logistics and transportation costs
o Customers are happier due to on-time deliveries

Execution The fourth stage of the project life cycle

o Carrying out the activities that make up the project
▪ For example, consider a wedding anniversary
party: this would entail booking the facility,
 arranging the music, conducting seating
arrangements, finalizing the menu, arranging the
limousine pickup, and so on.
▪ In business, the execution of the project entails
completing the product design, obtaining the
materials and equipment needed, setting up the
process, writing job instructions, and making the
product
▪ For a political candidate, execution would include
specific fund-raising activities, making public
appearances, and showcasing the political
message (advertising)
External distributors The role third-party logistics providers play in the supply chain
o Outside the company
o Could include: another company, transportations, suppliers
Feasibility analysis The second stage of the product life cycle
o Evaluate expected costs, benefits, and risks of the project
▪ Example 1: A couple’s wedding anniversary - a
feasibility study might mean deciding whether
the couple would be happier by being guests at
the party or if they would rather take a getaway
trip to visit some exotic part of the world.
▪ Example 2 - A company launching a new product
- a feasibility study means examining the
potential market, the market share, and profits for
the new product compared to the costs.
▪ Example 3 – A Political Candidate - a feasibility
study is a candidate's assessment of the resources
needed to run a successful political campaign and
the benefits of being elected to office.
Finished goods Completed goods from the manufacturing process that have not yet
been sold or distributed to end users
o A manufacturing firm uses warehouses and shippers in
their supply chain.
o At which stage of the firm's inventory management system
would the statement “percentage of line items shipped on
schedule” be used?
o You are shipping finished goods
o If they are sold, it is sunk costs
Finite Loading Scheduling that loads work centers up to a predetermined amount
of capacity.

o Entails working forward

o Calculation of capacity is based on the capacity
available
o Start and finish time of each activity
o Example, if a doctor can spend 10 minutes with a
patient, they can schedule 6 patients per hour

Flowchart Chart showing the sequence of steps in producing the product or

service
Forward scheduling Schedule that determines the earliest possible completion date for a
job
o Starts as soon as the job is received
Group technology A company has a number of facility and each facility is responsible
for a particular process.
o Example, one facility manufactures, and another provides
servicing
Horizontal integration Company acquires another company that is in the same industry
o Example: Facebook acquisition of Instagram; T-Mobile
merged with Sprint.
Infinite loading Scheduling that calculates the capacity needed at work centers in
the time period needed without regard to the capacity available to
do the work.

o Entails working backwards

o The job is planned backwards
o Calculation of the capacity regardless of the
capacity availability
o For example, if a customer needs X product built in Y
time, we tell customer what the end result is and identify
the resources needed to get there
Internal distributors: Within the company

Inventory management differ for o Manufacturing organizations must maintain tangible

manufacturing organizations inventory
compared to service o Avoid keeping large amount of inventory
organizations o Serving organizations do not maintain inventory

ISO 9000 o Developed to establish agreement on international quality

standards
o TQM process consists of 13 published standards and
guidelines
o These are published and can be used in all industries
o Businesses are to measure themselves against those
standards
o If the criteria are met, then the business can become ISO
9000 certified
o Businesses are updating to ISO 9001 or ISO 9002
o It helps control standards
o Businesses must meet specific values and are audited to
those standards
o It’s comparative to joint commission who goes to a
hospital without telling them and measure how the
hospitals are doing their procedures. If they don’t meet
the required standards, they give the hospital time to
improve and then they come back to check it
ISO 14000 o Standards for evaluating a company's environmental
responsibility
o Focuses on three major areas
• Management systems standards measure systems
development and integration of environmental
responsibility into the overall business
• Operations standards include the measurement of
consumption of natural resources and energy
• Environmental systems standards measure
emissions, effluents, and other waste systems
Job Design o Specifies the work activities or contents of the job
o Doesn’t have anything to do with people
Job enrichment Motivational tool used to give employees greater satisfaction in
their work
o For example, giving an employee additional work reserved
for more skilled or manager-level employees
Just-in-time (JIT) system - o Control inventory levels in order to eliminate excess
influence all functional areas inventory or lower than required inventory
within a company o Companies can reduce waste
o Companies develop new ways to generate revenue
Kanban - significance to the pull Kanban system: which is a scheduling system for lean
system manufacturing. Kanban is a signal
o It specifies the exact quantity of a product that needs to be
produced.
o Pull system tells you how much to be produced
o Starts when customers order it
o Could be more expensive and custom type of items
o Small lots mean less average inventory and shorten
manufacturing lead time
o Push system gives you a forecast
o Forecast how much inventory you going to need
Labor specialization Work system that acknowledges the benefits of employee
proficiency
o If an employee is good at doing one thing, they will be
asked to keep on doing it
Lean systems A business approach to holistically apply lean principles to the way
it plans, measures, prioritizes, and manages work
o Depicts what has been created to minimize waste without
sacrificing productivity
o Lean system is the whole package
o JIT is part of lean system; JIT is considered a lean system
used for reducing waste
Marketing plan essential to the The marketing plan provides insight into operations goals and
creation of the aggregate plan activities for the year.
o Aggregate - everything together
o Taking all different components and putting them
together.
▪ Tell the other departments what their
goals, sales quarters, etc. are for the
upcoming period
Mean A statistic that measures the central tendency of a set of data

MRP (material requirements A system that uses the MPS, inventory record data, and BOM to
planning) calculate material requirements
▪ MPS – check to ensure work is feasible
▪ Determine how much material is needed and
bringing in the materials needed
▪ BOM (Bill of Material) model – contains the
product structure for each model
o Uses the concept of backward scheduling to determine
activity start dates to include:
▪ What to order
▪ How much to order
▪ When to order
▪ When to deliver
▪ When to replenish
o Organized priorities
 o Looks at demand and schedules to meet the demand
o MRP systems are designed to calculate material
requirements from dependent demand items
o The objectives of MRP are to determine the quantity and
timing of material requirements and to keep schedule
priorities updated and valid.
Observed time Actual time

Performance time The length of time to completion (from start to finish)

Periodic Review System Vs Periodic:

Perpetual Review System o Physical verification
o For example, a periodic review of inventory done every
Friday of the month. The inventory will be physically
counted on that specified day.
o Think of, for example, quarterly audits at your company
Perpetual:
o Constant moving things
o Inventory is updated its going to be updated after every
transaction
Planning The third stage of the product life cycle
o Analyze the work to be done and develop time estimates
for completing each of the activities
o Plan what must be done, by whom, and when
▪ Example 1, A couple’s wedding
anniversary - When planning the party, a
friend or another family member might
do the initial screening of caterers,
musicians, and so forth, allowing the
wedded couple to make the final
decision.
o In business, planning consists of the activities
needed to launch the new product.
▪ For example, the company must design
the new product, source and order the
materials, equipment, and tools, choose
the process to use, design the layout,
write the job instructions, do a pilot run,
evaluate the process and the product
design, and transition the product to
manufacturing.
o In politics, for example, planning might include
deciding how to raise funds, schedule personal
appearances and debates, handle public relations,
and adopt policy positions
Process A sequence of events or steps. Each item goes through a process

Project process Process used to make a one-at-a-time product exactly to customer

specifications (how the customer wants it)
Proximity to customers • major factor in the decision to locate a business near
its primary market territory
• key factor of a location analysis for a service
company
 • Example, if you need to have your car repaired, you
may look for the repair shop nearest to you
Repetitive Processes Process used to produce one or a few standardized products in high
volume. For example, a production line making only Oreo cookies
Respect for people An element of JIT that considers human resources as an essential
part of the JIT philosophy
o The third basic element in the just-in-time (JIT)
o The first element is total quality management (TQM) and
the second is JIT manufacturing
Revised or implemented new Follow up to make sure the new operation resolves quality
operations problems
Scatter diagram Graphs that show how two variables are related to each other.

SCOR (Supply Chain Operations Name of the model that has been created to examine the four
Reference) different supply chain perspectives namely,
o reliability, flexibility, expenses, and assets/utilization
Service location decision Factors affecting service location decisions include: Proximity
to customers, Quality-of-life issues
Six Sigma o The use of technical tools to identify and eliminate the
causes of quality problems
o People involvement - able to use technical tools and solve
problems
o the empirical rule: 3 standard deviations is 3 Sigma
o 6 standard sigma means almost at 100%. It is a target, but
you can never complete 100%, that is, you are 6 deviations
out, and have almost 100% of TQM. Outcome: You are
going to be reliable.
o Example, when looking for jobs, people sometimes imply
that Six Sigma certified means you have taken courses that
can promote the Six Sigma program.
o Six Sigma in practice:
o Perfect product at all times
o Nothing can be 100% but it meets the six
deviations (-/+)
o No more than 3.4 defects per million
opportunities (DPMO)—this is a very small
number
Standard time The length of time it takes to finish a task or complete one’s work
o For example, measure how long it takes a qualified
operator to perform a duty of the job requirements under
the assumption that the operator is working at a
sustainable pace with the proper tools for the process; if
you have everything you need to do a specific job, how
long does it take you to do it without any distractions.

Status of overall customer o It measures efficiency.

satisfaction support supply chain o Overall customer service is important
objectives
Suggestions for improving the An organization can designate employees to communicate
operation. alternative ways to complete a job in a methods analysis
o Helps make the business better,
o Identifies different ways to communicate
Termination The final stage of the project life cycle
o End the project
o After this date, resources can be used for different
activities.
o Examples:
▪ For the wedding anniversary party, termination
occurs after the party is over
▪ In business, termination means product design
engineers work on new products, purchasing
agents can return to routine activities or a new
project, and manufacturing engineers can begin
work on new projects.
▪ For the political candidate, termination means
serving in an elected office or looking for a new
job
The Role of Marketing in just-in- o JIT marketing focuses on customer-driven quality
time (JIT) o Manage inventory levels (high and low)
o Objective: satisfy the customer through product
availability
Throughput time/value-added The time it takes from raw material to finished goods
time
Tier One Suppliers Supplier supplies directly to the processor
o Supplies component (parts) to the manufactures (that’s the
start)
o Supplies parts or systems of parts directly to
manufacturers
Tier Three Suppliers Supplies directly to tier two supplier
o Directly supplies materials or services to a processing and
packaging plant
o Example, suppliers of raw materials like plastic
Tier Two Suppliers Supplier supplies directly to tier one
o Supplies a lot of non-automotive customers
o They do not have the ability or desire to produce
automobile parts. They are not supplying the
actual parts of automobile to the manufacturer
To manage the demand for o Primary purpose in using the master production schedule
promised deliveries (MPS) in the marketing department of an organization
▪ See Ch 14 MPS: Manufacturing productions
schedule, what and when to build.
- They were building a cabinet
- MPS was in the statement when and
what to build.
- Manage the demand of delivery system
because the objective is to manage not to
create something new
Two areas managers should o Their control over internal operations
consider in order to adapt to the o Their influence and leverage over supplies
business dynamics affecting their o PS: There is a need to control internal operations
company as well as suppliers
Two common drawbacks of o It takes a long time to implement and to see any benefits.
implementing an enterprise o It requires extensive, often complex, training.
resource planning (ERP)
solution:
Two reasons a company might be o Overtime is not a long-term solution
hesitant to provide overtime as a o Overtime is typically a 50% wage premium
capacity-based option o Increase cost in payroll
o Quality of product due to employee overworked and
exhaustion
Two strategic objectives for o Increasing cost effectiveness
every member of the supply o Becoming more efficient
chain include:
Two ways management can assist o Ensure that workers receive multifunctional training
employees’ focus in a just-in-time o Develop an incentive system to reward workers for their
(JIT) processing environment efforts
o Ensure that they are well-trained
o Provide bonuses for completing work on time or
before time.
Vertical integration Company acquires another company that is not the same industry; a
company purchases one of its suppliers
o Examples:
o Google purchased Motorola
o Ikea purchased forests in Africa to get their own
wood
What is the importance of It provides the ability to compare available production capabilities
capacity requirements planning to the planned workload.
(CRP)? o Provides the ability to compare the actual workload