Chapter 1: Operations and Supply Chain Management (4 comp.

questions) OSM: design, operation, and improvement of the systems that create and deliver the firms primary products and services. (functional field, clear line mgt. responsibilities, concerned with entire system) 3 Major Functions: operations, finance, marketing 4 Basic Operations Mgt. Functions: planning, organizing, directing (plans into tasks), controlling (eval. performance) Global Supply Chain: customer pref., environment, shareholder needs, supply (move info and material mfg. and service) Durable vs. Non-Durable Goods: physical product that lasts 3 years or less (tangible) Service: primary/complementary activity, no physical product, more difficult to predict than goods, perishable, time dependent, close proximity, not protected by patents, cant inventory (not tangible, service encounter, moments of truth) External vs. Internal Focus: customer expectations or service encounter (delivery performance) 3 Attributes to eval. Quality: search (prior to purchase), experience (after purchase), credence (aspect customer believes in but cannot eval.), goods are easier to eval. than services Quality of Services: rely on personal sources, adopt innovation slowly, perceive greater risk Efficiency vs. Effectiveness: lowest cost or most value To Increase Value: perceived benefits/price, increase benefits - constant price and cost, decrease price/cost - constant benefits, increase benefit - reduce price/cost Value Chain: network of facilities and proceses that describes the flow of goods, services, info, and financial transactions from suppliers through the facilities and processes that create goods and services and deliver them to customers (cradle to grave model), begins with suppliers, inputs to outputs, outputs are goods and services Operations Management Evolution: cost - quality - customization Sustainability vs. Triple Bottom Line: maintain balance or economic (compensate shareholders), employee (social - fair beneficial business), and environment Chapter 2: Strategy and Sustainability (3 comp. & 3 calc. questions) Vision: where the org is headed Mission: reason for orgs existence Three Levels of Strategy: Corporate (develop plans for acquisition and allocation of resources), Business (focus for SBU - Strategic Business Units, which markets to pursue and how to compete), Functional (decisions that each functional area develops to support strategy) Operations Strategy: how orgs processes are designed and organized to produce goods and services (a core competency, superior operational capability over long term favored to win industry shakeout Shareholders vs. Stakeholders: legally own stock or influenced directly/indirectly by firm Closed-Loop Strategy Process: strategic decisions (long term, broad policies), tactical (manage capacity, inventory, and schedule), operations (narrow, short term, act under operation constraints set out by the strategic and tactical management decisions) 3 Classes of Customer Req.: dissatisfiers (expected not met), satisfiers (say they want), exciters/delighters (new, not expected) Order Qualifiers: basic customer expectations (minimum) Order Winners: features and performance that differentiates to win consumer business Competitive Priorities: cost, quality, delivery (speed), flexibility, innovation Trade-offs: operations cannot excel on all competitive priorities at the same time (management decides on which), activities are incompatible Activity-system Maps: how company strategy is delivered through a set of tailored activities (efficient - cost w/out compromising customer needs) Operations Manager: job is to improve the transformation processes Productivity: common measure of how well an organization is using its resources (plan workforce req., scheduling equipment, financial analysis), relative measure, compared with similar operations and over time, expressed as partial measures (output to one input), multifactor measures (output to a group of inputs), total measures (output to all inputs) FORMULA 1: Productivity = Quantity of output / Quantity of input FORMULA 2: Productivity Growth = (Current Period Productivity - Previous Period Productivity) / Previous Period Productivity * 100 FORMULA 3: VLC = P * CM * RF * BLC [VLC - value of a loyal customer, P - price (revenue per unit), CM - contribution margin, RF - repurchase freq. = # purchases / # years, BLC - buyers life cycle = 1 / (defection rate = 1 - customer retention rate)] Chapter 4: Production Processes (3 comp. & 4 calc. questions) Lead Time: time needed to respond to customer order Customer Order Decoupling Point: where inventory is positioned to allow entities in supply chain to operate independently (closer the quicker) Make to Stock Firms: firms that serve finished goods inventory (balance level of inventory against customer service, trade off between costs of inventory and level of customer service must be made, lean manufacturing) Assemble to Order Firms: combine a number of preassembled modules to meet customers specs. (flexibility, advantages from moving customer order decoupling point from finished goods to components) Make to Order Firms: make product from raw materials and parts Engineer to Order Firms: work with customer to design and produce (customer order decoupling point can be in raw materials or supplier inventory) Production Process Mapping; high-level map of supply chain process (first step in analyzing how material flows and where inventory is held) Types of Inventory: raw materials, work in process (WIP), finished goods Inventory measures: total avg. value of inventory (commonly tracked in accounting and finance, not useful for performance eval.), inventory turns (costs of goods sold divided by the avg. inventory value, provides a relative measure that has comparability), days of supply (the inverse of inventory turn scaled to days Littles Law: long-term relationship between the inventory (WIP), throughput (R, long term avg. rate that items flow), and flow time (T, time it takes to move from start to finish) Process Selection: selecting what type of production process to use (5 basic structures: project, work center (job shop), manufacturing cell, assembly line, continuous process FORMULA 1: Inventory (WIP) = Throughput (R) * Flow Time (T) FORMULA 2: Utilization (U) = Demand Rate / (Service Rate * # of Services) FORMULA 3: Break-even Analysis (Q*) = FC1 - FC2 / VC1 - VC2 [Total Cost = VC * Q + FC, whenever anticipated volume exceeds Q* produce in-house] Project Layout: product stays in fixed location (high degree of task ordering, arranging materials according to assembly priority) Workcenter: most common type of layout to arrange workcenters to optimize material movement (large interdepartmental traffic adjacent, particular type) Manufacturing Cell: allocating dissimilar machines to calls designed to work on products that have similar shapes and req. (group parts, identify dominant flow, regroup into cells) Assembly Lines: special purpose of building a product by going through a progressive set of steps done in areas called stations (linked by material handling device) Continuous Process: similar to assembly line except product continuously moves through the process Chapter 5: Service Processes (refer to Ch.4) Service Organizations: classified as who the customer is and what service is provided Customer Contact: physical presence of the customer in system (higher the degree of contact the more difficult to control) Creation of the Service: work process involved in providing the service In Services: capacity is the dominant issue, too much capacity leads to excessive costs, not enough capacity leads to loss of customer (waiting line models) Service Encounters: uses service-system design matrix, horizontal axis shows degree of contact, buffered core (physically separated), permeable system (penetrable by customer), reactive system (penetrable and reactive) Left Side Addresses: great amount of contact the greater chances for sale Right Side Addresses: impact on production efficiency as customer exerts more influence Pure Virtual Customer Contact: enable customer to interact with one another in open environment (ebay, second life) Mixed Virtual and Actual Customer Contact: customer interaction in a server moderated environment (youtube, wiki) Challenges: to keep tech functioning, policing through monitoring encounters Service Blueprint: standard tool for service process design (flowchart), unique feature is distinction made between the high customer contact vs. what customer does not see, made with line of visibility on flowchart Fail-Safe: designed to stop working when problems/mistakes arise Poka-Yokes: procedures that block or prevent inevitable mistakes (common in factories, warning methods, physical/visual contact, three Ts - task treatment, tangible)

Chapter 6: Quality Management and Quality Control (4 comp. & 8 calc. questions) Quality Management: systematic policies, methods, and procedures that make sure a product meets certain levels of quality and needs of customers Quality Mgt. Tools: total quality management (TQM), six sigma, lean operating systems Total Quality Management (TQM): entire org. excels on all dimensions important to customers 2 Operational Goals: careful design, consistent production Japan: culture of continuous improvement Dr. W. Edwards Deming: focus on bringing improvements, reduce uncertainty and variability, higher quality leads to higher productivity and lower costs, 14 points philosophy, Deming cycle (plan - study current situation, do - implement plan on trial basis, study - is trial working properly, act - standardized improvements) Dr. Joseph Juran: quality control handbook in 1951, defined quality as fitness for use, quality cost measurement, quality trilogy (quality planning - budgeting, control - cost and expense, improvement - cost reduction and profit improvement) Philip B. Crosby: quality is free in 1979 (top US corp. mgt.), absolutes of quality management (conformance to req. not elegance, no quality problem, no economics of quality, do it right the first time is always cheaper, cost of quality is the only performance measurement (expense of nonconformance), only performance standard is zero defects (ZD) Malcolm Baldrige National Quality Award: US gov. to US companies, stimulate efforts to improve quality, recognize achievements, publicize successful programs, improve competitiveness and performance, catagories (manufacturing - 1988, education and health care - 1999, non-profit - 2007), core values (leadership, strategic planning, customer and market focus, info and analysis, human resources, process management, business results (450 pts.)), benefits (winners share knowledge, motivation, obtain data and provide feedback, well-designed quality system) Design Quality: inherent value of product (performance, features, reliability, serviceability, aesthetics, perceived quality) Conformance Quality: degree to which the product or service meets design specs. Cost of Quality: costs assoc. with avoiding poor quality or incurred because of poor quality Appraisal Costs: inspection and testing costs to ensure quality Prevention Costs: sum of all costs (TQ training, planning, customer assessment, process control, quality improvement costs) Failure Costs: costs from faulty/defective products/services Internal vs. External Failure Costs: costs to fix problem before delivered to customer vs. after Quality Certification: International Org. of Standardization (ISO) promotes worldwide standards for quality improvement, productivity, and operating efficiency ISO 9000: set of international standards on quality management and quality assurance ISO 14000: set of international standards for assessing a companys environmental performance ISO 26000: set of international standards giving guidance on social responsibility Six Sigma Quality: method used to eliminate defects in products and processes, reduce variation, + or - 3, have no more than 3.4 defects per million Defects: mistake passed to customers, also called nonconformance Unit of Work: output of process FORMULA 1: Defects Per Million Opportunities (DPMO) or Errors Per Million (EPMO) = # of defects / 3 of opportunities * # of units Flowchart: diagram of sequence of operators Run Charts: line graph with data plotted over time Pareto Chart: arranges category from highest to lowest frequency (80/20 rule) Checksheet: basic form to standardize data collection Cause and Effect Diagram: shows relationships between causes and problems (fish bone diagram) Opportunity Flow Diagram: used to separate value-added from non-value-added Process Control Chart: assure processes are in statistical control Failure Mode and Effect Analysis (FMEA): identify, estimate, prioritize, and evaluate risk of possible failures at each stage Design of Experiments (DOE): test to see cause and effect relationship between process variables and output Quality Control (QC): ensure that good or service conforms to specs. And meets customer req. by monitoring and measuring processes and making necessary adjustments 3 Components of QC: performance standard or goal, means of measuring actual performance, comparison of actual performance with standard Quality at the Source: people responsible for the work control the quality of their processes by identifying and correcting any defects when they first occur Statistical Quality Control (SQC): the quantitative aspect of quality management, processes usually exhibit some variation in their output (common/random variation inherent in the process, assignable variation - caused by factors that can be identified and managed) Sampling: to find when the process has changed in some nonrandom way so that reason for the change can be quickly determined Process Control: monitors quality while the product or service is produced Statistical Process Control: testing random sample of output to determine preselected range production Control Charts: run charts to which two horizontal lines (control limits - LCL & UCL) are added to monitor process output to see if it is random Stability: stable system - governed by common causes, in control - if no special causes affect output, out of control - special causes are present Continuous Metric: calc. from data that are measured as the degree of conformance to specs on a continuous scale of measurement (length, volume, weight) Discrete Metric: calc. from data that are counted (number of flaws, years, accidents, good/bad) Control Chart Classification: continuous metric (mean chart - x-bar chart detects the shift of mean OR range chart - R chart detects shift of dispersion), discrete metric (Pchart - fraction defectives OR C-chart - # of defects) Type I Error: false negative (producer risk) Type II Error: false positive (consumer risk) FORMULA 2: X-Bar Chart

FORMULA 3: R-Chart

FORMULA 4: P-Chart

FORMULA 5: C-Chart

FORMULA 6: Process Capability (Cp)

FORMULA 7: Off-Centered Processes (Cpk)