3 - Operations Management Processes Flashcards
What do operating processes produce and deliver?
Goods and services to customers.
Why was managing operations considered critical in the late twentieth century?
Inspired by the remarkable results achieved by Japanese manufacturers.
What are the four operations management processes?
- Develop and sustain supplier relationships
- Produce products and services
- Distribute and deliver products and services to customers
- Manage risk
What is one objective for effective supplier relationships?
Lower the total ‘cost of ownership.’
What does the total cost of ownership include?
- Purchase price
- Costs of design and engineering
- Ordering materials
- Receiving materials
- Inspecting materials
- Returning materials
- Moving materials
- Storing materials
- Scrapping obsolete materials
- Reworking products due to defective materials
- Delays from late deliveries
- Expediting materials
True or False: The best suppliers are defined as low-price only.
False.
What does activity-based costing (ABC) enable companies to do?
Assign aggregate procurement costs to the procurement activities.
Fill in the blank: Companies strive to find suppliers that accept electronic orders and deliver products with no _______.
Defects.
What are some objectives for managing supplier relationships?
- Lower the cost of ownership
- Achieve just-in-time supplier capability
- Develop high-quality supplier capability
- Use new ideas from suppliers
- Achieve supplier partnership
- Outsource mature, noncore products and services
What initiatives have been applied to improve process performance?
- Reengineering
- Business process redesign
- Continuous improvement
- Activity-based management
- Total quality management
- Time-based management
What is a measure for improving process responsiveness?
Cycle time from start of production until product completion.
What does the distribution process aim to lower?
Cost-to-serve.
What are key objectives in risk management?
- Reduce the costs associated with financial distress
- Decrease taxes
- Reduce monitoring costs
- Provide internal funds for investment
What can effective risk management reduce for key undiversified investors?
The risks they face due to wealth concentration in the company.
Fill in the blank: Companies can manage risk by modifying their _______.
Operations.
What are some ways companies can employ to manage risk?
- Adjust capital structure
- Employ targeted financial instruments such as derivatives
What does a high level of debt influence regarding risk?
It increases the likelihood of financial distress.
True or False: Companies should seek to insulate themselves completely from all kinds of risks.
False.
What is a measure of purchasing process quality?
Percentage of orders that arrive with the correct volume and mix of items.
What percentage of purchases made electronically is used as a measure?
Percent of purchases made electronically (EDI or Internet).
Fill in the blank: The time from completion of product/service until ready for use by customer is called _______.
Lead time.
What is the cash-to-cash cycle?
Days of accounts receivable plus days of inventory less days of payables.
What does EBITDA stand for?
Earnings Before Interest, Taxes, Depreciation, and Amortization
What is the relationship between high-debt companies and profitability?
High-debt companies can benefit from the tax shield of interest payments and leverage high returns for shareholders.