Exam Study Flashcards
1
Q
What are the 2 types of decisions that are key to fitting an operations strategy to the firm’s overall competitive position and strategic goals?
A
Structural (decisions regarding a firm’s physical attributes)
Infrastructural (the policies and systems underlying operations, which in turn have implications for structural and other infrastructural operational decisions)
2
Q
Structural Decisions (4)
A
- Facilities (size, location, specialization)
- Capacity (amount to produce, type, timing)
- Sourcing and vertical integration (how much will be done internally and how much will be outsourced)
- Information process and technology (what equipment should be chosen, and how should they be located, connected and used)
3
Q
Infrastructural Decisions (7)
A
- Resource allocation and capital budgeting
- HR systems
- Work planning and control systems
- Quality systems
- Measurement and reward systems
- Product and process development systems
- Organization
4
Q
4 Components of Focus
A
- Product
- Process stages/technologies
- Geography
- Market and customer group
5
Q
Operations Strategy
A
set of goals, policies and restrictions that guide organizations in optimizing their operations to fulfill its organizational mission
6
Q
3 Tiers of Operations Strategy
A
Corporate Strategy - high-level decisions regarding how the firm will approach the industry and how it allocates resources to various activities, based on company values
Strategic Business Units (SBUs)/Business Strategy - Corporate strategies, but at a business subsidiary level – scope of that business and position in its respective industry
Functional Strategy - Support the type of competitive advantage being pursued. Includes strategies in operations, marketing/sales, financial control, research/development
***Value that a company embodies runs through all the tiers and inform, constrain, and unify strategies across the tiers.
7
Q
4 Types in Service Industry Matrix
A
Professional Services (financial advisor) Service Shop (general hospital) Service Factory (one-type hospital like Shouldice) Mass Services (flying experience)
8
Q
5 Types in Product Process Matrix
A
Project (shipyard) Job Shop (Airbus) Batch/Cell (H&M, textiles in general) Line (Tesla) Continuous flow product (refinery)
9
Q
Product Process Matrix characteristics at top end and low end (ALF)
A
ASSETS (General to Dedicated)
LABOR (High skill to Low skill)
FLOW (Intermittent to Continuous)
10
Q
Kaizen
A
Continuous Improvement
Combination of incremental improvement and radical/step improvement (incremental in workplace, eventually hit ceiling, then move to radical improvement)
How to implement -
- Measurement to know baseline
- Create SOPs to prevent backslide
11
Q
Process failure symptoms (4)
A
- Poor Morale (staff turnover, sick days)
- Schedule Adherence (fire fighting)
- Buffers (inventory, capacity, time)
- Workarounds
12
Q
Backsliding
A
Danger of just doing radical improvement
Reasons for failure/backsliding
- External consultants - no buy in
- Key personnel leave
- Wrong metrics
- Competing initiatives
13
Q
Root Cause Analysis Tool
A
Fishbone diagram / Ishikawa diagram / 5 whys
14
Q
Sandcone model (4 manufacturing capabilities)
A
CE - cost efficiency
S - speed
D - dependable (stable)
Q - quality
CAN ELIZABETH STAY a DEPENDABLE QUEEN?
Although in the short term you can trade off capabilities against one another, there is actually a hierarchy amongst the four capabilities.
Processes are improved by reductions in undesired variation and time. By improving one, you generally also improved the other.
15
Q
Quality
A
To consistently produce to customer specification
Need to be in control and capable (independent)
16
Q
Common Cause Variation (Stewart/Deming/Jwan)
A
Noise
Predictable from past-data
17
Q
Assignable Cause Variation (Stewart/Deming/Jwan)
A
Non-random
Not predicatable
18
Q
Process in control
A
Monitoring repeatability and consistency of the process
“early warning system”
Look for process walk (variation may be by shift, switching of machine) vs. random differences
A process is in control only if it exhibits common cause variation
As your process becomes better, more samples become necessary
19
Q
Where do control/specification limits come from?
A
Control limits come from own data
Specification limits come from customers
20
Q
SPC requirements
A
quantifiable, measurable, repetitive, actionable (implicit)
21
Q
p-chart
A
binary. often a lower limit of zero. “attribute” - defective yes/no
p = number of defective unites/total units inspected
22
Q
Just in Time (JIT)
A
Make only what is needed when it is needed in the right quantity
Reduce the seven wastes
23
Q
3Ms - Muda
A
WASTE - everything the customer is not willing to pay for (internal or external)
24
Q
3Ms - Mura
A
UNEVENESS - level scheduling (heijunka)
25
3Ms - Muri
OVERBURDEN - safe and productive workplace
26
Heijunka
level scheduling to eliminate mura
27
7 Wastes (TIMWOODt)
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Transportaion
Inventory (excess)
Motion (on the shop floor - spaghetti map)
Waiting
Overproduction (worst)
Overprocessing (wrong machine for the job)
Defect
(t)alent
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28
DEMING CYCLE / Ball and Wedge diagram of Continuous Improvement (PDCA)
Part of House of Lean base
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Ball that rotates:
Plan
Do it (on a trial basis)
Check (outcomes/risks)
Act (implement)
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Wedge:
Standardization - hold the gains, no backslide
29
Jidoka
Intelligent automation - principle of designing equipment to stop automatically and to detect and call attention to problems immediately whenever they occur.
30
Bullwhip effect (definition)
Order variance increases over time due to bad demand signals (from customer, retailer, distributor, factory)
Time is x-axis, Demand is y-axis
31
Bullwhip effect (formula)
Cov2/Cov1 = 2 -- order variance doubles in every cycle
Cov (Coefficient of variation) = standard deviation/mean (sigma over mu)
32
Root causes of bullwhip effect
1. System's effect/demand signal processing (time delays, tiers/decision points, variation/trigger [uncertainty])
2. Order batching (volume discounts, full truck loads) (aka Burbidge effect)
3. Rationing game (aka flywheel effect) and inflated orders (supply chain partners try to anticipate rationing by distributing by increasing order size/safety stock, not communicating this results in distributor causes them to think its an increase in customer demand)
4. Price fluctuations/promotions (end users buy what the need by stocking up, EDLP is effective in eliminating this)
(5. Lead times - safety stocks and order quantities are calculated from lead time and variability)
33
Causes of Supply Chain Distortion
Uncertainty (from down and up stream)
- Demand uncertainty
- Conversion or throughput uncertainty
- Supply uncertainty
- Actual and self-created uncertainty
34
Main objective of supply chain management
Achieving stable and reliable flows in the system. The more volatile the demand and delivery patterns, the more inventory and sub-optimally utilized capacity you can expect.
35
Demand uncertainty
weather, seasonality, general trend, sales promotions, new product introductions or new technologies, competitor actions
36
Conversion or throughput uncertainty
producing defects, machine stoppages/breakdowns, long change-overs, unpredictable lead times
These can be eliminated through use of lean production/six sigma tools.
37
Supply uncertainty
variable quality, poor on-time delivery performance, variable lead times
38
Actual and self-created uncertainty
Self-created uncertainty is created by poor coordination in the supply chain (sales promotions lead to self-created slump in demand).
Actual uncertainty is uncertainty created by the end customer.
39
Ways to mitigate supply chain distortion
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Vendor Managed Inventory (VMI)
Electronic Point of Sale data (EPOS)
Collaborative Forecasting (CF)
Collaborative Planning, Forecasting and Replenishment (CPFR)
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Information sharing and collaboration
Solution to bullwhip problem (think of the tiers of water and the floating balls as ordering decisions)
40
Vendor Managed Inventory (VMI)
Reduces supply chain distortion by removing decision making points. Reduces uncertainty and lead time (visibility and reduction of demand signals)
Customer passes inventory information to the supplier instead of orders.
Must agree on reorder point (ROP) and order-up-to point (OUP)
41
CPFR
Collaborative Planning, Forecasting and Replenishment
42
Which case study had an efficient supply chain and which had a responsive supply chain?
Efficient (stable demand) = Barilla
| Responsive = Zara
43
Kingman Formula
Think airport security - can't afford to load system to high degree if you want fast turnover and high variability
x-axis is capacity utilization (percentage), y-axis is wait time (queue) -- line moves up and left as variability increases
44
Total Supply Chain Cost Model
Static (unit costs)
Dynamic
Hidden
45
Static Costs
Material
Labor
Transportation (customs and duties)
46
Dynamic Costs
Labor cost inflation
Safety stock
Potential obsolescence
Pipeline inventory
47
Hidden Costs
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Political unrest
Labor unrest
Labor cost that remains in home country (quality)
Natural disasters
Tax/Currency movement
Corruption
IP loss
Governance
Quotas
Reputational risk
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48
Rock the boat analogy
Inventory masks problems
Safety stock is water
Rocks are damage, poor quality, shortages, equipment breakdowns, defects, DOWNTIME, QUALITY, LONG S/C
49
Little's Law
How much inventory do I have in a pipeline? MINIMUM WIP IS NEEDED TO RUN A FACTORY
Little's Law states that the minimum average WIP inventory (W) in a process is determined by the product of the average lead time (L) and average output rate (O) (inverse of cycle time)
Minimum WIP = lead time x throughput rate
Throughput rate is also cycle time
??? Lean production = reduce inventory by reducing lead time, little's law deals with reducing the inventory?
50
The 5 S's (of Lean Production House Keeping)
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Sort
Straighten
Sweep
Standardize
Sustain/self-discipline
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a methodical way to organize your workplace and your working practices, as well as being an overall philosophy and way of working.
51
Operating process
A process is a set of tasks to be performed in a defined sequence and uses inputs (such as labor, capital, knowledge, raw materials, purchased components, and energy) to create outputs that are of great value to customers and therefore to the organization itself
52
Two goals of the operating process
1. Deliver the customer promise - strategic positioning, achieve effectiveness
2. Create value for stakeholders - achieve efficiency
53
Sequential process
A set of tasks that must be performed in sequence, one after another
54
Parallel process
Tasks that can be performed at the same time. Outputs from parallel processes are typically integrated into one product at some point later in the process flow.
55
Work in Progress (WIP)
The number of units or partially completed units in the process at any point in time. WIP includes units currently being worked on, as well as those in WIP inventory.
WIP is separate from raw materials inventory (RMI) and finished goods inventory (FGI).
In a service, WIP can be customers, either receiving service or waiting to be served.
DOWNWARD POINTING TRIANGLE
56
Decision nodes
At this point in the process, the flow (of either customers or materials) can move in different directions.
DIAMOND WITH A QUESTION MARK
57
Information flow
The customer's order informs the decision as to which employee will serve that customer.
Indicated with a dotted line and an arrow
58
Measuring Task Time
Usually standard times, which can be defined as the average time that an employee (or customer in many service processes) with average skills will take to complete a task, under ordinary circumstances, and working at a sustainable pace.
59
Consideration of batch processes
It takes time to change a machine from processing one kind of part or product to another, so processing multiple units of the same product together will save changeover (or setup time).
In order to account for a batch process, we need to consider setup time and run time.
60
Setup time
Time taken to perform a task that is independent of the number of products or customers being processed
61
Run time
The time it takes to process each unit
62
Capacity
The number of units of product that a process can produce (denoted in unites of product per time period) or, for service processes, the number of customers who can be served (again, customers over a time period).
Capacity is an ideal, assuming nothing goes wrong to slow the process to shut it down.
63
Bottleneck analysis
The key to assessing the capacity of a process.
A bottleneck constrains product flow, decreasing the potential revenue and curing potential profits.
The bottleneck of a any process is the task that causes all other tasks to have idle time (could be more than one).
Creates blocked tasks and starved tasks.
64
Cycle time
The average time between the completion of successive units of product or, in the case of a service process, the average time between the departures of successive customers.
SYSTEM CYCLE TIME IS EQUAL TO THE TASK TIME OF THE BOTTLENECK TASK. All other tasks are either blocked or starved and have some idle time.
65
Cycle time (with multiple workers doing same task)
As the number of workers at the task increases, cycle time drops. Task time remains the same.
66
Capacity is the inverse of...
Cycle time
67
Cycle time is the inverse of...
Capacity
68
Capacity utilization
Output rate/capacity
69
How do you adjust cycle time and capacity utilization to make a process more efficient?
Balance the process -- make cycle times at each task as equal as possible and make the capacity utilization at each task as high as possible.
70
Labor utilization
Productive time spent by workers as a percentage of total time for which they are available. Time worked/time available for work.
71
Labor utilization per cycle
labor content per unit/(process cycle time*number of workers)
72
Caution for increasing labor utilization
For non-bottleneck tasks, increasing workers creates more inventory, not salable product.
73
Process effectiveness
Quality - ability of a product or services to meet or exceed customer expectations
Speed - how quickly and reliably they can produce and deliver a product to customers (or how quickly a customer can be served)
Flexibility - the ability to change or react with little penalty in time, effort, cost of performance.
Safety -- ?
74
Performance quality
A firm that competes on performance quality produces goods and services that deliver a high level of some set of performance dimensions.
75
Conformance quality
A product or service with high conformance quality delivers on its specifications, whether this means a high level of performance or not.
76
Lead time
The elapsed time between when an order is placed and when it is delivered. For physical product, this involves many players in the supply chain.
77
Throughput time (TPT)
The time it takes for one unit to compete a process from beginning to end.
Minimum TPT - only achieved by firms that produce rush orders. Not really a possible or useful metric.
Average TPT - Critical for organizations because it influences promised delivery time, a critical part of the customer promise.
78
Andon
Stop all work if there's a problem
79
Statistical Process Control and 3 steps
SPC - not a one-off check, but continuous monitoring.
1. Pick specification range (UTL and LTL)
2. Collect sample and calculate standard deviation
2. Cp = UTL - LTL/???
80
3 Types of Buffers
Inventory
Capacity
Time
81
Total Quality Management (TQM)
Quality DEVELOPMENT, MAINTENANCE, and IMPROVEMENT.
Most ECONOMICAL while serving customer
Customer Centric
Philosophy all buy in 'internal customers'
External operation only as good as internal operation
82
4 Costs of TQM
Prevention
Analysis
Internal failure costs
External failure costs
Graph: x-axis is amount of quality effort, y-axis is cost (Total cost is top line in crescent shape, cost of effort goes up to right, cost of error goes down to right. Optimum point is where latter to lines cross.)
83
Taylorism (scientific model)
Division of labor, work measurement, productivity
Managers manage, workers work
84
2 Delivery Models
1. Periodic delivery model (peaks and lows, saves money on transport)
2. Supplier-led delivery model (helps variability, decreases waste - profit for all?)
85
4 Vs of Characteristics (VaVaVoomVis)
VOLUME of their output
VARIETY of their output
VARIATION in demand for output
Degree of VISIBILITY which customers have on the production of output
4 Vs lead to 5 Performance Objectives
86
5 Performance Objectives (Quebec Delivers Snow For Canada)
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Quality
Dependability
Speed
Flexibility
Cost
```
Cumulative and dynamic process, there must be adjustment, improvement in all layers
Constantly building
Alignment
87
Strategy & Factors
Order Winning factors
Qualifying factors
Less Important factors
88
Operations Hierarchy (Low to High)
Sub-process level
Process Level
Operations Level
Supply Network Level
89
Just in Time Production Key Characteristics
- Moving from push to pull
- links all processes together (stops insulation of processes)
- short term may be slow, but long term better solution
- reduces levels of inventory, thus highlights problems (rock boat analogy)
- short term utilisation may decrease
- resolves issues and squeezes out waste
90
SPC Analysis (above or below 1)
If result = 1+, process is capable
| If result = 1-, process is not capable
91
2 errors in SPC
Type 1 - stop process when in control
| Type 2 - don't stop when out of control
92
2 criticisms of SPC
No push for improvement
Either in control or not - no differentiation of "in control"
Answer - Taguchi loss function (cost of variability)
93
House of Lean
Policy deployment (roof) is built on columns of JIDOKA and JIT and base of teams, kanban, removing waste, PDCA, 5s of Housekeeping
94
Process-focused organization
Organizes similar kinds of skills, activities and technologies into (usually physically) separate departments, with products (often in batches) moved by material handlers from one department to another.
JOB OR MACHINE SHOP
95
Product-focused organization
Work is organized by the product family (a grouping of products that are manufactured in a similar way) or by customer type. Each product type would have a dedicated production line.
96
Machine- vs. worker-paced lines
Machine-paced line can never build up inventory since the line keeps moving. However, reworks would pile up in the end so the manager needs to take measure at some point.
97
Job Shop CHALLENGE
Keep products moving to meet delivery dates.
98
Worker-paced lines CHALLENGE
Designing tasks to minimize delays, idle time, WIP inventories caused by bottlenecks.
99
Machine-paced lines CHALLENGE
Task design - finding the right division of labor to minimize idle time and to run the line fast enough to meed demand.
Ongoing - improve productivity, monitor staffing levels, and occasionally rebalance line.
100
Continuous-flow process CHALLENGE
Keeping the line running.
101
Process Knowledge
The degree to which we understand, and can specify, the conditions under which a process does what we've designed it to do, with limited variation in output. Process Knowledge implies explicit knowledge of the variables that are critical to scuccess and an ability to control them (Scale is 0 to 8)
102
Pull scheduling
driven by the replenishment signal that acts as trigger in the system. Needs a minimum amount of inventory to pull from.
103
Push scheduling (MRP)
production is driven by a central schedule (often based on forecast demand)
104
Push and pull envelope
customer pull operations are supported by forecast-push systems for those cases where the lead-time to provide the goods exceeds the willingness to wait of the customer.
105
Order Fulfillment Strategies (MAYBE)
Balancing production lead time and demand lead time
Make-to-stock
Assemble-to-order
Build-to-order
Engineer-to-order
106
Make-to-stock
goods made to be placed in stock prior to receiving an order
efficient production, but risk of obsolescence/high stock cost
107
Assemble-to-order
Dell Model
Producers hold components in stock to assemble an order as required by the customer.
Responsive to customization but cost of holding components remains.
108
Build-to-order
Material ordered and product made only after the buyer's order is received. No cost of holding goods or components, but may be less efficient.
109
Engineer-to-order
Product designed and built to customer order (consulting project)
110
Types of inventory
Raw materials, WIP, Finished Goods, Safety/Cycle stock
"Inventory is a substitute for information" - Hammer
111
Safety stock
a non-active component to protect against fluctuations of demand, production and supply.
112
Cycle stock
an active component that depletes over time and is replenished cyclically. (Inventory sawtooth)
113
Materials Requirements Planning (MRP)
Computer system that calculates the exact requirements of components and materials for a given product, or more accurately, for a complete schedule of products.
114
MRP inputs (3)
1. Master Production Schedule (MPS) - schedule of what should be produced at end item. Effectively a mixture of actual customer orders and forecast demand.
2. Bill of materials (BOM) - file that identifies which materials are needed to produce the item at the end of service.
3. Inventory master file - database that captures all relevant information for each SKU, including how many items are currently on order and held in inventory
115
MRP outputs (3)
1. Work orders - telling the respective processes what to work on
2. Purchase orders - telling the respective suppliers what materials are needed and when
3. Rescheduling notices - whenever there is a problem with previous schedule, it will recalculate
116
Problems with MRP system
1. MRP system works on fixed batches and fixed lead times (lengthens lead times, increasing WIP inventory....MRP holds more WIP than JIT)
2. MRP system plan end item levels - does not synchronize between items that may be sharing parts can cause uneven order for suppliers, giving rise to bullwhip effect)
3. Weakness in production scheduling (JIT consistently outperforms here)
117
Kanban
Used in JIT
Signals the authorization of movement and the production of material.
WIP is limited to what is authorized by the aggregation of production specified in Kanbans.
WITHDRAWAL and PRODUCTION
118
Withdrawal Kanban
allows for material to be removed from the kanban supermarket
119
Production Kanban
allows a process to produce a replenishment batch once inventory is withdrawn from the kanban supermarket
120
3 advantages of JIT system
1. Prevents overproduction
2. Limits the total WIP
3. Beats MRP on both lead time and inventory levels
121
Weaknesses of JIT system
The system itself is more fragile.
Schedule variability needs to be kept below 5-10% around planned levels.
System is tightly controlled and thus unable to cope with large swings in volume or product mix.
122
When do we forecast?
When production lead time exceeds demand lead time.
123
3 golden rules of forecasting
1. Forecast is always wrong
2. The longer the forecast horizon, the worse the forecast becomes
3. The less aggregated, the worse the forecast becomes
124
Performance Measures (+MMS)
Management
Morale
Stability
125
Pareto Analysis
Ranks problems, issues or causes from most to least important. The operating concept is the Pareto rule, which states that approximately 8-% of the issues can be attributed to 20% of the possible causes. Helps identify fixes that will have the most impact.
126
Process Improvement Tools
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Deming Cycle
Fishbone Diagram (root cause analysis)
Pareto analysis
Trade-off model
Sand cone model
Six Sigma System
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127
Trade-off model
Unless there is some slack in the system, improving any one of the four basic manufacturing capabilities (sand cone), must necessarily be at the expense of one or more of the other three.
128
Six sigma system
A managerial approach which uses a variety of statistical and problem-solving tools to process problems and reduce defects. In contrast to the conventional 3-sigma test, six sigma is more rigorous with goal of 3.4 defects per million.
129
What makes up quality for products?
functionality/performance, ease of use, reliability, aesthetics, durability, reputation, conformance (consistency)
You can only control conformance at production stage
130
What makes up quality for services?
responsiveness, adherence to specification, access, assurance, empathy
131
Objective of Process Control
Detect variability, reduce variability
132
Mean chart
the mean chart captures averages from a series of samples. it is a sequential (time-ordered) plot of the sample means.
reflects "central tendency" and shows any changes in the averages across the samples.
133
Range chart
A time-ordered plot of the difference between the highest and lowest value in a series of samples.
Measures dispersion or "spread" within each sample
134
Process Capability Ratio
Cp = USL-LSL/2zo
Compares the full allowable range to process variability
+1 or below 1
135
Process Capability Index
similar to process capability ratio, but accounts for the possibility that the process mean is not centered between the specification limits. It measures the distance between the process mean and the nearest specification limit.
Cpk = minimum of [Upper specification limit-x/3o, x-lower specification limit/3o]
136
poka yoke
failsafe devices in the production process (sensors, templates, etc.) that automatically stop the line when an abnormality occurs
137
Drivers of Globalization
Arbitraging labor conditions/cost
Utilization of time difference
Efficient transportation
Access to local market
138
Supply Chain Risk Management
Location pooling - inventory from multiple territories and locations is combined into a central or regional facility, which minimizes the risks of stock-outs or overstocking
Product pooling or postponement - product configuration is delayed using a modular design, which can serve overall product demand with fewer components (HP)
Capacity pooling - each production facility produces several models, in order to counter an peaks or troughs for individual models.
139
3 Supply Chain Enemies
Inventory and delays - worsens and 'swings' of amplification. the longer the response time to a change, the worse the swing upstream. particular problem for global supply chains
Unreliability and uncertainty - any kind of uncertainty needs to be covered with inventory
Hand-offs or decision points - every tier in the system bears the danger of distorting the demand signal, as planners tend to have "misperceptions" of the actual demand. problem of double guessing by forecasting based on someone else's forecast.
140
3 Ts of highly effective supply chains
Time - lead-time results in bullwhip and inventory
Transparency - lack of forward visibility creates uncertainty and stock or unused capacity
Trust - long-term collaborative supplier relationships outperform short-term adversarial ones
141
Triple-A supply chain
Agility - respond to changing customer needs
Adaptability - adapt to long-term changes in markets and technology
Alignment - align incentives to enable cooperation and coordination across tiers in the chain
142
fallacy of the "one best way"
emulation of the best practices often don't work, since all operations have different characteristics
143
Legacy of mass production
alternative approach to mass production sought -- long running time, matching capacities of equipment, ample inventory bugger to deal with erratic demand
remains underlying premise due to simplicity and clarity
144
Contingency approach (Skinner)
different companies have different strengths and weaknesses, hence different yardsticks of success
different ways of operation functions result in different operating characteristics, making it easier/harder to copy one another
rather than adopting "one best way", task for an operations organization is to seek "fit" between business unites chosen approach to competition and the way operation is designed.
- lean production not necessarily holy grail
- not appropriate in all situations
- applying lean production does not create enduring strategic advantage
145
Age of Lean
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Japanese system achieving reliability, speed and flexibility
achieved the elimination of waste
generalist approach to hr
horizontal communication
cellular production
```
146
Mind Map of Operations Management
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Interchangeable parts
Mass Production
TPS
TQM
Lean and Six Sigma (develop around the same time)
Lean/Six Sigma
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147
Process performance (internal)
Efficiency (relative term) - benchmarking, in relation to standard or time
Productivity (absolute term) - sum of outputs over sum of inputs
148
Process performance (external)
QCD
Quality
Cost
Time (delivery)
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Service
Flexibility
Management
Morale
Safety
Sustainability
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