OPPS FINAL STUDY GUIDE
OPPS FINAL STUDY GUIDE BUSMGT3230
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This 42 page Study Guide was uploaded by Brittany Gajarsky on Monday February 9, 2015. The Study Guide belongs to BUSMGT3230 at Ohio State University taught by Veech in Fall. Since its upload, it has received 226 views. For similar materials see Operations Management in Business at Ohio State University.
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Date Created: 02/09/15
OPPS FINAL STUDY GUIDE CH5 KRM5 pp 157188198 Skip Example 52 p 174 0 Skip Solved Problem 4 I0 188 Costs of Quality DEFECT any instance when a process fails to satisfy its customer Four Main Costs 1 Prevention costs associated with preventing defects before they happen 2 Appraisal costs incurred when the rm assesses the performance level of its processes 3 Internal Failure costs resulting from defects that are discovered during the production of a service or a product a 2 Categories i Rework incurred if some aspect of a service must be performed again or it a defective item must be rerouted to some previous operations to x the defect ii Scrap incurred if a defective item is un t for further processing 4 External Failure costs that arise when a defect is discovered after the customer receives the service or productbad word of mouth a Warranty written guarantee that the producer will replace or repair defective parts or perform the service to the customer s satisfaction Deceptive Business Practices 1 The conduct of the provider is intentional and motivated by a desire to exploit the consumer 2 The provider conceals the truth based upon what is actually known to the provider 3 The transaction is intended to generate a disproportionate economic bene t to the provider at the expense of the consumer TQM a philosophy that stresses here principles for achieving high levels of process performance and quality 1 Customer satisfaction internal or external customers are satis ed when their expectations regarding a service or product have been met or exceeded 0 Quality a term used by customers to describe their general satisfaction with a service or a product a Conformance to Speci cations process that produced the product or service is bing judged relates to consistent quality on time delivery or delivery speed b Value how well the service or product serves its intended purpose at a price customers are willing to pay Two factors must be balanced out to make value for the customer i Serviceproduct development process ii Firms competitive priorities relating to top quality versus low cost operations c Fitness for Use convenience of a service the mechanical features of a product or other aspects Ex you may de ne the quality of the entertainment center you bought based on the basis of how easy it was to assemble and its appearance and styling d Support just as important to customers as the quality of the service or product itself e Psychological impressions peope evaluate based on this includes atmosphere image aesthetics 2 Employee involvement changing organizational culture and encouraging team work a Cultural Change i Customer internal or external ii External customer people or rms who buy the service or product iii lnternal customers employees in the rm who rely on the output of other employees iv Quality at the Source a philosophy whereby defects are caught and corrected where they were created b Teams small groups of people who have a common purpose set their own performance goals and approaches and hold themselves accountable for success i Employee empowerment moves responsibility for decisions further down the organizational chart to the level of the employee actually doing the job ii Three approaches to teamwork 1 Problem solving teams also called quality circles small groups of supervisors and employees who meet to identify analyze and solve process and quality problems 2 Special purposed teams groups that address issues of paramount concern to management labor or both 3 Self managed team a small group of employees who work together to produce a major portion or sometimes all of the service or product 3 Continuous improvement in performance quotKAIZENquot the philosophy of continuously seeking ways to improve processes Identi es bench marks of excellent practice and instills a sense of ownership in the process a Reduce waste monetary scrap or employee number etc b Virtually any processes are in the best position to improved and that most people closely associated with it are the ones who should id the changes to be made c SPC statistical process of control methods and trust should be given to employees d PLANDOSTUDY ACT deeming wheel Used by rms actively engaged in continuous improvement to train their work teams in problem solving Six Sigma A comprehensive and exible system for achieving sustaining and maximizing defects and variability in process A close understanding of customers needs drives it Improvement model 6 Sigma 1 De ne determine the characteristics of the processes output that are critical to customer satisfaction and identify any gaps between these characteristics and the processes capabilities 2 Measure quantify the work of the process does that affects the gap 3 Analyze use the data on measures to perform process analysis use tools pirate charts scatter diagrams and cause and effect diagrams 4 Improve modify or redesign existing methods to meet the new performance objectives and make changes 5 Control monitor the process to make sure that high performance levels are maintained tools can be used Green Belts devote part of their time to teaching and helping teems with their projects and the rest of they time to their normal duties Black Belts are full time teachers and leaders of teams involved in six sigma projects Master Black Belts full time teachers who review and mentor black belts Acceptance Sampling Acceptance Sampling the application of statistical techniques to determine if a quantity of material from a supplier should be accepted or rejected based on the inspection or test of one or more samples Acceptable quality level AQL a statement of the proportion of defective items that the buyer will accept in a shipment 1 Random sample is taken from a large quantity of items and tested or measured relative to the speci cations or quality measures of interest 2 Sample passes low number of defects the entire quantity of items is accepted 3 If it fails option a is 100 of items are tested or option b the entire order is returned Statistical Process Control The application of statistical techniques to determine whether a process is delivering what the customer wants Control Charts used to primarily detect defectiveness of services or products or to indicate that the process has changed and that the services or products will deviate from their design speci cations unless something is done to correct the situation EX of process changes 1 Decrease in the average number of complaints at a hotel per day 2 Increase in proportion of defective gear boxes 3 Increase in the time to process a mortgage app etc Variation of Outputs no two services are exactly alike because all their sources are variations Best to minimize options 1 Performance measurements can be measured in two ways a Variables service or product characteristics such as weight length volume or time that can be MEASURED b Attributes service or product characteristics that can be quickly counted to acceptable performance yes no decisioness effort and fewer resources 2 Sampling the most through approach to inspection is to inspect each service or product a Complete inspection used when the costs of passing defects to an internal or external customer out weigh the inspection costs b Sampling plan a plan that specifies a sample size the time between successive samples and decision rules that determine when action should be taken c Sample size a quantity of randomly selected observation of process outputs Sample Distributions estimate a variable or attribute measure for the output of the process with out doing a complete inspection Estimate the parameters of the process distribution using stats such as the sample mean and the sample rangestandard deviation Sample statistics have their own distribution 1 Sample mean the sum of the observations divided by the total number of observations xi observation of a quality characteristic time N total time Barmean 2 Range the difference between the largest observation in a sample and the smallest Standard deviation the square root of the variance of a distribution Two categories of variation 1 Common Causes the purely random unidenti able sources of variation that are unavoidable with the current process Symmetric distribution has the same number of observations above and below the mean most orbs near the center Skewed distribution have a greater number of observations either above or below the mean 2 Assignable causes of variation aka special causes any variation causing factors that can be identi ed and eliminated EX employee needing training or a machine needing repair Control Charts a time ordered diagram that is used to determine whether observed variations are abnormal has center line nominal and cull and local A process that falls between cull and local indicates that the processes are exhibition common causes of variation If it is not inbetween the two indicates that the process is exhibiting assignable causes of variation this does not always mean poor quality Managers can use control charts in the following ways 1 Take a random sample from the process and calculate a variable or attribute performance measure 2 If it falls outside the charts control limits or exhibits unusual behavior look for an assignable cause 3 Eliminate the cause if it degrades performance incorporate the cause if it improves performance Reconstruct the control chart with new data 4 Repeat the procedure periodically Take action if ve or more actions show a downward or upward trend even if cull and local have not been exceeded Two types of error that are associated with control charts errors happen because they are based on sampling distributions 1 Type I Error occurs when the conclusion is made that the process is out of control based on a sample result that falls outside the control limits when in fact it is due to pure randomness 2 Type II Error occurs when the conclusion is that the process is in control and only randomness is present when actually the process is out of statistical control Statistical Process Control Methods SPC useful for both measuring the current process performance and detecting whether the process has changed in a way that will affect future performance Control Charts for Variables 1 RChart range chart is used to monitor the process variability a To calculate the range or a set sample of data Subtract the smallest from the largest measurement in each sample 2 XChart xbar chart used to see whether the process is generating output on average consistent with a target value set by management for the process or whether its current performance with respect to the average of the performance measure is consistent with past performance Control Charts for Attributes 1 2 PCharts commonly used control chart for attributes A chart used for controlling the proportion of defective services or products generated by the process CCharts a chart for controlling the number of defects when more than one defect can be present in a service or product if there is a stain on lots of shirts etc a Poisson distribution based on the assumption that defects occur over a continuous region on the surface of a product or a continuous time interval during the provision of a service two or more defects at more than one location on the surface or at any instant of time is negligible Process Capability Process Capability the ability of the process to meet the design speci cations for a service or product a Nominal value how design speci cations are expressed A target for design speci cations target b Tolerance an allowance above or below the nominal value i EX the turn around time results to the attending physicians of 25 minutes and a tolerance of 5 minutes because of the need for speed under life threating conditions Process Capability index formula Measures how well the process is centered as well as whether the variability is acceptable bench mark of 3 std Process Capability Ratio the tolerance width divided by standard deviations formula Steps for using continuous improvement to determine the capability of a process Step 1 collect data calculate mean and standard deviation of the process output distribution Step 2 use the data from the process distribution to compute process control charts such as an xbar chart and an rchart Step 3 take a series of at least 20 consecutive samples of size n from the process and plot Step 4 calculate the process capability index if the results are acceptable the process is capable and document any changes made to the process If the results are unacceptable calculate the process capability ratio Quality Engineering an approach originated by genichi taguchi that involves combining engineering and statistical methods to reduce cost and improve quality by optimizing product design and manufacturing processes Quality Loss Function The rationale that service or product that barely conforms to the speci cations is more like a defective service or product than a perfect one Rationale a service or product that barely conforms to the speci cations is more like a defective service or product than a perfect one Reduce all variability International Standards ISO 90012008 Documentation Standards a set of standards governing documentation of a quality protection Address QUALITY MANAGEMENT by specifying what the rm does to ful ll the customer s quality requirements and applicable regulatory requirements while aiming to enhance customer satisfaction and get continuous improvement of its performance It says NOTHING about the actual quality of a product ISO 140002004 Environmental Management System documentation standards that require participating companies to keep track of their raw materials use and their generation treatment and disposal of hazardous wastes Addresses ENVORONMENTAL MANAGEMENT a Environmental Management System requires a plan to improve performance in resource use and pollutant output b Environmental labeling de nes terms such as recyclable energy ef cient and safe for the ozone layer c Life cycle assessment evaluates the lifetime environmental impact from the manufacture use and disposal of a product ISO 260002010 Social Responsibility Guidelines international guidelines for organizational social responsibility aka ethical behavior Vountary Seven core subjects are covered 1 Human rights 2 Labor practices 3 The environment 4 fair operating practices 5 Consumer issues 6 Community involvement and development 7 The organizationBaIdrige Performance Excellence Program a program named after the late secretary of commerce Malcolm baldridge who was a strong proponent of enhancing quality as a means off reducing the trade de cit organizations vie for an award that promotes recognizes and publicizes quality strategies and achievements SEVEN MAJOR CRITERIA FOR THE AWARD 1 Leadership 2 Strategic planning 3 Customer focus 4 Measurement analysis and knowledge management 5 Workforce focus 6 Operations focus 7 Results most weight is given to this criteria 8 CH4 KRM4 pp 119144 Skip quotWork Measurement Techniquesquot pp 127129 Process Analysis the documentation and detailed understanding of how work is performed and it can be redesigned 3 STEPS 1 Identify Opportunities managers must pay attention to 1 Supplier relationship 2 New service product development 3 Order ful llment 4 The customer relationship Deiver value to the external customers Suggestion System is a voluntary system by which employees submit their ideas on process improvements 2 De ne the Scope establishes the boundaries of the process to be analyzed Design Team a group of knowledgeable team oriented individuals who work at one or more steps in the process conduct the process analysis and make the necessary changes Internal or External Facilitators know process analysis methodology Guides that train the design team Steering Team if the design team cuts across many departmental lines it may bene t for having quotseveral managers from various departments headed by a project manager who oversees the process analysis Document the Process includes making a list of the processes inputs suppliers internal or external outputs and customers in or ex Then shown in a diagram Next part is understanding the different steps preformed in the process 4 Evaluate Performance good performance measures to evaluate a process for clues on how to improve it a METRICS performance measures for the process and the steps within it b Start with competitive priorities must be speci c once the metrics are identi ed info must be collected on how the process is currently performing on each one 5 Redesign the process disconnects should be identi ed and xed 6 Implement changes widespread participation is essential because it builds commitment Five techniques are effective for documenting and evaluating processes 1 Flowchart traces the ow of information customers equipment or materials thorough the various steps of a process It is important to id what is being traced 2 Swim Lane Flow Chart visual representation that groups functional areas responsible for different sub processes into large lanes It is most appropriate when the business process spans several department boundaries 3 Service Blueprints a special owchart of a service process that shows which steps have high customer contact Create three levels 1 Customer is in control 2 Customer interacts with the service provider 3 Service is removed from the customers control when work is being performed or the invoice is prepared Work Measure Techniques 1 Time study Method A work measurement method using a trained analyst to perform four basic steps in setting a time standard for a job or process selecting the work elements no nested processes within the process to be studied timing the elements determining the sample size and setting the nal standard The allowance is expressed as a proportion or percent of the total NORMAL time Elemental Standard Data when products or services are highly customized job processes prevail and process divergence is great a database of standards compiled by a rms analyst for basic elements that they can draw on later to estimate the time required for a particularjob Predetermined Data Approach a database approach that divides each work element into a series of micro motions that makes up the element The analyst then consults a published database that contains the normal times for the full array of possible micro motions Work Sampling Method estimates the proportion of time spent by people or machines on different activities based on observations randomized over time Learning Curve analysis takes into account that learning takes place on an ongoing basis such as when new products or services are introduced frequently 1 Learning CURVE a line that displays the relationship between processing time and the cumulative quantity of a product or service produced Process Charts an organized way of documenting all the activities performed by a person or group of people at a workstation with a customer or working with certain materials it analyzes a process using a table and provides information about each step in the process 5 categories Operation transportation inspection delay storage Data Analysis Tools Checklist a form used to record the frequency of occurrence of certain process failures Process failure any performance shortfall such as error delay environmental waste rework and the like Histograms summarizes data measured on a continuous scale showing the frequency distribution of some process failure in statistical terms the central tendency and dispersion of the data Bar Chart a series off bars representing the frequency of occurrence of data characteristics measured on a yes or no basis Pareto Chart a bar chart on which factors are charted on the horizontal axis in decreasing order of frequency Scatter Diagrams a plot of two variables showing whether they are related can be used to verify or negate this suspicion One data observationone pint Cause and Effect Diagrams a diagram that relates a key performance problem to its potential causes aka shbone diagram Graphs representations of data in a variety of pictorial forms such as line charts and pie charts Pie charts useful for showing data from a group of factors that totals 100 percent Process simulation the act of reproducing the behavior of a process using a model that describes each step Brainstorming letting a group of people knowledgeable about the process propose ideas for change by saying whatever comes to mind Benchmarking a systematic procedure that measures a rms processes services and products against those of industry leaders Competitive benchmarking based on comparisons with a direct industry competitorfunctional benchmarking compares areas such as admin customer service and sales operations with those of outstanding rms in the industry nterna Benchmarking involves using an organizational unit with superior performance as the benchmark for other units Can be advantageous if the rm has many different units most accessible Four steps in benchmarking 1 Plan 2 Analysis 3 Integration 4 Action Seven MISTAKES in managing processes 1 Not connecting with strategic Issues 2 Not involving the right people in the right way 3 Not giving the design teams and process analysts a clear charger and then holding them accountable 4 Not being satis ed unless fundamental quotreengineeringquot changes are made 5 Not considering the impact on people 6 Not giving attention to implementation 7 Not creating an infrastructure for continues process improvement CH 8 KRM8 pp 275299 0 Skip quotDetermining the Number of Containersquot and Example 82 pp 291292 Skip Solved Problem 2 p 299 Continuous Improvement using a Lean Systems Approach Lean Systems Operations systems that maximize the value added by each of a company s activities by removing waste and delays from them Just In Time Philosophy the belief that cutting unnecessary capacity or inventory and removing nonvalue added activities in operations can eliminate waste JIT System organizes the resources information ows and decision rules that enable a rm to realize the bene ts ofjit principles EIGHT types of WASTE 1 Overproduction manufacturing an item before it is needed making it difficult to detect defects and creating excessive lead times and inventory 2 Inappropriate Processing using high precision equipt when simpler machines would suffice 3 Waiting wasteful time incurred when product is not being moved or processed 4 Transportation excessive movement and handling material between processes 5 Motion unnecessary effort related to bending stretching walking lifting 6 Inventory excess inventory hides problems on the shop oor increases lead times etc 7 Defect result in rework and scrap 8 Underutilization of Employees failure of the rm to learn from and capitalize on the employees knowledge 2 supply Chain Considerations in Lean Systems CLOSE supplier Ties suppliers are located in close proximate with the manufacturer SMALL lot sizes lots are a quantity of items that are processed together pass through the system faster do caused increased setup frequency Setup a group of activities needed to change or readjust a process between successive lots of items sometimes referred to as changeover Process Considerations in Lean Systems Pull Method of Work Flow consumer demand activates the production of a good or service Push method not mph ln lean systems involves using forcasts of demand producing and producing the item begins in advance of when the customer needs it Quality at the Source which is a philosophy whereby defects are caught and corrected where they are created Jidoka automatically stopping the process when something is wrong and then xing the problems on the line itself as they occur Pokayoke mistake proo ng methods aimed at designing fail safe systems that minimize human error Andon a system that gives machines and their opperators the ability to signal the occurance of any abnormal condition as tool malfunction shortage of parts or the product being made outside the desired speci cations Uniform Work Station Loads Takt Time the cycle of time needed to match the rate of production to the rate of sales or consumption Heijunka the leveling of production load by both volume and product miz 1 mixed model assembly producing a mix of models in smaller lots Standardized Components and Work Methods Flexible Work Force Automation Five S SS practices a methodology for organizing cleaning developin and sustaining a productive work environment 1 sort separate needed items from unneeded items 2 Straighten neatly arrange what is left with a place for everything in its place 3 Shine clean and wash the work area until it shins 4 Standardize establish schedules and methods of performing the cleaning and softening Formalize the cleanines 5 Sustain create discipline to perform the rst four practices Total Preventive Maintenance TPM reduce the frequency and duration of machine down time Achieving Line Flow layouts with low volume processes One Worker Multiple Machines a work station that a worker operates several different machines simultaneously to achieve a line flow Group Technology an option for achieving line ow layouts with low volume processes this technique creates cells not limited to just one worker and has a unique way of selecting work to be done by the cell Value Stream Mapping Value Stream Mapping is a widely used qualititiave lean tool aimed at eliminating waste or muda VSM crates a visual map of every process involved in the ow of materials and information in a products value chain future current state and implementing a plan The Ka ban System Kanban Card or visible record that refers to cards used to control the ow of production through a factory Container System sometimes the container itself can be used as a signal device Container less system systems requiring no containers have been devised use their own work benches to place completed products Process Considerations rms using lean systems have some dominant work ow Inventory and Scheduling need to have stable master productions schedules short setups and frequent reliable supplies of materials and components Schedule Stablility daily production schedules in high volume make to stock enviroments must be stable for extended periods Setups if inventory advantages of a lean system are to be realized small lot sizes must be used Purchasing and Logistics if frequent small shipments of purchased items cannot be arranged with suppliers large inventory savings for these items ca nt be realized KRM2 pp 4977 CH 2 Project an interrelated set of activities with a de nite starting and ending point which results in a unique outcome for a speci c allocation of resources Goals of Projects 1 complete the project on time or earlier 2 do not exceed the budget 3 meet the speci cations of the satisfaction of the customer Project Management a systemized phased approach to de ning organizing planning monitoring and controlling projects is one way to overcome that chaHenge Program an interdependent set of projects with a common strategic purpose De ning the Scope and Objectives of a Project 0 Project Objective Statement a thorough statement of a projects scope time frame and allocated resources 0 Scope provides a succinct statement of project objectives and captures the essence of the desired project 0 Scope Creep changes in scope in large enough qty they can be the primary cause of failed projects 0 Every thing should be speci c 0 Selecting the Project Manager and Team 0 The qualities of a good project manager should be well aligned with the roles a project manager must play o Facilitator resolve con icts good leadership skills and a quotsystems view which is a view that encompases the interaction of the project its resources and its deliverables with the rm as a whole 0 Communicator project progress and needed additional resources must be communicated Also must talk to the team 0 Decision Maker good project managers will be able to make tough decisions 0 Selecting the team is just as important as the selections of the project manager 0 Technical competence team members should be able to do the task assigned 0 Sensitivity sensitive to all interpersonal con icts that arise o Dedication team members should feel passionate to get the project done 0 Recognizing Organizational Structure 0 Functional the project is housed in a speci c department or functional area 0 Pure Project team members work for the project manager 0 Matrix a compromise between the functional and pure project structure Planning Projects lnvolve 5 Steps 1 De ning the Work Breakdown Structure WBS a statement of all work that has to be completed Project manager must work closely with the team to id all activities a Activity the smallest unit of work effort consuming both tie and resources that the project manager can schedule and control b Each activity must have an owner who is responsible for doing the work c Activity Ownership avoids confusion in the execution of activities and assigns responsibility for timely completion 2 Diagramming the Network helps managers monitor and control projects These methods treat a project as a set of interrelated activites that can be visualy displayed in a network diagram a Network Diagram a network planning method designed to depict the relationships between activities that consists of nodes circles and arcs arrows b Two network planning methods i Program evaluation and review technique PERT created for the navys Polaris missile project which involved 3000 separate contractors and suppliers ii Critical path method developed as a means of scheduling maitnence shutdowns at chemical processing plants iii Today refered to as one bene ts are as follows 1 Considering projects as networks forces project teams to identify and organize the data required 2 Networks enabe project managers to estimate the completion time of projects 3 reports highlight the activities that are crucial to completing projects on schedule Frees up time overall for other activities network methods enable project managers to analyze the time and cost implications of resource trade offs c Est Precedence Relationship a relationship that determines a sequence for undertaking activities It specifies that one activity cannot start unitl a preceding activity has been completed d Estimating Activity Times statistical methods can be used and learning curve methods or using managerial opinions based on prior expedences e Activity on node AON network an approach used to create a network diagram in which nodes represent activities and arcs represent the precedence relationships between them 0 Developing the Schedule 0 1 Critical Path the sequence of activities between a projects start and nish that takes the longest time to complete If the critical path is delayed the whole project is delayed estimating the time of completion of a project is curucial Path the sequence of activities between the projects start and nish 0 2 Project Schedule nish the project as quickly as possible as determined by the critical path It is speci ed by the start and nish times for each activity Earliest nish time EF equals its earliest start time plus its estimated duration t gt EFES t Earliest Start Time ES the earliest nish time of the immediately preceding activity Latest nish time LF the latest start time of the activity that immediately follows Latest start time LS the latest nish time minus its estimated duration t or LSLFt o 3 Activity Slack the maximum length of time that an activity can be delayed with out delaying the entire project Activities on the critical path have zero slack Highlights activities that need the most attention It can be calculated one of two ways 1 SLSES or SLFEF o 4 Gantt Chart a project schedule usually created by the project manager using computer software that superimposes project activities with their precedence relationships and estimated duration times on a time line Analyzing CostTime TradeOffs Total Project Costs the sum of direct costs indirect costs and penalty costs These costs are dependent on either activity times or project completion time Direct Costs include labor materials and any other variable overhead costs that can be avoided by reducing total project time Penalty costs if it extends beyond some speci c date Incentive may be provided by early completion Crashing expediting some activities to reduce overall project completion time and total project costs Cost to crash in order to asses the costs the manager needs to know how to calculate the costs 1 normal time NT is the time necessary to complete an activity under normal conditions 2 Normal Cost NC the activity cost associated with the normal time 3 Crash Time CT is the shortest possible time to complete an activity 4 Crash Costs CC is the activity cost associated with the crash time Minimizing Costs the objective of cost analysis is to determine the poject schedule that minimizes total project costs MinimumCost schedule a schedule determined by starting with the normal time shciele and crashing activites along the critical path in such a way that the costs of crashing do not exceed the savings in indirect and penalty costs Assessing Risk it is a measure of the probability and consequence of not reaching a de ned projected goal uncertainty 0 Risk management plans a plan that Identi es the key risks to a projects success and prescribes ways to circumvent them 0 Strategic t the project may not be a good strategic t in that it may not be clearly linked to strategic goals of the rm 0 Serviceproduct Attributes if the project involves the development of a new service or product 0 Project team capability the project team may not have the capability to complete the project successfully because of the size and complexity of tec involved 0 Operatins ops risk because of poor information accuracy lack of communication and other things Probability distributions of activity times can be calculated using two approaches 1 computer simulation time for each activity is randomly choosen 2 statistical analysis approach that requires that activity times be stated in terms of thre reasonable time estimates a the OPTIMISTIC TIME aka the shortest time in which an activity can be completed if all goes exceptionally well b most likely time the probable time required to perform an activity c pessimistic time the longest estimate time required to perform an activity i Two key assumptions are required 1 All estimated times are accurate 2 Std is one sixth the range ba Monitoring an controlling projects 1 open issues and risks 2 Schedule status Monitoring Project Resources 4 major phases of the product lifecycle 1 de nition and organization 2 planning 3 execution 4 close out Resource leveling attempt to reduce peaks and valleys in resources Resource allocation the assignment of resources to the most important activities Resource Acquisition the addition of more of an overloaded resource to maintain the rule of an activity Controlling Projects Close Out an activity that includes writing nal reports completing remaining deliverables and compiling the teams recommendations for improving the project process KRMlO pp 359377 CH 10 Supply Chain the interrelated series of processes within a rm and across different rm that produces a service or product to the satisfaction of customers may be multiple Supply Chain Design Designing a rms supply chain to meet the competitive priorities of the rms operations strategy 3 Areas of focus in creating an effective supply chain 1 Link ServiceProducts with lnternal Processes how rms coordinate internal processes decisions with the competitive priorities of the services or products covered in the operations strategy 2 Link Services Products with the External Supply Chain the competitive priorities assigned to the rms services or products must be re ected in the design of the network of suppliers 3 Link ServicesProducts with Customers Suppliers and Supply Chain Processes the rms process that enable it to develop what customers want interact with suppliers deliver services or products interact with customers address environmental and ethical issues and provide the information and planning tools needed to execute the ops strategy th at glue the supply chain Supply Chain Management the synchronization of a rms processes with those of its supppliers and customers to match the ow of materials services and information with demand is a critical skill in most organizations Supply Chain Design seeks to design a rms supply chain to meet the competitive priorities of the rms supply chain to meet the competitive priorities of the rms operations strategy Ef ciency curve shws the tradeoff between costs and performance for the current supply chain design if the supply chain is operated as ef ciently as it can be Pressures from internal organizations 1 Dynamic Sales Volumes Meet the needs of volatile sales volumes sometimes this involves excessive inventories underutilized personnel or more expensive delivery options to meet customer demands ontime 2 Customer Service Levels pressure from sales and marketing groups for superior service levels for the organizations customers 3 ServiceProduct Proliferation development of new products a balance needs to be struck between the cost of operating the supply chain and the need to market new services and products Supply Chain for Services driven by the need to provide support for the essential elements of the various services it delivers Suppliers in a service supply chain play an integral role in its ability to meet its competitive priorities such as top quality delivery speed and customization Supply Chin for Manufacturing Purpose for manuf is to control inventory by managing the ow of materials Because materials comprise such a large component of the sales dollar manufacturers can reap large pro ts with a small reduction in the costs of material which makes the supply chain a key weapon Very complicated because some companies may have 100 s of thousands of suppliers Measures of Supply Chain Performance Inventory Measures 3 ways to measure inventories 1 Average aggregate inventory value the total average value of all items held in inventory for a rm a Average aggregate inventory value number of units of item A on handValue of each unit of item A number of units of item B typically on handvalue of each unit of item B b Tells the managers how much of the total assets are tied up in inventory manuf have about 25 and wholesalers and retailers average about 75 2 Weeks of Supply an inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost form below i Weeks of supply average aggregate inv value weekly sales at ost ii Denominator is cogs 3 Inventory turnover turns is an inventory measure obtained by dividing annual sales at cost by the average aggregate inventory value maintained during the year i Inventory turnover annual sales at cost Average aggregate invetroy value ii best inventory level cant be determined easily a starting point is to benchmark a leading rm in the industry Financial Measures inventory is an investment but also ties up funds supply chain decisions can affect nancial measures 1 Total Revenue Increases sales through better customer service a EX increasing the percent of on time deliveries to customers will increase total revenue because satis ed customers will buy more services and products from the rm 2 Cost Of Goods Sold reduces costs of transportation and purchased materials 3 Oprating Expenses reduce xed expenses by reducing overhead associated with supply chain opperations 4 Cash Flow improve positive cash ows by reducing overhead associated with supply chain opperations 5 Inventory increase inventory turnover 6 Working Capital Reduce working capital by reducing inventory investment lead times and back logs 7 Fixed assets reduce the number of warehouses through improved supply chin design 8 Total Assets achieve the same or better performance with fewer assets 9 Net Income improve pro ts with greater revenue and lower costs 10 Return on Assets increase ROA with higher net income and fewer total assets Inventory Placement Centralized placement keeping all the inventory of a product at a single location such as a rms manufacturing plant or a warehouse and shipping directly to each of its customers advantage inventory pooling Inventory pooling a reduction in inventory and saftety stock because of the merging of uncertain and variable demands from the customers a disadvantage of keeping inventory in a centralized is added cost of shipping smaller and uneconomical quantities directly to customers over long distances Forward Placement locating stock closer to customers at a warehouse DC wholesaler or retailer 2 advantages gt 1 faster delivery times 2 reduced transportation costs overal services to the customer is quicker and the rm can take advantage of larger less costly shipments to the DC s from the manuf plant at the expense of larger overall inventories Mass Customization a rms highly divergent processes generate a wide variety of customized services or products at reasonably low costs Allows customers to select from a variety of standard options to create the service or product of their choice EX paint mix at home depot etc 3 Competitive Advantages of Mass Customization 1 Managing Customer Relationships requires detailed inputs from customers so that the ideal service or product can be produced 2 Eliminating Finished Goods Inventory producing what you need to produce the order quickly Some rms use software called CONFIGURATOR which gives rms and customers easy access to data relevant to the options available for the service or product a Increasing Percieved Value of Services or Products customers can have it their way Perception that there is higher value allows rms to charge more than is actualy necessary Supply Chain Design for Mass Customization how does it affect the supply chain 3 consideratoins 1 Assemble to Order Strategy two stages rst standardized components are purchased and held in stock Second the rm assembles these standard components to a speci c customer order no nished goods inventory 2 Modular Design the service or product must have this it enables customization that the customer wants Attention must be paid 3 Postponment successful mass customizers postpone the task of differentiating a service or product for a speci c customer until the last possible moment It is quot some of the nal activities in the provision of a service or product are delayed until the orders are receivedquot It is a key decision because it speci es where in the supply chain volume oriented standardized opps are separated from cust opps Channel Assembly members of the distribution channel at as if they were assembly stations in the factory It is useful when the required customization has some geographical rationallle such as a language differences or technical requirements Outsourcing Process Outsourcing paying suppliers and distributors to perform those processes and provide needed services and materials Make or buy decisions when managers opt for more vertical integration less outsourcing occurs MAKE means more vertical integration BUY means more outsourcing Vertical Integration can be in two directions Backward integration represents a rms movement upstream toward the source of raw materials parts and services through acquisitions Forward Integration the rm acquires more channels of distribution such distribution centers warehouses and retail stores or even business customers Offshoring A supply chain strategy that involves moving processes to another country The decision to outsource or offshore is complex and has many factors 1 Comparative labor costs 2 Rework and Product Returns internal rework costs and the cost of product returns may offset the advantage in wage rates 3 Logistics Costs 4 Tariffs and Taxes 5 Market Effects positive effects of outshoring presence of the rm can have positive effets on local sales 6 Labor Laws and Unions 7 Internet reduces the transaction costs of managing distant partners or operations Pitfalls 1 Pulling the Plug too Quickly 2 Technology Transfer often outsourcing strat involves creating a quotjoint venturequot two rms agree to jointly produce a service or product together 3 Process Integration difficult to fully integrate outsourced processes with the rms other processes Strategic Implications 2 1 Ef cient Supply Chains work best in environments where demand is highly predictable Common designs there is one popular design for ef cient supply chains have competitive priorities of low cost operations consistent quality and ontime delivery Builttostock BTS the product is built to a sales forecast and sold to the customer from a nished goods stock 2 Responsive Supply Chains Designed to react quickly in order to hedge against uncertainties in demand Work best when rms offer a great variety of services or products and demand predictability is low Common Designs Assemble To Order ATO the product is built to customer speci cations fro a stock of existing components DELL Make to order MTO The product is based on a standard design but the component production and manufacturer of the nal product is linked to the customers speci cations make to buy houses pre designed Tommy Hil ger quotcustom clothesquot Designtoorder DTO the product is designed and built entirely to the customers speci cations womens designer dresses KRM12 pp 411434 Skip Examples 121122amp 123 CH 12 Supply Chain Integration the effective coordination of supply chain processes through the seamless ow of information up and down the supply chain Upstream suppliers they control the ow of supply to the ketchup factory Downstream suppliers who the ketchup factory supplies Supply Chain Dynamics Bullwhip Effect A phenomenon in supply chains whereby ordering patterns experience increasing variance as they proceed upstream in the chain increase in variability as you process upstream The slightest change in customer demands can ripple through the entire chain with each member getting more variability in demands from the member immediately downstream A rm contributes to this effect if the variability of the orders to its suppliers exceeds the variability of the orders from its immediate customers External Causes rm has least amount of control over these external customers and suppliers who can periodically cause disruptions 1Volume changes 2 Service and product mix changes 3 Late Deliveries 4 Under lled Shipments Internal Causes a rms own operations can be the culprit in what becomes the source of constant dynamics in the supply chain 1 Internally Generated shortages 2 Engineering Changes 3 Order Batching discount for larger orders etc 4 New Service or Product Introductions 5 Service or Product Promotions creates a spike in demand 6 Information Errors Cause a rm to order too many or too few service SCOR model supply chain operations reference model a framework that focuses on a basic supply chain of plan source make deliver and return process repeated again and again 1Design 2 Analysis involves critical review of the new offering and how it will be produced 3 Development brings speci city Concurrent Engineering a concept that brings product engineers product engineers marketers buyers information specialists and suppliers together to design a product and the process that will meet customer expectations Fu Launch involves coordination of many internal processes as well as those both upstream and downstream in the supply chain Ramp Up when the production processes must increase volume to meet demands while coping with quality problems and last minute design changes Supplier Relationship Process 5 major nested process 1 sourcing 2 design collaboration 3 negotiation 4 buying 5 information exchange Purchasing the activity that decides which suppliers to use negotiates contracts and determines whether to buy locally 4 Key costs to consider when choosing a supplier 1 material cost they equal annual requirements multiplied by ppu 2 Freight costs the cost of transporting the product or the equip and personell who wil perform the service 3 Inventory cost buyers interested in purchasing products must consider the shipping quantity and the lead time from the supplier The lead time and the average requiremetns will determine the level of pipeline inventory Also mucst Pay inventory holding costs on the cycle of pipeline inventories a Cycle inventoryQ2 4 Administrative Costs supply contacts must be monitored Include managerialtime travel and other variable costs associated with interacting with a supplier Green Purchasing involves identifying assessing and managing the ow of environmental waste and nding ways to reduce it and minimize its impact on the environment Design Collaboration Early Supplier Involvement a program that includes suppliers in the design phase of a service or product Suppliers provide suggestions Presourcing suppliers are selected early in a products concept development and are given signi cant if not total responsibility for the design of certain components or systems of the product These suppliers will also take responsibility for the cost quality and ontime delivery of the items that they produce Vaue Analysis a systematic effort to reduce the cost or improve the performance of services or products either purchased or produced NeganUon Competitive Orientation sees negotiations between buyer and seer as a zero sum game what ever one side looses the other side gains Short term agdvantages are better than long termed ones Economic Dependency a buyer has purchasing power when the purch volume represents a signi cant share of the suppliers sales or the purchased service or item is standardized and many substitutes are available 1 Referent the supplier vaues identi cation with the buyer 2 Expert the buyer has access to knowledge information and skills desired by the supplier 3 Legal the buyer has the legal right to prescribe behavior for the supplier 4 Coercive the buyer has the ability to punish the supplier Cooperative Orientation emphasizes that the buyer and the seller are partners each helping the other as much as possible long term commitment reduces number of suppliers in the supply chain Sole Sourcing the awarding of a contract for a service or item to only one supplier can amplify any problems with the supplier that may crop up Buying actua procurement of service or material from the supplier 4 approaches to epurchasing 1 electronic data interchange a technology that enables the transmission of routine standardized business documents from computer to computer over telephone or direct leased lines 2 Catalog Hubs can be used to reduce the cost of placing orders to suppliers as well as the cost of the services or goods themselves 3 Exchange an electronic market place where buying rms and selling rms come together to do business No contract nego a on 4 Auctions where rms place competitive bids to buy something Radio Frequency Identi cation a method for identifying items through the use of radio signals from a tag attached to an item Vendor Managed Inventories System in which the supplier access to the customers inventory data and is responsible for maintaining the inventory on the customers site The Order Ful llment Process 1 Customer Demand Planning facilitates the collaboration of a supplier and its customers for the purpose of forecasting customer requirements for a service or product 2 Supply Planning takes the demand forecasts produced by cdp and others to generate a plan to meet the demand 3 Production excutes the supply plan to produce the service or product 4 Logistics a key aspect of orderful lment delivers the product or service to the customer ve important decisions to determine the design and implementation of the logistics are a Degree of ownership b Facility location c Mode selection i Truck ii Train iii Ship iv Pipeline v Airplane d Capacity level e Amount of cross docking the packing of products on incoming shipments so that they can be easily sorted at intermediate warehouses for outgoing shipments based on their nal destinations Marketing Electronic commerce ecommerce the application of information and communication technology anywhere along the supply chain of businesses processes has a huge impact up and down the supply chain BZB and BZC
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