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by: Kade Labadie


Kade Labadie
GPA 3.85

John Larsen

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John Larsen
Class Notes
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This 15 page Class Notes was uploaded by Kade Labadie on Thursday September 17, 2015. The Class Notes belongs to MAN 3504 at Florida State University taught by John Larsen in Fall. Since its upload, it has received 122 views. For similar materials see /class/205684/man-3504-florida-state-university in Business, management at Florida State University.

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Date Created: 09/17/15
Chapter 1 operations management OMthe science and art of ensuring that goods and services are created and delivered successfully to customers planning organizing directing and controlling 5 eras of OM focus on efficiency quality revolution customization and design timebased competition service revolution current challenges technology globalization changing customer expectations changing workforce sustainabilityrefers to an organization39s ability to strategically address current business needs and successfully develop a long term strategy that embraces opportunities and manages risk for all products systems supply chains and processes to preserve resources for future generations environmental social economical goods v services gooda physical product that you can see touch or possibly consume durable gooda product that usually lasts at least three years nondurable gooda product that is perishable and generally lasts for less than three years serviceany primary or complementary activity that does not directly product a physical product 0 similarities Goods and services provide value and satisfaction to customers who purchase and use them They both can be standardized or customized to individual wants and needs A process or set of processes creates and delivers each good or O I O serv1ce NOTE most products are a mixture of goods and services ranging from quothigh goods contentquot tangible to quotlow goods contentquot intangible service managementintegrates marketing human resource and operations functions to plan create and deliver goods and services and their associated service encounters o managerial issues for services intangibledifficult to define measure and control cannot be 0 inventoried service variability because service firms cannot stockpile inventory they must change their capacity in response to demand ie seasonal workers demand variability demand for services tends to vary more than demand for goods customer contact service encounteran interaction between the customer and the service provider moment of truthany episodes transactions or experiences in which a customer comes into contact with any aspect of the delivery system however remote and thereby has an opportunity to form an impression designing the service encounter is critical location issues 0 customer benefit package CBPa clearly defined set of tangible and intangible features that the customer recognizes pays for uses or experiences primary good or services corethe offering that attracts customers and responds to their basic needs ie cars at a car dealership peripheral goods or services enhancementsthose that are not essential to the primary good or service ie complementary gourmet coffee at car dealership good free credit reports service varianta CBP feature that departs from standard CBP and is normally location or firmspecific ie fishing pond at the car dealership location 0 processa sequence of activities that is intended to create a certain result value creation processesfocus on primary goods or services support processesie purchasing materials and supplies installation customer support general management processesie accounting and information systems human resource management marketing Chapter 3 performance measurementthe act of quantifying the performance criteria metrics of organizational units goods and services processes people and other business activities good performance measures are actionable actionableprovide the basis for decisions at the level at which they are applied 0 categories financial measures revenue profit return on assets asset utilization etc customer and market measures customer satisfaction customer retention market share etc customer satisfaction measurement systemprovides a company with customer ratings of specific goods and service features and indications the relationship between those ratings and the customer39s likely future buying behavior safety accident rates security in a hotel room etc qualitymeasures the degree to which the output of a process meets customer requirements goods qualityrelates to the physical performance and characteristics of a good service qualityconsistently meeting or exceeding customer expectations external focus and service delivery system performance internal focus for all service encounters 5 key dimensions tangiblesphysical facilities uniforms equipment vehicles and appearance of employees ie the physical evidence reliabilityability to perform the promised service dependably and accurately responsivenesswillingness to help customers and provide prompt recovery to service upsets assuranceknowledge and courtesy of the service providers and their ability to inspire trust and confidence in customers empathycaring attitude and individualized attention provided to its customers service upsetsfailureserrors in service creation and delivery recovery from service upsets is critical environmental qualityfocuses on designing and controlling work process to improve the environment timethe speed of doing something average and the variability of the process processing timethe time is takes to perform some task queue timetime spent waiting flexibilitythe ability to adapt quickly and effectively to changing requirements design flexibilitythe ability to develop a wide range of customized goods or services to meet different or changing customer needs volume flexibilitythe ability to respond quickly to changes in volume and type of demand innovation and learning innovationthe ability to create new and unique goods and services that delight customers and create competitive advantage O O learningcreating acquiring and transferring knowledge and modifying the behavior of employees in response to internal and external behavior productivity quantity of outputquantity of input interlinkingthe quantitative modeling of causeandeffect relationships between external and internal performance criteria value of a loyal customer VLCquantifies the total revenue of profit each target market customer generates over the buyer39s life cycle VLCPCMRFBLC P revenue per unit price CM contribution margin to profit and overhead expressed as a fraction RF repurchase frequency number of purchases per year BLC buyer39s life cycle 1defection rate 11retention rate total market value VLCabsolute number of customers models of organizational performance 0 O O A Malcolm Baldrige National Quality Award frameworka framework for performance excellence through selfassessment to understand an organization39s strengths and weaknesses thereby setting priorities for improvement 7 hierarchical categories leadership strategic planning customer focus measurement analysis and knowledge management workforce focus process management business results Balanced Scorecard 4 performance perspective financialmeasures the ultimate value of the firm customerfocuses on customer wants and needs and satisfaction as well as market share and growth innovation and learningdirects attention to the basis of a future success internalfocuses attention on the performance of the key internal processes that drive the business Value Chain modelevaluates performance throughout the entire value chain value chainsynchronized network of processes including suppliers and inputs processes and associated resources goods and service outputs and outcomes customers and their market segments synchronized information and feedback loops ServiceProfit Chainbased on a set of cause and effect linkages between internal and external performance defines the key performance measurements on which servicebased firms should focus Chapter 4 competitive advantagea firm39s ability to achieve market and financial superiority over its competitors 0 understanding customer requirements dissatisfiersrequirements that are expected in a good or service satisfiersrequirements that customers say they want excitersdelightersnew or innovative good or service features that customers do not expect eventually become satisfiers order qualifiersthe minimum performance level required to stay in business basic customer expectations dissatisfiers and satisfiers order winnersgoods and service features and performance characteristics that differentiate one customer benefit package from another and win the customer39s business 0 competitive prioritiesthe strategic emphasis that a firm places on certain performance measures and operational capabilities within a value chain cost keeping costs low in order to offer quality goods at the lowest prices ie WalMart Southwest quality businesses offering premium goods usually have large market shares and were early entrants into their markets quality is positively and significantly related to a higher return on investment for almost all kinds of market situations a strategy of quality improvement usually leads to increased market share but at a cost in terms of reduced shortrun profitability producers of high quality goods can usually charge premium prices 3 time reductions in flow time can speed up work processes so that customer response is improved help streamline value chains by removing nonvalueadded steps improve quality cost and productivity A flexibility mass customizationbeing able to make whatever goods and services the customer wants at any volume at any time for anybody and from any place 5 innovationthe discovery and practical application of commercialization of a device method or idea that differs from existing norms NOTE organizations generally make tradeoffs among these priorities and focus their efforts along one or two key dimensions Chapter 6 designing goods and services 0 Step 1 strategic mission and vision Step 2 strategic and market analysis and understanding competitive priorities require a significant amount of research and innovation 0 Step 3 customer benefit package design and configuration CBP design and configuration choices revolve around a solid understanding of customer needs and target markets and the value that costumers place on such attributes 0 Step 4 detailed goods services and process design 4a service and service delivery system design service delivery system design facility location and layout servicescapeall the physical evidence a customer might use to form an impression provides the behavioral setting where service encounters take place ambient conditionmanifested by sight sound smell touch and temperature spatial layout and functionalityie furniture organizations signs symbols and artifactsie diplomas on the wall service process designthe activity of developing an efficient sequence of activities to satisfy both internal and external customer requirements technology and information support systems organizational structure functionbased processbased 4b service encounter designfocuses on the interaction directly or indirectly be 0 Step 5 market introductiondeployment tween the serviceprovider and the customer 0 Step 6 marketplace evaluation quality function deployment QFDa philosophy and a set of planning and communication tools that focuses on costumer requirements in coordinating the design manufacturing and marketing of goods or services House of Quality 0 voice of the costumercustomer requirements as expressed in the customer39s own terms 0 technical requirementshow the firm can deliver what the customer wants Chapter 7 process selection 0 3 types of goods and services custom maketoorder goods and servicesgenerally produced and delivered as oneofakind or in small quantities and are designed to meet specific specifications ie weddings estate plans surgery option assembletoorder goods and servicesconfigurations of standard parts subassemblies or services that can be selected by customers from a limited set ie Dell computers Subway sandwiches travel agent services standard maketostock goods and servicesmade according to a fixed design and the customer has no options from which to choose ie appliances shoes sporting goods bus services 4 processes used to produce goods and services projectslargescale customized initiatives that consist of many smaller tasks and activities that must be coordinated and completed to finish on time and within budget ie legal defense preparation construction used for custom goods services job shop processesorganized around particular types of general purpose equipment that are flexible and capable of customizing work for individual customers ie hospitals restaurant kitchens high setupchangeover time dedicated to many different products which are produced in small quantities requires some work force skill used for custom or option goods and services flow shop processesorganized around a fixed sequence of activities and process steps to produce a limited variety of similar goods or services ie assembly lines automobiles insurance policies low setupchangeover time dedicated to a small range of products which are produced in high quantities requires little work force skill used mostly for standard goods and services continuous flow processescreate highly standardized goods or services ie automated car wash paint factories 247 continuous operation that requires little human oversight produces a very limited range of products in massive quantities used for standard goods and services productprocess matrixa model that describes the alignment of process choice with the characteristics of the manufactured good ammu mum mmquot A amend Law Vomme Deana w Cusmmaannn mgh Numneukanga a Prawns Low rm a Gum Cuslom MakHvOIdel ervv cerpon om ng matrix Wamm Modems ManyMumblu omns Assembiwoomer Hugh eral Standardsz Mamosmck mum 5an snmnm Alexy Slqulnn um ue rm u mu nu r Mn u r rn nun Mun We u r H Mung Numbv or mm an mumsMnsuu n a vlnhu lnnzlmm proce dengn 2 tevet ofwork L ecv c unr t ofwork required to create an ut ut actvvvtyna group of tow needed to create and detwer an rnterrnedrate or nal output y 6 proceconit of a group oractrvr tre vatue chamwa network of procee tegend rectanglewa EEK or actwrty manglewvvavt trrne o rt or end ofa proce a overnent tramfer or owto the next tak or actwrty proce dvamondwa decmon tnat mvght reutt m Lakmg atternatwe path me of cumomer Vmbmt proce rnap owchart decrvbe the equence of alt proce actr mtv e and tam neceary to create and detwer a derred output or outcome 0 vatue Lream mappmg value streamall valueadded activities involved in designing producing and delivering goods and services to customers highlights valueadded activities versus nonvalueadded activities process analysis 0 management strategies to improve process designs usually focus on increasing revenue by improving process efficiency in creating goods and services and delivery of the customer benefit package increasing agility by improving flexibility and response to changes in demand and customer expectations increasing product or service quality by reducing defects mistakes failures or service upsets decreasing costs through better technology or eliminating of nonvalue added activities decreasing process flow time by reducing waiting time or speeding up movement through the process and value chain 0 reengineeringthe fundamental rethinking and radical resign of business processes to achieve dramatic improvement in critical contemporary measures of performance such as cost quality service and speed 0 utilizationthe fraction of time a workstation or individual is busy over the long run U resources usedresources available U demand rateservice ratenumber of servers from book A telephone call center uses two customer service reps CRPs during the 830900 am time period The standard service rate is 3 minutes per telephone call per CSR Assuming a target labor stabilization rate of 80 how many calls can these CSRs handle during this halfhour period U DRSRNS 08 DR3302 08 DR20 DR 16 callshalf hour 5 from book What is the implied service rate at a bank teller window if customer demand is 27 customers per hour two bank tellers are on duty and their labor utilization is 90 percent U DRSRNS 09 27SR2 18 27SR 185R 27 SR customershourbank teller o throughputthe average number of entities completed per unit time from a process output rate 1time bottleneckthe work activity that effectively limits throughput of the entire process pathwaya unique route through a service system customerrouted servicesservices that offer customers broad freedom to select the pathways that are best suited for their immediate needs and wants from many possible pathways through the service delivery system ie searching the Internet to buy product providerrouted servicesconstrain customers to follow a very small number of possible and predefined pathways through the service system ie ATMs NOTE some services lie somewhere between these two extremes ie ordering something on the telephone service encounter activity sequenceconsists of all the process steps and associated service encounters necessary to complete a service transaction and fulfill a customer39s wants and needs the degree of customer discretion freedom and decisionmaking power in selecting the service encounter activity sequence the degree of repeatability of the service encounter activity sequence Chapter 12 inventoryany asset held for future use or sale 0 basic types raw materials component parts subassemblies suppliesinputs to manufacturing and servicedelivery processes workinprocesspartially finished products in various stages of completion that are waiting further processing finished goods inventorycompleted products ready for distribution 0 other types pipeline inventoryinventory that has been ordered but not yet received and is in transit anticipation inventorybuilt up during the offseason to meet future estimated demand cycle inventory order or lot size inventoryinventory that results from purchasing or producing in larger lots than are needed for immediate consumption or sale safety stock inventoryan additional amount that is kept over and above the average amount required to meet demand 0 characteristics number of items stockkeeping unit SKUa single item or asset stored at a particular location a unique identifier assigned to each item of inventory nature of demand independent demanddemand for an SKU that is unrelated to the demand for other SKUs and needs to be forecasted directly related to market demand dependent demanddemand for an SKU that is directly related to the demand of other SKUs and can be calculated without needing to be forecasted deterministic demandan assumption that demand is known for the future and not subject to future fluctuations made when uncertainty is not included in its characterization stochastic demandincorporates uncertainty by using probability distributions to characterize the nature of demand static demanddemand that remains stable dynamic demanddemand that varies over time number and duration of time periods lead timethe time between placement of an order and its receipt stockoutsinabilities to satisfy the demand for an item backorderoccurs when a customer is willing to wait for an item lost saleoccurs when a customer is unwilling to wait and purchases the item elsewhere inventory managementplanning coordinating and controlling the acquisition storage handling movement distribution and possible sale of raw materials component parts and subassemblies supplies and tools replacement parts and other assets that are needed to meet customer wants and needs 0 2 fundamental decisions when to order items from a supplier OR when to initiate production runs how much to order or produce NOTE inventory management is all about making tradeoffs among the costs associated with these decisions 4 categories of inventory costs orderingsetup costsincurred as a result of the work involved in placing orders with suppliers or configuring tools equipment and machines within a factory to produce an item fixed inventoryholding costsexpenses associated with carrying inventory defined as a percentage of the dollar value of inventory per unit of time represent the opportunity cost associated with using the funds invested in inventory for alternative uses and investments shortagestockout costscosts associated with a SKU being unavailable when needed to meet demand unit costthe price paid for purchased goods or the internal cost of producing them usually a sunk cost 0 ABC inventory Pareto analysis a vital few SKUs represent a high percentage of the total dollar inventory value SKUs are separated into 3 groups according to their total annual dollar usage A large dollar value by a relatively small percentage of total items C small dollar value but a relatively large percentage of total items B somewhere between A and C 0 fixed quantity systems FQSsan inventory system in which the order quantity or lot size is fixed inventory position IP OH SR BO OH onhand quantity SR scheduled receipts BO backorders reorder point rpoint at which if the IP falls at or below a new order is placed r depends on the lead time and nature of demand for deterministic demand r dL d average demand per unit of time L lead time expressed in the same units of time for stochastic demand r uLzoL uL average demand during the lead time 1 5 o o l1 ulL z number of standard deviations necessary to achieve the acceptable service level service level SLdesired probability of not having a stockout during a leadtime pen39o UL stand deviation of demand during the lead time UL tilL TE zoL amount of safety stock Economic Order Quantity EOQ model y assumptions Only a single item SKU is considered The entire order quantity Q arrives in the inventow at one time Only two types of costs are relevant ordersetup and inventow holding cos 5 No stockouts are allowe The demand for the item is deterministic and constant over time This means that units are withdrawn from inventory at a constant rate proportional to time Lead time is constant order quantity with the most minimal orden39ng cost total cost inventow holding cost ordering cost annual holding I C l 2 20C as per unil annual ordering Mb f 5 D mm W a peryear order Q inventory level Cn cost of storing one unit in inventow for one year D annual demand for produc C cost of placing one order fixed period systems FPSsinventow management system in which the inventow position is checked only at fixed intenals of time Z principal decisions the time interval between reviews T average annual invenlory 7 inventory holding cost T the replenishment level M for deterministic demand M dTL d verage demand per time period for stochastic demand M pLTL zoLTL FQS vs FPS FQ reduces stockout risk


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