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MGT 302

Notes for Operations and Supply Chain Management - MGT 302

Operations and Supply Chain Processes

  1. Planning
  2. Sourcing
  3. Making
  4. Delivering
  5. Returning

Goods-Services Continuum

  • Pure Goods: Food products, chemicals, mining
  • Core Goods: Appliances, automobiles, data storage systems
  • Core Services: Hotels, airlines, ISPs
  • Pure Services: University, medical, investment

Efficiency: doing something at the lowest possible cost.

Effectiveness: doing the right things to create the most value for the customer.

Value: the attractiveness of a product relative to its price.

Efficiency measures:

  • Cash conversion cycle = Days sales outstanding + Days inventory - Payable period

  • Receivables turnover = Annual credit sales / Average AR
  • Inventory turnover = COGS / Average inventory value
  • Asset turnover = Revenue / Total assets

Just-in-time (JIT): Using minimal inventories of parts that arrive exactly when they are needed.

Total quality control (TQC): aggressively eliminates causes of production defects.

Lean manufacturing: refers to both JIT and TQC.

Total quality management (TQM): Managing for all dimensions of products and services important to the customer.

Six Sigma: describes a quality goal of no more than 3.4 defects out of every million units. Also refers to a quality improvement philosophy and program.

Mass customization: producing a unique product exactly to a particular customer’s requirements.

Triple bottom line: strategy that includes social, economic, and environmental criteria.

Chapter 2

Sustainability: meeting current resource needs without compromising the ability of future generations to meet their needs.

Straddling: matching a competitor by adding new features, services, or technologies to existing activities.

Order winners: One or more specific marketing-oriented dimensions that clearly differentiate a product from competing products.

Order qualifiers: Dimensions used to screen a product or service as a candidate for purchase.

Chapter 3

Strategic forecasts: Medium- and long-term forecasts used to make decisions related to strategy and estimating aggregate demand.

Tactical forecasts: Short-term forecasts used as input for making day-to-day decisions related to meeting demand.

Time series analysis: data relating to past demand is used to predict future demand.

Moving average: forecast based on average past demand.

Weighted moving average: forecast made with past data where more recent data are given more significance than older data.

Chapter 4 Strategic Capacity Management

Strategic capacity planning: Finding the overall capacity level of capital-intensive resources

Capacity: Output a system can achieve over a period of time. (minimize average unit cost)

Capacity utilization rate: How close current output is to best operating level (percentage).

Plant within a plant (PWP): An area in a larger facility dedicated to a specific production objective (for example, product group).

Chapter 5 Projects

Project: Series of jobs directed toward a major output that requires significant time to perform.

Project management: Planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project.

Pure project: A self-contained team works full time on the project.

Functional project: Team members are assigned from functional units. Team members remain in their functional units and are not dedicated to the project.

Matrix project: Blends functional and pure project structures. Uses people from different functional areas. A dedicated project manager decides what tasks need to be performed and when, but the functional managers control which people to use.

Work breakdown structure (WBS): The hierarchy of project tasks, subtasks, and work packages.

Earned value management (EVM): Evaluates project progress by combining measures of scope, schedule, and cost.

Critical path: Activity sequence chain with the longest time to complete

Immediate predecessor: Activities blocking completion of another activity.

Slack time: Time an activity can be delayed without delaying entire project; (late - early start times).

Early start schedule: Lists activities by early start times.

Late start schedule: Lists activities by late start times. (may create savings by postponing purchases of material and other costs associated with the project)

Time–cost models: Extension of critical path models, considers trade-off between time to complete an activity and cost. Often referred to as “crashing” the project.

Chapter 6 Manufacturing Processes

Lead time: order response time

Customer order decoupling point: Where inventory is positioned in the supply chain.

Make-to-stock: On-demand product from finished goods inventory.

Assemble-to-order: Assembled product made to a specific customer order.

Make-to-order: Built product from raw materials and components to a specific customer order.

Engineer-to-order: Customer-built product made from purchased material, parts, and components.

Lean manufacturing: High customer service with minimum levels of inventory investment.

Total average value of inventory: The total investment in inventory at the firm, which includes raw material, work-in-process, and finished goods.

Inventory turn: (efficiency measure) cost of goods sold / total average value of inventory.

Days-of-supply: number of days of supply of an item.

Little’s law: Mathematically relates inventory, throughput, and flow time.

Throughput Flow time: Average rate (e.g., units/day) items flow through a process.

Flow time: Time for one unit to flow through a process.

Project layout: Labor, material, and equipment are moved to the product

Workcenter: A process with great flexibility to produce a variety of products, typically at lower volume levels.

Manufacturing cell: Dedicated area where a group of similar products are produced.

Continuous process: Converts raw materials into finished product in one contiguous process.

Product–process matrix: When the different production process types are used, depending on product volume and how standardized the product is.

Workstation cycle time: Time between two units off an assembly line.

Assembly-line balancing: Assigning tasks to a series of workstations so cycle time is met and idle time is minimized.

Precedence relationship: The required order in which tasks must be performed in an assembly process.