IKEA maximizes how many mugs they can fit on a pallet--thus therefore reducing their shipping costs also they can make more and lower their costs. (decreased costs=increased profits)
What does Operations focus on?
Operations management focuses on the design, operation, and improvement of processes used to deliver the firm's products and services.
What does OM emphasize?
Effectiveness and efficiency
How is America's West an example of efficient OM?
They reinvented the order of seating on their airplanes to be efficient instead of just seating passengers based on first class to couch. They boarded by aisle so they could board the plane faster therefore they were more time efficient.
What percent of employees in the US are in the service industry?
Can services include goods and can goods include services?
Yes, services w/ goods=restaurants, cable television.-- goods w/ services= software, xbox, any type of support for a good
What is partial productivity?
total output/ 1 input, this 1 input can be labor, capital, materials, energy, etc.
What is total productivity?
total output/ total input or goods and services produced all/ all resources used
What is multifactor productivity?
total output/2 + inputs
Is productivity a relative or absolute measure?
Productivity is relative measure. It means nothing to us, unless it is compared to another ration.
What is operations strategy concerned with?
It is concerned with long term plans to effectively and efficiently support the overall strategy--it is basically the direction in which they are going--it is a document that acknowledges the long term goals of a company and the direction they take
What are some competitive dimensions?
cost/price, quality, delivery speed, delivery reliability, coping with changes in demand, flexibility, and new product introduction speed, support
What are order qualifiers?
the basic criteria that a product must satisfy to be considered a potential customer (ex- for a digital camera the order qualifier would be that is has the features you are looking for)
What are order winners?
the criteria that differentiate a firm's products and services from competition-- (ex- for a digital camera the order winner would be which one gives you the best value)
What must a business do before it can properly focus?
determine what the goal of a for profit enterprise it--the goal is making $$
Why can't being efficient be the goal of a for profit enterprise?
because even if it can efficient make products--those products actually have to sell
Why can't market share be the goal of a for profit enterprise?
you may gain market share but sell at a loss
Why can't providing satisfaction for employees be the goal?
You are not a charity-- you can't support them w/o being profitable
What is a bottleneck?
Where capacity is less than demand--any resource whose capacity is less than the demand placed on it
If you break the organization into smaller units and maximize the performance of each unit are you doing the right thing?
NO, b/c local improvements result in system improvements only for a FEW variables (and these FEW variables that do result in an improvement by maximizing their use are called constraints)..weakest link dictates what the company can do
What is a constraint?
A variable where a significant improvement in local performance causes a significant improvement in global performance
If you want to achieve your goal or at least get close to it, what must you do?
identify your constraint, focus on it, and follow through
After you identify your goal what must you do next?
you must identify which measurements will be used to judge success
What are some traditional measures for measuring the goal?
net profit, efficiency, utilization, ROI, and cash flow
Which of the traditional measures are used more frequently?
utilization and efficiency
What is efficiency?
actual output/ effective capacity
Like a Goal, what is the problem with working robots 100% of the time?
You have to be able to sell what they are making, this increases the work-in-progress inventory, and utilization of working something 100% of the time is important on bottleneck resources but it is not as crucial with non bottleneck resources
If traditional measures for measuring success are not accurate what should be used?
Throughput, inventory and investment, and operating expense
What is throughput?
the rate at which sales dollars ($) are entering the organization--only $ generated by your system get counted (value added)--Raw materials and purchased services DO NOT COUNT throughput=sales revenue-variable costs
What is inventory and investment?
all the money currently tied up in the system in either 1)investment in machinery and buildings or 2) inventory in the form of raw materials, WIP, and finished goods
What is operating expenses?
all the money the system spends to turn the inventory into throughput--all expenses are lumped together and usually considered as one big expense--ALL employee labor expenses are almost always operating expense
net profit/inventory and investment
throughput/ inventory and investment
throughput/ operating expense
If throughput is increased, Inventory and investments stay the same, and operating expense stays the same,what will happen to net profit, ROI, &CF
Net profit will increase, ROI will decrease, and CF will increase
If throughput stays the same, inventory/investments decreases and operating expense stay the same, what will happen to net profit, ROI, and CF?
net profit will stay the same, ROI will increase, and CF will increase
if throughput stays the same, inventory/investments stay the same and operating expense decrease--what will happenb to net profit, ROI, and CF?
net profit, ROI, and CF will all increase
In the throughput world what is the #1 priority and why?
increasing throughput b/c it has the greatest potential to impact the bottom line
In the throughput world what is the #2 priority and why?
If your main focus is on reducing costs what will happen?
there will be a decreased quality of raw materials used, you could fire employees, and use less reliable suppliers
Are employees a fixed cost?
yes, b/c most of the time you are paying them regardless of productivity
What are the 5 steps in the TOC?
identify the system's constraint, decide how to exploit the constraint, subordinate everything else to the decision in step 2, elevate the system's constraint, if a constraint is broken in step 4 go back to step 1 and start over
Do constraints have to be internal?
No, constraints can be external too such a market demand
With the hiking example in the Goal what was the throughput, operating expense, inventory, and investment?
Walking was the throughput, food was the operating expense, inventory is the space b/w boy scouts, and the investment was equipment
What do we mean by exploiting the constraint?
we want to get the most that is reasonably possible out of the capacity constrained resource
Why should you put quality control before a constraint?
You should make sure you are spending quality parts to the constraint so the constraint is not wasting time on making parts that are not good anyways
Where should you put a buffer of raw materials?
before a bottleneck and a buffer does not cost much
In the Goal what was the problem with their lunch break?
a constrained machine would sit idle during lunch breaks and they should have been making sure this constrained machine was not idle while they were on their lunch break
Where are utilization and efficiency factors to emphasize?
at the constraint resource
If after exploiting the constraint,--more capacity is still needed to meet demand
you should elevate the constraint by adding more capacity through capital investment or outsourcing, or loading the constraint by process or product design--(often exploitation and subordination are sufficient to reach the needed output)
is the long term strategic application of TOC call for the continuous removal of the constraint?
NOO! the idea is to choose where the constraint should be in order to best exploit business opportunities--then keep the constraint stationary
why should you focus your company on coping with changes in demand?
to retain customers and increase flexibility
In the goal what was the problem with the plant?
The plant was making too much and they had an overload of inventory and no one to sell
What is process flow?
it represents the logical sequence of steps needed to deliver the product/service to the customer--it may include the passing of information or materials from one step to the next
What is throughput time (also known at Turn Around Time-TAT)
the total time required to complete one unit of a product or service
What is the effect of a shorter throughput time?
less cost and therefore more profit
What is cycle time?
it represents the average time b/w completion of successive units
What is the throughput rate (THr)?
it defines the output rate that a process is expected to produce over a period of time (units/time)-it is the inverse of the cycle time.
What is utilization?
it is the ratio of the time that a resource is activated relative to available time for use
What is considered WIP?
Items (parts) in process and items (parts) waiting to be processed
What determines the system output?
How do you determine how many hours a day to schedule each process?
assuming the demand exceeds supply you should set the constraint to work all available time
True/False:Substantial research has proved that the only successful method of dealing with bottlenecks is to increase the bottleneck's capacity
What are the techniques for dealing with a bottleneck?
Have a cross--trained employees available to keep the constraint at full operation.
Develop alternate routings
schedule throughput to match capacity of the bottleneck.
increase the capacity of the constraint
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