SOM 306 Final Exam Study Guide Fall 2024 PDF

**Chapter 1 -- Introduction to Operations** - **What is Operations? -** business organization responsible for transforming inputs into goods / services. Operations encompasses many cost elements, which *affect* price, does NOT determine prices to customers. - **Operations managemen...

**Chapter 1 -- Introduction to Operations** - **What is Operations? -** business organization responsible for transforming inputs into goods / services. Operations encompasses many cost elements, which *affect* price, does NOT determine prices to customers. - **Operations management? -** The management of systems or processes that create goods and/or provide services; organization that oversees activities directly related to the **supply chain** - Effective / Effectiveness -- achievement of a goal or objective - Efficient / Efficiency -- achieving the goal using fewer resources - labor, material, machines, less overhead - **Goods/manufacturing vs. services** -- aspects / characteristics, similarities and differences - Degree of customer contact - Uniformity of input / output - Labor content of goods produced is more consistent than that of services delivered - **Three interconnected business functions** -- Operations, Marketing, Finance - **Vision & mission statements** -- guidance for the organization on goals, strategies, purpose **Chapter 2 -- Competitiveness, Strategy and Productivity** - **Strategy** - A plan for achieving organizational goals Serves as a roadmap for reaching organizational destination - Strategy formulation incorporates core competencies and SWOT analysis - **Core Competencies -** The special attributes or abilities that give an organization a *competitive edge* - Core competencies are those strengths, skills, knowledge and capability that separate a company from their competition - Core competencies are *never* a consideration for outsourcing - **Productivity --** measure of effectiveness regarding use of resources; ratio of **Outputs / Inputs**; need to be tracked over time, compared to previous internal results, industry results, or national results - Units of measure are critical to define, i.e. parts / hour, parts / machine, parts / employee, parts produced / all inputs (labor + machine + material (all in \$) =\> multifactor productivity - Stated as "*output per input*" but to improve, the **ratio** has to be increased -- proportion of output to input (do the division; i.e. 100/50 is higher than 100/25 but less than 125/75) - Know how to calculate increase or decrease in productivity -- (current-previous)/previous - **Forecast -- a statement about the future value of a variable of interest** - Forecasts are usually wrong, but the margin of error can vary; goal is to be close, not precise - Forecasts for groups of items (higher level) are more accurate than for individual items - Accuracy decreases as the horizon increases -- short term forecasts tend to be more accurate - **Trends, Seasonality** - **Techniques** - Naïve -- use previous time period's value (stable series, seasonal variation, trends) - **Average, Moving Average, Weighted Moving Average** -- smooth variations , gradual changes; uses history, moving changes with newer, actual data, if weighted more emphasis put on most recent data - **Forecast Error** = Actual -- Forecast; MAD Mean Absolute Deviation, take difference, take absolute value of errors, and average them **Chapter 4 -- Product & Service Design** - 3 Rs -- Reduce, reuse and recycle - Reduce -- function, cost (cheaper material, lower quality) and quantity of part numbers used or can standard or parts used on other products / models vs. custom parts be used? - Reuse (or remanufactured, refurbished) -- worn out or defective parts replaced so item can be resold (not "new"). Requires products be serviceable =\> design for disassembly/service - Recycle -- recovery of materials for future use -- includes product, packaging, oil / lubricants / solvents other chemicals. - All support sustainability goals, must comply with environmental regulations -- sustainability is producing with natural resources but ensuring those resources will be available for future generations. Should be incorporated into design requirements, at concept/development stage - Reverse-engineering -- buying an competitors product and taking it apart to examine more efficient and cost-effective ways to produce a good or service **Chapter 5 -- Capacity** 1. Capacity Types 1. Equipment 2. Space 3. \# of Employees (direct) 4. Employee Skills 2. Like forecasts capacity for Operations is needed in units -- sq ft, \# of machines or workstations, etc. but not in \$ 3. 2 types of capacity and 2 terms to know 5. Design capacity -- ideal capacity, maximum system is designed for, given the \# of shifts, days per week the factory is expected to run 6. Effective capacity -- design capacity minus allowances for personal time, maintenance, holidays, scrap and 7. Efficiency -- Actual output divided by the Effective capacity (expressed as a %) 8. Utilization -- Actual output divided by the Design capacity (expressed as a %) 4. Outsourcing is one way to increase capacity, but do not outsource your core competency activities. 5. Take a "big picture" approach -- consider how one element of capacity relates to other factors and look for potential conflicts. 9. [Bottlenecks] occur when sub-processes or previous process steps have higher capacity than a subsequent step. If so, the lower capacity step becomes a bottleneck 10. Ways to deal with variability in demand 1. Overtime / furlough -- a short term fix of additional hours worked, or reduced hours worked, reduction in force, part time workers 2. Subcontract -- enlist a supplier to add capacity for a short term boost in capacity **Chapter 6 -- Process Selection and Facility Layout** 1. 4 process types 1. Job shop -- 1. Low volume, high mix / variety of goods or services, 2. *Intermittent* processing -- small jobs, wide range of requirements, few similarities 3. High flexibility, general use equipment 4. Skilled workers needed due to range of requirements and general equipment 5. Usually results in high per unit cost 2. Batch -- 6. Medium volume, moderate variety 7. Intermittent processing, but to a lesser extent, 8. Less skill required than a job shop because there is less variety in jobs processed 9. Batch sizes present some opportunities for volume discounts 3. Repetitive 10. Medium to high volumes, low mix / variety of goods produced 11. Goods are standardized to a great extent 12. Equipment is somewhat flexible\] 13. Worker skill level required is low -- repeatable tasks, not a lot of variety in tasks 14. This is a good situation to use the mass customization strategy 15. Cost curves for this process are highly predictable 4. Continuous 16. Very high volumes, little to no mix changes, or consistent input like oil or waste water 17. Highly standardized 18. No equipment flexibility required because of the inputs' continuous flow 19. Manufacturing costs are low due to repetition and large economies of scale **Chapter 9 - Management of Quality** 1. Dimensions of customer expectations for [products], price is not a dimension of quality, is affected by quality a. Performance -- key characteristics and utilization b. Special features -- any differentiator c. Conformance -- fit for use, meets specifications d. Reliability -- dependability and consistency of performance (first 4 are "fit for use") e. Aesthetics - the look, feel, taste of the product f. Durability -- performance over time g. Perceived quality -- reputation of product or service provider h. Serviceability -- warranty, repairs, handling of complaints 2. Benefits of good quality i. Reputation maintained or strengthened j. Ability to charge premium pricing on goods and services k. Increased market share l. Customer loyalty m. Lower warranty costs n. Higher profits 3. Costs of poor quality o. Loss of customers and of business p. Increased rate of liabilities from poor workmanship and poor designs q. Productivity goes down, or is lower than expected r. Costs driven by scrap, rework, low productivity, etc. 4. Four (4) types of costs of quality s. Appraisal costs -- costs of inspection, testing, test equipment t. Prevention costs -- training, planning, supplier quality, designs to prevent defects from occurring u. Internal failure costs -- costs to fix problems before the good or service is delivered v. External failure costs -- costs to fix problems after the good or service is delivered, warranty, recall w. Biggest costs are rework and scrap **Chapter 10 -- Quality Control** 1. Four questions answered by Quality Control, derived from customer needs and wants and the product's fit to a. How much to inspect and how often? -- answer driven by 2 factors i. Cost of inspection ii. Cost of passing a defect or an "escape" to the end customer iii. Optimal point is where the cost of inspection equals the cost of passing a defect b. When during the process to inspect? -- several options / factors to consider iv. Raw material / purchased parts -- best to flow down if possible v. Finished product -- may be 100% or a sampling plan vi. Before adding significant cost -- manage cost of defects at the lowest level vii. Before a point of no return -- prior to a step that would prevent repair or rework c. Do we inspect attributes or variables? viii. Attributes are counted, visual observations ix. Variables are measured 2. Control chart types (graphs) d. X-bar charts (control charts) x. Measure the central tendency of a process xi. Will detect when the mean is changing xii. May miss that variability is widening e. R / Range charts xiii. Will detect when range of variability is expanding xiv. May not detect when the mean is trending up or down f. Flow charts g. Pareto charts / histograms h. Check sheets **Chapter 12 -- Inventory Management** 1. Types of inventory a. Raw material b. Work-in-process (WIP) c. Finished goods d. Tools and supplies (equipment) e. Maintenance and repair (MRO) f. in-transit (into and out of a production facility) 2. Inventory functions g. Meet and satisfy customer demand h. Avoid stockouts i. Take advantage of economic order quantities, volume discounts j. Manage costs of materials, avoid or delay price increases k. Support production requirements 3. Inventory costs l. Purchase cost -- what was paid for the inventory, largest value m. Holding costs -- costs to carry item in inventory -- usually annualized n. Ordering costs -- cost of purchasing and receiving inventory o. Setup costs -- cost of preparing equipment for a job p. Shortage costs -- cost of demand exceeding supply; opportunity cost, lost sales, factory shutdown 4. A-B-C classification System q. A parts -- highest inventory value (\~60%) and lowest number of parts/skus (\~10-15%) r. B parts -- medium inventory value (\~25%), moderate number of parts/skus (\~25%) s. C parts -- lowest inventory value (\