WGU C215 Q Bank For CPHQ Practice Questions And Answers

1. TQM: Total Quali- ty Management 2. Customer De- fined Quality 3. Conformance to specification 4. Example of Con- formance to specification is an integrated organizational effort designed to improve quality at every level. TQM is about meeting quality expectations as defined by the customer. measures how well the product or service meets the targets and tolerances determined by its designers. The wait for hotel room service may be specified as 20 minutes, but there may be an acceptable delay of an additional 10 minutes. Also, consider the amount of light delivered by a 60-watt light bulb. If the bulb delivers 50 watts, it does not conform to specifications. 5. Fitness for use focuses on how well the product performs its intended function or use. 6. Example of Fit- ness for use 7. Value for a price paid 8. Examples of Val- ue for a price paid For example, a Mercedes-Benz and a Jeep Cherokee both meet a fitness for use definition if one considers transportation as the intended function. However, if the definition becomes more specific and assumes that the intended use is for transportation on mountain roads and carrying fishing gear, the Jeep Cherokee has a greater fitness for use. You can also see that fitness for use is a user-based definition in that it is intended to meet the needs of a specific user group. is a definition of quality that consumers often use for prod- uct or service usefulness. This is the only definition that combines economics with consumer criteria; it assumes that the definition of quality is price sensitive. For example, suppose that you wish to sign up for a personal finance seminar and discover that the same class is being taught at two different colleges at signifi- cantly different tuition rates. If you take the less expensive 9. Support Ser- vices 10. Example of Sup- port Services 11. Psychological Criteria 12. Examples of Psy- chological Crite- ria 13. Manufacturing Organizations 14. Quality in manu- facturing organi- zations 15. Common quali- ty definition in manufacturing seminar, you will feel that you have received greater value for the price. provided are often how the quality of a product or service is judged. Quality does not apply only to the product or service itself; it also applies to the people, processes, and organizational environment associated with it. For example, the quality of a university is judged not only by the quality of staff and course offerings but also by the efficiency and accuracy of processing paperwork. is a subjective definition that focuses on the judgmental evaluation of what constitutes product or service quality. Different factors contribute to the evaluation, such as the atmosphere of the environment or the perceived prestige of the product. For example, a hospital patient may receive average healthcare, but a very friendly staff may leave the im- pression of high quality. Similarly, we commonly associate certain products with excellence because of their reputa- tion; Rolex watches and Mercedes-Benz automobiles are examples. Manufacturing organizations produce a tangible product that can be seen, touched, and directly measured. Exam- ples include cars, CD players, clothes, computers, and food items. quality definitions in manufacturing usually focus on tan- gible product features. 1. Conformance: the degree to which a product character- istic meets preset standards. 2. Performance: such as acceleration of a vehicle 3. Reliability: meaning that the product will function as expected without failure 4. Features: the extras that are included beyond the basic 16. Service Organi- zations 17. Examples of Ser- vice Organiza- tions 18. Quality of Ser- vice is defined by perceptual fac- tors 19. Quality Control Costs 20. Two types of Quality Control Costs 21. Prevention Costs characteristics 5. Durability: the expected operational life of the product 6. Serviceability: how readily a product can be repaired service organizations produce a product that is intangible. Usually, the complete product cannot be seen or touched. Rather, it is experienced. The intangible nature of the product makes defining quality difficult. delivery of healthcare, the experience of staying at a vacation resort, and learning at a university. 1. Responsiveness to customers needs/ 2. Courtesy and friendliness of staff. 3. Promptness in resolving complains. 4. Atmosphere 5. Time: the amount of time a customer has to wait for the service. 6. Consistency: the degree to which service is the same each time. Cost necessary for achieving high quality. 1. Prevention costs. 2. Appraisal costs. are all costs incurred in the process of preventing poor quality from occurring. Costs includes the following. 1. quality planning costs, such as the costs of developing and implementing a quality plan. 2. cost of product and process design. 3. Employee training in quality measurement. 4. Cost of maintaining records of information and data related to quality. 22. Appraisal Costs incurred in the process of uncovering defects. They in- clude the following; 23. Quality Failure Costs 24. Two types of Quality Failure Costs 25. Internal Failure Costs 26. External Failure Costs 1. Cost of quality inspections. 2. Product testing. 3. performing audits to make sure that quality standards are being met. 4. costs of worker time spent measuring quality 5. cost of equipment used for quality appraisal. Cost consequences of poor quality. 1. External Failure Costs 2. Internal Failure Costs are associated with discovering poor product quality be- fore the product reaches the customer site. 1. rework: the cost of correcting the defective item. 2.Scrap: when item is so defective that it cannot be fixed and must be thrown away. Scrap cost includes all the material, labor, and machine cost spent in producing the defective product. 3. cost of machine downtime due to failures in the process and the costs of discounting defective items for salvage value. are associated with quality problems that occur at the customer site. These costs can be particularly damaging because customer faith and loyalty can be difficult to regain. 1. Customer complaints 2. Product returns 3. repairs to warranty claims 4. recalls 5. litigation costs resulting from product liability issues 6. lost sales and lost customers 27. manufacturers of lunch meats and hot dogs whose prod- ucts have been recalled due to bacterial contamination Example of Ex- ternal Failure Costs 28. External Fail- ure Costs are particularly high where? 29. Walter A. She- whart 30. W. Edwards Dem- ing have had to struggle to regain consumer confidence. Other examples include auto manufacturers whose prod- ucts have been recalled due to major malfunctions such as problematic braking systems and airlines that have experienced a crash with many fatalities. External failure can sometimes put a company out of business almost overnight. External failure costs tend to be particularly high for ser- vice organizations. The reason is that with a service the customer spends much time in the service delivery sys- tem, and there are fewer opportunities to correct defects than there are in manufacturing. Examples of external failure in services include overbooking airline flights, long delays in airline service, and lost luggage. "grandfather of quality control" -developed quality control charts that are used to identify whether the variability in the process is random or due to an assignable cause, such as poor workers or miscal- ibrated machinery. "father of quality control" -Deming prize: an annual award given to firms that demonstrate outstanding quality. -"14 points": upper management must develop a com- mitment to quality and provide a system to support this commitment that involves all employees and suppliers. 31. Joseph M. Juran -considered to have had the greatest impact on quality management. -defines quality as fitness for use which takes in to ac- count customer intentions for use of the product instead of focusing on technical specifications. -develpped the concept of cost of quality which allows measuring quality in dollar terms rather than on the basis of subjective evaluations. -originated the quality trilogy. 32. Quality Trilogy 1. quality planning 2. quality control 3. quality improvement. 33. Quality planning companies identify their customers, product require- ments, and overriding business goals. Process set up so quality standards can be met. 34. Quality control stresses the regular use of statistical control methods to ensure that quality standards are met and to identify variation from the standards. 35. Quality improve- ment 36. Armand V. Feigenbaum quality improvement should not be just breakthroughs, but continuous as well. -introduced the concept of quality control. -promoted idea that quality developments are integrated throughout the entire organization/ -managers & employees have a total commitment to im- prove quality and people can learn from each other's success. -adapted by the Japanese and called "company-wide quality control. 37. Philip B. Crosby -developed phrase "Do it right the first time" and the notion of zero defects, assuming that no amounts of defects should be considered acceptable. -coined the phrase "quality is free" and for pointing out the many costs of quality. -stressed role of management in the quality improvement effort and the use of statistical control tools in measuring and monitoring quality. 38. Kaoru Ishikawa -development of quality tools called cause-and-effect dia- grams aka fishbone or Ishikawa diagrams. -diagrams are used for quality problem solving. -first quality guru to emphasize the importance of the "internal customer" and total company quality control. - a proponent of implementation of quality circles. 39. Quality circle employees who volunteer to solve quality problems. They solve quality problem through a preset of a process for analyzing and solving quality problems. -Team approach 40. Genichi Taguchi -product design -about 80% of all defective items are caused by poor product design. -stresses effort on design stage. -apply a concept called design of experiment to product design based on robust design. -Taguchi loss function. 41. Robust design a design that results in products that can perform over a wide range of conditions. It is easier to design a product that can perform over a wide range of environmental conditions that it is to control the environment conditions. 42. Taguchi Loss Function as conformance values move away from the target, loss increases as a quadratic function. -smaller differences from target result in smaller cost. -larger differences from target result in larger cost. 43. TQM Philosophy 1. Customer focus 2. Continuous improvement 3. Employee empowerment 4. use of quality tools 5. product design 6. process management 7. managing supplier quality 44. Customer focus goal is to identify and meet customer needs. Quality is customer driven. Companies continue to gather infor- mation via focus groups, market surveys, and customer interviews to know what they want. 45. Continuous im- provement a philosophy of never-ending improvement. Japanese be- lieve lasting changes come from gradual improvements. Kaizen: called by the Japanese requires that the company 46. Employee em- powerment 47. Use of quality tools continually strive to be better through learning and prob- lem solving. employee are expected to seek out, identify, and correct quality problems. They are rewarded for uncovering qual- ity problems not punished. They're given training in qual- ity measurement tools. To further stress their role, TQM differentiates between internal and external customers. ongoing employee training in the use of quality tools. 48. Product design products need to be designed to meet customer expecta- tions. 49. Process man- agement 50. Managing suppli- er quality quality should be built into the process; sources of quality problems should be identified and corrected. quality concepts must extend to a company's suppliers. 51. Kaizen requires that company continually strive to be better through learning and problem solving. 52. Plan-Do-Study-ActdCesyccrliebe(PsSthDeAa)cCtiyvcitlyeaakcaomSphaenwyhnaertecdysctloepoerrtfhoremDienming w order to incorporate continuous improvement in its oper- ation. -circular nature of the cycle demonstrates that improve- ment is a never-ending process. 53. PSDA Cycle steps 1. plan: managers must evaluate the current process and make plans based on any problems they find. Document procedures, collect data, and identify problems. 2. Do: during the implementation process, managers should document all changes made and collect data for evaluation. 3. Study: study the data collected and see whether the plan is achieving the goals established in the plan phase. 4. Act: act on the basis of the results of the first three phrases by communicating the result to other members of the company and then implement the new procedure if it has been successful. 54. Benchmarking studying business practices of companies considered "best in class." 55. Internal Cus- tomers 56. External Cus- tomers 57. Seven Tools of Quality Control 58. Cause-and-Ef- fect Diagram aka fishbone diagram are employees of the organization who receive goods or services from others in the company. In order words, if a defective item cannot be pasted on to an external customer, it shouldn't to an internal. are those that purchase the company's goods and ser- vices. 1. Cause-and-Effect Diagram 2. Flowchart 3. Checklist 4. Control Chart 5. Scatter Diagram 6. Pareto Chart 7. Histogram Identify potential causes of particular quality problems. 59. Flowcharts a schematic diagram of sequence of steps involved in an operation or process. A visual tool that helps develop a clear picture of how operation works and possible prob- lem locations. 60. Checklists a list of common defected the # of observed occurences. Collect specific information regarding defects observed. 61. Control Charts very important quality control tool. Used to evaluate whether a process is operating within expectations rela- tive to measured value. When it is, it's "in control." -UCL: upper control limit -LCL: lower control limit within these two lines, okay. outside, not ok. 62. Scatter Dia- shows how two variables are related to one another. grams Correlations could be positive or negative. Example: increased production speed & number of de- fects could correlate positively. -greater the correlation, the more linear and less, the more scatter. -Inverted U: observing relationship between two vari- ables. 63. Pareto Analysis technique used to identify problem based on their degree of importance. The 80-20 rule in respect that most quality problems are a result of only a few causes and the trick is to identify the causes. -ranks causes of poor quality in decreasing order based on the percentage of defects each has caused. 64. Histograms a chart that shows frequency distribution of observed val- ues of a variable. If distribution is normal or symmetrical. Example, Kroger must record and monitor product quality of incoming produce. Quality tools are used to evaluate the acceptability of product quality and to monitor product quality from individual suppliers. 65. Quality Func- a useful tool in translating the voice of the customer tion Deployment into specific technical requirements. Useful in enhancing (QFD) communication between different functions, such as mar- keting, operations, and engineering. -house of quality: goals set to address identified prob- lems. 66. QFD List 1. Customer requirements 2. competitive evaluations 3. product characteristics 4. relationship matrix 5. the trade-off matrix 6. setting targets 67. ISO 14000 a set of international standards and a certification focus- ing on a company's environmental responsibility 68. Descriptive sta- tistics 69. Most important descriptive sta- tistics are... Can be helpful in describing certain characteristics of a product and a process. 1. central tendency (mean) 2. measures of variability (standard deviation) 3. measures of distribution of data 70. Mean (average) is a statistic that measures the central tendency of a set of data. -calculated by the sum of all observation and divide by the total number of observation. 71. Example of Mean average soft drink bottle is filled with 16 ounces of liquid. 16 is the mean. 72. Range and stan- dard deviation 73. Just-in-time (JIT) philosophy information provides us with the amount of variability of the data. It tells us how spread out the data are around the mean. Getting the right quantity of goods at the right place at the right time. The goods arrive just in time. 74. Waste Anything that does not add value. 75. a broad view of JIT 76. Central belief of JIT A philosophy that encompasses the entire organization. everyone should have a broad view of the organization and work towards the same goal and that is serving the customers. Elimination of waste broad view of operations simplicity continuous improvement visibility flexibility 77. Types of waste material energy time space 78. Simplicity provide a simpler solution. JIT encourages staff to think about the problem and come up with a simple solution. 79. Continuous Im- provement aka Kaizen never-ending improvement always continue to improve since you will never be per- fect. 80. Kaizen Blitz This process allows a small group of people to concen- trate on a bite-size chunk of the problem for a short period of time and deliver improvement. 81. Visiblilty Problems must be visible to be identified and solved. JIT facilities are open and clean. Visibility allows us to readily see waste. We can then eliminate it. 82. Flexibility (ways) 1. A company can quickly adapt to the changing needs of its customers. 2. being able to produce a wide variety of products. 83. JIT system 1. just-in-time manufacturing 2. total quality management 3. respect for people 84. Just-in-time manufacturing 85. Manufacturing process in JIT 86. master produc- tion schedule focuses directly on the production system to make this possible starts with the final assembly schedule, often called the master production schedule a statement of which products and quantities will be made in specific time periods -usually fixed for few months ahead. 87. Kanban to pull the needed products through the production sys- tem. For this reason, JIT is often referred to as a pull system. The kanban specifies what is needed. 88. setup cost Cost incurred when setting up equipment for a production run. 89. acceptable quali- Traditional quality control systems . ty level (AQL) indicate the acceptable number of defective parts 90. Quality at the objective is not only to identify a quality problem but to source uncover its root cause 91. respect for peo- An element of JIT that considers human resources as an ple essential part of the JIT philosophy. 92. Pull system JIT is based on a "pull" system rather than a "push" system. 93. Kanban card "signal" or "card" in Japanese a kanban card has such information on it as the product name, the part number, and the quantity that needs to be produced. The kanban is attached to a container. 94. Production card A kanban card that authorizes production of material. 95. Withdrawal card A kanban card that authorizes withdrawal of material. 96. Signal Kanban flag that is used to indicate it is time to produce the next container of goods. often used when inventory between workstations is nec- essary. 97. Supplier Kan- The suppliers bring the filled containers to the point of bans usage in the factory and at the same time pick up an empty container with a kanban to be filled later. 98. small lot-produc- he amount of products produced at any one time is tion small—say, 10 versus 1000. 99. Economic setup of JIT 1. internal setups 2. external setups 100. internal setups require the machine to be stopped for the setup to be performed 101. external setups can be performed while the machine is still running. Almost all setups in traditional manufacturing systems are internal. 102. Uniform plant loading 103. Flexible re- sources 104. multifunction workers to eliminate the problem by making adjustments as small as possible and setting a production plan that is frozen for the month. A constant production plan for a facility with a given plan- ning horizon. 1. relying on general-purpose equipment capable of per- forming a number of different functions. 2. multifunction workers who can perform more than one job—an essential aspect of JIT. Capable of performing more than one job. 105. Facility layout Proper arrangement and layout of work centers and equipment is critical. Physical proximity and easy access contribute to the effi- ciency of the production process. 106. Streamlined pro- duction 107. Cell manufactur- ing is an important part of JIT; it relies heavily on assembly lines, dedicated to the production of a family of products. Placement of dissimilar machines and equipment togeth- er to produce a family of products with similar processing requirements. 108. Quality (today) meeting or exceeding customer expectations. 109. strategies for quality improve- ment 110. Quality problems from sources Step 1. Define quality as seen by the customer. Step 2: Translate customer needs into measurable terms. Step 3: Measure quality on an ongoing basis. Step 4: Set improvement targets and deadlines. Step 5: Develop a systematic method for improvement. 1. Product design. In the design process, customer needs may be misunderstood and not incorporated into the product design. 2. Process design. Management and equipment problems may stem from the design of the production process. Op- erator error actually contributes to only about 15 percent of quality problems. 3. Suppliers. Quality problems caused by suppliers in- clude low-quality materials and are often due to misun- derstandings between manufacturer and supplier. 111. Jidoka Authority given to workers to stop the production line if a quality problem is detected. 112. Undercapacity scheduling to leave ample time for problem-solving activities. JIT systems usually operate with seven hours of produc- tion and one hour of problem solving and working with teams. 113. poka-yoke Foolproof devices or mechanisms that prevent defects from occurring. 114. preventive main- tenance 115. Workers perform routine preven- regular inspections and maintenance designed to keep machines operational. perform routine preventive maintenance activities, includ- ing cleaning, lubricating, recalibrating, and making other tive maintenance adjustments to equipment. These duties are viewed as part of the worker's job 116. 116. work environ- ment 117. cross functional worker skills 118. Bottom-round management 119. Role of produc- tion employees in JIT 120. role of manage- ment in JIT 121. single source suppliers Keeping the facility clean is the workers' responsibility. Every worker is responsible for cleaning equipment and tools after using them and putting them back in their place. the ability of workers to perform many different tasks on many different machines. consensus management by committees or teams. When a decision needs to be made, it is discussed at all levels, starting at the bottom, so that everyone in the company contributes to the decision. 1. Workers have cross-functional skills. 2. Workers are actively engaged in solving production and quality problems. 3. Workers are empowered to make production and qual- ity decisions. 4. Quality is everyone's responsibility. 5. Workers are responsible for recording and visually displaying performance data. 6. Workers work in teams to solve problems. 7. Decisions are made through bottom-round manage- ment. 8. Workers are responsible for preventive maintenance. 1. Be responsible for creating a JIT culture. 2. Serve as coaches and facilitators, not "bosses". 3. Develop an incentive system that rewards workers for their efforts. 4. Develop employee skills necessary to function in a JIT environment. 5. Ensure that workers receive multifunctional training. 6. Facilitate teamwork. Suppliers that supply an entire family of parts for one manufacturer. 122. Benefits of JIT 1. reduction in inventory 2. Improved quality 123. JIT Implementa- tion process 124. Make quality im- provements. 125. Reorganize workplace 126. Reduce setup times 127. Reduce lot sizes and lead times 128. Implement layout changes 3. Reduced space requirements 4. Shorter lead times 5. Lower production costs 6. Increased productivity 7. Increased machine utilization 8. Greater flexibility 1. Make quality improvements. 2. Reorganize workplace. 3. Reduce setup times. 4. Reduce lot sizes and lead times. 5. Implement layout changes. 6. Switch to pull production. 7. Develop relationship with suppliers. Usually it is best to start the implementation process by improving quality. The reason is that quality is pervasive and all the JIT objectives are dependent on quality im- provement. Reorganizing the workplace is the next step. This means proper facility layout, cleaning and organizing the work environment, designating storage spaces for everything, and removing clutter. The next step is to focus on reducing setup times, which will involve manufacturing and industrial engineering. It will require analysis of current setup procedures, elimi- nation of unneeded steps, and streamlining of motions. Workers will need to be trained in the proper setup pro- cedures. Once setup times have been reduced, the focus is on reducing lot sizes and lead times. This, in turn, will reduce the inventory between workstations and free up space. The empty space will contribute to visibility. The next step is to arrange equipment and workstations in close proximity to one another and to form work cells. 129. Switch to pull production 130. Develop relation- ship with suppli- ers 131. JIT concepts seen in service firms 132. Lean supply chain 133. Company suppli- ers 134. zero waste busi- ness model 135. Capacity plan- ning 136. Capacity plan- ning formed at two levels After the preceding changes have been implemented, it is time to switch to pull production. Changing from a push system to a pull system, including worker training, needs to be planned very carefully. However, the change needs to be made at once because a production facility cannot use a push and a pull system at the same time. Changes in relationships with suppliers should be among the last steps implemented. Demands for smaller and more frequent deliveries should be instituted gradually. 1. improve quality 2. uniform facility loading 3. use of multifunction workers 4. reduction in cycle time 5. minimizing setup time and parallel processing 6. workplace organization JIT adopted by all members of a supply chain in order to have a full impact. aka external factory. The pull system cannot work if its suppliers don't use it. addresses every aspect of waste, including wasted water and energy, in order to maximize production efficiency as well as eliminate pollution and toxins. is the process of establishing the output rate that can be achieved by a facility. If a company does not plan its capacity correctly, it may find that it either does not have enough output capability to meet customer demands or has too much capacity sitting idle. 1. strategic decisions 2. tactical decisions 137. This is where a company decides what investments in new facilities and equipment it should make. Because Example of strategic deci- sion 138. Capacity can be measured how 139. when discussing capacity of a fa- cility, you need, 140. Two most com- these decisions are strategic in nature, the company will have to live with them for a long time. using inputs and outputs output measures such as the number of cars per shift, are easier to understand inputs works better when a company produces different kinds of products. 1. amount of available capacity 2. effective of capacity use 1. design capacity mon measures of 2. effective capacity capacity 141. Design Capacity is the maximum output rate that can be achieved by a facility under ideal conditions. In our example, this is 30 pies per day. Design capacity can be sustained only for a relatively short period of time. A company achieves this output rate by using many temporary measures, such as overtime, overstaffing, maximum use of equipment, and subcontracting. 142. Effective capaci- ty 143. Capacity utiliza- tion is the maximum output rate that can be sustained under normal conditions. These conditions include realistic work schedules and breaks, regular staff levels, scheduled ma- chine maintenance, and none of the temporary measures that are used to achieve design capacity. Note that effec- tive capacity is usually lower than design capacity. In our example, effective capacity is 20 pies per day. simply tells us how much of our capacity we are actually using. 144. 144. Capacity utiliza- tion can be mea- sure how? 145. Best operating level 146. economies of scale 147. Diseconomies of scale 148. Considering ca- pacity: Alterna- tive 1 149. Considering ca- pacity: Alterna- tive 2 150. Focused Facto- ries 151. PWP: plant with- in a plant 152. subcontractor networks Capacity utilization can simply be computed as the ratio of actual output over capacity: a volume of output that results in the lowest average unit cost. the average cost of a unit produced is reduced when the amount of output is increased. occur at a point beyond the best operating level, when the cost of each additional unit made increases. Purchase one large facility, requiring one large initial in- vestment. - large amount of excess capacity in the beginning -initial costs would be high -risk that demand might not materialize -operating level is much higher -costs would be lower in the long run -provides greater rewards but is more risky Add capacity incrementally in smaller chunks as needed. -less risky but does not offer the same opportunities and flexibility Facilities can respond more efficiently to demand if they are small, specialized, and focused on a narrow set of objectives. more efficient. is a large facility divided into smaller, more specialized facilities that have separate operations, competitive prior- ities, technology, and workforce. suppliers and manufacturers work together to achieve the same quality standards, and much of the quality check- ing of incoming materials is performed at the supplier's g more responsibility on subcontractors and sup- pliers, a manufacturer can focus on tasks that are critical to its success, such as product development and design. 153. three-step proce- dure for making capacity plan- ning decisions 154. Identify Capacity Requirements 155. Develop Capaci- ty Alternativesf 156. Evaluate Capaci- ty Alternatives 157. Identify capacity requirements 158. forecasting ca- pacity 159. Qualitative fore- casting methods 160. One way to proceed with long-range de- mand forecast- ing 1. Identify capacity 2. Develop capacity alternatives 3. evaluate capacity alternatives The first step is to identify the levels of capacity needed by the company now, as well as in the future. A company cannot decide whether to purchase a new facility without knowing exactly how much capacity it will need in the future. It also needs to identify the gap between available capacity and future requirements. Once capacity requirements have been identified, the company needs to develop a set of alternatives that would enable it to meet future capacity needs. The last step in the procedure is to evaluate the capacity alternatives and select the one alternative that will best meet the company's requirements. Long-term capacity requirements are identified on the basis of forecasts of future demand identified on the basis of forecasts of future demand. Forecasting at this level is performed using qualitative forecasting methods. 1. Executive opinion 2. Delphi method use subjective opinions of experts to first forecast overall market demand and then estimate its market share as a percentage of the total 161. capacity cush- ions 162. capacity alterna- tives A capacity cushion is an amount of capacity added to the needed capacity in order to provide greater flexibility. It can be helpful if demand is greater than expected. 1. Do nothing 2. Expand large now 3. Expand small now, with option to add later 163. decision trees is a diagram that models the alternatives being consid- ered and the possible outcomes. 164. Decision tree 1. decision points 2. decision alternatives 3. chance events 4. outcomes 165. Decision points These are the points in time when decisions, such as whether or not to expand, are made. They are represent- ed by squares, called "nodes." 166. Decision alterna- tives. Buying a large facility and buying a small facility are two decision alternatives. They are represented by "branches" or arrows leaving a decision point. 167. Chance events These are events that could affect the value of a decision. For example, demand could be high or low. Each chance event has a probability or likelihood of occurring. 168. Outcomes For each possible alternative an outcome is listed. In our example, that may be expected profit for each alternative (expand now or later) given each chance event (high demand or low demand). 169. Expected value is a weighted average of the chance events, where each chance event is given a probability of occurrence. 170. Facility location determining the best geographic location for a company's facility. 171. Facility locations are important for two reasons 172. factors affect- ing location deci- sions 173. proximity to cus- tomers 174. proximity to source of labor 175. community con- siderations 1. they require long-term commitments in buildings and facilities, which means that mistakes can be difficult to correct. 2. decisions require sizable financial investment and can have a large impact on operating costs and revenues. 1. proximity to customers 2. transportation 3. source of labor 4. community attitude 5. proximity to suppliers and many other factors. To capture their share of the business, service firms need to be accessible to their customers. For this reason, ser- vice firms typically locate in high-population areas that offer convenient access. Examples are retail stores, fast-food restaurant other reasons for locating close to customers may include the perishable nature of the company's products or high costs of transportation to the customer site. Proximity to an ample supply of qualified labor is impor- tant in many businesses, especially those that are labor intensive. Other factors that should be considered are local wage rates, the presence of local unions, and attitudes of local workers. The success of a company at a particular location can be affected by the extent to which it is accepted by the local community. viewing them as providing sources of tax revenues and opportunities for jobs, and as contributing to the overall 176. site considera- tion well-being of the community. However, if it hinders their way of life such as pollution, noise, traffic, they resist their location there. Site considerations for a particular location include factors such as utility costs, taxes, zoning restrictions, soil condi- tions, and even climate. 177. quality of life the quality of life a particular location offers the company's employees. 178. other considera- tion for location anlaysis They include room for customer parking, visibility, cus- tomer and transportation access, as well as room for expansion. 179. globalization is the process of locating facilities around the world. 180. advantages of globalization 181. An area that has further encour- aged globaliza- tion 182. disadvantages of globalization 183. Issues consid- ering locating globally 1. is to take advantage of foreign markets. 2. reduction of trade barriers. 3. cheap labor in certain countries is the growth of just-in-time manufacturing, which encour- ages suppliers and manufacturers to be in close proximity to one another. 1. political risk 2. whether to use local employees. Company might find that worker attitudes toward tardiness and absenteeism are different. 1. different culture 2. language barriers 3. different laws and regulations 184. Forecast determine the size of current and future capacity needs. 185. product design defines a product's characteristics, such as its appear- ance, the materials it is made of, its dimensions and tolerances, and its performance standards. 186. Service design defines the characteristics of a service, such as its phys- ical elements, and the aesthetic and psychological bene- fits it provides. both the service and the entire service concept are being designed. 187. Design steps 1. idea generation 2. product screening 3. preliminary design and testing 4. final design. 188. idea develop- ment 189. product screen- ing 190. preliminary de- sign product idea developed; sources can be customers, sup- pliers, or competitors. product idea evaluated to determine its likelihood of suc- cess. Break-even calculation is also done at this time. product prototypes built, tested, and refined. 191. final design final product specification completed. 192. benchmarking Studying the practices of companies considered "best-in-class" and comparing the performance of one's own company against theirs 193. reverse engi- neering 194. early supplier in- volvement (ESI) 195. break-even analysis 196. Design for manu- facture (DFM) Another way of using competitors' ideas is to buy a com- petitor's new product and study its design features. Suppliers participate in a program called early supplier involvement (ESI), which involves them in the early stages of product design. It computes the quantity of goods a company needs to sell just to cover its costs, or break even is a series of guidelines that we should follow to produce a product easily and profitably 197. DFM guidelines focus on two is- sues: 198. Design simplifi- cation 199. Design standard- ization 1. Design simplification 2. Design standardization reducing the number of parts and features of the product whenever possible. A simpler product is easier to make, costs less, and gives higher quality. the use of common and interchangeable parts. By using interchangeable parts, we can make a greater variety of products with less inventory and significantly lower cost and provide greater flexibility. 200. DFM Guidelines 1. minimize parts 2. design parts for different products. 3. use modular designs 4. avoid tools 5. simplify operations Example, using less part, cost less, and less errors. 201. Competitive evaluation 202. relationship ma- trix 203. Negative rela- tionship matrix identify which customer requirements we should pursue and how we fare relative to our competitors. Example, you can see that our products excels in durabili- ty relative to competitors, yet it does not look as nice. This means that we could gain a competitive advantage by focusing our design efforts on a more appealing product. the strenght of the relationship between customer re- quirements and product characteristics is shown in the relationship matrix. means that we increase the desirability of one variable, we decrease the desirability of the other. Example, you can see that the number of zippers and compartments is negatively related to the weight of the backpack. 204. Trade-off Matrix shows how each product characteristics is related to the others and thus allows us to see what trade-offs we need to make. Example, the number of zippers is negatively related to the weight of the backpack. 205. Setting targets evaluated competitors' products relative to the specific product characteristics and to set targets for our own product. 206. reliability the probability that a product, service, or part will perform as intended for a specific period of time under normal conditions. Example, product warranties. a product with 90 percent reliability has a 90 percent chance on functioning as intended. The more components a product has, the lower its relia- bility. 207. Way to increase product reliabili- ty 208. process manage- ment 209. quality at the source 210. The Malcolm Baldrige Nation- al Quality (MBN- QA) is to build redundancy into the product design in the form of backup parts. Redundancy is built into the system by placing components in parallel so that when one compo- nent fails the other component takes over. a quality product comes from a quality process. This means that quality should be built into the process. is the belief that it is far better to uncover the source of quality problems and correct it than to discard defective items after production. It recognizes companies that establish and demonstrate high-quality standards and is given to no more than two companies in each of three categories: manufacturing, service, and small business. 211. For the MBN- QA, companies are evaluated on 7 categories 212. The Deming Prize 213. ISO 9000 214. Statistical Process Control (SPC) 215. Common causes of TQM failure 216. Variation in pro- duction process 217. Descriptive char- acteristics 218. Most important descriptive char- acteristics are established in 1987 when Congress passed the Malcolm Baldridge National Quality Improvement Act. 1. leadership 2. strategic planning 3. customer and market focus 4. information and analysis 5. management of human resource 6. management of processes 7. is a Japanese award given to companies to recognize their efforts in quality improvement. a necessary tool for identifying quality problems. 1. lack of genuine quality culture. 2. lack of top management support and commitment. 3. over-and underreliance on statistical process control methods. leads to quality defects and lack of product consitency. helpful in describing certain characteristics of a product and a process. 1. central tendency (mean) 2. measures of variability (standard deviation and range) 3. measures of the distribution of data 219. Mean The arithmetic average is a statistic that measures the central tendency of a set of data. sum of all the observa- tion and divide by the total number of observations. 220. range and stan- dard deviation example, soft-drink bottling's average bottle is filled with 16 ounces of liquid. information provides us with the amount of variability of the data. It tells us how spread out the data are around the mean. 221. range the difference between the largest and smallest observa- tion. 222. Two measures of variability are 223. Symmetric distri- bution 224. Skewed distribu- tion 225. Statistical process control 1. range 2. standard deviation is when the same number of observations below and above the mean commonly found when only normal vari- ation is present in the data. when a disproportionate number of observations are ei- ther above or below the mean. 226. Type I error the chance of concluding that there are assignable caus- es of variation when only normal variation exists. 227. alpha (a) risk refers to the sum of the probabilities in both tails of the distribution that fall outside of confidence limits. 228. product life cy- cle: 4 stages 229. Early stages of product life cy- cles 230. 230. 1. introduction 2. growth 3. maturity 4. decline 1. introduction: not well defined, and neither is their mar- ket. 2. growth: the product takes hold and both product and market continue to be refined. Later stages of product life cy- cles 231. concurrent engi- neering 232. the "over-the-wall" approach 233. Problems with over-the-wall ap- proach 3. maturity: demand levels off and there are usually no design changes: the product is predictable at this stage and so is its market. 4. decline: decline in demand because of new technology, better product design, or market saturation. is an approach that brings many people together in the early phase of product design in order to simultaneously design the product and the process. designers would throw their design "over-the-wall" to op- erations, who then had to decide how to produce the product. 1. it is very inefficient and costly. 2. approach takes a longer amount of time than when product and process design are performed concurrently. 234. remanufacturing uses components of old products in the production of new ones. 235. Types of processes 236. intermittent op- erations 237. repetitive opera- tions 1. intermittent operations. 2. repetitive operations. are used to produce a variety of products with different processing requirements in lower volumes. Examples are an auto body shop, a tool and die shop, or a healthcare facility. They are labor intensive rather than capital intensive. we see skilled and semiskilled workers in this environ- ment, with a fair amount of worker discretion in performing their jobs. volume of goods produced is directly tied to the number of customer orders. are used to produce one or a few standardized products in high volume. 238. most common differences be- tween intermit- tent and repeti- tive operations Examples are a typical assembly line, cafeteria, or auto- matic car wash. these operations tend to be capital intensive rather than labor intensive. volume produced is usually based on a forecast of future demands rather than on direct customer orders. 1. the amount of product volume produced 2. the degree of product standardization. 239. product volume range from making a unique product one at a time to producing a large number of products at the same time. 240. product stan- dardization 241. Intermittent op- erations can be divided into 242. Repetitive opera- tions can be di- vided into refers to a lack of variety in a particular product. Examples of standardized products are white undershirts, calculators, toasters, and television sets. project processes and batch processes. line processes and continuous processes. 243. project process are used to make one-of-a-kind products exactly to cus- tomer specifications. Examples can be seen in construction, shipbuilding, med- ical procedures, creation of artwork, custom tailoring, and interior design. 244. 244. batch process aka job shops 245. line process aka flow shops, flow lines, or assem- bly lines 246. continuous process 247. process flow analysis 248. process flow- chart 249. elements in de- veloping a flow- chart are used to produce small quantities of products in groups or batches based on customer orders or product specifi- cations. Examples can be seen in bakeries, education, and print- ing shops. are designed to produce a large volume of a standardized product for mass production. Example, assembly line that produces everything from cars, computers, television sets, shoes, candy bars, even food items. operate continually to produce a very high volume of a fully standardized product. Examples include oil refineries, water treatment plants, and certain paint facilities. continuous processes are usu- ally in continual rather than discrete units, such as liquid or gas. is a technique used for evaluating a process in terms of the sequence of steps from inputs to outputs with the goal of improving its design. is used for viewing the sequence of steps involved in pro- ducing the product and the flow of the product through the process. It is useful for seeing the totality of the operation and for identifying potential problem areas. 250. bottleneck Longest task in the process. 251. make-to-stock strategy Produces standard products and services for immediate sale or delivery. 252. assemble-to-or- der strategy 253. make-to-order strategy 254. operations man- agers use process perfor- mance metrics to determine 255. process perfor- mance metrics 256. common process performance metrics Example popular items, and Antonio makes them ahead of time to ensure that they are always available upon demand. Produces standard components that can be combined to customer specifications. Produces products to customer specifications after an order has been received. how a process is performing and how it is changing over time. are measurements of different process characteristics that tell us how a process is performing. 1. throughput time 2. process velocity 3. productivity 4. utilization 5. efficiency 257. throughput time the average amount of time it takes a product to move through the system. 258. Process velocity is computed as a ratio of throughput time to value-added time: 259. Productivity measures how well a company converts its inputs to outputs. ratio of outputs over inputs 260. utilization is the ratio of the time a resource is actually used versus the time it is available for use. measures the actual time that a resource (e.g., equipment or labor) is being used. 261. efficiency is a metric that measures actual output relative to some standard of output. It tells us whether we are performing at, above, or below standard. 262. vertical integra- tion 263. Information tech- nology (IT) 264. Enterprise re- source planning (ERP) 265. Global position- ing systems (GPS) 266. Radio frequen- cy identification (RFID) is a strategic decision that should support the future growth direction of the company. An example is Dole Food Company, which owns and controls most of its canned pineapple production from pineapple farms to the processing plant. The company has chosen to be vertically integrated so as to have greater control of costs and product quality. is technology that enables storage, processing, and com- munication of information within and between firms. It is also used to organize information to help managers with decision making. Examples: internet, enterprise resource planning, wire- less communication technologies. These are large software programs used for planning and coordinating all resources throughout the entire enter- prise. They allow data sharing and communication within and outside of the firm, enabling collaborative decision making. type of wireless technology that uses satellite transmis- sion to communicate exact locations. uses memory chips equipped with tiny radio antennas that can be attached to objects to transmit streams of data about the object. For example, RFID can be used to identify any product movement, reveal a missing prod- uct's location, or have a shipment of products "announce" their arrival. 267. automation is the use of machinery able to perform work without human operators and can involve a single machine or an 268. automated guid- ed vehicle (AGV) 269. automated stor- age and re- trieval systems (AS/RSs) 270. flexible manu- facturing system (FMS) 271. numerically con- trolled (NC) ma- chine 272. Computer-aided design (CAD) 273. computer-aided engineering (CAE) 274. Computer-aided manufacturing (CAM) 275. collaborative product commerce (CPC) software, 276. Computer-inte- grated entire factory. advantage of product consistency and ability to efficiently produce large volumes of product. disadvantages is that its very costly, and is typically not flexible in accommodating product and process changes. a small battery-driven truck that moves materials from one location to the other. are basically automated warehouses. AS/RSs use AGVs to move material and also computer-controlled racks and storage bins. a type of automation system that combines the flexibility of intermittent operations with the efficiency of repetitive operations. NC machines are controlled by a computer and can do a variety of tasks such as drilling, boring, or turning parts of different sizes and shapes. is a system that uses computer graphics to design new products. performed by CAD, engineering design calculations can be performed to test the reactions of the design to stress and to evaluate strength of materials. is the process of controlling manufacturing through com- puters. sharing designs with suppliers is possible. is a term used to describe the integration of product design, process planning, and manufacturing using an manufacturing (CIM) 277. 4 basic layout types integrated computer system. key element of CIM is the integration of different parts of the operation process to achieve greater responsiveness and flexibility. 1. process 2. product 3. hybrid 4. fixed position 278. process layout are layouts that group resources based on similar processes or functions. This type of layout is seen in companies with intermittent processing systems. Example, all fruits are on the fruit isle but in groups like apples together, then banana, etc... 279. characteristic of process and product layout 280. product layout are layouts that arrange resources in a straight-line fash- ion to promote efficient production. They are called prod- uct layouts because all resources are arranged to meet the production needs of the product. Examples of product layouts are seen on assembly lines, in cafeterias, or even at a car wash 281. hybrid layouts combine aspects of both process and product layouts. This is the case in facilities where part of the operation is performed using an intermittent processing system and another part is performed using a continuous processing system. 282. group technolo- gy (GT) or cell layouts Hybrid layouts that create groups of products based on similar processing requirements. 283. fixed-position layout 284. manufacturabili- ty 285. three steps in de- signing process layout is used when the product is large and cannot be moved due to its size. Examples of fixed-position layouts include building con- struction, dam or bridge construction, shipbuilding, or large aircraft manufacture. the ease with which a product can be made. Step 1 Gather information. Step 2 Develop a block plan or schematic of the layout. Step 3 Develop a detailed layout 286. block plan a schematic that shows the placement of departments in a facility. Using a block plan, we can visualize the available space and evaluate whether we can meet space needs. 287. from-to matrix a table that shows the number of trips or units of product moved between any pair of departments. 288. REL chart is a tool that reflects opinions of managers with regard to the importance of having any two departments close together. 289. systematic lay- out planning (SLP) 290. develop a new block plan a relationship chart to develop acceptable layouts is part of a classic layout technique A block plan can be developed either by trial and error or by choosing from a variety of decision-support tools. 291. 291. load-distance model 292. rectilinear dis- tance 293. ALDEP (auto- mated layout de- sign program) 294. CRAFT (comput- erized relative al- location of facili- ties technique) Model used to compare the relative effectiveness of dif- ferent layouts. The shortest distance between two locations using north-south and east-west movements. ALDEP works from a REL chart. It constructs a layout within the boundaries of the facility by trying to link togeth- er departments that have either an A or an E rating in the REL chart. CRAFT uses a from-to matrix and an existing layout as a starting point. 295. Flexible layouts Layouts that remain desirable many years into the future or can be easily modified to meet changing demand 296. office landscap- ing using plants, decor, and indoor landscaping to provide natural-looking partitions and sections that allow for pri- vacy and flexibility but still have the feel of an open office environment. 297. line balancing The process of assigning tasks to workstations in a prod- uct layout in order to achieve a desired output and balance the workload among stations. 298. immediate pre- decessor 299. precedence dia- gram A task that must be performed immediately before anoth- er task. A visual representation of the precedence relationships between tasks 300. output rate The number of units we wish to produce over a specific period of time. 301. Cycle time is the maximum amount of time each workstation has to complete its assigned tasks. 302. Types of invento- ry 1. raw materials 2. components 3. WIP (work-in-process) 4. finished goods 5. distribution inventory 6. maintenance repairs and operating supplies 303. raw materials are the purchased items or extracted materials that are transformed into components or products. For example, gold is a raw material that is transformed into jewelry. 304. components are parts or subassemblies used in building the final product. For example, a transformer is a component in an electronic product. 305. Work-in-process (WIP) refers to all items in process throughout the plant. Since products are not manufactured instantaneously, there is -always some WIP inventory flowing through the plant. 306. finished goods the bicycles, stereos, CDs, and automobiles that the com- pany sells to its customers. 307. distribution in- ventory 308. Maintenance, re- pair, and opera- tional (MRO) in- ventory 309. Anticipation In- ventory aka Sea- sonal Inventory 310. Fluctuation In- ventory aka Safe- consists of finished goods and spare parts at various points in the distribution system—for example, stored in warehouses or in transit between warehouses and con- sumers. are supplies that are used in manufacturing but do not become part of the finished product. Examples of MRO are hand tools, lubricants, and cleaning supplies. is built in anticipation of future demand, planned promo- tional programs, seasonal fluctuations, plant shutdowns, and vacations. is carried as a cushion to protect against possible demand variation, "just in case" of unexpected demand. ty Stock, re- verse stock, safe- ty stock 311. Lot-size Invento- results when a company buys or produces more than is ry or Cycle Stock immediately needed. carried in inventory and depleted as customers place orders. 312. Transportation or Pipeline Inventory 313. Speculative or Hedge Inventory 314. Maintenance, Re- pair, and Operat- ing (MRO) Inven- tory 315. Percentage of Orders Shipped on Schedule 316. relevant invento- ry costs is in transit between the manufacturing plant and the distribution warehouse. is a buildup to protect against some future event such as a strike at your supplier, a price increase, or the scarcity of a product that may or may not happen. includes maintenance supplies, spare parts, lubricants, cleaning compounds, and daily operating supplies such as pens, pencils, and note pads. 1. item cost 2. holding cost 3. capital cost 4. storage cost 5. risk cost 6. ordering cost 7. shortage cost 317. item cost of a purchased item include the price paid for the item and any other direct costs for getting the item to the plant, such as inbound transportation, insurance, duty, or taxes. 318. holding cost include the variable expenses incurred by the firm for the volume of inventory held. We can determine unit holding costs by examining three cost components: capital costs, storage costs, and risk costs. 319. capital cost are the higher of either the cost of the capital or the opportunity cost for the company. The cost of the capital is the interest rate the company pays to borrow money to invest in inventory. The opportunity cost is the rate of return the company could have earned on the money if it were used for something other than investing in inventory. 320. storage cost usually include the cost of space, workers, and equip- ment. 321. risk cost include obsolescence, damage or deterioration, theft, in- surance, and taxes. 322. ordering cost are fixed costs for either placing an order with a supplier for a purchased component or raw material or for placing an order to the manufacturing organization for a product built in-house. 323. shortage cost 324. Pareto's law Implies that about 20 percent of the inventory items will account for about 80 percent of the inventory value. 325. ABC classifica- tion 326. continuous re- view system 327. periodic review system A method for determining level of control and frequency of review of inventory items. Updates inventory balances after each inventory transac- tion. keeps track of an inventory item 24/7. the EOQ model is often used. reviews the inventory level of the item at regular intervals (daily, weekly, monthly) to determine whether a replenish- ment order is needed. 328. two-bin system One bin with enough stock to satisfy demand during replenishment time is kept in the storeroom; the other bin is placed on the manufacturing floor. 329. Periodic count- ing A physical inventory is taken periodically, usually annually. satisfy auditors. 330. Cycle counting is a method of counting inventory throughout the year. This is a series of mini-physical inventories done daily of some prespecified items. 331. Vendor-man- aged inventory (VMI) 332. Percentage of Line Items Shipped on Schedule 333. Percentage of Dollar Volume Shipped on Schedule 334. Idle Time Due to Material and Component Shortages requires the vendor to maintain an inventory of certain items at the customer's facility. The supplier still owns the inventory until the customer actually withdraws it for use. recognizes that not all orders are equal but fails to take into account the dollar value of orders. recognizes the differences in orders in terms of both line items and dollar value. This is an absolute measure of the manufacturing or ser- vice time lost because material or parts are not available to the workforce. 335. back-order Delaying delivery to the customer until the item becomes available. 336. lost sale Occurs when the customer is not willing to wait for deliv- ery. 337. stock-keeping unit (SKU) An SKU is a specific item at a particular geographic location. For example, a pair of jeans, size , in inventory at the plant and also eight different warehouses, represents nine different SKUs 338. Lot-for-lot is ordering exactly what you need. You adjust the ordering quantity to your ordering needs, which ensures that you will not have leftover inventory. 339. Fixed-order quantity specifies the number of units to order each time you place an order for a certain SKU or item. 340. min-max system involves placing an order when the on-hand inventory falls below a predetermined minimum level. 341. Order n periods means that you determine the order quantity by summing your company's requirements for the next n periods. 342. economic order quantity model (EOQ) 343. economic pro- duction quantity (EPQ) model. 344. Order-cycle ser- vice level 345. target inventory level (TI), 346. single-period model is a continuous review system, used to keep track of the inventory on hand each time stock is added or withdrawn. A model that allows for incremental product delivery. The probability that demand during lead time will not exceed on-hand inventory. Used in determining order quantity in the periodic review system. Target inventory less on-hand inventory equals order quantity. Designed for use with products that are highly perishable. Example, Christmas tree, newspaper objective is to balance the gross profit generated by the sale of a unit with the cost incurred for each unit that is not sold until after the primary selling period has elapsed. 347. SCM software is designed to improve decision making in the supply chain. 348. Supply chain in- telligence (SCI) is the capability of collecting business intelligence along the supply chain. This intelligence enables strategic de- cision making by analyzing data along the entire supply chain. 349. application ser- vice provider (ASP 350. Tangible benefits of ERP 351. Intangible bene- fits of ERP 352. Closed-loop MRP 353. manufacturing resource planning (MRP II) 354. Material require- ments planning (MRP) 355. capacity require- ments planning (CRP) Sets up and runs ERP systems. Tangible benefits refer to reductions in inventory and staffing, increased productivity, improved order manage- ment, quicker closing of financial cycles, reduced IT and purchasing costs, improved cash flow management, in- creased revenue and profits, reduced transportation and logistics costs, and improved on-time delivery perfor- mance. Intangible benefits refer to the