Ch2

1)Competitiveness How effectively an organization meets the wants and needs

of customers relative to others that offer similar goods or services

2)Mission The reason for the existence of an organization.

3)Mission statement States the purpose of an organization.

4)Goals Provide detail and scope of the mission.

5)Strategies Plans for achieving organizational goals.

6)Tactics The methods and actions taken to accomplish strategies.

7)Core competencies The spe- cial attributes or abilities that give an

organization a competi- tive edge.

8)SWOT Analysis of strengths, weaknesses, opportunities, and threats.

9)Order qualifiers Character- istics that customers perceive as minimum

standards of accept- ability to be considered as a potential for purchase.

10)Order winners Characteristics of an organization’s goods or services that

cause it to be perceived as better than the competition.

11)Environmental scanning The monitoring of events and trends that present

threats or opportunities for a company

12)Operations strategy The approach, consistent with the organization

strategy, that is used to guide the operations function.

13)Quality-based strategy Strategy that focuses on quality in all phases of an

organization.

14)Time-based strategy Strategy that focuses on reduction of time needed to

accomplish tasks.

15)Productivity A measure of the effective use of resources, usually expressed

as the ratio of output to input.
******Summary*******

Competition is the driving force in many organizations. It may involve price,

quality, special features or services, time, or other factors. To develop effective
strategies for business, it is essential for organiza- tions to determine what
combinations of factors are important to customers, which factors are order
qualifiers, and which are order winners. It is essential that goals and strategies
be aligned with the organization’s mission. Strategies are plans for achieving
organizational goals. They provide focus for decision making. Strategies must
take into account present and future customer wants, as well as the
organization’s strengths and weaknesses, threats and opportunities. These can
run the gamut from what competitors are doing, or are likely to do, to
technology, supply chain management, and e-business. Organizations generally
have overall strategies that pertain to the entire organization and strategies
that pertain to each of the functional areas. Func- tional strategies are
narrower in scope and should be linked to overall strategies. Time-based
strategies and quality-based strategies are among the most widely used
strategies business organizations employ to serve their customers and to
become more productive. The chapter includes a description of the Bal- anced
Scorecard approach, which can be helpful for transforming strategies into
actions, and the impli- cations of organization strategy for operations
management. Productivity is a measure of the use of resources. There is
considerable interest in productivity both from an organizational standpoint
and from a national standpoint. Business organizations want higher
productivity because it yields lower costs and helps them to become more
competitive. Nations want higher productivity because it makes their goods
and services more attractive, offsets inflationary pres- sures associated with
higher wages, and results in a higher standard of living for their people.

********Key point *********

1. Competitive pressure often means that business organizations must

frequently assess their competi- tors’ strengths and weaknesses, as well as
their own, to remain competitive.
2. Strategy formulation is critical because strategies provide direction for the
organization, so they can play a role in the success or failure of a business
organization.

3. Functional strategies and supply chain strategies need to be aligned with

the goals and strategies of the overall organization.

4. The three primary business strategies are low cost, responsiveness, and
differentiation.

5. Productivity is a key factor in the cost of goods and services. Increases in

productivity can become a competitive advantage.

6. High productivity is particularly important for organizations that have a

strategy of low costs.

Ch4

1)Manufacturability The capability of an organization to produce an item at an

acceptable profit.

2)Serviceability The capability of an organization to provide a service at an

acceptable cost or profit.

3)Reverse engineering Dismantling and inspecting a competitor’s product to

discover product improvements.

4) Research and development (R&D) Organized efforts to increase scientific

knowledge or product innovation.

5)Product liability The respon- sibility of a manufacturer for any injuries or

damages caused by a faulty product.

6)Uniform Commercial Code Products carry an implication of merchantability

and fitness.

7)Cradle-to-grave assessment The assessment of the environ- mental impact

of a product or service throughout its useful life.
8)Value analysis Examination of the function of parts and materials in an effort
to reduce cost and/or improve product performance.

9)Remanufacturing Refurbishing used products by replacing worn-out or

defective components.

10)Design for disassembly (DFD) Design so that used products can be easily
taken apart.

11)Recycling Recovering materi- als for future use.

12)Design for recycling (DFR) Design that facilitates the recov- ery of materials
and components in used products for reuse.

13)Standardization Extent to which a product, service, or process lacks variety.

14)Mass customization A strategy of producing basi- cally standardized goods,

but incorporating some degree of customization.

15)Delayed differentiation The process of producing, but not quite

completing, a product or service until customer prefer- ences are known.

16)Modular design A form of standardization in which component parts are

grouped into modules that are easily replaced or interchanged.

17)Reliability The ability of a product, part, or system to per- form its intended
function under a prescribed set of conditions.

18)Failure Situation in which a product, part, or system does not perform as

intended.

19)Normal operating conditions The set of conditions under which an item’s

reliability is specified.

20)Robust design Design that results in products or services that can function
over a broad range of conditions.

13)Quality function deployment (QFD) An approach that integrates the “voice

of the cus- tomer” into both product and service development.

14)Concurrent engineering Bringing engineering design and manufacturing

personnel together early in the design phase.
15)Computer-aided design (CAD) Product design using computer graphics.

16)Design for assembly (DFA) Design that focuses on reducing the number of
parts in a product and on assembly methods and sequence.

17)Manufacturability The ease of fabrication and/or assembly.

18)Design for manufacturing (DFM) The designing of prod- ucts that are
compatible with an organization’s capabilities.

19)Service Something that is done to or for a customer.

20)Service delivery system The facilities, processes, and skills needed to

provide a service.

21)Product bundle The com- bination of goods and services provided to a

customer.

22)Service package The physi- cal resources needed to perform the service,
the accompanying goods, and the explicit and implicit services included.

*****THE SUMMARY*****

Product and service design is a key factor in satisfying the customer. To be

successful in product and service design, organizations must be continually
aware of what customers want, what the competition is doing, what
government regulations are, and what new technologies are available. The
design process involves motivation, ideas for improvement, organizational
capabilities, and fore- casting. In addition to product life cycles, legal,
environmental, and ethical considerations influence design choices. What
degree of standardization designers should incorporate into designs is also an
important consideration. A key objective for designers is to achieve a product
or service design that will meet or exceed customer expectations, within cost
or budget and taking into account the capabilities of operations. Although
product design and service design are similar in some respects, a number of
key differences exist between products and services that influence the way
they are designed. Successful design often incorporates many of these basic
principles: Determine what customers want as a starting point; minimize the
number of parts needed to manufacture an item or the number of steps to
provide a service; simplify assembly or service, standardize as much as
possible; and make the design robust. Trade-off decisions are common in
design, and they involve such things as development time and cost, product or
service cost, special features/performance, and product or service complexity.
Research and development efforts can play a significant role in product and
process innovations, although these are sometimes so costly that only large
companies or governments can afford to under- write them. Reliability of a
product or service is often a key dimension in the eyes of the customer.
Measuring and improving reliability are important aspects of product and
service design, although other areas of the organization also have an influence
on reliability. Quality function deployment is one approach for getting
customer input for product or service design.

***** KEY POINT ****

1. A range of factors can cause an organization to design or redesign a product

or service, including economic, legal, political, social, technological, and
competitive pressures. Furthermore, an impor- tant cause of operations
failures can be traced to faulty design.

2. Every area of a business organization, and its supply chain, is connected to,
and influenced by, its products and/or services, so the potential impact on
each area must be taken into account when prod- ucts or services are
redesigned or new products or services are to be designed.

3. Central issues relate to the actual or expected demand for a product or

service, the organization’s capabilities, the cost to produce or provide, the
desired quality level, and the cost and availability of necessary resources.

4. Among considerations that are generally important are legal, ethical, and
environmental.

5. Although there are some basic differences between product design and
service design, there are many similarities between the two.
Ch8

1)Microfactory Small factory with a narrow product focus, located near major
markets.

2)Geographic information system (GIS) A computer- based tool for collecting,

storing, retrieving, and displaying demo- graphic data on maps.

3)Clustering Similar types of businesses locate near each other.

4)Locational cost-profit- volume analysis Technique for evaluating location

choices in economic terms.

5)Factor rating General approach to evaluating locations that includes

quantitative and qualitative inputs.

6)Center of gravity method Method for locating a distri- bution center that
minimizes distribution cost.

*****THE SUMMARY *****

Location decisions confront both new and existing organizations. Growth,

market shifts, depletion of raw materials, and the introduction of new products
and services are among the reasons organizations are concerned with location
decisions. The importance of these decisions is underscored by the long- term
commitment they typically involve and by their potential impact on the
operating system. The primary location options available to existing
organizations are to expand an existing location, move to a new location,
maintain existing facilities while adding another facility in a new location, or do
nothing. In practice, the major influences on location decisions are location of
raw materials, labor supply, market considerations, community-related factors,
site-related factors, and climate. Foreign locations may be attractive in terms
of labor costs, abundance of raw materials, or as potential markets for a firm’s
products or services. Problems organizations sometimes encounter in foreign
countries include language differences, cultural differences, bias, and political
instability. A common approach to narrowing the range of location alternatives
is to first identify a country or region that seems to satisfy overall needs and
then identify a number of community-site alternatives for more in-depth
analysis. A variety of methods are used to evaluate location alternatives. Those
described in the chapter include locational cost-profit-volume analysis, factor
rating, and the center of gravity method. The transportation model was
mentioned briefly; the chapter supplement contains a more com- plete
description of that subject. There are numerous commercial software packages
available for location analysis. In addition to the models described, many
packages employ linear programming or mixed integer programming algo-
rithms. In addition, some software packages use heuristic approaches to obtain
reasonable solutions to location problems.

***** KEY POINT *****

1. Location decisions are strategic; they can have a significant impact on the
success or failure of a business.

2. Very often, location decisions are long term and involve substantial cost, so
it is important to devote an appropriate amount of effort to selecting a
location.

3. Decision makers must not let the attractiveness of a few factors cloud the
decision-making process. There are many factors to take into account when
selecting a location. It is essential to identify the key factors and their relative
importance, and then to use that information to evaluate location alternatives.

4. It is important to also factor in the impact that location choices will have on
the supply chain.

CH9

1)Quality The ability of a product or service to consistently meet or exceed

customer expectations.

2)Quality of design Intention of designers to include or exclude features in a

product or service.

3)Quality of conformance The degree to which goods or ser- vices conform to

the intent of the designers.
4)Prevention costs Costs of pre- venting defects from occurring.

5)Failure costs Costs caused by defective parts or products or by faulty

services.

6)Internal failures Failures dis- covered during production.

7)Return on quality An approach that evaluates the financial return of

investments in quality.

8)External failures Failures discovered after delivery to the customer.

9)Deming Prize Prize estab- lished by the Japanese and awarded annually to
firms that distinguish themselves with quality management programs.

10)Baldrige Award Annual award given by the U.S. government to recognize

quality achievements of U.S. companies.

11)European Quality Award European award for organiza- tional excellence

12)ISO 9000 A set of international standards on quality manage- ment and

quality assurance, criti- cal to international business.

13)ISO 14000 A set of interna- tional standards for assessing a company’s

environmental performance.

14)ISO 24700 A set of interna- tional standards that pertains to the quality and
performance of office equipment that contains reused components.

15)Total quality management (TQM) A philosophy that involves everyone in

an orga- nization in a continual effort to improve quality and achieve cus-
tomer satisfaction.

16)Fail-safing Incorporating design elements that prevent incorrect

procedures.

17)Continuous improvement Philosophy that seeks to make never-ending

improvements to the process of converting inputs into outputs.

18)Kaizen Japanese term for continuous improvement.

19)Quality at the source The philosophy of making each worker responsible

for the quality of his or her work.
20)Six sigma A business process for improving quality, reducing costs, and
increasing customer satisfaction.

21)DMAIC A six-sigma process: define, measure, analyze, improve, and

control.

22)Lean/six sigma An approach to continuous improvement that integrates

lean operation prin- ciples and six-sigma techniques.

23)Plan-do-study-act (PDSA) cycle A framework for prob- lem solving and

improvement activities.

24)Process improvement A sys- tematic approach to improving a process.

25)Flowchart A diagram of the steps in a process.

26)Check sheet A tool for record- ing and organizing data to identify a
problem.

27)Pareto analysis Technique for classifying problem areas according to

degree of impor- tance, and focusing on the most important.

28)Scatter diagram A graph that shows the degree and direction of

relationship between two variables.

29)Control chart A statistical chart of time-ordered values of a sample statistic.

30)Cause-and-effect diagram A diagram used to search for the cause(s) of a

problem; also called fishbone diagram.

31)Run chart Tool for tracking results over a period of time.

32)Brainstorming Technique for generating a free flow of ideas in a group of

people.

33)Quality circles Groups of workers who meet to discuss ways of improving

products or processes.

34)Benchmarking Process of measuring performance against the best in the

same or another industry.
******THE SUMMARY *******

This chapter presents philosophies and tools that can be used to achieve high
quality and continually improve quality. Quality is the culmination of efforts of
the entire organization and its supply chain. It begins with careful assessment
of what the customers want, then translating this information into technical
specifications to which goods or services must conform. The specifications
guide product and service design, process design, production of goods and
delivery of services, and service after the sale or delivery. The consequences of
poor quality include loss of market share, liability claims, a decrease in
productivity, and an increase in costs. Quality costs include costs related to
prevention, appraisal, and failure. Determinants of quality are design,
conformance to design, ease of use, and service after delivery. Modern quality
management is directed at preventing mistakes rather than finding them after
they occur and reducing process output variation. Currently, the business
community shows widespread interest in improving quality and
competitiveness. The chapter includes a description of the key contributors to
quality management, and it outlines the ISO 9000, ISO 14000, and ISO 24700
international quality standards. Three awards of distinction, the Baldrige
Award, the European Quality Award, and the Deming Prize, are given annually
to organizations that have shown great achievement in quality management.
Total quality management is a never-ending pursuit of quality that involves
everyone in an organization. The driving force is customer satisfaction; a key
philosophy is continuous improvement. Train- ing of managers and workers in
quality concepts, tools, and procedures is an important aspect of the approach.
Teams are an integral part of TQM. Two major aspects of the TQM approach
are problem solving and process improvement. Six-sigma programs are a form
of TQM. They emphasize the use of statistical and management science tools
on selected projects to achieve business results.

******KEY POINT *****

1. Price and quality are the two primary considerations in every buying
transaction, so quality is extremely important.
2. Quality gurus have made important contributions to the way business
organizations view quality and achieve quality.

3. Quality certification and quality awards are important because they can
provide some degree of assurance to customers about quality.

4. Many tools are available that can be used for problem solving and process
improvement.