Operations

A function or system that transforms inputs into outputs of greater value

Operations Management
Designing, planning, controlling, and improving these transformation systems

Competitiveness
Degree to which a nation or company can produce goods and services that meet the
test of relevant markets

Balanced Scorecard
-Measures more than just financial performance/productivity
1. Finances
2. Customers
3. Processes
4. Learning & Growing

Productivity
- Ratio of output to input (Output/Input)
- Higher productivity increases competitiveness
- Measures efficiency of converting inputs to outputs

Strategy
-How are we going to compete?
-Well defined strategy:
Unites the organization
Provides direction and consistency in decision making

Strategy Formulation
1. Defining primary task (What is the firm in the business of doing?)
2. Assessing core competencies (What does the firm do well?)
3. Determining what the customer wants (Order winners and order qualifiers)
4. Positioning the firm (How will the firm compete?)
5. Deploying the strategy (Develop operations functions to achieve strategic goals)

Order Qualifiers
What you have to have

Order Winners
Puts you ahead of the competition

Positioning the Firm

Cost, speed, quality, flexibility, innovation, or environmental

Positioning the Firm: Cost

-Low price to consumers
-Standardization of products
-Automation- Cheaper than human labor
-Reducing waste
- Lean operations
Positioning the Firm: Speed
-Customers want the product or service fast
-Internet- Customers expect immediate responses
-Service Organizations- McDonalds, Federal Express
-Manufacturers- Time based competition; Faster new product design

Positioning the Firm: Quality

-Internal Quality- Minimize defect rates or conforming design specifications
-External Quality- Satisfy customer needs better than anyone else. Ex. Ritz Carlton
"one customer at a time"

Positioning the Firm: Flexibility

-Ability to adjust in product mix, production volume, or design
-Mass Customization- Mass production of customized parts
-Modular Design - Subway- Standard components the customer can choose to
create their own individual product
-Postponement- Wood U- Product unfinished until the customer makes final
decisions

Policy Deployment
Translates corporate strategy into measurable objectives

Hoshins
Action plans generated form policy deployment

Process
Group of related tasks with specific inputs and outputs

Process Strategy
Organizations overall approach for physically producing goods and services

Process Design
Critical to determine what the steps are, who performs them, where are they done

Process Planning
Converts designs into workable instructions for manufacture or delivery

Process Strategy: First Decision

-Will we make the product ourselves or not?
(Vertical Integration vs Outsourcing)
-Considerations: Cost, capacity, quality, speed, reliability, expertise

Process Strategy: Second Decision

-Type of process chosen
-Trade off between efficiency and flexibility
*Capital Intensity (Efficiency)- Mix of capital (i.e equipment, automation) and labor
resources used in the production process
*Process Flexibility- Ease with which resources can be adjusted in response to
changes in demand, technology, products or services, or resource availability
Types of Processes: Projects
One of a kind production of a product to consumer order

Types of Processes: Batch Production

(Job Shop) Process many different jobs at the same time in groups or batches

Types of Processes: Mass Production

(Assembly Line) Produce large volumes of a standard product for a mass market

Types of Processes: Continuous Production

(Chemicals, petroleum,..) Used for very high volume commodity products

Break-Even Analysis
-Study cost trade offs based on demand volume
-Costs: Fixed- Constant regardless of the number of units.
Variable- Vary with the number of units produced

Bottleneck
-Slowest activity in the process
-Determines the overall throughput (capacity, output rate) of the process

Services
Act, deed, or performances

Facilitating Services
Accompany almost all purchases of goods

Characteristics of Services
-Inseparable from delivery
-Higher consumer contact
-Intangible
-Output is variable (perceive quality differently)
-Decentralized and dispersed
-Perishable (Once a customer consumes it, its gone)
-Consumed more often than products
-Can be easily emulated

Service Design Process

-Service Concept- Purpose of a service; it defines target market and customer
experience
-Service Package- Mix of physical items, sensual benefits, and psychological
benefits.
- Service Specifications- Performance, design, and delivery specifications
Service Process Matrix
-Professional Service- Lawyers, Doctors
-Service Shop- Schools, hospitals
-Mass Service- Retail, Banking
-Service Factory- Fast Food, Trucking

High Contact vs Low Contact

-Based on customer contact with the service
*Front Office- Where contact happens
*Back Office- Customers don't see

Customer Participation
-Customer performs some of the work in creating the service
-Salad bars, self serve soda dispensers

Service Blueprinting
Shows what goes on in the front and back office

Perceived Wait Times

-Occupied feel shorter than unoccupied
-Group feels shorter than solo
-Initial- When the customer is first acknowledged by the company
-Subsequent- After initial, when they are waiting for service
-Fairness vs preferential
- Explained vs unexplained (Why are we waiting and for how long)

Operating Characteristics (Waiting in line)

Average values for characteristics that describe performance line system

Queue
A single waiting line

Waiting Line Syetem

Consists of arrivals, servers, and waiting line structure

Calling Population
-Source of (potential) customers
-Can be infinite or finite

Arrival Rate
Lambda- Frequency at which customers arrive at a waiting line

Service Rate
Mu- Number of customers that can be served in a given time period

Queue Discipline
-Order in which customers are served
-Usually first come first serve
Channels
-Number of parallel servers for servicing customers
-Multiple channels means one line and more than one server

Phases
Number of servers in a sequence that a customer must go through (Not a good
system)

L
Average number of customers in the system

Lq
Average number of customers in line

W
Average number of time the customer spends in the system

Wq
Average number of time the customer spends in the line

Po
Probability of 0 customers in the system

Pn
Probability of n customers in the system

p (rho)
Utilization rate; proportion of time that the system is in use

V
Volume at which the profit is 0
*break-even point

Lambda
Average arrival rate

Mu
Average service rate

Single-Server Model
Simplest, most basic waiting line structure

Constant Service Times

Occur most often when automated equipment or machinery performs the service

Finite queue lengths

Occurs when there is a physical limitation to the length of the waiting line
Finite calling population
Occurs when the number of "customers" that can arrive is limited

Layout
Physical configuration of productive resources

Process Layouts
-Group similar activities together according to the process or function they perform
-Ex. Health clinic; group radiology, lab, pediatrics, etc.
-Job Sop, focuses on efficiency

Product Layouts
-Arrange activities in order according to the sequence of operations for a particular
product or service
-Ex. Assembly line
-Focuses on efficiency

Goal of Process Layouts

-Minimize material handling costs; sometimes to minimize customer movement
-Do this by placing departments with significant interaction close together
Goal of Product Layout
-Balance the assembly line
-Try to equalize the amount of work at each work station

Cycle Time
The maximum amount of time a product is allowed to spend at each workstation
(production time available/desired units of output)

Flow Time
Time to complete all stations

Efficiency
Work time / flow time

Work time
Actual amount of time that work is happening

Service (Retail) Layouts

-Must be both attractive and functional

Free Flow Layouts (Retail)

Encourage browsing, increase impulse buying, are flexible and visibly appealing

Grid Layouts (Retail)

Encourage customer familiarity, are low cost, easy to clean and secure, good for
repeat customers

Loop & Spine Layouts (Retail)

Both increase customer sight lines and exposure to products, while encouraging the
customer to circulate through the entire store
Balanced scorecard:
A performance assessment that includes metrics related to customers, processes,
and learning and growing, as well as financials
Competitiveness:
The degree to which a nation can produce goods and services that meet the test of
international markets.
Core competencies:
The essential capabilities that create a firm's sustainable competitive advantage.
Craft production:
The process of handcrafting products or services for individual customers
Division of labor:
Dividing a job into a series of small tasks each performed by a different worker.
Flexibility:
In operations, the ability to adjust to changes in product mix, production volume, or
product and process design.
Hoshins:
The action plans generated from a policy deployment process.
Interchangeable parts:
The standardization of parts initially as replacement parts; enabled.
Key performance indicators:
A set of measures that help managers evaluate performance in critical areas.
Lean production:
An adaptation of mass production that prizes quality and flexibility.
Mass Production:
The high-volume production of a standardized product for a mass market.
Operations:
A function or system that transforms inputs into outputs of greater value.
Operations Management:
The design and operation of productive systems.
Order qualifiers:
The characteristics of a product or service that qualify it to be considered for
purchase.
Order Winner:
The characteristic of a product or service that wins orders in the marketplace.
Policy Deployment:
A planning system for converting strategy to measurable objectives throughout all
levels of an organization.
Positioning:
Determining how a firm will compete in the marketplace.
Primary Task:
The task that is most central to the operation of a firm; it defines the business that a
firm is in and is often expressed in a mission statement.
Productivity:
The ratio of output to input.
Quality revolution:
An emphasis on quality and the strategic role of operations.
Resilience:
The ability to bounce back, change, or adapt in response to a disaster, failure, or
disruption.
Scientific Management:
The systematic analysis of work methods proposed by Frederick Taylor in the early
1900s
Strategy:
A common vision that unites an organization, provides consistency in decisions, and
keeps the organization moving in the right direction.
Supply Chain Management:
Managing the flow of information, products, and services across a network of
customers, enterprises, and supply chain partners.
Value Chain:
A series of activities from supplier to customer that add value to a product or service.

Service is a:
Time-perishable, Intangible Experience Performed for a Customer Acting in the Role
of a Coproducer
Stages of economic development
1. Primary (Extractive)
2. Secondary (Goods-Producing)
3. Tertiary (Domestic Services)
4. Quaternary (Trade and Commerce)
5. Quinary (Extending Human Potential)
The Service Package
1. Supporting Facility
2. Facilitating Goods
3. Information
4. Explicit Services
5. Implicit Services
Unique Characteristics of Services
1. Intangibility
2. Perishability
3. Heterogeneity
4. Simultaneity
5. Customer Participation in the Service Process
Service Process Orientation
1. Customer as Coproducer
2. Front and Back Office Perspectives
3. Service Profit Chain Focus on Internal and External Customers
4. Quality (perceptions vs expectations)
5. Focus on Both Efficiency and Effectiveness
6. Use IT as Productivity Enabler for Both Internal and External Customers
Target Market Segments
What are common characteristics market segments?

What dimensions can be used to segment the market, demographic, psychographic?

How important are various segments?

What needs does each have?

How well are these needs being served, in what manner, by whom?
Service Concepts
What are important elements of the service to be provided, stated in terms of results
produced for customers?

How are these elements supposed to be perceived by the target market segment, by
the market in general, by employees, by others?

How do customers perceive the service concept?

What efforts does this suggest in terms of the manner in which the service is
designed, delivered, marketed?
Operating Strategy
What are important elements of the strategy: operations, financing, marketing,
organization, human resources, control?

On which will the most effort be concentrated?

Where will investments be made?

How will quality and cost be controlled: measures, incentives, rewards?

What results will be expected versus competition in terms of, quality of service, cost
profile, productivity, morale/loyalty of servers?
Service Delivery System
What are important features of the service delivery system including: role of people,
technology, equipment, layout, procedures?

What capacity does it provide, normally, at peak levels?

To what extent does it, help insure quality standards, differentiate the service from
competition, provide barriers to entry by competitors?
Structural Design Elements
1. Delivery system (front & back office)

2. Facility design (aesthetics, layout)

3. Location (competition, site characteristics)

4. Capacity planning (number of servers)

Managerial Design Elements
1. Service encounter (culture, empowerment)

2. Quality (measurement, guarantee)

3. Managing capacity and demand (queues)

4. Information (data collection, resource)

Overall Cost Leadership Strategy
1. Seeking Out Low-cost Customers
2.Standardizing a Custom Service
3. Reducing the Personal Element in Service
4.Delivery (promote self-service)
5. Reducing Network Costs (hub and spoke)
6. Taking Service Operations Off-line
Differentiation Strategy
1. Making the Intangible Tangible (memorable)
2. Customizing the Standard Product
3. Reducing Perceived Risk
4. Giving Attention to Personnel Training
5. Controlling Quality
Focus Strategy
1. Buyer Group: (e.g. USAA insurance and military officers)

2. Service Offered: (e.g. Shouldice Hospital and hernia patients)

3. Geographic Region: (e.g. Austin Cable Vision and TV watchers)

Service Purchase Decision
Service Qualifier: Examples are cleanliness of restaurant safety of aircraft

Service Winner: Example is price

Service Loser: Example failure to repair auto, rude treatment

Degree of Complexity
Measured by the number of steps in the service blueprint.

Example: a clinic is less complex than a general hospital.

Degree of Divergence
Amount of discretion permitted the server to customize the service

Example the activities of an attorney contrasted with those of a paralegal.

Generic Approaches to Service Design
1. Production-line
2. Customer as Coproducer
3. Customer Contact
4. Information Empowerment
Production-line
1. Limit Discretion of Personnel
2. Division of Labor
3. Substitute Technology for People
4. Standardize the Service
Customer as Coproducer
1. Substitution of Customer Labor for Provider

2. Smoothing Service Demand

Customer Contact
1. Degree of Customer Contact

2. Separation of High and Low Contact Operations

Information Empowerment
Employee and Customer
Challenges of Adopting New Technology
1. The Process is the Product
2. Back Office vs Front Office Changes
3. The Nature of the Technology
4. Need for Standardization
The 3 Ts
1. Task
2. Tangible
3. Treatment
Disruptive Technological Change
Existing businesses are typically aware of technology but do not implement

New businesses start at edge of market

Old businesses rarely survive

Economics of Scalability
1. Information vs goods content of service package

2. Degree of customer contact

3. Standardization vs customization

4. Shipping and handling costs

5. Cost of after sales service

Network Effects
Each member adds incremental value to all of the other members.

Bigger networks become more valuable, attracting more members.

Most services consist of a bundle of goods and services known as the

service package, which is the major output of the development process.
It is difficult to separate the operations management functions from
marketing in services.
Services often take the form of
repeated encounters involving face-to-face interactions.
The term "encounter" is defined by Webster's Dictionary as "meeting in conflict or
battle" and is used to also designate meetings between
consumers and service systems
A service business is an organization whose primary business requires interaction
with customers to produce the service. The customer is (or should be)
the focal point of all decisions and actions of the service organization.
Service systems with a high degree of customer contact are more difficult to control
than those with
a low degree of customer contact.
Too much capacity generates excessive costs. Insufficient capacity leads to lost
customers. In these situations, of course, we seek
the assistance of marketing. This is one reason we have discount airfares, hotel
specials on weekends, and so on
the standard tool for service process design is
the flowchart. Recently, the service gurus have begun calling the flowchart a service
blueprint to emphasize the importance of process design.
Poka-Yokes are
procedures that block the inevitable mistake from becoming a service defect. Poka-
yokes (roughly translated from the Japanese as "avoid mistakes") are common in
factories.
Service guarantees can be used at the service design stage to focus the firm's
delivery system on the things it must do well to satisfy the customer.
One characteristic of a well-designed service system is
that it is cost-effective.
Among the decisions that service managers must make is
how much they should accommodate the variation introduced by the customer into a
process.
While it is essential to achieve a base level of satisfactory performance at the
beginning so that the customer remains throughout the service, a company is likely
to be better off with a
relatively weak start and a modest upswing on the end than having a great start and
a so-so ending.
The seven characteristics of a well-designed service system include
6. It manages the evidence of service quality in such a way that customers see the
value of the service provided.
Customer contact refers to the
physical presence of the customer in the system, and creation of the service refers to
the work process involved in providing the service itself.
Implicit services:
Psychological benefits that the customer may sense only vaguely. Explicit services:
The benefits that are readily observable by the senses and that consist of the
essential or intrinsic features of the service.
Customers, employees, support systems, and service strategy are parts of the
service triangle.
The service package is a major factor that
distinguishes service design and development from manufacturing design and
development?
In the service-system design matrix, a face-to-face total customization service
encounter is expected to
have low production efficiency
In Poka Yokes the three T's are: These can be classified into warning methods,
physical or visual contact methods, and by what we call the Three T's —the
the Task to be done (Was the car fixed right?), the Treatment accorded to the
customer (Was the service manager courteous?), and the Tangible or environmental
features of the service facility (Was the waiting area clean and comfortable?).
Recent research on service guarantees has provided the following conclusions about
them:
1. Any guarantee is better than no guarantee.
2. Involve the customer as well as employees in the design.
3. Avoid complexity or legalistic language. Use big print, not small print.
4. Do not quibble or wriggle when a customer invokes the guarantee.
5. Make it clear that you are happy for customers to invoke the guarantee.
The seven characteristics of a well-designed service system include:
1. Each element of the service system is consistent with the operating focus of the
firm.
2. It is user-friendly.
3. It is robust.
4. It is structured so that consistent performance by its people and systems is easily
maintained.
5. It provides effective links between the back office and the front office so that
nothing falls between the cracks.
6. It manages the evidence of service quality in such a way that customers see the
value of the service provided.
7. It is cost-effective.
Which of the following is considered a high-contact service operation?
A. On-line brokerage house
B. Internet sales for a department store
(C.) Physician practice
D. Telephone life insurance sales and service
E. Automobile repair
Every service has a service package, which is defined as
a bundle of goods and services that is provided in some environment
The service package, rather than a definable good, constitutes the major output of
the development process.
The top of the matrix shows the degree of customer/server contact: the buffered
core, which is
physically separated from the customer
The top of the matrix shows the degree of customer/server contact: the permeable
system, which is
penetrable by the customer via phone or face-to-face contact
The top of the matrix shows the degree of customer/server contact: the reactive
system, which is
both penetrable and reactive to the customer's requirements.
Service guarantees can be used at the service design stage to
focus the firm's delivery system on the things it must do well to satisfy the customer.
In designing service organizations we must remember one distinctive characteristic
of services:
We cannot inventory services
The elements of a good service guarantee are:
Unconditional (no small print), easy to understand, easy to communicate, and
meaningful to the customer.
Flowcharts are a common process design and analysis tool used in both
manufacturing and services. What is a key feature on flowcharts used in service
operations that differentiates between the front-office and back-office aspects of the
system?
Line of visibility
Which of the following are significant ways in which service systems differ from
manufacturing systems?
1. The process is part of the product
2. Service is tangible

3. You cannot inventory service

4. Employees do not require any technical training

What are the "Three Ts" relevant to Poka-Yokes in service systems?
1. Task to be done, 2. Treatment of the customer, 3. Tangible features of the service
or Task to be done, Treatment of the customer, Tangible features of the service
Which of the following is NOT a characteristics of a Well-Design Service System?
Unstructured.
Which of the following is NOT ONE of the approaches to delivering services?
Word-of mouth approach.
Which approach to Service Design empower employees to be decision makers with
regards to pleasing customers?
Personal attention approach
A FLOW CHART of a service process, emphasizing what is Visible and what is NOT
visible to the customer is know as a?
Service blueprint.
A bundle of Goods and Services that is provided in some environment is known as
a?
service package.
Efficiency is the focus of which of the following approaches to service design?
Production-line approach
The term that refers to the physical presence of the customer in the system is known
as?
Customer contact
Which of the following are the applications of Poka-Yokes to services of the Three
T's?
1. Treatment.

2. Task.

3. Tangible.
Which of the following is NOT ONE of the basic type of customer-introduced
variability?
Purchase variability.
In Services, the process and the product must be designed simultaneously?
True.
The type of service where companies enable customers to interact with one another
in an open environment is known as?
Pure-virtual customer contact.
Which of the following are ways to convince customers that the Self-Service
approach to service design is good for all?
1. Follow up.

2. Developing Customer trust.

Promoting benefits of cost and convenience.

How many basic accommodation strategies exist for a service system?
four (4).
The entries within the Service-System Matrix list the ways in which a service can be/
Delivered.
Which of the following are the aspects of the Service encounter that Chase and
Dasu suggest applying behavioral concepts?
1. The flow of the service experience.

2. Judging encounter.
Which of the following are characteristics of a well-designed service system?
1. Each element of the system is consistent with the operating focus of the firm.
2. It is user-friendly.
3. It is robust.
4. It is structured so that consistent performance by its people and system is easily
maintained.
5. It provides effective links between the front-office and back-office parts of the
system.
6. It manages the evidence of service quality so that customers see the value of the
service.
7. It is cost-effective
An operations and supply chain strategy must be integrated with the organizations
corporate strategy.
True
Operations and supply chain strategy
is concerned with setting broad policies and plans for using the resources of a form
and must be integrated with corporate strategy.
One of the competitive dimensions that form the competitive position of a company
when planning their strategies is delivery speed
TRUE
Competitive Dimensions
Cost of Price
Quality
Delivery Speed
Delivery Reliability
Coping with Changes in Demand
Flexibility and New Product Introduction Speed
One of the competitive dimensions that form the competitive position of a company
when planning their strategies is cost
TRUE
One of the competitive competitive dimensions that form the competitive position of a
company when planning their strategies is making the best trade off
FALSE
The process when a company seeks to match the benefits of a successful position
while painting its existing position by adding new features, services, and
technologies into its current portfolio is called flexibility.
FALSE
Straddling
occurs when a company seeks to match the benefits of a successful position while
painting its existing position.
The process when a company seeks to match benefits of a successful position, while
painting its existing position by adding new features, services, and technologies into
its current portfolio is called straddling.
TRUE
By following a straddling strategy, firms can broaden their capabilities and effectible
compete with more focused firms in markets requiring low cost for success
FALSE
An order winner is a set of criteria that differentiated the products or services of one
firm from another.
TRUE
Order winner
a criterion that differentiates the products or services of one firm from those other.
An order winner is a set of screening criteria that permits a firms products to be
considered as possible candidates for purchase
FALSE
Order qualifier
is a screening criterion that permits a firms product to even be considered as
possible candidates for purchase.
An order qualifier is a set of screening criteria that permits a firms product to be
considered as possible candidates for purchase
TRUE
Activity systems maps show how a company's strategy is delivered through a set
tailored activities.
TRUE
Activity Systems Maps
show a company strategy is delivered though a set of tailored activities.
Activity system maps are useful in understanding how well a system of activities fits
the overall company's strategy.
TRUE
Activity systems maps depict the geographic reach of a company business
strategies.
FALSE
An operations strategy must resist change because of the longterm nature of
equipment and personnel investment.
FALSE
Operatios and supply strategy can be viewed as part of a planning process that
coordinates operations goals with those of the larger organization.
TRUE
Infrastructure decisions within operations strategy include the selection of the
appropriate technology, the role of inventory and the location of facilities
FALSE
Process Design
includes selecting the appropriate technology, sizing the process over time,
determining the role of inventory in the process, and locating the process.
Infrastructure decisions within operations strategy include the selection of the logic
associated with the planning and control systems
TRUE
Infrastructure Decisions
involve the logic associated with the planning and control systems, quality assurance
and control approaches, work payment structure, and organization of the operations
and supply functions.
Once an operations strategy is adopted and articulated, the primary emphasis
becomes perfecting the system of activities that make up the strategy through
detailed refinements over a long period of time
FALSE
The job of operations and supply chain strategy is to deliver the most feature rich,
highest quality product at the lowest price within specified parameters of delivery
time and customization.
FALSE
Productivity is a relative measure.
TRUE
Productivity
a common measure of how well a country, industry, or business unit is using its
resources.
In a partial measure of productivity the denominator of the ratio would include all
resources used or all inputs.
FALSE
Partial Measure
ration of some output to a single input
In a multifactor measure of productivity the numerator of the ratio would include all
resources used or all inputs
FALSE
Multi-factor Measure
the denominator includes several but not all inputs.
The triple bottom line considers evaluating the firm against social, economic, and
environmental factors.
TRUE
Sustainability means meeting a firm's current needs without excessively
compromising the ability of future generations to meet their own needs.
FALSE
"sustainability" to the concept (of strategy),
we add the requirement to meet these current needs without compromising the
ability of future generations to meet their own needs.
The social impact of the triple bottom line concept pertains to fair and beneficial
business practices toward labor, the community, and the region in which a firm
conducts its business.
TRUE
A firm's business practices toward its' labor force pertain mainly to the economic
aspect of the triple bottom line concept.
FALSE
According to the economic aspect of the triple bottom line concept, the firm is
required to compensate shareholders by paying dividends and growing the value of
their common stock faster than their competitors.
FALSE
Within a sustainability framework, the economic dimension of the triple bottom line
concept goes beyond just profit for the firm but also provides lasting economic
benefit to society
TRUE
Within a sustainability framework, the environmental dimension of the triple bottom
line concept has to do with labor, the community, and the region in which a firm
conducts its business.
FALE
Which of the following is not a major strategic operational competitive dimension that
forms a company's competitive position?

A. Cost or price

B. Delivery speed

C. Delivery reliability

D. Management acumen

E. Coping with changes in demand

D. Management acumen
A major competitive dimension that forms a company's strategic operational
competitive position in their strategic planning is which of the following?

A. Cost or price

B. Focus

C. Automation

D. Straddling

E. Activity-system mapping
A. Cost or price
When developing an operations and supply chain strategy, which of the following is
an important product-specific criterion to consider?

A. Technical liaison

B. Learning curve

C. Competitor's product performance

D. Production lot-size

E. Total quality management

A. Technical liaison
In development of an operations and supply chain strategy, which of the following
may be an important product-specific criteria to consider?

A. Focus

B. Production lot-size

C. Supplier after-sale support

D. Learning curve
E. Total quality management
C. Supplier after-sale support
When a company seeks to match the benefits of a successful position while
maintaining its existing position in offering customers a variety of differing services,
what is this process called?

A. Operations capability analysis

B. Straddling

C. Order qualifying

D. Order winning

E. Inter-functional analysis
Straddling occurs when a company
B. Straddling
An activity-system map is which of the following?

A. A network guide to route airlines

B. A listing of activities that make up a project

C. A diagram that shows how a company's strategy is delivered to customers

D. A facility layout schematic noting what is done where

E. A timeline displaying major planned events

C. A diagram that shows how a company's strategy is delivered to customers
Which of the following is a partial measure of productivity?

A. Output/Materials

B. Output/(Labor + Capital + Energy)

C. Output/All resources used

D. Output/Inputs

E. All of the above

A. Output/Materials
Which of the following is a multifactor measure of productivity?

A. Output/(Materials)

B. Output/(Labor + Capital + Energy)

C. Output/All resources used

D. Output/Inputs

E. All of the above

B. Output/(Labor + Capital + Energy)
Which of the following is a total measure of productivity

A. Output/Materials

B. Output/(Labor + Capital + Energy)

C. Output/Labor

D. Output/Inputs

E. All of the above

D. Output/Inputs
If all you knew about a production system was that total daily output was 400 units
and the total labor necessary to produce the 400 units was 350 hours, what kind of
productivity measure could you use to compute productivity?

A. Partial measure

B. Multifactor measure

C. Total measure

D. Global measure

E. All of the above

A. Partial measure`
If all you knew about a production system was that total daily output was 400 units
and the total labor necessary to produce the 400 units was 350 hours, and the total
materials used were 425 units, what kind of productivity measure could you use to
compute productivity?

A. Partial measure

B. Multifactor measure

C. Total measure

D. A and B above

E. B and C above
D. A and B above
Capacity can be defined as the ability to hold, receive, store, or accommodate
TRUE
When evaluating capacity, managers need to consider both resource inputs and
product outputs.
TRUE
Capacity can be defined as the amount of available resource inputs relative to
requirements for output over a particular period of time.
TRUE
The capacity utilization rate is found by dividing best operating level by capacity
used.
FALSE
The objective of strategic capacity planning is to provide an approach for determining
the overall capacity level of labor-intensive resources.
FALSE
The objective of strategic capacity planning is to determine the overall capacity level
of capital intensive resources (including facilities, equipment, and overall labor force
size) that best supports the company's short-range competitive strategy.
FALSE
The objective of strategic capacity planning is to determine the overall capacity level
of capital intensive resources (including facilities, equipment, and overall labor force
size) that best supports the company's long-range competitive strategy.
TRUE
Best operating level is usually a multiple of the level of capacity for which a process
was designed.
FALSE
Best operating level is the volume of output at which average unit cost is minimized.
TRUE
At some point, the size of a growing plant can become too large and diseconomies
of scale become a capacity planning problem.
TRUE
Long-range capacity planning requires top management participation.
TRUE
Overtime and personnel transfers are solutions to capacity problems in the
intermediate term.
FALSE
Capacity planning is generally viewed in three time durations: Immediate,
Intermediate and Indeterminate.
FALSE
The basic notion of economies of scale is that as a plant gets larger and volume
increases, the average cost per unit of output drops.
TRUE
A piece of equipment with twice the capacity of another piece typically costs twice as
much to purchase and to operate.
TRUE
The problem of keeping demand sufficiently high to keep a large factory busy is a
sales issue and not a diseconomy of scale.
FALSE
A production facility works best when it focuses on a fairly limited set of production
objectives.
TRUE
A production facility develops virtuosity and works best when it focused on a widely
varied set of production objectives.
FALSE
Making adjustments to eliminate the variance between planned and actual output is
tied into intermediate range capacity planning.
FALSE
The ultimate in plant flexibility is a one-hour-changeover time plant.
FALSE
Capacity flexibility means having the ability to rapidly increase or decrease
production levels, or to shift production capacity quickly from one product or service
to another.
TRUE
Economies of scope exist when multiple products can be produced at a lower cost in
combination than they can separately.
TRUE
The frequency of adding to productive capacity should balance the costs of
upgrading too frequently and the costs of upgrading too infrequently.
TRUE
Outsourcing is a common source of external capacity
TRUE
Sharing capacity is a common source of external capacity.
TRUE
A capacity cushion is the amount of capacity less than expected demand.
FALSE
A decision tree problem does not need probabilities or payoffs to generate a solution.
FALSE
In solving a decision tree problem, calculations start at the ends of the "branches" of
the tree and work backwards to the base of the tree.
TRUE
The probability of each occurrence at a decision tree chance node is the reciprocal
of the number of possibilities at the chance node.
FALSE
In a decision tree, the only time probabilities are applied to a decision node is when
the decision is being made by someone else such as you customer or your
competitor.
FALSE
Low rates of capacity utilization in service organizations are never appropriate
FALSE
The smaller the capacity cushion the better.
FALSE
The larger the capacity cushion the better.
FALSE
The capacity cushion is the ratio of capacity used to the best capacity level.
FALSE
When a firm's design capacity is less than the capacity required to meet its demand,
it is said to have a negative capacity cushion.
TRUE
In decision tree analysis the time value of money is ignored because you are only
concerned with cash costs.
FALSE
In practice, achieving a perfectly balanced plant is usually desirable but impossible.
FALSE
In practice achieving a perfectly balanced plant is usually both impossible and
undesirable.
TRUE
Because services cannot be stored for later use, service managers consider time as
one of their supplies or resources.
TRUE
The ability to rapidly and inexpensively switch production from one product to
another enables what are sometimes referred to as:

A. Economies of scale
B. Economies of size
C. Economies of shape
D. Economies of scope
E. Economies of shipping
D. Economies of scope
Capacity planning that involves hiring, layoffs, some new tooling, minor equipment
purchases, and subcontracting is considered as which one of the following planning
horizons?

A. Intermediate range
B. Long range
C. Short range
D. Current
E. Upcoming
A. Intermediate range
Capacity planning involving acquisition or disposal of fixed assets such as buildings,
equipment or facilities is considered as which one of the following planning horizons?

A. Intermediate-range
B. Long-range
C. Short-range
D. Current
E. Upcoming
B. Long-range
If the best operating level of a piece of equipment is at a rate of 400 units per hour
and the actual output during an hour is 300 units, which of the following is the
capacity utilization rate?

A. 0.75
B. 1.00
C. 1.33
D. 2.33
E. 300
A. 0.75
If the actual output of a piece of equipment during an hour is 500 units and it's best
operating level is at a rate of 400 units per hour, which of the following is the capacity
utilization rate?

A. 0.75
B. 1.00
C. 1.25
D. 1.33
E. 100
C. 1.25
If the best operating level of a piece of equipment is at a rate of 400 units per hour
and the actual output during an hour is 300 units, which of the following is the
capacity cushion?

A. 25 percent
B. 100 units per hour
C. 75 percent
D. 125 percent
E. 133 percent
B. 100 units per hour
The capacity focus concept can be put into practice through a mechanism called
which of the following?

A. Best operating level (BOL)

B. Plant within a plant (PWP)
C. Total quality management (TQM)
D. Capacity utilization rate (CUR)
E. Zero-changeover-time (ZXT)
B. Plant within a plant (PWP)
The way to build in greater flexibility in your workers is to do which of the following?

A. Pay higher wages to motivate a willingness to do a variety to tasks

B. Provide a broader range of training
C. Provide a wide variety of technology to augment workers skills
D. Institute a "pay for skills" program
E. Use part-time employees with specialized skills as needed
B. Provide a broader range of training
When deciding to add capacity to a factory which of the following need not be
considered?

A. Maintaining system balance

B. The frequency of capacity additions
C. Use of external capacity
D. Immediate product demand
E. Availability of raw materials
D. Immediate product demand
Which of the following is not a step used in determining production capacity
requirements?

A. Forecasting to predict product sales

B. Forecasting raw material usage
C. Projecting availability of labor
D. Calculating equipment and labor needs
E. Projecting equipment availability
B. Forecasting raw material usage
Which of the following models uses a schematic model of the sequence of steps in a
problem and the conditions and consequences of each step?

A. Probability indexing
B. Johnson's sequencing rule
C. Decision trees
D. Activity System Maps
E. Decision mapping
C. Decision trees
Compared with a service operation, a manufacturing operation's capacity is which of
the following?

A. More dependent on time and location

B. Subject to more volatile demand fluctuations
C. Utilization more directly impacts quality
D. Demand can be smoothed by inventory policies
E. More capable of reacting to demand fluctuations
D. Demand can be smoothed by inventory policies
At a decision point in a decision tree, which machine would you select when trying to
maximize payoff when the anticipated benefit of selecting machine A is $45,000 with
a probability of 90%; the expected benefit of selecting machine B is $80,000 with a
probability of 50% and the expected benefit of selecting machine C is $60,000 with a
probability of 75%?

A. Machine A
B. Machine B
C. Machine C
D. You would be indifferent between machines A and C
E. You would be indifferent between machines A and B
C. Machine C
What is an important difference between capacity planning in services as contrasted
to capacity planning in manufacturing operations?

A. Time
B. Location
C. Demand volatility
D. Utilization impacts service
E. All of the above
E. All of the above
Capacity planning involving consideration of production scheduling and inventory
position is characterized by which one of the following time durations?

A. Intermediate-range
B. Long-range
C. Short-range
D. Current
E. Upcoming
C. Short-range
An operations and supply chain strategy must be integrated with the organizations
corporate strategy.
True
Operations and supply chain strategy
is concerned with setting broad policies and plans for using the resources of a form
and must be integrated with corporate strategy.
One of the competitive dimensions that form the competitive position of a company
when planning their strategies is delivery speed
TRUE
Competitive Dimensions
Cost of Price
Quality
Delivery Speed
Delivery Reliability
Coping with Changes in Demand
Flexibility and New Product Introduction Speed
One of the competitive dimensions that form the competitive position of a company
when planning their strategies is cost
TRUE
One of the competitive competitive dimensions that form the competitive position of a
company when planning their strategies is making the best trade off
FALSE
The process when a company seeks to match the benefits of a successful position
while painting its existing position by adding new features, services, and
technologies into its current portfolio is called flexibility.
FALSE
Straddling
occurs when a company seeks to match the benefits of a successful position while
painting its existing position.
The process when a company seeks to match benefits of a successful position, while
painting its existing position by adding new features, services, and technologies into
its current portfolio is called straddling.
TRUE
By following a straddling strategy, firms can broaden their capabilities and effectible
compete with more focused firms in markets requiring low cost for success
FALSE
An order winner is a set of criteria that differentiated the products or services of one
firm from another.
TRUE
Order winner
a criterion that differentiates the products or services of one firm from those other.
An order winner is a set of screening criteria that permits a firms products to be
considered as possible candidates for purchase
FALSE
Order qualifier
is a screening criterion that permits a firms product to even be considered as
possible candidates for purchase.
An order qualifier is a set of screening criteria that permits a firms product to be
considered as possible candidates for purchase
TRUE
Activity systems maps show how a company's strategy is delivered through a set
tailored activities.
TRUE
Activity Systems Maps
show a company strategy is delivered though a set of tailored activities.
Activity system maps are useful in understanding how well a system of activities fits
the overall company's strategy.
TRUE
Activity systems maps depict the geographic reach of a company business
strategies.
FALSE
An operations strategy must resist change because of the longterm nature of
equipment and personnel investment.
FALSE
Operatios and supply strategy can be viewed as part of a planning process that
coordinates operations goals with those of the larger organization.
TRUE
Infrastructure decisions within operations strategy include the selection of the
appropriate technology, the role of inventory and the location of facilities
FALSE
Process Design
includes selecting the appropriate technology, sizing the process over time,
determining the role of inventory in the process, and locating the process.
Infrastructure decisions within operations strategy include the selection of the logic
associated with the planning and control systems
TRUE
Infrastructure Decisions
involve the logic associated with the planning and control systems, quality assurance
and control approaches, work payment structure, and organization of the operations
and supply functions.
Once an operations strategy is adopted and articulated, the primary emphasis
becomes perfecting the system of activities that make up the strategy through
detailed refinements over a long period of time
FALSE
The job of operations and supply chain strategy is to deliver the most feature rich,
highest quality product at the lowest price within specified parameters of delivery
time and customization.
FALSE
Productivity is a relative measure.
TRUE
Productivity
a common measure of how well a country, industry, or business unit is using its
resources.
In a partial measure of productivity the denominator of the ratio would include all
resources used or all inputs.
FALSE
Partial Measure
ration of some output to a single input
In a multifactor measure of productivity the numerator of the ratio would include all
resources used or all inputs
FALSE
Multi-factor Measure
the denominator includes several but not all inputs.
The triple bottom line considers evaluating the firm against social, economic, and
environmental factors.
TRUE
Sustainability means meeting a firm's current needs without excessively
compromising the ability of future generations to meet their own needs.
FALSE
"sustainability" to the concept (of strategy),
we add the requirement to meet these current needs without compromising the
ability of future generations to meet their own needs.
The social impact of the triple bottom line concept pertains to fair and beneficial
business practices toward labor, the community, and the region in which a firm
conducts its business.
TRUE
A firm's business practices toward its' labor force pertain mainly to the economic
aspect of the triple bottom line concept.
FALSE
According to the economic aspect of the triple bottom line concept, the firm is
required to compensate shareholders by paying dividends and growing the value of
their common stock faster than their competitors.
FALSE
Within a sustainability framework, the economic dimension of the triple bottom line
concept goes beyond just profit for the firm but also provides lasting economic
benefit to society
TRUE
Within a sustainability framework, the environmental dimension of the triple bottom
line concept has to do with labor, the community, and the region in which a firm
conducts its business.
FALE
Which of the following is not a major strategic operational competitive dimension that
forms a company's competitive position?
A. Cost or price

B. Delivery speed

C. Delivery reliability

D. Management acumen

E. Coping with changes in demand

D. Management acumen
A major competitive dimension that forms a company's strategic operational
competitive position in their strategic planning is which of the following?

A. Cost or price

B. Focus

C. Automation

D. Straddling

E. Activity-system mapping
A. Cost or price
When developing an operations and supply chain strategy, which of the following is
an important product-specific criterion to consider?

A. Technical liaison

B. Learning curve

C. Competitor's product performance

D. Production lot-size

E. Total quality management

A. Technical liaison
In development of an operations and supply chain strategy, which of the following
may be an important product-specific criteria to consider?

A. Focus

B. Production lot-size

C. Supplier after-sale support

D. Learning curve

E. Total quality management

C. Supplier after-sale support
When a company seeks to match the benefits of a successful position while
maintaining its existing position in offering customers a variety of differing services,
what is this process called?

A. Operations capability analysis

B. Straddling

C. Order qualifying

D. Order winning

E. Inter-functional analysis
Straddling occurs when a company
B. Straddling
An activity-system map is which of the following?

A. A network guide to route airlines

B. A listing of activities that make up a project

C. A diagram that shows how a company's strategy is delivered to customers

D. A facility layout schematic noting what is done where

E. A timeline displaying major planned events

C. A diagram that shows how a company's strategy is delivered to customers
Which of the following is a partial measure of productivity?

A. Output/Materials

B. Output/(Labor + Capital + Energy)

C. Output/All resources used

D. Output/Inputs

E. All of the above

A. Output/Materials
Which of the following is a multifactor measure of productivity?

A. Output/(Materials)

B. Output/(Labor + Capital + Energy)

C. Output/All resources used

D. Output/Inputs
E. All of the above
B. Output/(Labor + Capital + Energy)
Which of the following is a total measure of productivity

A. Output/Materials

B. Output/(Labor + Capital + Energy)

C. Output/Labor

D. Output/Inputs

E. All of the above

D. Output/Inputs
If all you knew about a production system was that total daily output was 400 units
and the total labor necessary to produce the 400 units was 350 hours, what kind of
productivity measure could you use to compute productivity?

A. Partial measure

B. Multifactor measure

C. Total measure

D. Global measure

E. All of the above

A. Partial measure`
If all you knew about a production system was that total daily output was 400 units
and the total labor necessary to produce the 400 units was 350 hours, and the total
materials used were 425 units, what kind of productivity measure could you use to
compute productivity?

A. Partial measure

B. Multifactor measure

C. Total measure

D. A and B above

E. B and C above
D. A and B above
What do lineups represent to many customers?
Fairness

T or F: Lineups always contain people?

False. Could be printer, assembly line, etc.

Queuing Theory
refers to the body of knowledge dealing with waiting lines

Queuing Theory: Erlang

began studying congestion and waiting times occurring in the completion of
telephone calls

What is the objective of queuing?

find the optimal service level that achieves an acceptable balance between the cost
of providing service and customer satisfaction

10 Suggestions for Managing Queues:

1. Perceptions of wait
2. Acceptable waiting time
3. Distractions
4. Avoid lineups where possible
5. Awareness of waiting time
6. Modify arrival behaviour
7. Idle resources out of sight
8. Segment customers
9. Think long term
10. Friendly server
Single server, single phase
Ex. single banking machine, car wash, convenience store w/ one cashier, diving
board/ slide at pool

Single server, multi-phase

Ex. drive though at McDonalds, Starbucks (inside), assembly line

Multi-server, single phase

Ex. Baking: tellers or bank machines, check in at airport, fast food restaurant

Multi-server, multi-phase
Ex. health care, auto repair, job shop

Purpose of Queuing models?

improve, operate, understand and design organizational systems where entities wait
in lineups
Customers arrive at an average?
Arrival rate

If the customer can immediately go to a server and receive service, the server must
have been?
Idle

If all servers are busy, they wait in the?

Queue

If they wait, then leave before receiving service, the customer?

Reneged

If upon arrival, they feel the queue is too long and they do not join, the customer?
Balked

The duration to "process" the customer is called?

Service time

When finished the customer _______ the system

Leaves

In the end, the total duration the customer has spent in the queue and receiving
service is the customer ______ in the system
Time

Two key events in lineups?

arrival pattern and service pattern

Average arrival rate:

λ
lambda (poisson)

Average service rate:

μ
Mu (poisson)

Arrival rate:
average # of customers arrivng in a time period = λ

Average interarrival time:

Average time between two customer arrivals = 1/ λ
Ex. 2 customers per minute
= 1/2 minute or 30 seconds between customers
Ex. 10 customers per hour
1/10 hour * 60min/hour = 6 min between customers

Service rate:
The number of customers one server and serve in a time period = μ
Average service time:
Average time required to provide service = 1/μ
Ex. 3 customers per minute
1/3 minute or 20 seconds
Ex. 4 customers per hour
1/4 hour or 15 minutes

T or F: Service time includes queue time?

False. Service time is the amount of time a customer spends at a service facility after
actual performance of the service begins.

For exponential distributions, if the mean service rate: μ = 3 customers per minute,
what would be the mean service time?
1/μ so 1/3 minute per customer

For exponential distributions, shorter service times have the ________ probability of
occurring
Largest

What does Kendall Notation do?

Allows key characteristics of a specific queuing model to be described in an efficient
manner

To describe and calculate a queuing question and its performance using queuing
theory, we will need to know:
- probability distribution of interarrival times
- probability distribution of service times
- number of servers

Most common Kendall Notation

M/M/1

Queuing theory is the study of?

Line-ups

Queuing theory elements: "Not enough servers"

s, the number of servers

Queuing theory elements: "servers are too slow"

μ, the average service rate

Queuing theory elements: " Too many customers"

λ, average arrival rate

Queuing theory elements: "Too many customers who arrived before you, and you
can't cut in line"
FIFO service protocol
T or F: Variation will happen in almost every queuing system?
T

The M/M/1 queuing system has:

- Poisson arrival process
- Exponential service times
- 1 server

M/M/1 is good for many service systems where customers arrive without ________
Appointments

Assumptions for the M/M/1 model:

- customers join a single lineup for one server
- interarrival times are drawn from an exponential dist.
- service times are exponential
- system is stable: λ < μ
- FIFO, no balking, no reneging
- system has reached steady state: it has "warmed up" since start-up

A process is said to be in control when all the variation that is noticed can be
assigned to specific causes.
False

When implementing an unconditional service guarantee, a company should make

the guarantee difficult to invoke so that few customers will demand compensation.
False

'GAPS' refer to differences in perceptions, expectations, goals and understanding

among management, employees and customers.
True

A walk-through audit is a service delivery process-oriented survey given to

customers and managers to evaluate the perception of the customer experience.
True

Service recovery is most successful when accomplished by empowered frontline

employees.
True

Quality function deployment is a service design tool to translate customer

expectations into measurable conformance specifications.
False

According to customers, ___ is the most important dimension of service quality?

the dependability and accuracy of the service
Companies often "manage the evidence". For example, a motel will place a plastic
liner on the toilet seat to show that it has been cleaned. Which 'GAP' is this activity
attempting to close?
GAP 4: difference between what is provided and what customers think is provided

There are four basic approaches to service recovery; ___ is not one of them.
refund with apology

Which category of the 'Cost-Of-Quality' is most closely related with Shing's Poka-
Yoke?
Prevention costs

Which is not a direct benefit normally associated with an unconditional service

guarantee?
Increases market share.

The implementation of an effective process control cycle for service systems is

hampered by:
The intangibility of services making direct measurement difficult.

Control Chart
a chart with an upper control limit and a lower control limit on which sample means
are plotted periodically to show visually when a process is out of control.

Poka-yoke
a "foolproof" device or checklist to assist employees in avoiding a mistake.

Quality function deployment

a process in which a "house of quality" is constructed to incorporate customer needs
into the design of a service process

Service recovery
converting a previously dissatisfied customer into a loyal customer.

SERVQUAL
a customer survey instrument used to measure service quality gaps.

Statistical process control

the use of a control chart to monitor a process performance measure

Taguchi methods
approaches to service process design that ensure "robustness" or an ability to
function under adverse conditions.

Unconditional service guarantee

a service warranty that provides a customer focus for the firm.

Walk-through audit
a process-oriented survey given to customers and managers to evaluate the
perception of the customer service experience.
Reliability
perform promised service dependably and accurately

Responsiveness
willingness to help customers promptly

Assurance
ability to convey trust and confidence

Empathy
ability to be approachable

Tangibles
physical facilities and facilitating goods

Gaps in service quality

measuring the gap between expected service and perceived service is a routine
customer feedback process that is practiced by leading service companies.
GAP 1
management's lack of full understanding about how customers formulate their
expectations on the basis of a number of sources
Closing GAP 1
strategies for closing this gap include improving market research, fostering better
communication between management and its contact employees, and reducing the
number of levels of management.
GAP 2
result from a lack of management commitment to service quality or a perception of
the unfeasibility of meeting customers' expectations
Closing GAP 2
setting goals and standardizing service delivery tasks can close this gap
GAP 3
arise from lack of teamwork, poor employee selection, inadequate training, and
inappropriate job design
GAP 4
the discrepancy between service delivery and external communications in the form
of exaggerated promises and lack of information provided to contact personnel
GAP 5
the gap between customer expectations and perceptions

Quality Function Development (QFD)

1. Establish the aim of the project
2. Determine customer expectations
3. Describe the elements of the service
4. Notre the strength of relationship between the service elements
5. Note the association between customer expectations and service elements
6. Weighting the service elements
7. Service element improvement difficulty rank
8. Assessment of competition
9. Strategic assessment and goal setting
Juran categories of cost
internal failure costs, external failure costs, detection costs, prevention costs

Prevention cost
Costs associated with operations or activities that keep failure from happening and
minimize detection costs

Detection cost
Costs incurred to ascertain the condition of a service to determine whether it
conforms to safety standards

Internal failure cost

Costs incurred to correct nonconforming work prior to delivery to the customer

External failure cost

Costs incurred to correct nonconforming work after delivery to the customer or to
correct work that did not satisfy a customer's special needs

What is Service Quality?

is measured by comparing a customer's expected service, which comes from word-
of-mouth, personal needs and past experience, with his or her perceptions of service

What is the Measurement of Satisfaction?

based on whether the expectations were met, not met, or exceeded

Each customer is called a __________

moment of truth

What is Service Recovery?

is satisfying a previously dissatisfied customer and making them a loyal customer

What are the five dimensions of Service Quality?

1. Reliability
2. Responsiveness
3. Assurance
4. Empathy
5. Tangibles

Reliability vs Responsiveness
Reliability - perform promised service dependably and accurately
Ex: receive mail at same time each day

Responsiveness: Willingness to help customers promptly

Ex: avoid keeping customers waiting for no apparent reason

Assurance, Empathy, Tangibles

Assurance - ability to convey trust and confidence
Ex: being polite & respectable to customer
Empathy - ability to be approachable
Ex: being a good listener

Tangibles - physical facilities and facilitating goods

Ex: cleanliness
Quality Service by Design
Quality in the Service Package
Budget Hotel example

Taguchi Methods (Robustness)

Notifying maids of rooms for cleaning

Poka-yoke (fail-safing)
Height bar at amusement park

Quality Function Deployment House of Quality

Poka-Yoke
- Shigeo Shingo believed that Low-cost, In-process quality-control mechanisms and
routines--> achieve high quality w/o costly inspection.

- "Foolproof" devices
- cleanliness and aesthetic quality
- Reminds workers of steps often forgotten in hurrying to satisfy customers in a
timely manner.

The elements of Achieving Service Quality

- cost of quality (juran)
- service process control
- statistical process control (deming)
- unconditional service guarantee

What are the 5 categories of Tipping Behavior?

1 Person-to-Person Service
2 Service Delays
3 Ambiance Variables
4 Check Presentation
5 Promotion & Suggestive Selling

Walk-Through-Audit
Service delivery system should conform to customer expectations.
Customer impression of service influenced by use of all senses.
Service managers lose sensitivity due to familiarity.

Need detailed service audit from a customer's perspective.

What are the 4 approaches to Service Recovery?
1 Case-by-case
2 Systematic response
3 Early intervention
4 Substitute service
Case-by-case & Systematic response
Case-by-case: addresses each customer's complaint individually but could lead to
perception of unfairness.

Systematic response: uses a protocol to handle complaints but needs prior

identification of critical failure points and continuous updating.

Early intervention & Substitute service

Early Intervention: attempts to fix problem before the customer is affected.

Substitute Service: allows rival firm to provide service but could lead to loss of
customer.

Capacity
The capability of a manufaturing or service resource such as a facility, process,
workstation or piece of equipment to accomplish its purpose over a specified time
period.

Output, units
Capacity is the maximum rate of ________ per unit of time or ________ of resource
availability.

Economies and diseconomies of scale

Capacity decisions are often influenced by ____________ and _____________.

Demand
Ops managers must decide on appropriate levels of capacity to meet current
short/long term ________.

Short-term
____________ Capacity decisions usually involve decisions normally involve
adjusting schedules or staffing levels.

Long-term
_____________ Capacity decisions typically involve major capital investments.

Average, varies
Capacity must be as large as the _____ demand, however demand ________.

Lost sales, customers

Not meeting demand during peak demand results in ________ or _________.

Idle processes, facilities, inventory build up

Exceeding demand results in ______ or _______ and ________.
Economies of Scale
Factors that cause a producer's average cost per unit to fall as the capacity and/or
volume of throughput increases.

diseconomies of scale
Occurs when the average unit costs of the good or service begins to increase as the
quantity of output increases.

Costs
Optimal amount of capacity exists where costs are at a minimum.

Focused Factory
A way to achieve economies of scale without extensive investments in facilities and
capacity by focusing on a narrow range of goods or services, target market
segments, and/or dedicated processes to maximize efficiency and effectiveness.

Few, technology, design, competitive, market

Focused factories focus, on _____ key products, specific _____, process ______ &
technology, _______ priority objective, and target _________ segments.

Safety Capacity
Cushion or an amount of capacity reserved for unanticipated events such as demand
surges, materials shortages, and equipment,ent breakdowns.

Average Safety Capacity

100% - Average Resource Utilization %

Work order
Specification of work to be performed for a customer or a client that incorporates
quantity, process requirements, and resources needed.

Capacity Required
Si + Pi * Qi

Resources used/Resources Available

Utilization formula 1
Demand Rate/Service Rate * Number of Servers
Utilization formula 2

Trade-offs, opportunity
Firms must make basic economic _______ between the cost of capital and the
________ cost of operating & maintaining.

Not having, opportunity

Cost of ________ sufficient capacity is the _______ loss incurred form lost sales and
reduced market shares.
Complementary
Goods and services that can be produced or delivered using the same resources
available to the firm, but whose seasonal demand patterns are out of phase with
each other.

Large, match, lead, lag

Capacity expansion strategies include one _____ capacity increase, small capacity
increases to ________ demand, small capacity increases that _______ demand,
small capacity increases that ____ demand.

Revenue Management System

Dynamic methods to forecast demand, allocate perishable assets across market
segments, decide when to overbook and by how much, and determine what price to
charge different customer (price) classes.

Perishable assets
Assets such as hotel rooms, airline seats, rental cars, sporting events, concert seats,
catering services, and broadcast advertising space.

Theory of Constraints
Set of principles focusing on increasing total process throughput by maximizing the
utilization of hall bottleneck work activities and workstation.

Throughput
The amount of money generated per time period through actual sales. Maximizing
this results in maximum cash flow.

Constraint
Anything in an organization that limits it from moving toward achieving its goal.

Physical constraint
Capacity of a resource such as a machine, employee, or work station that results in
a process bottleneck.

Nonbottleneck
Activity in which idle capacity exists

Bottleneck
Activity that effectively limits the capacity of the entire process.

Nonphysical constraint
Environmental or organizational activity, such as low product demand or inefficient
management policy or procedure.
It is usually a good idea to keep capacity planning separate from product and service
design so that the issues in each area don't become intertwined.
False (Product and service design decisions often have an important impact on
capacity, and capacity limits can have an important impact on design options.)

Effective capacity is always less than design capacity.

True (This is due to lunch and rest breaks, breakdowns, maintenance, and other
factors.)

Design capacity is the maximum output rate or service rate an operation is designed
for.
True

Increasing the capacity of a bottleneck operation by 10% will always increase the
capacity of the system by 10%.
False (Other bottlenecks may then appear, limiting the improvement to less than
10%.)

Increasing quality will cause an increase in productivity, and hence, and increase in
capacity.
True

Increasing the capacity of operations that follow a bottleneck operation will improve
productivity because it will help those operation to overcome the bottleneck effect.
False (Process productivity will be governed by the bottleneck operation.)

If capacity increases require a long time, a following strategy may be the best option.
False (A leading strategy would probably be better.)

Efficiency can be defined as the ratio of actual output to effective capacity.

True

Utilization can be defined as the ratio of design capacity to actual output.

False (Utilization is the ratio of actual output to design capacity.)

A capacity cushion is the difference between capacity and expected demand.

True

The term economies of scale is used to describe the phenomenon whereby

increases in the output rate result in a decrease in unit costs.
True

Concepts such as cash flow and present value are important financial measures for
analyzing capacity alternatives.
True
The breakeven point occurs at an output where total cost and total profit are equal.
False (It occurs where total cost and total revenue are equal.)

The point at which a decision maker is indifferent between two alternatives means
both alternatives are optimal.
False (It is called the indifference point.)

Capacity planners must keep a narrow focus in order to stay on track.

False (Ignoring the "big picture" can have serious consequences.)

Which one of these is not a determinant of effective capacity, or are they all
determinants?
All: Facilities, Quality capabilities, Job Design, Supply chain

Which one of these does not enhance developing capacity alternatives?

Staying focused on quantitative factors. (Qualitative factors are typically important as
well.)

Which one of these is the primary input in capacity planning?

Demand forecasts. (Plans for future capacity relate directly to forecasts of future
demand.)

Which one of these is not necessarily an important factor in planning service

capacity?
The need to be near customers. (Some services can be handled from a distance
(e.g., tax preparation, prescription refills).)

Which one of these is not a reason for diseconomies of scale?

Fixed costs are spread over more units. (That is a reason for economies of scale.)

capacity planning challenges

- inability to create a steady flow of demand to fully utilize capacity
- idle capacity always a reality for services
- customer arrivals fluctuate and service demands also vary
- customers are participants in the service and the level of congestion impacts on
perceived quality
strategic role of capacity decisions
- using long range capacity as preemptive strike where market is too small for two
competitors
ex.) building a luxury hotel in a mid-sized city

- lack of short term capacity planning can generate customers for competition
ex.) restaurant staffing

- capacity decisions balance costs of lost sales if capacity is inadequate against

operating losses if demand does not reach expectations

- strategy of building ahead of demand is often taken to avoid losing customers

capacity
the maximum rate of output for a facility
- sufficient capacity is necessary to meet current and future demand or suffer the
consequences of missed opportunities

basic decisions to be made relative to capacity planning

- sizes and times for facilities to be added
- location
- technology

long term capacity planning

- at least two years
- investment in or construction of new facilities and equipment "constrained" by
competitors, the uncertainty of demand, limited financial resources, government
incentives

medium term capacity planning

- up to two years
- planning for work-force (hiring, firing), production, inventory, subcontracting,
overtime, number of shifts
- planning for equipment preventive maintenance, replacement
- constrained by long term plan

short term capacity planning

- hourly, daily, weekly
- make work schedules; overtime, absentees
- adjusting assignments as rush orders or other unplanned demands that are placed
on the facility
- performing preventive maintenance and/or repairs on equipment
- constrained by medium term plan
capacity utilization
- requires a knowledge of current capacity and its utilization rate
- peak versus sustained levels
peak may include overtime, subcontracting etc.

reasons for economies of scale

fixed costs
- as output increases, the average cost per unit decreases because fixed costs are
spread over more units

construction costs
- permits, architect fees, rental of building equipment may not increase with size of
facility

lower cost of purchased materials

- volume discounts

process advantages
- higher output allows for more automation

reasons for diseconomies of scale

complexity
- many layers of employees and bureaucracy

loss of focus
- involved with internal services

inefficiencies
- very involved in analysis and planning - less innovation

capacity cushion
level of capacity in excess of the average utilization rate

reasons why a large cushion is needed

- demand arrives at different rates
- service cannot be inventoried
- high level of uncertainty in demand
- cost of missed demand is very high
- similar to manufacturing: allowances for vacations, holidays, delays, equipment
breakdowns, uncertain capacity losses
risks and cost associated with a large capacity cushion
...

bottlenecks
if average demand is greater than capacity and slows them down
two long term capacity strategies
expansionist strategy
wait and see strategy

expansionist strategy
large, infrequent jumps in capacity

advantages of expansionist strategy

- ahead of competition
- no lost sales

disadvantages of expansionist strategy

- risky if demand changes

wait and see strategy

smaller, more frequent jumps in capacity

advantages of wait and see strategy

- no unused capacity
- easier to adapt to new technologies

disadvantages of wait and see strategy

- rely on short term options
customer induced variability
- arrival
- capability
- request
- effort
- subjective preference

arrival
customer arrivals are independent decisions not evenly spaced
- accommodation: provide generous staffing
- reduction: require reservations

capability
level of knowledge and skills vary resulting in some hand-holding
- accommodation: adapt to customer skill levels
- reduction: target customers based on capability

request
uneven service times result from unique demands
- accommodation: cross-train employees
- reduction: limit service breadth

effort
level of commitment to co-production or self-service varies
- accommodation: do work for customers
- reduction: reward increased effort
subjective preference
personal preferences introduce unpredictability
- accommodation: diagnose expectations and adapt
- reduction: persuade customers to adjust expectations