Strategic Management of Resources (SMR) Definitions

A
absorption costing: variable costs and a portion of fixed costs (based on labor hours, machine hours, or material
costs) are assigned to each unit of production
acceptance sampling: testing a portion of goods produced (accept or reject whole/partial lot)
2 types of sampling: Yes/No inspection, or # (magnitude) inspection
activity-based cost (ABC) accounting: accumulated fixed costs (overhead) based on activities performed and
allocates costs based on products, customers, markets, or projects.
activity-based management (ABM): using ABC info about cost pools and drivers, activity analysis, and business
processes to identify business strategies, improve product design/mfg/distribution, and remove waste

B
backward integration: process of buying or owning elements of the production cycle of distribution back toward
raw material suppliers
baseline measures: measurements that seek to establish the current/starting level of acceptable performance
benchmarking: comparing cost, product, and service data with that of other companies;
7 types: Competitive, financial, functional, performance, process, product, and strategic.
benchmark measures: technique where each operation is allowed a “block” of time to complete.
break-even chart: graph showing total cost (variable+fixed) along with total revenue.
break-even point: intersection point of total cost and total revenue curves
bullwhip effect: a small demand change downstream (customer) causes extreme demand change upstream (mfr)
business process reengineering (BPR): fundamental rethinking / radical redesign of business processes for dramatic
organizational improvements. BPR emphasizes process and customers, not functions and products.

C
capacity strategy: one of the strategic choices that a firm must make as part of its manufacturing strategy. 3 types:
1. Lead: adds capacity in anticipation of increasing demand
2. Lag: does not add capacity until firm is operating at or beyond full capacity
3. Tracking: adds capacity in small amounts to attempt to respond to changing market demand
cash conversion cycle: In MFG, length of time from purchase of raw materials to collection of accounts receivable.
In retail, length of time between sale of products and the cash payments for a company’s resources.
cash-to-cash cycle time = Inventory days + accounts receivable days – accounts payable days; indicator of how
effective a company manages its assets to improve cash flow (cash flow turnover)
competitive advantage: unique attribute that gives a company advantage/defense over its rivals to attract customers
competitive analysis: Analysis of a competitor including its strategies, capabilities, prices, and costs. (SWOT) analysis
computer-aided design (CAD): to interactively engineer and design allowing computer to manipulate objects and views
computer-aided engineering (CAE): to generate and test engineering specifications
computer-aided manufacturing (CAM): to program, direct, and control production equipment
computer-assisted software engineering (CASE): using computers to help design, develop, and maintain software
and systems
computer-integrated manufacturing (CIM): seamless linking of all computer systems in the manufacturing organization
concurrent engineering: all stakeholders including customers and suppliers are involved in the design process
continuous manufacturing: High volume process dedicated to a very narrow range of standard products
core competencies: bundle of skills/knowledge that enables a firm to provide the greatest value to customers. Core
competencies are difficult for competitors to emulate and provide for future company growth.
core process: unique capability that is central to a company’s competitive strategy
corporate culture: set of important assumptions that members of a company share. A system of shared values
critical chain: longest sequence of dependent events through a project network considering resource constraints
critical chain method: TOC, a network planning technique to determine a project’s completion time; Strategic
buffering of paths and resources is used to increase project completion success.
critical path method (CPM): same as critical chain; identifies the activities that constrain the project completion time
customer supplier partnership: long-term relationship between buyer and supplier with teamwork and trust

D
database management system (DBMS): software designed to store, maintain, and retrieve data (reports)
decision support system (DSS): software designed to evaluate and select courses of action using logical, quantitative
analysis of relevant factors.
delivery lead time = receipt of customer order  delivery of product (customer receipt)
design for manufacture and assembly (DFMA): product development approach to ensure feasibility, quality, and cost
discounted cash flow: investment analysis method, that discounts future cash flows to the present value (NPV)

E
economic value added = Net operating profit – Cost of capital; for a profit center
enterprise resource planning (ERP): framework for organizing, defining, and standardizing the business process
necessary to effectively plan and control an organization, and use its internal
knowledge to seek external advantage.
expert system: a type of A.I. computer system that mimics human experts using rules and heuristics rather than
deterministic algorithms.

F
flexibility: ability to respond quickly and effectivelyto internal or external changes.
6 categories: product-mix, design changeover, modification, volume, rerouting, and material flexibility.
focused factory: plant established to focus on manufacturing a limited type/volume of products (JIT example); used
with cellular manufacturing
forward integration: process of buying/owning elements of the production cycle and distribution channels
downstream/forward to the final customer.
G
Gantt chart: planning and control chart showing relationship between planned and actual performance over time;
usually used to show capacity and load against that capacity or to monitor job progress over time
generally accepted accounting principles (GAAP): conform to accepted conventions, rules, and procedures for acctg
global measurements: measurements used to judge the performance of the system as a whole
group technology (GT): philosophy that identifies the physical similarity of parts (common routing) and establishes
their effective production. Allows for rapid retrieval of existing designs and facilitates cellular layout

H
heijunka: JIT philosophy, level production approach
house of quality (HOQ): 6-step process that relates customer-defined attributes to a product’s technical features
1. Identification of customer attributes
2. Identification of supporting technical features
3. Correlation of customer attributes with technical features
4. Assignment of priorities to the customer attributes and technical features
5. Evaluation of competitive stances and competitive products
6. Identification of technical features to be used in final product design
hurdle rate = minimum acceptable rate of return on a project

I
in-sourcing: using a firm’s internal resources to provide goods and services
information system architecture: a model of how the organization operates regarding info. Considers 4 factors:
1. Organization functions
2. Communication of coordination requirements
3. Data modeling needs
4. Management and control structures
Architecture of the information system should be aligned with the organization architecture
internal rate of return (IRR): rate of compound interest provided by project proceeds over the project investment
ISO 9000: set of int’l standards on quality management and assurance developed to help companies effectively
document quality systems implementation and maintenance. Originally developed in 1987.
ISO 14000 Series Standards: generic environmental management standards to manage compliance efforts.

J
job enlargement: an increase in the # of tasks that an employee performs, designed to reduce employee dissatisfaction
job enrichment: an increase in both the # and control of tasks that an employee performs (extension of job enlargement)

K
knowledge-based system: software that employs relational structure and reasoning rules to solve problems by
generating new knowledge from the subject relationships.
L
learning curve: reflects the rate of improvement in production or other factors over time and experience
learning organization: group who has woven a continuous, enhanced capacity to learn into the corporate culture
life-cycle costing: considering Total Cost of Ownership (TCO) in evaluating purchasing/production alternatives
local measures: measurements that relate to a specific resource, operation, process, or part (NOT a global measure)

M
managerial accounting: branch of accounting to make daily decisions; uses techniques such as break-even analysis,
cost-volume profit analysis, make-buy analysis, and others.
manufacturing execution systems (MES): programs and systems that help execute shop floor control and help
gather quality control information for cause and effect analysis
manufacturing strategy: collection of decisions that acts to formulate and deploy manufacturing resources

N
net present value (NPV): the present (discounted) cash flow of projected future earnings (revenues – expenses)
network planning: techniques used to plan complex projects such as: Critical Path Method (CPM) and PERT

O
operational performance measurements: related to efficiency / utilization, and related to throughput in TOC
outsourcing: process of having suppliers provide goods and services that were previously provided internally (substitution)

P
participative design/engineering (concurrent engineering): when all stakeholders simultaneously participate in design
participative management: all levels of employees share decision-making powers to help advance company
payback: method of evaluating an investment by the amount of time required to recover the initial project investment
performance measurement: actual value measured to meet certain criteria
performance measurement system: system for collecting, measuring, and comparing company data to benchmarks
pilot test: a verification test before final acceptance of a new system, process, or product
preventive maintenance: activities to forestall machine breakdowns including adjustments, replacements, and cleaning
process capability: ability of a process to produce parts that conform to engineering specifications
process control: maintaining/monitoring a process within a given range of capability by feedback and correction
process costing: accounting system where costs are collected by time period and averaged over all units
process focused: manufacturing organization where responsibilities are delineated by production process, not function
product focused: manufacturing organization where responsibilities are delineated by product(s) or market segment
product profiling:
program evaluation and review technique (PERT analysis): Network analysis technique in project mgmt; each
activity is assigned a pessimistic and optimistic duration estimate. CPM applies a weighted average
of these times for each node, then PERT computes std. dev. of the project duration estimate.
project costing: accounting method where each assignment/service is valued and costed separately
prototyping: product design and development process to ultimately create a working model of a product

Q
QS 9000: variation of ISO-9000 with additional requirements tailored to the auto industry, including suppliers
quality functional deployment (QFD): methodology to ensure that all the major requirements of the customer are
identified and met or exceeded through the product design process

R
return on investment (ROI): relative measure of financial performance to compare investments by profits over time

S
strategic drivers: factors that influence business unit and manufacturing strategies
strategic performance measurements: measurements that relate to the long-term goals of a business such as
profitability, market share, growth, and productivity
sunk cost: unrecoverable balance of an investment or past cost that is no longer relevant for making future decisions
surge capacity: ability to meet sudden, unexpected increases in demand by expanding production with existing resources
synchronized production: manufacturing philosophy that evaluates actions in terms of the global goal of the system
systems thinking: a school of thought that focuses on recognizing interconnections between parts of a system to
synthesize a unified view of the whole

T
time-based competition (TBC): corporate strategy that emphasizes time as the vehicle to achieve and maintain a
competitive edge. 3 characteristics:
1. Only lead times important to the customer are dealt with
2. Lead time reductions must include both mean and variance decreases
3. Lead time reductions must be achieved through system/process analysis, not increased resources
trading partner: any external organization that plays an integral role within the supply chain community and whose
business fortune depends on the success of the supply chain community

V
value chain: the functions within a company that add value to the goods or services that the organization sells
variable costing: inventory valuation method where only variable production costs are applied to the product
vertical integration: degree to which a firm has decided to produce multiple value-added stages (From raw material to
product delivery). The more steps done by the firm (not outsourced) the more vertically integrated
virtual organization: short-term alliances between independent organizations in a potentially long-term relationship
to design, produce, and distribute a product. Organizations cooperate based on mutual values
and act as a single entity to customers and other third parties
voice of the customer (VOC): actual customer descriptions for the functions and features desired in a product/service