Operations Management PDF

Operations Management Notes * Page 1 of 25 * rpe
Comprehensive Exams Preparations
Chapter 1: The Operations Function
1. Definition
• Transformation processes – inputs of raw materials, energy, labor and capital are transformed into
finished goods.
2. Framework
• Process – decisions determine the physical process or facility used to produce the product or service
and the associated workforce practices.
i. Type of equipment and technology
ii. Process flows
iii. Layout of the facility
iv. Job design
v. Workforce policies
• Quality – decisions must ensure that quality is designed and built into the product in all stages of
operations: standards must be set, people trained and product/service inspected.
• Capacity – aimed to provide the right amount of capacity at the right place at the right time.
i. Function of size of the physical facilities, suppliers – long range
ii. Subcontracting, extra shifts, rental – short range
iii. Staffing
iv. Scheduling people, equipment and facilities
• Inventory – determine what to order, how much to order, when to order
i. How much inventory is needed
ii. Where to locate the inventory, etc.
3. Cross-functional decision-making
• Marketing:
i. Identification of customer, and the associated customer needs
ii. Determining the volume of product, selection of the product, pricing and promotion
decisions
iii. Volume affects the type of process type: line, batch, and project and capacity required
iv. Distribution channel used to deliver to customer – how much inventory to carry by
operations
• Finance and accounting
i. Availability of capital, return on capital, risk taken by the firm, cash flows, measurement of
operations.
ii. Availability of capital affects – inventory levels, capacity and degree of automation
iii. Efficiency of the operation process affects operations – selection of process type (flow or
batch), arrangement of process flows, eliminated of NVA steps in processes; operations
determine the type of costing system (process costing or job costing)
• HR – type of people recruited, hiring, training and development, teamwork and compensation
systems
i. Affect operations: skill levels of employees, capacity and scheduling decisions
ii. Training of employees for quality management
• IT – software and hardware from systems design support operations decisions: capacity
determination, forecasting, quality management, inventory control and scheduling.
4. A process
5. Contemporary operations themes
• Services and manufacturing – excel by applying operations concepts such as service design, process
thinking, quality improvement, capacity management and lean operations.
• Customer-directed operations
• Lean operations – concerned with eliminating waste (non-value-adding) activities, employ the
concepts of JIT
• Integration of operations with other functions
• Environmental concerns
• Supply chain management
• Globalization of operations
Questions:
1. Why study operations management? Creation of Wealth
• Operations is the engine that creates wealth for the enterprise and underpins the global economy.
Wealth is created in the global economy through excellent operations management. Wealth
creation occurs when the value of outputs in goods and services exceeds the cost of the inputs used
– reflected in the standard of living of people and a function of constantly increasing productivity.
• Raising productivity (output is greater than input) is the primary basis for creating wealth. A
company and a country cannot prosper in the long run with higher productivity than their domestic
and foreign competitors.
• The task of operations manager is one of the wealth creator.
i. Through operations, lead the way to enhance the ability to create wealth,
ii. Improve productivity
iii. Raise the standard of living for all people.
2. Production management versus operations management
• When the field was primarily related to manufacturing, it was termed as production management.
Later expanded to production and operations management and later operations management to
include the service industries.
3. Function of operations manager from marketing or finance manager?
• Decisions. Operation managers make decisions regarding operations function and its connection
with other functions.
• Function: Operations is responsible to supply the product or service of the organization.
• Process: Plan and control the production process and its interfaces within the organization and the
external environment
i. Service and manufacturing operations is a transformation process
ii. As a process, operations managers are managers of the conversion process in the firm.
4. How operations management related to HR, IT or accounting?
• Process improvement is not restricted to operations. It also provides important insights for the
management of productive processes in functional areas outside the operations function. Other
functions may be viewed as a production process with inputs, transformation and outputs.
Operations management can improve processes throughout the firm including HR, IT, finance and
legal department.
• Marketing – creating demand and generating sales revenue
• Finance – responsible for acquisition and allocation of capital
• Operations – responsible for the production of goods or services (generating supply)
5. 4 decisions types to identify importation operations decisions and responsibilities.
• Process: workforce as an integral part of the process
• Quality – certain standards for quality that must be followed; standards to maintain service quality,
etc.
• Capacity – maximum level o output
• Inventory – integrate purchasing and inventory decision to control the flow of materials in relation
to capacity.
6. Conversion process?
7. Decision-making and process view of operations management?

• Process view provides a basis for seeing an entire business as a system of interconnected processes.
• External environments – occurs through the economic, physical, social and political environment of
operations
8. Challenges of operations management in the future?
9. Changes in environment affect operations management?
10. Current trends in operations?
Chapter 2: Operations and supply chain strategy
1. Operations strategy model:

• Operations should be fully connected to business strategy
• Operations strategy is the strategy of operations functions that is linked to the business strategy and
other functional strategies, leading to a competitive advantage for the firm.
• Four elements of operations strategy model:
i. Mission – connected to the business strategy and in agreement with other functional
strategies
ii. Distinctive competence
1. what differentiates from the competitors
2. may be based on unique resources, proprietary or patented technology
3. must be coordinated with marketing, finance and supported by the entire business
as a competitive advantage
4. should match mission of operations; no good to compete on superior inventory
when the mission is to excel at new-product introduction
5. an essential ingredient for a successful business strategy
6. Wal-mart: mission is to be the low-cost retailer; distinctive competence – cross-
docking and sophisticated inventory control system; distinctive competence help
Wal-mart compete at low cost.
iii. Objectives – restatement of the mission in quantitative and measure terms. 4 objectives:
1. Cost
2. Quality – satisfying a particular set of customers; satisfying customer requirements
3. Delivery
4. flexibility
iv. Policies
1. Policies should indicate how the objectives will be achieved.
2. Should be developed for each category: process, quality, capacity and inventory
3. May require trade-offs or choices in each case.
• Corporate strategy – what business the company is pursuing; where to compete
• Business strategy – how to compete
i. Customer intimacy
ii. Product leadership
iii. Operational excellence
2. Emphasis on operations objectives
• 4 operations objectives may be ways to compete through operations:
i. Competing through quality
1. Satisfying customer requirements;
2. Marketing identifying the particular type of customer for the business or market
segment customers
3. Effect on product design and operations

4. Process is capable of meeting the customer needs
5. Workers are trained to provide the product or service needed
Quality objective leads to certain actions and policies in operations to provide a product
or service that the customer wants.
ii. Low-cost objective

1. Low cost is compatible with the quality objective since quality is satisfying the
customer requirements
To lower cost is to focus on customer requirements to eliminate rework, scrap, inspection,

and other NVA steps in operations.
2. Cheaper to prevent error and mistakes than to correct them after they occur.
3. Requires not only emphasis on quality – investment in automation, information
systems
iii. Delivery time
1. Quality improvement as a way of reducing wasted time in operations
2. When rework, scrap, inspection and NVA are reduced, time to order, produce and
deliver is also reduced.
3. To reduce time beyond quality improvement efforts is to attack time directly.
4. Waiting time may be as much as 80 or 90 percent of the total time of production.
Reduce waiting time by reducing machine changeover time, moving processes
closer together, smoothing outflows, simplifying complex operations, redesigning
the product or service for fast production.
5. Quality improvement objective and the waiting time reduction
iv. Flexibility of operations
1. By reducing time, flexibility will automatically improve.
2. From 16 weeks, reduced production time to 2 weeks, more flexibility to cater to
changes in customer requirements.
3. Attacked directly: buy more flexible equipment, redesign the product for high
variety.
• Operations objectives are connected. Stress quality improvement, also get cost reduction, time
improvement and more flexibility.
• Quality is the place to start and time reduction.
• Series of actions will result in continuous improvement of the four operations objectives.
3. Linking strategies
• Operations strategy should be linked to business strategy and to marketing and financial strategies
• When asked to evaluate operations, consider immediately the business strategy as well as the
mission and objectives of operations.
i. Product imitator (operational excellence)
1. Mature, price-sensitive market with standardized product
2. Cost as the dominant objective
3. Operations to reduce costs with policies as superior process technology, low
personnel costs, low inventory level, high degree of vertical integration, quality
assurance aimed at saving costs
4. Marketing and finance strategies (mass distribution and low risk, low profit margins)
ii. Product innovation (product leadership)
1. Emerging and possibly growing market

2. Super-quality products in short amount of time
3. Higher prices could be charged, lower emphasis costs
4. Mission: flexibility to rapidly and effectively introduce superior new products
5. Policies: new-product introduction teams, flexible automation, workforce with
flexible skills
6. Marketing and finance strategies (selective distribution and higher risks, higher
profit margins)
• Order winners and order qualifiers: Product imitator strategy:
i. Price for the customer is the order winner
ii. Other objectives (flexibility, quality and deliver) order qualifiers
iii. Insufficient levels of performance on order qualifiers can lose the order
iv. High levels of performance of order qualifiers cannot by themselves win the order
v. Only price/cost will win the order in this case
• Order winners and order qualifiers: Product innovation strategy:
i. Order winner: flexibility to rapidly and effectively introduce superior products
ii. Order qualifiers: cost, delivery and quality
4. Operations competence
• Distinctive competence:
i. the basis for competitive strategy
ii. refers to resources or capabilities that are unique relative to competitors
iii. must be difficult to imitate or copy
• resources or capabilities that are difficult to imitate:
i. skills of managers and employees
ii. equipment and processes patented/protected
iii. ability to continuously learn and improve operations at a rapid pace
iv. partnerships with customers or suppliers developed and nurtured over the long run.
v. Advantageous location of facilities
vi. Organizational knowledge
vii. Unique information and control systems
• Not purchased from the market, but often built up by the organization over time
• e.g. dell computer corporation: distinctive competence in marketing and production
i. software
ii. developed partnerships with suppliers
iii. employees have flexible skills
iv. Different to imitate: retool entire production system, write new software, develop long-
term supplier relationships and retrain employees
5. Global scope of operations
6. Supply chain strategy
• An entire supply chain can implement product innovator and product imitator strategies.
Not all supply chains have the same strategies but are configured according to their
fundamental purpose and therefore exhibit mission, objectives, distinctive competencies
and policies.
Questions:
1. Reasons for formulating and implementing the operations strategy?
2. Mission of operations, order winner, order qualifier, distinctive competence?
3. 4 objectives of operations
4. Distinctive competence
5. Practical consequences of a lack of strategic linkage between business and operations function?
Chapter 3: Product Design
1. Strategies for new-product introduction: Product design is the result of the development of a business
strategy.
• Market pull – market is the primary basis for determining the products with little regard to existing
technology
• Technological push – products are pushed in the market; marketing job’s to create demand for
these superior products.
• Interfunctional – should not only fit the market needs but have a technical advantage as well.
2. New-product development process
• Concept development
• Product design
i. Requires consideration on many different trade-offs between product cost, quality
(features) and schedule
ii. Process design should be taking place simultaneously with product design.
iii. Better if process design is done in parallel with product design
• Pilot production/testing
i. To facilitate full-scale production, an information package should be finalized that contains
not only product specifications but also process design specifications, training procedures
for operators and test results.
3. Cross-functional product design
• Technology misalignment happens when the product designed by engineering cannot be made by
operations.
• Sequential process:
i. Technology is transferred in stages, as a handoff between marketing, engineering and
operations.
ii. Each function completes its work before the next one starts.
• Concurrent engineering
i. All functions are involved from the beginning.
1. First stage: marketing effort
2. Product design phase: engineering
3. Final stage: operations – new product is tested and launched into the market.
ii. To do more in less time with limited resources.
4. Quality function deployment
• Uses:
i. tool for linking customer requirements as defined by the customer to technical
specifications.
ii. Very useful in translating the ordinary language obtained from the customers to technical
requirements understood by engineers.
iii. Facilitates interfunctional cooperation between marketing, engineering and manufacturing.
• Customer attributes
i. Represents the voice of the customer
ii. Determined through market research
• Engineering characteristics
i. Translate customer attributed into engineering characteristics
ii. Engineering characteristics must be measurable and specific and are closely related to the
final design specifications for the product.
• House of quality neatly connects the market requirements, which the customer values with the
design characteristics that engineers must consider.
5. Value analysis/ Design for Manufacturing (DFM) – method of improving the usefulness of a product without
increasing its cost or reducing the cost without reducing the usefulness of the product.
• Ratio of usefulness to cost. Usefulness – functionality that the customer ascribes to the product;
product features, performance or reliability of the product.
• Value analysis can be used to determine the best way to open a tin can.
6. Modular design (?) page 46
Questions:
1. Why inter-functional cooperation important for NPD?
2. What is the best approach for NPD?
3. How does modular design concept control production variety?
4. What is the role of operations in product design?
5. Benefits of QFD to product design?
Chapter 4: Process Selection
1. Product-flow characteristics
• Determine the type of process used to make the product or service.
• Process selection includes the volume of the product and whether the product is standardized or
customized.
• Process selection decisions are strategic in nature.
• Types of product-flow:
i. Line flow
1. linear sequence of operations like assembly line
2. mass production/continuous flow
3. operation requires high-volume products that are standardized.
4. Marketing geared toward mass appeal and high-volume product.
ii. Batch
1. Production of product in batches or lots
2. Can be used to make many different types of products
3. Use general-purpose equipment not specialized to make just one particular product.
4. Offers equipment flexibility; labor highly skilled and flexible
5. Configured to handle low-volume orders.
iii. Project flows
1. Used for unique or creative products.
2. Classification by type of customer order
• Made-to-order (MTO)
i. Higher flexibility for product customization
ii. Cycle of production and order fulfillment begins with the customer order
iii. Key performance measure: length of time it takes to design and make the product – lead
time.
• Made-to-stock (MTS)
i. Faster service to customers from available stock
ii. Lower costs
iii. Building products to inventory and jobs not specified to any customer
iv. Has standard product line specified by the producer not by the customer
v. Critical management tasks: forecasting, inventory management and capacity planning
vi. Production cycle is being operated to replenish stock.
vii. Production is geared to future orders and replenishment of inventory.
viii. Performance measure: percentage of order filled from inventory – service level
ix. Objective: to meet the desired service level at minimum cost.
• Assemble-to-order (ATO)
i. Hybrid process of MTS and MTO.
ii. Subassemblies are made to stock, the final assembly is made to order.
3. Process selection decisions, 4 factors
• Market conditions
• Capital requirements
• Labor
• technology
4. Product-process strategy
• Product-process matrix represents the strategic choices available to firms in both product and
process dimensions.
5. Focused operations
• Service/produce should have well-defined mission such as low cost or product innovation, not both.
• Lack of focus in manufacturing plants and services have resulted from excessive attention to
economies of scale.
• In the name of efficiency due to economies of scale, different missions are being served by the same
operation.
• Plant-within-a-plant (PWP) – may sacrifice some economies of scale while doing a better job of
meeting market requirements and improving profitability.
• Type of focus:
i. Product focus
ii. Process type
iii. Technology
iv. Volume of sales
v. MTO and MTS
vi. New products and mature products
• Operating off the diagonal of the matrix – lack of focus
6. Mass customization
• Economies of scale – high volume standardized product with few options; common product
• Economies of scope – common process; high variety from a single process
• 4 forms of mass customization page 67
i. Mass-customized services
ii. Modular production assemble-to-order (ATO)
iii. Fast changeover (zero setup time between orders)
iv. Postponement of options
7. Cross-functional decision making
• Rapidly changing markets, to deal with:
i. Move below the diagonal by choosing a batch process when the product is still in a low-
volume, high-variety state; requires anticipation of future demand and the willingness to
create demand.
ii. Choose mass customization
• Critical role of marketing: estimating and managing future demand; to manage risk inherent in
making process choices with the associated capital investment.
• Stimulating demand in market segments that marketing and operations have already chosen.
• Finance – capital investment required (present value analysis, cash flow, etc.)
• HR – providing the human capital consistent with the process selected; job shops and batch skills of
employees are higher than for assembly lines.
• Information systems and accounting professionals
Questions:
1. Why line processes more efficient but less flexible than batch?
2. Processes in service industries?
3. Product-process matrix?
4. Process characteristics?
5. Factors of decision-making in process planning?
6. Marketing strategy independent of process strategy?
7. Product or process strategy employed by service/product companies?
8. Considerations for process changes?
9. Techniques or approaches to achieve mass customization?
10. Economies of scale versus economies of scope
11. Unfocused operation?
12. PWP?
Chapter 5: Service Process Design (?)
Chapter 10: Supply Chain Management
1. Definitions
• Rationale:
i. To reduce total supply chain cycle time to reduce inventory, increase flexibility, reduce costs
and better deliveries.
ii. Consider relations with customers and suppliers for further improvements of operations.
iii. Supply chain thinking is a systems thinking and provide basis for understanding processes of
internal departments to outside processes of the company.
• Supply chain – sequence of business processes from suppliers to ultimate consumer
• Supply chain management – planning, design and control of the flow of information and materials
along supply chain in order to meet customer requirements efficiently
• Distribution channel – route from the producer to the distributors to the customer.
• Demand management – demand can be managed through mechanisms such as product, pricing,
promotion and distribution
• Logistics management – inbound transportation and outbound distribution; a subset of supply chain
management
2. System interactions
• The supply chain is a highly interactive system. Decisions in each part of the supply chain affect the
other parts.
• The accelerator effect of demand changes. Bullwhip effect/accelerator effect – the demand change
is magnified the further back you go in the supply chain; overshooting the true demand;
• The best way to improve the supply chain is to reduce the total replenishment time and to feed back
actual demand information at all levels. Time lags create fluctuations in orders and inventories;
increase coordination within and between organizations.
3. Coordination in the supply chain
• Close parallel between supply chains and quality improvement. Quality improvement requires
coordination across organizational boundaries and recognition of systems interactions.
4. Measuring supply chain performance
• Delivery – on-time delivery
• Quality – customer satisfaction; related to quality – customer loyalty; more expensive to find a new
customer than to maintain an existing one.
• Time – total replenishment time; number of days in inventory and AR – number of days in AP =
business cycle; dell’s very effective management of supply chain.
• Flexibility – time it takes to change volume or product mix by a certain percentage or amount.
• Cost – total delivered costs typical cost measure; another way: to measure efficiency in value added
or productivity
A company should meet with its customers and suppliers and set supply chain goals as a
group. Improve overall chain not just one portion. Operational improvements must be in
the financial interest of each party in the supply chain.
5. Supply chain strategies

• Before making improvements to supply chains, a company should sort its products into two
categories (functional and innovation) and then apply supply chain strategies that fit the nature of
these products.
6. Structural improvement
2 basic ways to improve supply chains: changing structure or infrastructure. Structure:

bricks and mortar; infrastructure: people and systems – both should reduce uncertainty
and replenishment time from the supply chain.
• Includes capacity, facilities, process technology and vertical integration

• Long-range in nature and require considerable capital.
• Rearrange elements of supply chain in a major and dramatic way.
• 5 forms of structural change:
i. Forward and backward integration – forward (manufacturer buys the wholesale firm);
backward (manufacturer buys the supplier); entire chain – total vertical integration – control
of supply chain, reap the profits of supplier or distributors. Drawback: loss of flexibility to
changing technology or loss of economies of scale
ii. Major process simplification – business process reengineering; processes are designed from
scratch without regard for the existing processes; conceptual changes in how business is
conducted, major information systems changes.
iii. Changing the configuration of factories, warehouses, or retail locations – too many
suppliers;
iv. Major product redesign – product lines are trimmed and redesigned to be more modular in
nature.
v. Outsourcing logistics to a third party – national semiconductor
7. Improvement in infrastructure
• People, information systems, organization, production and inventory control, quality control
systems.
• Cross-functional teams – without functional team, the functional silos are very effective in
destroying any semblance of a master schedule that everyone can implement.
• Partnerships – with suppliers and customers provide coordination across businesses; the team was
so integrated it was difficult to tell the members apart.
• Setup time reduction
• Information systems – obtaining sales data from final customer and feeding this information back
through the supply chain – sharing of information is easy once partnership has been established;
downstream demand information require improved information systems and new decision rules for
capacity planning
• Cross-docking – wal mart; supplier’s shipments from various docks are transferred directly to wal-
mart truck at another dock – do not spend time in the warehouse inventory;
8. Internet and supply chains
9. Virtual supply chains
Questions:
1. Supply chain management versus demand management?
2. Why study SCM?
3. Structural improvement versus business process reengineering
4. 5 approaches of structural improvement?
5. Setup time reduction powerful effect on entire supply chain?
My Framework (How I see it…)

1. Corporate strategy
2. Business strategy:
a. how to compete
• Customer intimacy
• Product leadership (product innovation)
1. Emerging, higher prices, flexibility, new-product introduction
• Operational excellence (product imitator/functional)
1. Mature, price-sensitive, cost as objective
b. Product design – result of development of business strategy
• Strategies for new-product intro: market pull, technology push; inter-functional
• New-product process: concept, design, production/testing
• Cross-functional product design: sequential or concurrent
• Quality function deployment – CA with Engineering characteristics
• Value Analysis/Design for Manufacturing (DFM) – improve usefulness w/o increasing cost
• Modular design
c. Process design – should take place with product design simultaneously
• 2 process types: product flow (line, batch, project) & classification by type of customer
order (MTO, MTS)
• Factors: market conditions, capital requirements, labor, technology
• Product-process strategy: MATRIX
• Focused operations: product, process, technology, volume of sales, MTO/MTS, new
products and mature products; off the diagonal of matrix – lack of focus
• Mass customization: economies of scope (high volume, few options, common product) and
scale (common process, high variety)
d. Job/Work systems design
•
3. Operations and supply chain strategy – linked with other functional strategies; supply chain can implement
product innovator and product imitator
a. Mission
b. Distinctive competence – basis for competitive strategy

c. Objectives/measure for supply chain performance/competitive advantage: Quality, Cost,
Delivery/time, flexibility
d. Policies based on the framework: Process, Quality, Capacity, Inventory
4. Supply chain management
a. Goal: reduce uncertainty and replenishment time from the supply chain
b. Measure SC performance: quality, cost, delivery, time, flexibility
c. Strategies: sort products into functional and innovation and apply SC strategy that fit the product
d. Improvements: structural (forward and backward integration, process simplification, product
redesign, configure factories, warehouses, and outsource to 3rd party); and infrastructure – people
and systems (inventory control, quality control systems), cross-functional teams, partnerships,
information systems, cross-docking.
• Supply management
• Logistics management
• Inventory management
Second Exam Notes
Chapter 8 & 9: Quality Management & Quality Control and Improvement
1. Introduction
• Quality is cross-functional in nature and involves the entire organization
• Operations has a special responsibility to produce a quality product for the customer
• In early 1900s, quality meant inspection – primary method used to ensure quality products
• In 1940s, statistical connotation as statistical methods were used to control quality
• In 1960s, quality management was expanded to include the entire organization – something the
organization should strive to provide the customer
2. Quality Definitions
• Continuous improvement – doing a better job of meeting customer needs by reducing variability in all
processes and by introducing new products when needed
i. A never-ending process and is driven by knowledge and problem solving.
ii. As producers gain better understanding of customer expectations, and as better technology
becomes available, quality can be continuously improved
• Quality of design
i. Determined before the product is produced done by a cross-functional product design team
ii. Determined by market research, design concept and specifications
• Quality of conformance – producing a product to meet the specifications
i. When product conforms to specifications, operations considers it a quality product regardless of the
quality of the design specifications
• The “abilities”
i. Availability – the continuity of service to the customer
ii. Reliability – the length of time a product can be sued before it fails
iii. Maintainability – the restoration of the a product or service once it has failed
• Field service – represents warranty or repair or replacement of the product after it has been sold
i. Also called customer service, sales service, or just service
ii. Is intangible – related to promptness, competence and integrity
iii. Any problems will be corrected quickly, in a satisfactory manner and with a high degree of honesty
and courtesy
• Quality is more than just good product design; it extends to quality control of production, quality over
the life of the product and quality of field service after the sale
3. Service Quality
• SERVQUAL – most popular measure of service quality; measured by a customer questionnaire based on
5 perceptual measures of service:
i. Tangibles – appearance of the company’s physical facilities, equipment and personnel
ii. Reliability – ability of the company to perform the promised service dependably and accurately
without errors
iii. Responsiveness – willingness to provide service that is prompt and helpful to the customer
iv. Assurance – knowledge and courtesy of the company’s employees and their ability to convey trust
and confidence
v. Empathy – the caring, individualized attention given to customers
4. Quality Planning, Control and Improvement
• Quality Cycle – process of quality planning, control and improvement requires a continuous interaction
between the customer, operations and other parts of the organization
i. Customer quality needs – determined through marketing function
1. Either expressed directly by the customer or discovered through a process of market research
ii. Engineering (in conjunction with other departments) – designs a product to meet those needs or
works with the customer on design specifications that fit within current or future production
capabilities
1. Quality function deployment – useful technique to align voice of customer with engineering
specifications
iii. Operations – produces the product or service as specified; operations must continually ensure that
the product is produced as specified by insisting on quality of conformance – done through proper
training, supervision, machine maintenance, and operator inspections.
1. In addition to meeting specifications, operations should strive to reduce the variance of its
processes and products overt time – continuous improvement
• Steps to implement quality cycle:
i. Define quality attributes on the basis of customer needs – product attributes
1. Quality planner determines which attributes are important to customer satisfaction and which
are not
ii. Decide how to measure each attribute
1. A method must be devised to test and measure quality for each of the product attributes
iii. Set quality standards
1. Quality planner should set standards that describe the amount of quality required on each
attribute
2. Usually standards are stated as tolerances (+- quantities), or minimum and maximum acceptable
limits
3. Standards can also be set as desired targets
iv. Establish appropriate tests for each standard
1. Testing program should be established after standards have been set
v. Find and correct causes of poor quality
1. “You cannot inspect quality into a product, you must build it in.”
2. Upon discovering defects, quality personnel and workers should find the underlying causes and
correct them
3. Causes of poor quality: improper raw materials, lack of training, unclear procedures, a faulty
machine, etc.
4. Regularly found and corrected, production system will be under constant control and
improvement possible
5. Better approach: prevent errors from occurring in the first place
a. Requires foolproof – work with suppliers to prevent errors, train employees before
problems occur, and perform preventive machine maintenance
b. Poka-yoke – “mistake proofing” in Japanese; to design the product and process so it is
impossible to make mistakes or they are easily detected when mistakes do occur
c. E.g. microwave wont start if the door is open; car doors wont lock when the key is in the
ignition
vi. Continue to make improvements
• Motorola
i. Fundamental objective is total customer satisfaction; has 5 initiatives
1. Product products and services to a Six Sigma standard (no more than 3.4 defects per million
actions)
2. Reduce total cycle time in all activities
3. Lead in the area of products, manufacturing and the environment
4. Improve profitability
5. Provide a creative, cooperative workplace in which employees are empowered
ii. Believer in the value of education for all employees
iii. to empower employees – need for continuous education
iv. employees continually renew their skills and knowledge in quality, design, manufacturing and their
own specializations
v. continuous improvement and the quality planning and control cycle’s process:
1. have a set of metrics
2. determine results
3. pick a problem
4. address the problem
5. analyze the solution
6. move on
vi. quality is not an assignable task; it is rooted and institutionalized in every process
vii. it is everyone’s responsibility to improve the system for total customer satisfaction
5. The Quality Gurus
• Deming – emphasized the role that management should take in quality improvement
i. Quality as continuous improvement of a stable system
ii. Emphasizes two things:
1. All systems (administrative, design, production and sales) must be stable in a statistical sense
2. Continuous improvement of the various systems to reduce variation and better meet customer
needs
iii. 14 points – philosophy toward quality
1. Management for the long run and not sacrifice quality for short-run profits
2. Management should cease dependence on mass inspection to achieve quality and stress
prevention of defects instead – through training, good supervision and use of statistical
procedures
iv. Strong advocate of statistical process control ideas – proper tools to identify causes of variation, to
control variation and to reduce variation in the product
v. Believes most quality problems are caused by poor systems, not by workers
• Juran – originated the idea of the quality trilogy: planning, control and improvement of quality
i. Planning: identify major business goals, customers and products required
1. Quality improvement requires careful planning to ensure that the most important quality
problems are attacked first – “the vital few.”
ii. a way of achieving process control – use of statistical methods
iii. improvement – breakthrough improvement and continuous improvement of processes
1. through training and involvement of employees
• Crosby – seek to produce zero defects or to “make it right the first time”
i. Argued that it is cheaper to make the product right the first time than to correct errors or to pay for
scrap, rework or failures in the field
ii. 99.9 percent quality is not good enough
iii. Defined the approach in terms of 14 implementation steps that require cross-functional
participation
1. Stress management commitment
2. Training
3. Worker involvement
4. Measurement of quality
5. Prevention of defects in all parts of the business
6. ISO 9000 Standards
• International organization for standardization – an international body consisting of members from 155
countries
• Meant to describe how a company should go about ensuring quality whether the company is large or
small, whether the product is complex or simple
• Specify a company must have:
i. Quality system in place – procedures, policies, and training to provide quality
ii. Quality manual and careful record keeping/documentation
iii. Process flowcharts, operator instructions, inspection and testing methods
iv. Job descriptions, organization charts, measures of customer satisfaction and continuous
improvement processes
• To ensure compliance, audit done by certified ISO 9000 registrars
• Only the process for making the product is certified – periodically renewed via return audits by a
registrar
• ISO 9000 doesn’t not provide a complete quality system – doesn’t address competitive strategy,
information systems, business results
7. Malcolm Baldrige Award
• Became a de facto standard for “best quality practice” in America
• Baldrige criteria:
i. Leadership – the extent to which quality values permeate the entire organization
ii. Strategic planning – the glue that holds the quality effort together
iii. Customer and market focus – winners strive to delight customers, not just minimally satisfy them
but exceed their expectations and anticipate their needs
iv. Measurement, analysis and knowledge management – “management by fact”, decision making
based on hard data
v. Human resource focus – includes employee involvement, continuous education and training,
teamwork and decision making by the workers; basis for all quality improvement efforts
vi. Process management – process definition, documentation, statistical process control, and tools of
quality improvement
vii. Business results – includes customer-focused results, product and service outcomes, financial and
market results, human resource results, organization effectiveness and leadership and social
responsibility results
1. Considers Standard measures: percent defective product, customer returns, on-time deliveries,
profitability, ROI, and market share
• Use baldrige criteria as a vehicle for internal assessment of quality and performance improvement
systems
i. To diagnose strengths and weaknesses of the management system
8. Quality and Financial Performance
• Cost of quality – quality and financial performance are intimately related; relationship between quality
and cost; includes prevention, appraisal, internal failure and external failure categories – costs of not
doing things right the first time (except prevention)
• 2 components:
i. Control costs – related to activities that remove defects from the production stream; can be done by
prevention and appraisal
1. Prevention – quality planning, new-product reviews, training and engineering analysis
2. Occur prior to production and are aimed at preventing defects before they occur
ii. Failure costs – appraisal or inspection aimed at eliminating defects after they occur but before the
products reach the customer
1. Incurred either during production process (internal) or after the product is shipped (external)
• Costs of quality:
i. Prevention costs: quality planning, new-product review, training, process planning, quality data,
improvement projects
ii. Appraisal costs – incoming materials inspection, process inspection, final goods inspection, quality
laboratories
iii. Internal failure costs – scrap, rework, downgrading, retest, downtime
iv. External failure costs – warranty, returned merchandise, complaints, allowances
• Cost of nonconformance or costs of poor quality (appraisal to external failure)
9. Why Some Quality Improvement Efforts
10. Key Points
Chapter 9: Quality Control and Improvement
1. Design of quality control systems

i. All quality control must start with the process itself
• Each of these processes has its own internal customers and its own products or services that are produced
i. By breaking down a large production system into many smaller systems or processes, quality can be
defined and controlled at each point along the way
• Critical control points – can be identified where inspection or measurement should take place
• Who will do the inspection? The workforce itself or separate inspectors? Operator inspection is preferred –
places responsibility on those who make the product or service
• Steps in designing control system:
i. Identify the critical points in each of the processes where inspection and testing are needed. Guidelines:
1. Supplier certification – ensure that incoming raw materials or purchased services will meet
specification
2. Test work in process or the service while it is being delivered. General rule, inspected before
irreversible take place or before a great deal of value is added
3. Finished product or service – final products are frequently inspected or tested prior to shipping or
prior to placing the product in inventory
a. Usually far better to prevent defects from occurring than to inspect and correct defects after
production
b. Sampling inspection is necessary
c. Inspection cannot be eliminated, but can be reduced by prevention process
ii. Decide on the type of measurement to be used at each inspection point; 2 options:
1. Variables measurement – continuous scale for factors: length, height and weight; e.g. dimensions of
parts, viscosity of liquids, time to wait on tables in a restaurant
2. Attribute measurement – discrete scale by counting the number of defective items or the number of
defects per unit; use attribute measurements when quality specifications are complex
iii. Decide on the amount of inspection to use

1. Statistical process control is preferred to minimize the amount of inspection needed
iv. Decide who should do the inspection
1. Quality at source – workers inspect their own output and be responsible for quality
2. Zero defects philosophy – workers with much responsibility for inspection and only a minimum of
outside inspection will be used
• The guiding principle: to first control the system and then aim for continuous improvement of the resulting
stable system
2. Process quality control - Utilizes inspection (or testing) of the product or service while it is being produced
3. Attribute control – occurs when the quality characteristic is measured on a discrete scale (e.g. item is either
good or defective) rather than a continuous scale
4. Variables control – a measurement of a continuous variable is made when each item is inspected; two
values are computed from the sample – a measure of central tendency and a measure of variability
5. Using control charts
• Issues concerning using control charts:
i. The problem of sample size
1. Attribute control chart, samples should be fairly large – 50 to 300 observations; must be large
enough to allow for the detection of one defective unit
2. Variables – require much smaller sample sizes, 3 to 10 items – each variable measurement provides
much information
ii. How frequently to sample
1. A high-volume production process should be sampled frequently since a large number of defective
units could be produced between samples
2. Cost of producing defective units is high – sampled frequently
iii. Relationship of product specifications to control limits
• Uses of control charts:
i. Manufacturing companies – frequently located on each machine to control the quality output of that
machine
1. Quality measurements are taken – to ensure that the machine is still producing at its required
tolerances and the average and range haven’t changed
ii. Service companies – used to control the time or the percentage of defects from various processes
6. Continuous improvement
• Aim: to reduce variability of the product or process; requires problem solving or changes in the design of
the product or process itself
• Pareto Analysis
i. Data can be collected on the various modes of failure of the product or service produced
ii. According to pareto’s law, a few of the failure modes account for most of the defects
iii. Shows which defects we should try to eliminate first
• Cause-and-effect (CE) diagram
• Process capability charts
7. Six Sigma
8. Quality Control in industry
9. Key Points
Chapter 16: Materials Requirement Planning, pages 364-384

1. Introduction
• Computerized planning and control system
• Independent-demand inventories – subject to market conditions; and independent of operations
i. E.g. finished goods and spare parts in manufacturing company – used to satisfy final customer
demand
ii. Managed by the order-point methods
• Dependent-demand – not subject to market conditions; dependent on demand for higher-level parts
and components up to and including the master production schedule
i. E.g. raw-materials and work-in-process inventories used in manufacturing companies to support
manufacturing process itself
ii. Restaurant – raw food is dependent on the number and types of meals served
iii. Managed by MRP system of JIT
• MRP is driven by master schedule – specified the end items or output of production function
i. Raw materials and work in process – dependent on master schedule – derived by the MRP
system from the master schedule
ii. Master schedule is better basis than past demand
iii. Master schedule driven by Sales and Operations Planning (SOP), forecasts, orders from
customers, orders for finished goods inventory
iv. During master scheduling, SOP – broken down into actual products that will be produced
v. Master schedule is “exploded” into purchase orders for raw materials, shop orders for
scheduling the factory
1. Requires a detailed bill of materials that lists each of the parts needed to manufacture
any given end item in the master schedule
2. Results in complete list of the parts – to be orders and the shop schedule required
• MRP system will produce a valid plan for procurement and manufacturing actions
• Can be part of a larger ERP system
• Purpose: to plan and control the manufacturing function in terms of products, orders, parts, production
levels and inventories
i. ERP expands information provided by MRP to planning and control of money, personnel and
other resources
ii. MRP is the heart of the ERP system – inaccurate MRP system leads to inaccurate numbers in
finance, marketing, accounting and personnel
2. Definitions of MRP systems
• Typical MRP system
i. Master production schedule – determined by customer’s orders, aggregate production planning,
forecasts, etc.
ii. Parts-explosion process – driven by: master schedule, bill of materials and inventory
iii. Results to:
1. Purchase orders – to vendors
2. Shop orders:
• if capacity is available, to shop-floor control system
• if capacity not available: change capacity or change master schedule
• MRP as an information system
i. Information processed through various parts to support management decisions
ii. If accurate and timely, used to control inventories, deliver customer orders on time and control
costs of manufacturing
• 3 principal functions of MRP:
i. Inventory: order the right part, order in the right quantity, order at the right time
ii. Priorities: order with the right due date, keep the due date valid
iii. Capacity : a complete load; an accurate (valid) load; an adequate time span for visibility of
future load
• 2 different types of MRP
i. Type I: An inventory control system

1. Minimal inventory control system – releases manufacturing and purchase orders for the
right quantities – right time to support schedule
2. Does not include capacity planning and shop-floor control modules
ii. Type II: A production and inventory control system
1. An information system used to plan and control inventories and capacities
2. Has a feedback loop between the orders launched and the master schedule to adjust for
capacity availability
3. A closed-loop system – Manufacturing Resource Planning System
• Enterprise resource planning system (ERP) – companywide enterprise resource planning used to plan
and control all resources: inventory, capacity, cash, personnel, facilities and capital
3. MRP versus order-point systems
MRP Order Point
Demand Dependent Independent
Order philosophy requirements Replenishment
Forecast Master schedule Past demand
Control concept Control all items ABC
Objectives Meet manufacturing needs Meet customer needs
Lot sizing discrete EOQ
Demand pattern Lumpy but predictable Random
Types of inventory Work in process & raw materials Finished goods and spare parts
• MRP is future-oriented; derives the future demand for component parts from higher-level demand
forecasts
• Independent-demand inventories with reorder-point rules: provide higher customer service level at
low inventory-operating costs; oriented toward customer
• Dependent-demand inventories with MRP: support the master production schedule;
manufacturing oriented; focuses inward rather than outward
4. MRP Example
• Common practice: to build assemblies for inventory – to reduce total production lead time and save
setup costs
• Bill of materials
• Planned lead times
• Materials plan
• Gross requirements
• Net requirement
• Planned order releases
• Time-phased materials plan
• Purchase orders and shop orders – interrelated to provide material when needed
• Planned production = final demand after adjusting for available inventories
• Unless safety stocks are added for uncertainties or inventories are added to smooth out production
levels – no inventories will be planned except work in process required for assembly or fabrication
• MRP assumption: parts are available exactly when they are needed to support the production plan.
5. MRP Elements
• Master scheduling – purpose: specify the output of operations function
i. Drives the entire materials planning process
ii. “top management’s handle on the business”
iii. Often delegate the task to cross-functional team
iv. Aggregate production plan (SOP) – top management’s primary interface with manufacturing
1. Deals with families of products/product lines, not specific products, models or options
that are in the master schedule
2. Part of the annual budgeting and strategic planning process; updated monthly
3. Objective: make resources (capacity, people, equipment and facilities available for the
future
v. Functions: make sure the final master schedule is not inflated; reflects realistic capacity
constraints
vi. Might extend into the future for a year or more – sufficient time is available to order all parts
• Bill of materials (BOM) – structured list of all the materials or parts needed to produce a particular
finished product, etc…
i. Like a recipe used for cooking – list of ingredients
ii. Not too costly to have 100 percent accurate BOMs; too costly to tolerate imperfect BOMs
iii. MRP system requires a single BOM for the entire company
iv. Engineering-change-roder (ECO) system is needed to keep the BOMs up to date; ECO
coordinator – responsible for coordinating all engineering changes with the various departments
involved
• Inventory records:
i. Data segments include:
1. Item master data segment – contains part number – unique item identifier; other
information such as lead time, standard cost, etc.
2. Inventory status segment – complete materials plan for each item over time;
3. Subsidiary data segment – contains information concerning outstanding orders,
requested changes, detailed demand history, and the like
ii. Cycle counting – a substitute for the annual physical inventory
1. Small percentage of the items are counted each day by storeroom personnel
2. Errors are corrected in the records; find and correct procedure that caused them
• Capacity planning
i. Over-launching MRP system (type I)
ii. Purpose: aid management in checking on the validity of the master schedule
iii. 2 ways:
1. Rough-cut capacity planning (resource planning) – approximate labor and machine
hours directly from master schedule without going through the parts-explosion process
• Less detailed but not as accurate as shop loading
2. Shop loading – full parts explosion is run prior to capacity planning
iv. Important: capacity planning should be used to close the loop in MRP system
• Purchasing
i. Past due-orders are eliminated because MRP – generates valid due dates; develop credibility
with vendors
ii. Eliminate order expediting – allows to concentrate on prime function: qualifying vendors,
looking for alternative sources of supply. Etc
iii. With MRP – provide suppliers with reports of planned future orders
1. Company have gone to insist their vendors to install MRP systems; and,
2. Electronic data interchange (EDI) and web-based methods – to transmit MRP planned
orders from the customer’s computer to the supplier’s computer
• Shop-floor control
i. Purpose: release orders to the shop floor and manage orders on their way through the factory –
to make sure they are completed on time
ii. Helps management adjust to all the day-to-day things that go wrong in manufacturing:
absenteeism, machine breakdowns, loss of materials, so on.
iii. Manufacturing Execution System (MES) – shop-floor control system
iv. Job priorities:

1. If a job is behind schedule – priority can be increased
2. Job can be slowed down if it is ahead of schedule
v. Lead times can be managed by expanding or contracting them on the basis of priority; “Lead
time is what you say it is.”
vi. Requirements:
1. Requires feedback reports on all jobs as they are processed by computer terminal on
the shop floor or by information submitted to a central office
2. Requires valid due dates on orders; shop floor system is highly dependent on proper
priority and capacity planning
vii. JIT for repetitive manufacturing – shop-floor control system is replaced by Kanban pull system
viii. MRP shop-floor control systems useful for batch-oriented plants, job shops and service
operations
6. Operating an MRP System
• How much safety stock to carry? Little safety stock is needed if MRP is properly used – due to concept of
lead-time management
i. Purchasing – lead time managed by developing relationships with vendors who provide reliable
deliveries
ii. Shop lead times – by shop-floor control system
iii. Purpose of safety stock: to provide flexibility to meet changing customer requirements
• Safety lead time – considered form component parts wherein the vendor is unreliable and situation
cannot be remedied
• Safety capacity – spare capacity can be used to make the right parts when the need becomes known; an
alternative to safety stock;
• Informal system will drive out the formal system
i. Strive to maintain data accuracy
ii. User education
iii. System integrity
• Type III: more than just a production and inventory control tool but can support planning and control in
all parts of the company
i. Used to drive financial planning systems – to project future total inventories, forecast
purchasing budgets, plan needs for personnel, equipment and facilities
ii. Can support product costing and cost accounting
iii. Can be expanded into personnel planning by using a bill of labor
7. The Successful MRP System – 5 elements:
• Implementation planning
i. Advanced planning and problem-prevention efforts help smooth out implementation efforts
ii. Should include education of senior management, selection of project manager, appointment of
implementation team, preparation of objectives, identification of expected benefits and costs,
and detailed action plan
• Adequate computer support
i. One of the easiest elements of MRP to implement
ii. Many use standard packages than writing own computer programs
• Accurate data – very difficult to obtain; required when decisions are made from information supplied by
a computer
i. Inventory records accuracy – cycle counting
ii. Shop routings, shop-floor status and cost – in an acceptable state of accuracy
iii. MRP data accuracy for system integrity – one of the most important tasks in operating MRP
system
• Management support – management participation or leadership
i. Top management must be actively involved in installing and operating the MRP system
• User knowledge
i. User knowledge at all levels of the company
ii. Employees must understand how they will be affected and grasp their new roles and
responsibilities
iii. The most benefit from MRP – achieved by a company vertically integrated through all stages of
manufacturing – with most complex bills of materials
Chapter 17: JIT Systems and Lean Thinking
1. Introduction
• Goes far beyond inventory control and encompasses the entire system of production
• An approach that seeks to eliminate all sources of waste in production activities by providing the right part
at the right place at the right time
• Results in much less inventory, lower costs and better quality than the just in case (JIC) approach
2. Philosophy of JIT
• The roots of JIT system can probably be traced to the Japanese environment – owing to a lack of space and
lack of natural resources, the Japanese have developed an aversion to waste
• Also believe that inventory storage wastes space and ties up valuable materials
• Another major tenet: Utilizing the full capability of the worker; greater responsibility for production:
i. Workers in the JIT system are charged with the responsibility for producing quality parts just in time to
support the next production process.
ii. Workers are also charged with improving the production process – through quality teams, suggestion
systems, other forms of participation, workers offer improvement to the process of production
iii. Capabilities of workers are used to a much greater extent in the JIT system than in traditional production
approaches
• Objective – to improve profits and ROI through cost reductions, inventory reductions, and quality
improvements
• To achieve this:
i. Eliminate waste
ii. Involve workers in the production process
• Has its roots in repetitive manufacturing – same as mass production
i. The production of standardized discrete products in high volume, e.g. automobiles, electronics, and
machinery
3. Elements of JIT System
• JIT Master Schedule or final assembly schedule
• Emphasis on quick changeovers and smaller lots – multifunction workers are required
• Quality is absolutely essential with a JIT system. A JIT system is designed to expose errors and get them
corrected rather than covering them up with inventory.
• Supplier relations are radically changed.
i. Suppliers are asked to make frequent deliveries directly to the production line.
ii. Close proximity of suppliers and changes in shipping procedures are often required to integrate
suppliers effectively with JIT producers.
iii. Suppliers are partners – required to deliver perfect quality goods.
• JIT affects every aspect of plant operations:
i. Lot sizing, scheduling, quality, layout, suppliers, labor relations, etc.
ii. Other function: engineering, marketing, HR, and finance
• Return on Investment Objective:
i. Increases by revenues, costs reductions, less investment
ii. Increase revenue by improving quality/giving better delivery service

iii. Better service – by shorter lead times, allow faster response to customer needs and better conformance
to schedule commitments
iv. Cost reductions: in materials (less scrap and rework), labor and OH
v. Investment is reduced by less inventory (root of all evil) and greater throughput of PPE
• Problem-solving activities by management and workers drive the whole system
• Built on constant improvement
• Problem-solving approach is the heart of JIT
4. Stabilizing the Master schedule
• Uniform load
• Single-unit production
• Master scheduling closely resembles customer demand on a daily basis
i. Minimizes finished-good inventory since production output is closely matched to demand
ii. Helps reduce work in process and raw materials inventory
iii. Stabilizing the master schedule is the key to stabilizing all other production processes and supplier
requirements
5. The Kanban System
• The method of production authorization and materials movement in the JIT system.
• Means marker (card, sign, plaque, other device) used to control the sequencing of jobs through a sequential
process
• Purpose: to signal the need for more parts and ensure those parts are produced in time to support
subsequent fabrication or assembly
• The number of containers needed to operate a work center is a function of the demand rate, container size,
and the circulating time for a container.
• Reducing lead time is the key
6. Reducing Setup time and lot sizes
• It increases available capacity, increases flexibility to meet schedule changes, and reduces inventory
• Single setups – a setup time that has a single digit in minutes
i. Achieved through external and internal setups are separated:
1. Internal setup – actions that require the machine to be stopped
2. External setup – can be done while the machine is operating
ii. Much of the setup as possible is converted from internal to external
iii. E.g. pit stop / quick changeover from the race track
7. Layout and Equipment
• The plant evolves toward a more streamlined flow and automated plant because lot sizes are reduced and
problems are constantly resolved making automation possible.
• JIT in Group technology or cellular manufacturing layout – work centers have been redefined so that parts
can flow smoothly from one work center to the next
• Superb maintenance of equipment is required.
8. Effect on Workers
• Multifunction workers
i. Must be able to operate several machines in a group
ii. Must be able to set up machines, do routine maintenance, inspect the parts
iii. Requires cross-training of workers in several different skills
iv. New pay systems reward workers on the basis of the number of different jobs they can perform –
encourage to learn more and become more flexible
• Management need to work closely with unions to develop the kind of workforce needed for JIT
• Methods to engage workers in problem-solving activities:
i. quality teams and suggestion systems are used
ii. environment of participation must be created

9. Suppliers
• Suppliers are viewed as external factory and as part of the production team
• Very much in line with modern supply chain thinking
• Several deliveries might be made each day provided supplier is located in the same vicinity
• Deliveries are made directly to the assembly line without receiving or inspection – requires complete
confidence in the supplier’s quality
• Tendency to use fewer suppliers – to establish long-term relationship and ensure quality of parts needed;
• Integrated supplier program:
i. Early supplier selection
ii. Family of parts sourcing
iii. Long-term relationship
iv. Paperwork reduction in receiving and inspection
10. Implementation of JIT
• Leadership with assistance of a cross-functional team
• Gain cooperation of the workforce
• Start with the final assembly line…
• Extend JIT to the suppliers
11. Comparison of Materials Resource Planning (MRP) and JIT
• Push system (MRP) pushes materials into production to meet future needs;
• Pull system (JIT) material is pulled through production by the subsequent (using) work centers
• Comparisons:
i. Pure repetitive manufacturing (with MRP 1)
1. Master schedule is the same from day-to-day, JUT works very well; no changes in the end products;
component parts needed each day are the same; only uncertainty is breakdowns in the production
process – which are handled by a pull system and excellent maintenance
2. JIT system is adjusted for major events by the MRP system
ii. Batch manufacturing
1. Might utilize hybrid MRP-II and JIT type of system, when batches are repetitive in nature
2. MRP II is used to push material into the factory and to plan capacity, while JIT is used for execution
on the shop floor
iii. Job shop manufacturing
1. Job shop process that is batch-oriented and non-repetitive must use MRP II to plan and control
production
2. Factory makes products only to order and each order is different
3. Material must be pushed into the factory to meet future demands that are different for each other
4. Only the Kanban system that will not work
12. Beyond JIT to Lean Thinking
• Lean thinking consists of 5 elements:
i. Specify value from the customer’s point of view
ii. Create a value stream map and remove waste
iii. Flow the product or service through the system
iv. Pull the product or service from the customer
v. Strive for perfection
• JIT takes an internal view of the firm, Lean thinking takes an external perspective starting with defining what
the customer really values
• JIT system takes the product and service design as given; Lean thinking moves the analysis upstream into
marketing and engineering by addressing true customer needs
• Lean thinking requires describing the value stream from design and operations to suppliers and distribution
• Value stream mapping – to identify waste in the current value stream and specification of a future value
stream that eliminates waste from the customer’s point of view
• Definition of perfection: affordable product or service, delivered rapidly and on time, that meets the
customers’ needs
13. Key Points
Chapter 12: Facilities and Aggregate Planning, pages 248-273

1. Facilities Decisions
2. Facilities Strategy
3. Aggregate Planning
4. Planning Options
5. Basic Strategies
6. Aggregate Planning Costs
7. Example of Costing
8. Sales and operations planning

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Operations Management Notes * Page 1 of 25 * rpe

Comprehensive Exams Preparations

Chapter 1: The Operations Function

7. Decision-making and process view of operations management?

Chapter 2: Operations and supply chain strategy

1. Operations strategy model:

3. Effect on product design and operations

ii. Low-cost objective

To lower cost is to focus on customer requirements to eliminate rework, scrap, inspection,

1. Emerging and possibly growing market

Chapter 3: Product Design

Chapter 4: Process Selection

Chapter 5: Service Process Design (?)

Chapter 10: Supply Chain Management

5. Supply chain strategies

2 basic ways to improve supply chains: changing structure or infrastructure. Structure:

• Includes capacity, facilities, process technology and vertical integration

My Framework (How I see it…)

b. Distinctive competence – basis for competitive strategy

Second Exam Notes

Chapter 8 & 9: Quality Management & Quality Control and Improvement

Chapter 9: Quality Control and Improvement

1. Design of quality control systems

iii. Decide on the amount of inspection to use

Chapter 16: Materials Requirement Planning, pages 364-384

i. Type I: An inventory control system

iv. Job priorities:

Chapter 17: JIT Systems and Lean Thinking

ii. Increase revenue by improving quality/giving better delivery service

ii. environment of participation must be created

Chapter 12: Facilities and Aggregate Planning, pages 248-273

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