operations function

the collections of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services

supply chain

a network of manufacturers and service providers that work together to convert and move goods from the raw materials stage through to the end user

operations management

the planning, scheduling, and control of the activities into finished goods and services

upstream

activities or firms that are positioned earlier in the supply chain relative to some other activity or firm of interest

downstream

activities or firms that are positioned later in the supply chain relative to some other activity or firm of interest

first-tier supplier

a supplier that provides products or services directly to a particular firm

second-tier supplier

a supplier that provides products or services to a firm's first-tier supplier

supply chain management

the active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage

e-commerce

the use of IT solutions to automate business transactions; promises to improve the speed, quality, and cost of business communication

SCOR model

comprehensive model of the core management processes and individual process types that together define the domain of supply chain management

structural elements

one of two major decision categories addressed by a strategy; includes tangible resources, such as buildings and equipment

infrastructural elements

one of two major decision categories addressed by a strategy; includes the policies, people, decision rules, and organizational structures choices made by a firm

strategies

the mechanisms by which businesses coordinate their decisions regarding structural and infrastructural elements

mission statement

a statement that explains why an organization exits

business strategy

the strategy that identifies the firm’s targeted customers and sets time frames and performance objectives for the business

core competencies

organizational strengths or abilities, developed over a long period, that customers find valuable and competitors find difficult or even impossible to copy

functional strategy

translates a business strategy into specific actins for the functional areas such as marketing, human resources, and finance

operations and supply chain strategy

a functional strategy that indicates how structural and infrastructural elements within the operations and supply chain areas will be acquired and developed to support the overall business strategies

value index

a measure that uses the performance and importance scores for various dimensions for performance for an item or service to calculate a score that indicates the overall value of an item or service to a customer

quality

the characteristics of a product or service that bear on its ability to satisfy stated or implied needs

performance quality

a subdimension of quality, addressing the basic operating characteristics of the product or service

conformance quality

a subdimension of quality addressing whether the product was made or the service performed to specifications

reliability quality

a subdimension of quality addressing whether a product will work for a long time without failing or requiring maintenance

delivery speed

a performance dimension that refers to how quickly the operations or supply chain function can fulfill a need, once it has been identified

delivery reliability

a performance dimension that refers to the ability to deliver products or services when promised

delivery window

the acceptable time range in which deliveries can be made

flexibility

a performance dimension that considers how quickly operations and supply chains can respond to the unique needs of different customers

mix flexibility

the ability to produce a wide range of products or services

changeover flexibility

the ability to provide a new product with minimal delay

volume flexibility

the ability to produce whatever volume the customer needs

trade-off

the decision by a firm to emphasize one performance dimension over another, based on the recognition that superior performance on some dimensions may conflict with superior performance on others

order winners

performance dimensions that differentiate a company’s products and services from its competitors’; firms win the customer’s business by providing superior levels of performance on order winners

order qualifiers

performance dimensions on which customers expect a minimum level of performance; superior performance on an order qualifier will not, by itself, give a company a competitive advantage

sales and operations planning

a business process that helps firms plan and coordinate operations and supply chain decisions over a tactical time horizon (usually 4 to 12 months)

strategic planning

planning that takes place at the highest levels of the firm, addressing needs that might not arise for years into the future

tactical planning

planning that covers a shorter period, usually four months to a year out, although the planning horizon may be longer in industries with very long lead times (such as engineer-to-order firms)

detailed planning and control

planning that covers time periods ranging from weeks, down to just a few hours out into the future

top-down planning

an approach to S&OP where a single, aggregated sales forecast drives the planning process; the mix of products and services must be essentially the same from one time period to the next, or they must have very similar resource requirements

bottom-up planning

an approach to S&OP that is used when the product/service mix is unstable and resource requirements vary greatly across the offerings; managers will need to estimate the requirements for each set of products or services separately and then add them up to get an overall picture of the resource requirements

planning values

values that decision makers use to translate the sales forecast into resource requirements and to determine the feasibility and costs of alternative sales and operations plans

level production plan

a sales and operations plan in which production is held constant and inventory is used to absorb differences between production and the sales forecast

chase production plan

a sales and operations plan in which production is changed in each time period to match the sales forecast

mixed production plan

a sales and operations plan that varies both production and inventory levels in an effort to develop the most effective plan

load profile

a display of future capacity requirements based on released and/or planned orders over a given span of time

net cash flow

the net flow of dollars into or out of a business over some time period

yield management

an approach commonly used by services with highly perishable "products," in which prices are regularly adjusted to maximize total profit

forecast

an estimate of the future level of some variable

laws of forecasting

1. Forecasts are almost always wrong
2. Forecasts for the near term tend to be more accurate
3. Forecasts for groups of products or services tend to be more accurate
4. Forecasts are no substitute for calculated values

qualitative forecasting techniques

forecasting techniques based on intuition or informed opinion; used when data are scarce not available, o irrelevant

market surveys

structured questionnaires submitted to potential customers, often to gauge potential demand

Delphi method

a qualitative forecasting technique that has experts work individually to develop forecasts; individual forecasts are then shared among the group, after which each participant is allowed to modify his of her forecast based on information from the others; process is repeated until consensus is reached

time series forecasting models

quantitative forecasting models that use time series to develop forecasts

moving average model

a time series forecasting model that derives a forecast by taking an average of recent demand values

weighted moving average model

a form of the moving average model that allows the actual weights applied to past observations to differ

exponential smoothing model

a special form of the moving average model in which the forecast for the next period is calculated as the weighed average of the current period's actual value and forecast

collaborative planning, forecasting, and replenishment (CPFR)

a set of business processes, backed up by information technology, in which members agree to mutual business objectives and measures, develop joint sales and operational plans, and collaborate to generate and update sales forecasts and replenishment plans

flexible manufacturing systems (FMSs)

highly automated batch processes that can reduce the cost of making groups of similar products

production line

a type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs

product-based layout

a type of layout where resources are arranged sequentially according to the streps required to make a product

cycle time

for a line process, the actual time off between completions of successive units on a production line

continuous line flow process

a type of manufacturing process that closely resembles a production line process

job shop

a type of manufacturing process used to make a wide variety of highly customized products in quantities as small as one; usually have general-purpose equipment and workers who are broadly skilled

functional layout

a type of layout where resources are physically grouped by function

batch manufacturing

a type of manufacturing process where items are moved though the different manufacturing steps in groups

fixed-position layout

a type of manufacturing process in which the position of the product is fixed and materials, equipment, and workers are transported to and from the product (airplanes)

hybrid manufacturing processes

general term referring to manufacturing processes that seek to combine the characteristics, and hence advantages, of more than one of the classic processes

make-to-stock

products that require no customization; generic products that are produced in large enough volumes to justify keeping a finished goods inventory

assemble- or finish- to-order

products that are customized only at the very end of the manufacturing process

make-to-order

products that use standard components, but the final configuration of those components is customer-specific

engineer-to-order

products that are designed and produced from the start to meet unusual customer needs or requirements; the highest level of customization

business process

a set of logically related tasks or activities performed to achieve a defined business outcome

primary process

a process that addresses the main value-added activities of an organization

support process

a process that performs necessary, albeit non-value-added, activities

development process

a process that seeks to improve the performance of primary and support processes

mapping

the process of developing graphic representations of the organizational relationships and/or activities that make up a business process

process map

a detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flows of a process

efficiency

a measure of process performance;
(actual output)/(effective capacity)

cycle time

the total elapsed time need to complete a business process

capacity

the capability of a worker, machine, work center, plant, or organization to produce output per time period

lead capacity strategy

a capacity strategy in which capacity is added in anticipation of demand

lag capacity strategy

a capacity strategy in which capacity is added only after demand has materialized

match capacity strategy

a capacity strategy that strikes a balance between the lead and lag capacity strategies by avoiding periods of high under- or over utilization

virtual supply chain

a collection of firms that typically exists for only a short period

indifference point

the output level at which two capacity alternatives generate equal costs

Theory of Constraints

an approach to visualizing an managing capacity that recognizes that nearly all products and services are created through a series of linked processes, and in every case, there is at least one process step that limits throughput for the entire chain

constraint

the process step that limits throughput for an entire process chain

cycle stock

components or products that are receive in bulk by a downstream partner, gradually used up, and then replenished again in bulk by the upstream partner

safety stock

extra inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time

anticipation inventory

inventory that is held in anticipation of customer demand

hedge inventory

a form of inventory buildup to buffer against some event that may not happen

transportation inventory

inventory that is moving from one link in the SC to another

smoothing inventories

inventories used to smooth out differences between upstream production levels and downstream demand

inventory drivers

business conditions that force companies to hold inventory

supply uncertainty

the risk of interruptions in the flow of components from upstream suppliers

demand uncertainty

the risk of significant and unpredictable fluctuations in downstream demand

independent demand inventory

inventory items with demand levels that are beyond a company's complete control

dependent demand inventory

inventory items whose demand levels are ties directly to the company's planned production of another item

economic order quantity

the order quantity that minimizes annual holding and ordering costs for an item

planning and control

a set of tactical- and execution-level business activities that includes master scheduling, material requirements planning, and some form of production activity control and vendor order management

master scheduling

a detailed planning process that tracks production output and matches this output to actual customer orders

forecasted demand

the company's best estimate of the demand in any period

booked ordered

confirmed demand for products

master production schedule

the amount of product that will be finished and available for the sale at the beginning of each week; drives more detailed planning activities, such as material requirements planning

available to promise

a field in the master schedule record that indicates the number of units that are available for sale each week, given those that have already been promised to customers

rough-cut capacity planning

a capacity planning technique that uses the master production schedule to monitor key resource requirements

material requirements planning

a planning process that translates the master production schedule into planned orders for the actual parts and components needed to produce the master schedule items

dependent demand inventory

inventory items whose demand levels are tied directly to the production of another item

bill of material

a listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make and assembly

product structure tree

a graphical rendering that shows how the components in the BOM are put together to make the Level 0 item

planning lead time

the time from when a component is ordered until it arrives and is ready to use

exploding the BOM

the process by which one works backwards from the master production schedule for a level 0 item to determine the quantity and timing of orders for the various subassemblies and components