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GMS 401 MIDTERM ch 1-6

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Global Management Studies
GMS 401
Robert Meiklejohn

CHAPTER 1: Introduction to Operations Management Operations Management = management of processes or systems that create goods and/or provide services - Process = a series of linked actions, changes, or functions bringing about a result - 3 types of process o Core/operational – directly create goods and/or services o Support- support core processes o Managerial- govern the system Companies use OM to improve: Efficiency (operating at ↓cost & time) and Effectiveness (achieving quality and responsiveness; intended goals to succeed) Why study OM? → Large % of expenses in OM area (improvements = ↑ profits), large # of jobs in OM & activities in other areas are interrelated with OM activities Functions of OM: 1. Operations = creates goods/services 2. Financing = provides funds & the economic analysis of investment proposals o Activities related to securing resources at favourable prices and allocating those resources throughout the organization (ex. budgeting) 3. Marketing = assess customers wants and needs & communicate it to them o Selling/promoting, advertising/prices 4. Other functions = Accounting, purchasing, personnel (HR), etc. - Inputs (land, labour, capital) → Transformation process → Outputs (Goods/services)→ Control (feedback) → Inputs - Adding value = difference b/w cost of input and price of output o Used for R&D, investment, profits and ↑ production (overlapping b/w main functions) Types of Operations - Goods producing (farming), storage/transportation (warehouse & trucking), exchange (retailing), entertainment (films), communication (newspaper & telephone - Product design, maintenance, MIS, logistics, personnel (HR), accounting, purchasing, & manufacturing/engineering The Scope of OM - Designing decisions = capacity, location, equipment o System design is the most important b/c many of the parameters of the system operation are decided by design (ex. Cost, space & capacity) - Operating decisions = planning, execution, controlling o Service sector accounts for > 70% of jobs in Canada Operations Manager’s Job - Planning = capacity, location, mix of products/services, make or buy, projects - Organizing = degree of centralization, specialization, staffing, suppliers, subcontracting - Controlling = inventory, quality, motivation, cost , productivity - Directing = scheduling, incentive plans, work orders, job assignments Operations managers & decision making - Models = ignore unimportant details so that attention can be concentrated on important aspects (types = mathematical, physical & schematic) - Quantitive approaches = linear programming, inventory techniques - Trade-offs = factor rating approach (amount of inventory: ↑ cost of holding inventory vs. level of customer service) - Systems approach = output & objective as a whole takes precedence over those of any one subsystem - Establishing priorities = Pareto phenomenon (a few factors account for a ↑ % of results achieved) → Ex. 80% problems caused are by 20% of activities - Ethics = worker safety, product safety, clean environment, impact of community Historical Evolution of OM - Earliest days = craft production (no economic scale; ↑skilled workers used simple/ flexible tools to produce small quantities of customized goods) - Industrial revolution = interchangeable parts (no custom fit), division of labour - Scientific management = mass production (↓ skilled workers, machines: ↑ volume of goods) - Human Relations movement = improve productivity with motivational theory, employee problem solving - Decision models & computers = management science, electronic data interchange (EDI), & enterprise resource planning (ERP) - Japanese manufacturers = total quality management (every employee to improve quality & satisfy the customer), lean production (↓ resources to produce ↑ volume of ↑ quality goods) Trends in Business - Internet & ecommerce, management technology, globalization, management of supply chains (outsourcing) CHAPTER 2: Competitiveness, strategic planning, and productivity Competitiveness = ability & performance of an organization in the marketplace compared to other organizations that offer similar goods/services - Order qualifiers = purchasing criteria that customers perceive as minimum standards of acceptability to be considered for purchase (allow it to be consider b/w competitors’ products) o Not good to get a customer to purchase form the organization - Order winners = purchasing criteria that cause the organization to perceived as better than the organization (allow it to be purchased) Businesses compete using operations - Cost (COGS) = firms compete with pricing will ↓ profit margins & most firms ↓ delivery fees - Quality (quality requirements) - Flexibility (produce variety; custom & easily ↑ or ↓ production quantity → change in demand/design) - Timeliness (due dates, planning, just-in-time strategy) Value = Performance ÷ Cost Strategic planning = mission/vision → goals → organizational strategy → functional strategy: (1) Finance = tactics → policies & actions, (2) Marketing = tactics → policies & actions, and (3) Operations = tactics → policies & actions Operations Strategy = approach that is used to guide that operation function → consistent with organization strategy & support competitive priorities - 9 strategic decision categories o Facility = specialize/focus by market, product group or production process type o Capacity = size of plants & major equipment o Vertical integration = cost, coordination & control of the supply chain o Vendor relations = strategic alliance, partner with suppliers o Product mix & new products = challenges ↑ & variety ↑ o Process types & technology = assembly lines, job shop, batch o Personnel (HR) = workers selected, motivation, promotion o Quality = assurance, control, improvement o Operations infrastructure & system = computerized planning and control system - Formulation of an operations strategy o Determine requirements (link to goals) o Categorize customers in types and choose competitive priority emphasis o Group product lines into types o Assess strengths/weaknesses & competitive position o Assess degree of plant focus o Develop & deploy strategy of each decision category (objectives, policies, action plans) - Generic operations strategies o Continuous improvement, large scale-base, focused factories, flexible factories, and low labour costs Time-based competition = focus on reducing time to finish task Outsourcing = buying parts from outside suppliers Productivity = a measure of the effective use of resources, usually expressed as the ratio of output to input - Computed for workers, department, organizations and country - Productivity = Outputs ÷ inputs (partial = single, multi-factor = multiple + OH & total = total) - Productivity growth = (Current period productivity – Previous period productivity) ÷ Previous period productivity - Productivity ≠ efficiency - Used to track performance, areas of improvement & compare competitiveness - Problems with services = intangible, involves intellectual activities, ↑ degree of variability - Factors = methods, technology (not = to gain unless, used wisely = ↓ productivity like playing games on the computer & employees need to learn if it’s a new system), quality & management (getting employees to work hard) CHAPTER 4: Product design Product design process: Elements 1. Product Approval committee = authorize, review, allocate resources o Top management oversees and directs the development activities 2. Core team = cross functional, plan & lead projects, expands as needed 3. Phase reviews = at milestones, approve/cancel/revise the project 4. Structured development process = project management technique, schedule, execute & control Product design process: Phases 1. Idea generation (idea starter to product) 2. Build a business case = market & competitor analysis (extra study) 3. Development = translate the “voice of the customer” (technical development) 4. Testing & validation (trial sell) 5. Launch (into the market) Idea generation → Idea screening → Concept development → product design → prototype development → test market → commercialization Sources of ideas = employees (R & D), customer (survey), competition (reverse engineering) and suppliers Searching for new product ideas = listening to market complaints, gaps in the market, exploring niche markets, using new technology, & creating new market space Life cycle of products 1. Incubation = ↓demand, not known, has ‘bugs’ 2. Growth = improvement 3. Maturity = few design change, ↓ demand 4. Saturation = competition exists, ↑ products 5. Decline = ↓ cost of the product Standardization = extent to which there is an absence of variety - Advantage = economic of scales ↓ costs, design time spent on improvements, ↓ training - Disadvantage = limits consumer appeal, designs frozen prematurely resist modification Mass customization = some custom - Delayed differentiation (producing but not complete) → until customer preference are known o Postponement tactic → Ex. Restaurants (frozen food) & men’s suits unhemmed - Modular design (old parts replaced/interchanged = easy to repair/replace) o Advantages = remedy of failures, easy repair & replacement, simple to manufacture Reliability = the ability of a product, part, or system to perform its intended function under a prescribed set of conditions - Improving reliability = component design, production/assembly techniques, testing, redundancy/backup, preventive maintenance procedures, user education and system design Robust Design = design that can function over a broad range of conditions - Taguchi approach = easier to create robust design than to control environment factors & central feature is Parameter Design (determines factors that are controllable/uncontrollable & their optimal levels relative to major product advances - Controllable factors = materials, dimensions, & form of processing - Uncontrollable factors = user’s control (length of use, maintenance, settings, etc) Legal Issues - Food & drug act (FDA; health Canada), Canadian environmental protection act (EPA; environment Canada) & hazardous products act (HPA; industry Canada) - Patent/trademark/copyright violations & product liability Ethical Issues - Releasing products with defects & environmental issues Design for environment - energy efficiency of product, energy efficiency used in manufacturing, hazardous material minimization, emissions and wastes in manufacturing, bio-degradable disposals packaging, re- use including packaging, disassembly & remanufacture, & recycling including packaging - Remanufacturing (refurbishing used products by replacing worn-out or defective components) - Design for disassembly (design so that used products can be easily taken apart) - Recycling (recovering material for future use) Concurrent engineering = bringing engineering design, manufacturing, marketing & purchasing staff together early in the design phase (instead of the ‘over the wall’ approach) Designing for manufacturing - Computer-Aided Design (CAD)= product design using computer graphics o ↑ productivity of designers 3-10 times o creates a database for manufacturing information on product specifications o provides possibility of engineering and cost analysis on proposed designs - Design for manufacturing = designers take into account the organization’s manufacturing
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