Summary of Terms CH 11-16 (2)
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service operations: Production activities that yield tangible and intangible service products.
goods production: Production activities that yield tangible products.
utility: The power of a product to satisfy a human want; something of value.
time utility: That quality of a product satisfying a human want because of the time at which it is made available.
place utility: That quality of a product satisfying a human want because of where it is made available.
ownership (possession) utility: That quality of a product satisfying a human want during its consumption or use.
form utility: That quality of a product satisfying a human want because of its form; requires raw materials to be
transformed into a finished product.
operations (production) management: The systematic direction and control of the processes that transform resources
into finished goods.
production managers: Managers responsible for ensuring that operations processes create value and provide benefits.
operations process: A set of methods and technologies used in the production of a good or a service.
analytic process: Any production process in which resources are broken down.
synthetic process: Any production process in which resources are combined.
high-contact system: A system in which the service cannot be provided without the customer being physically in the
system (e.g., transit systems).
low-contact system: A system in which the service can be provided without the customer being physically in the system
(e.g., lawn care services).
forecast: Estimates of future demand for both new and existing products.
capacity: The amount of a good that a firm can produce under normal working conditions.
process layout: A way of organizing production activities such that equipment and people are grouped together according
to their function.
cellular layout: Used to produce goods when families of products can follow similar flow paths.
product layout: A way of organizing production activities such that equipment and people are set up to produce only one
type of good.
assembly line: A type of product layout in which a partially finished product moves through a plant on a conveyor belt or
U-shaped production line: Production layout in which machines are placed in a narrow U shape rather than a straight
flexible manufacturing system (FMS): A production system that allows a single factory to produce small batches of
different goods on the same production line.
service flow analysis: An analysis that shows the process flows that are necessary to provide a service to customers; it
allows managers to determine which processes are necessary.
master production schedule: Schedule showing which products will be produced, when production will take place, and
what resources will be used.
Gantt chart: Production schedule diagramming the steps in a project and specifying the time required for each.
PERT chart: Production schedule specifying the sequence and critical path for performing the steps in a project.
operations control: Managers monitor production performance by comparing results with plans and schedules.
follow-up: Checking to ensure that production decisions are being implemented.
materials management: Planning, organizing, and controlling the flow of materials from purchase through distribution
of finished goods.
standardization: Using standard and uniform components in the production process.
transportation: The means of transporting resources to the company and finished goods to buyers.
warehousing: The storage of both incoming materials for production and finished goods for physical distribution to
inventory control: In materials management, receiving, storing, handling, and counting of all raw materials, partly
finished goods, and finished goods.
purchasing: The acquisition of all the raw materials and services that a company needs to produce its products.
holding costs: Costs of keeping extra supplies or inventory on hand.
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lead times: In purchasing control, the gap between the customer's placement of an order and the seller's shipment of
supplier selection: Finding and determining suppliers to buy from.
just-in-time (JIT) production systems: A method of inventory control in which materials are acquired and put into
production just as they are needed.
material requirements planning (MRP): A method of inventory control in which a computerized bill of materials is
used to estimate production needs so that resources are acquired and put into production only as needed.
bill of materials: Production control tool that specifies the necessary ingredients of a product, the order in which they
should be combined, and how many of each are needed to make one batch.
manufacturing resource planning (MRP II): An advanced version of MRP that ties together all parts of the
organization into the company's production activities.
quality control: The management of the production process so as to manufacture goods or supply services that meet
specific quality standards.
productivity: A measure of efficiency that compares how much is produced with the resources used to produce it.
quality: A product's fitness for use in terms of offering the features that consumers want.
labour productivity: Partial productivity ratio calculated by dividing gross domestic product by total number of workers.
level of productivity: The dollar value of goods and services produced by each worker.
total quality management (TQM): A concept that emphasizes that no defects are tolerable and that all employees are
responsible for maintaining quality standards.
performance quality: The overall degree of quality; how well the features of a product meet consumers' needs and how
well the product performs.
quality reliability: The consistency of quality from unit to unit of a product.
quality ownership: The concept that quality belongs to each employee who creates or destroys it in producing a good or
service; the idea that all workers must take responsibility for producing a quality product.
competitive product analysis: Process by which a company analyzes a competitor's products to identify desirable
value-added analysis: The evaluation of all work activities, material flows, and paperwork to determine the value they
add for customers.
statistical process control (SPC): Statistical analysis techniques that allow managers to analyze variations in production
data and to detect when adjustments are needed to create products with high quality reliability.
process variation: Any change in employees, materials, work methods, or equipment that affects output quality.
control chart: A statistical process control method in which results of test sampling of a product are plotted on a diagram
that reveals when the process is beginning to depart from normal operating conditions.
quality/cost study: A method of improving product quality by assessing a firm's current quality-related costs and
identifying areas with the greatest cost-saving potential.
internal failures: Expenses incurred during production and before bad product leaves the plant.
external failures: Allowing defective products to leave the factory and get into consumers' hands.
quality improvement (QI) team: TQM tool in which groups of employees work together to improve quality.
benchmarking: Comparing the quality of the firm's output with the quality of the output of the industry's leaders.
ISO 14000: Certification program attesting to the fact that a factory, laboratory, or office has improved environmental
ISO 9000: Program certifying that a factory, laboratory, or office has met the quality management standards of the
International Organization for Standardization.
business process re-engineering: Redesigning of business processes to improve performance, quality, and productivity.
supply chain: Flow of information, materials, and services that starts with raw-materials suppliers and continues through
other stages in the operations process until the product reaches the end customer.
supply chain management (SCM): Principle of looking at the chain as a whole to improve the overall flow through the
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continuous improvement: The ongoing commitment to improve products and processes, step by step, in pursuit of ever-
increasing customer satisfaction.
employee empowerment: Principle that all employees are valuable contributors to a firm's business and should be
entrusted with decisions regarding their work.
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