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Operations Management:
  • Acceptable quality level (AQL)- In quality control, level used to define good lots.

  • Acceptance plan- In quality control, the overall scheme for accepting or rejecting a product lot based on information gained from samples.

  • Acquisition cost- Cost of purchasing or producing a unit of a material or product.

  • Activity- In project management, a task or a certain amount of work required in a project.

  • Aggregate planning- Process of providing an intermediate-term production capacity scheme to support a sales forecast for a product.

  • Aggregate unit of capacity- Measure that allows rates of various outputs to be converted to a common unit of output measure.


  • Arrival- One unit of the arrival rate distribution. Occurs when one person, machine, part, etc., arrives and demands service. Each unit may continue to be called an arrival while in the service system.


  • Arrival rate- The rate at which things or persons arrive, in arrivals per unit of time (e.g., persons per hour). Arrival rate is usually normal or Poisson distributed.


  • Assemble-to-order firm- Firm that assembles, from a relatively few major assemblies or components, customer ordered end items having many options.


  • Assembly chart- Macroview chart listing all major materials, components, subassembly and assembly operations, and inspections for a product.


  • Assignment method- Linear programming solution method used to assign jobs or personnel to machines or departments.


  • Attributes- In quality control, product characteristics that are classified into one of two categories: defective or nondefective.


  • Automated assembly system- System of automated assembly machines linked by automated materials-handling equipment; used to produce major assemblies or completed products.


  • Automated flow line- Production line that includes sereral automated machines linked by automated parts transfer and handling machines; designed to produce one type of component or product.


  • Automated guided vehicle system (AGVS)- System that uses powered and computer-controlled conveyors such as driverless trains, pallet trucks, and unit load carriers to deliver orders to workstations in operations.


  • Automated process controls system- System that uses sensors to obtain measures of the performance of industrial processes, compare them to predetermined standards, and then automatically signal changes in the settings of those processes.


  • Automated quality control inspection system- System utilizing machines that have been integrated into the inspection of products for quality control purposes.


  • Automated storage and retrieval system (ASRS)- System for receiving orders for materials, collecting the materials, and delivering them to work stations in operations.


  • Automatic identification system (AIS)- System that uses bar codes, radio frequencies, magnetic strips, optical character recognition, and machine vision to sense and input data into computers.


  • Automation- Integrating a full range of advanced scientific and engineering discoveries into production processes for strategic purposes.


  • Average outgoing quality (AOQ)- Average percentage of defectives in lots leaving an inspection station.


  • Average outgoing quality limit (AOQL)- Maximum average outgoing quality that can occur as the actual percent defectives in lots varies.


  • Backward integration- Expansion of the ownership of a company's production and distribution chain backward toward the sources of supply


  • Backward scheduling- Scheduling jobs at work centers starting backwards in time from the customer due date, so that jobs start as late as possible at each work center and still meet the due dates.


  • Base stock model- Simple inventory-planning system that replenishes inventory only in the amount of each withdrawl, thereby maintaining inventory at a constant level.


  • Batch production- Product-focused production in which large batches of standardized products follow direct linear routes in the same production system.


  • Benchmarking- The practice of establishing internal standards of performance by looking at how world-class companies run their business.


  • Best-in-class- Being the best product or service in  a particular class of products or services.


  • Bill of material- List of the materials and their quantities required to produce one unit of a product, or end item.


  • Bills of material file- Complete list of all finished products, quantity of each material in each product, and the structure of all prudcts; may also be called an indented parts list.


  • Break-even analysis- Process of determining the production volume needed to make revenues equal to costs.


  • Bucket- Principal unit of time measurement in a material requirements planning system; usually one week.


  • Buffer- Work in process inventory that is kept in front of the bottleneck machine so that it does not run out of work. Used in theory of contraints approach.


  • Business strategy- Long-range plan of an organization and the methods to be used to achieve its corporate objectives.


  • Business-to-business (B2B) transactions- E-business transactions between companies; also called e-commerce.


  • Capacity cushion- Additional amount of production capacity added on to the expected demand.


  • Capacity utilization percentage- The percentage of capacity used during a time period. As an economic indicator, utilization levels under 80% are indicative of recessionary pressure.


  • Capital-intensive- Depending on capital rather than labor as the predominant resource in a operation.


  • Carrying cost- Total cost of holding material in inventory; expressed in dollars per unit per year.


  • Causal forcasting model- Model that develops  forecasts after establishing and measuring an association between the dependent variable and one or more indenpendent variables; used to predict turning points in sales.


  • Cellular manufacturing (CM)- Grouping of machines into cells that function like a product layout island within a larger job shop or process layout.


  • Central limit theorem- Theorem that states that sampling distributions can be assumed to be normally distributed even though the population distributions are not normal.


  • Changes to planned orders- Reports that show how planned order schedules should be changed to allow for earlier or later delivery, for cancellation or for change in quantity.


  • Channels- The number of waiting lines in a service system. A single-channel system has only one line, and a multichannel system has two  or more lines.


  • Closed-loop MRP- System built around  material requirements planning and also including production planning, master production scheduling, and capacity requiements planning , and various execution functions.


  • Closeness ratings- Used to reflect the desirability of having one department near another.


  • Coefficient of correlation- Measure that explains the relative importance of the relationship between two variables.


  • Coefficient of determination- Measure of the expected precision of the forecast, explaining the amount of variation in one variable that is explained by another variable.


  • Component reliability- Probability that a type of part will not fail in a given time period or in a number trials under ordinary conditions of use.


  • Computer-aided design (CAD)- Computerized process for designing new products or modifying existing ones.


  • Computer-aided manufacturing (CAM)- Use of computer to plan and program production equipment in the production of manufactured items.


  • Computer-integrated manufacturing (CIM)- Total integration of all business functions associatied with production through computer systems.


  • Consumer's risk- In quality control, the probability of accepting a bad lot.


  • Continuous production- Product-focused production in which a few highly standardized products are produced continously in very large volumes.


  • Control chart- Chart used to routinely monitor a production operation to determine if its outputs meet quality standards.


  • Control decision- Short-range, relatively simple decision about the planning and controlling of day-to-day operations.


  • Control subsystem- Subsystem of a larger production system in which a portion of the outputs is monitored for feedback signals to provide corrective action if required.


  • Continuous improvement- Allows companies to accept modest beginnings and make a small incremental improvements toward excellence.


  • Controllable factors- Machine malfunctions, bad materials, and incorrect work methods.


  • Conversion subsystem- Subsystem of a larger production system in which inputs are converted to outputs.


  • Co-producers- What the Japanese call suppliers.


  • Corporate mission- A set of long range goals unique to an organization and including statements about the kind of business the company wants to be in, who its customers are , its basic beliefs about business, and its goals of survival, growth, and profitability.


  • Crashing- Accelerating or speeding up an activity by adding resources; reducing the time required for a project.


  • Crew size standard- Labor standard determined by estimating the total number of workers required to produce the necessary output per shift.


  • Critical activity- In project management, an activity that has no room for schedule slippage; an activity with zero slack.


  • Critical path- In project management, a chain of critical activities for a project; the longest path through a network.


  • Critical path method (CPM)- Network-based project management initially used in maintenance and defense projects; nearly identical to PERT.


  • Cumulative end item lead time- Amount of time required to obtain materials from suppliers, produce and assemble all parts of a product, and deliver the product to the customer.


  • Custom product- Product designed to meet the needs of individual customers.


  • Customer-as-participant- There is a high degree of customer involvement in this type of service operation. Physical goods may or may not be a significant part of the service, and the services may be either custom or standard. Retailing is a example of this type of service.


  • Customer-as-product- In this type of service operation, customers are so involved that the service is actually performed on the customer. Physical goods may or may not be a significant part of the service, and the services are usually custom. Examples of this type of service operation are hair salons, medical clinics, and hospitals, and tailors.


  • Customer satisfaction- Determination of customer requirements and demonstrated success in meeting them.


  • Customer surveys- Allows customers to fill out survey questionnaires or participate in interviews that are aimed at determining the customers' perceptions about several quality-related issues.


  • Cycle counting- Verifying the accuracy of inventory records by periodically counting the number of units of each material in inventory.


  • Decision tree analysis- Graphic aid in making multi-phase decisions that shows the sequence and interdependence of decisions.


  • De-expediting- Slowing down a job order in the production system that is ahead of schedule.


  • Delphi method- Qualitative forecasting method used to achieve consensus within a committee.


  • Demand during lead time (DDLT)- Number of units of a material demanded during the inventory replenishment process or lead time.


  • Demand management- Recognizing and managing all demands for products and services to ensure that the master scheduler is aware of them.


  • Deming Prize- Established in 1951 for innovation in quality management to be awarded annually to a company that has distinguished itself in quality management programs.


  • Dependent demand- Demand for an item that depends on demands for other inventory items.


  • Design simplification- In product and machine reliability, the reduction of the number of interacting parts in a machine or product.


  • Discrete unit manufacturing- Manufacturing distinct or separate products such as automobiles or dishwashers.


  • Diseconomies of scale- Increase in unit cost caused by additional volume of outputs past the point of best operating level for a facility.


  • Dispatching list- A list showing the sequence in which a set of jobs at a work center should be processed.


  • Distinctive competencies- Competitive advantages of a firm that can be used in capturing markets.


  • Distribution requirements planning (DRP)- Planning for the replenishment of regional warehouse inventories.


  • Distribution resource planning- Planning for the provision of the key resources of warehouse space- number of workers, cash, shipping vehicles, ect.- in the right quantities and when needed.


  • Distribution system- Network of shipping and receiving points starting with the factory and ending with the customers.


  • Dodge-Romig tables- In quality control, attribute acceptance plans that set sample size and maximum number of defectives in a sample to accept the lot.


  • Double-sampling plan- In quality control, an acceptance sampling plan in which an accept or reject decision can be made on the first sample drawn, but if it is not, a second sample is taken and a decision is made on the basis of the combined samples.


  • Drum- The bottleneck process that sets the pace of the entire production system. Used in theory of constraints approach.


  • Dummy activity- In project management, a CPM network device that simply indicates precedence relationships.


  • Earliest finish (EF)- In project management, the earliest that an activity can finish.


  • Earliest start (ES)- In project management, the earliest time that an activity can start.


  • E-business- Use of the Internet to conduct or facilitate business transactions, such as sales, purchasing, communication, inventory management, customer service, submitting orders, and checking the status of orders.


  • E-commerce- E-business transactions between companies.


  • Economic order quantity (EOQ)- Optimal order quantity that minimizes total annual stocking costs.


  • Economies of scale- Reduction in unit cost as fixed costs are spread over increasingly more units.


  • Economies of scope- Production of many product models in one highly flexible production facility more cheaply than in separate production facilities.


  • Electronic Data Interchange (EDI)- A dedicated computer hardware and software system that allows two companies to electronically conduct business transactions with each other.


  • End item- Product, service, or other output that has a demand independent of the demands for other components or end items.


  • Enterprise resource planning (ERP) systems- Comprehensive software packages that companies use to help automate a variety of business processes. ERP systems intergate most of the business functions in an organization.


  • Event- In project management, a signal that an activity has either begun or ended.


  • Expediting- Speeding up an order through all or part of the entire materials system.


  • Exponential smoothing- Short-range forecasting model that takes the forecast for preceding period and adds an adjustment to obtain the forecast for the next period.


  • 5s process- Another name for housekeeping. Five housekeeping rules include sort, straighten, sweep, standardize, and self-discipline.


  • Facility layout- Plan for the location of all machines and utilities and for the physical arrangement within facilities of all manufacturing processes and their support functions.


  • Facility planning- Determination of how much long-range production capacity is needed, where production facilities should be located, and the layout and characteristics of the facilities.


  • Final-assembly schedule (FAS)- Schedule for assembling unique products ordered by customers.


  • Finite loading- Assigning jobs to work centers so that the capacities of the work centers are not exceeded.


  • Fishbone diagram- Diagram used to trace back a customer complaint about a quality problem to the responsible production operation.


  • Fixed order quantity system- System of inventory planning that places fixed quantity orders for a material when the inventory level falls to a predetermined critical level.


  • Fixed-position layout- Layout that locates the product in a fixed position and transports workers, materials, machines, and subcontractors to and from the product.


  • Flexible automation- Use of computer-driven automated machines that are easily reprogrammed for other products.


  • Flexible manufacturing system (FMS)- System in which groups of production machines are sequentially connected by automated materials-handling and transferring machines and intergrated into a computer system.


  • Flow diagram- Diagram of the flow of workers, equipment, or materials through a process.


  • Flow shop- Type of product-focused factory in which large batches of standardized products are produced in the same production system.


  • Focus groups- Groups of customers brought together to discuss and evaluate quality with executives and engineers.


  • Forecasting- Estimating the future demand for products/services and the resources necessary to produce them.


  • Forward integration- Expansion of the ownership of a company's production and distribution chain forward toward the market.


  • Forward scheduling- Scheduling jobs to start as early as possible at each work center, without considering the due dates for the job.


  • Gantt chart- Chart that coordinates work center schedules by showing the progress of each job in relation to its scheduled finish date.


  • Group technology- Form of production based on a coding system for parts that allows families of parts to be assigned to manufacturing cells for production.


  • Group technology coding system- A coding system that is developed for parts in a factory. A code describes physical characteristics, processing characteristics, and other information about a part.


  • Hard automation- Use of automatic machinery that is difficult to change over to other products.


  • Heuristics- Simple rules or guides to action.


  • Historical labor standard- Labor standard determined by using historical data from the actual performance of the operation being studied.


  • Housekeeping- Maintaining an orderly environment at a workstation in order to avoid confusion and errors.


  • Human relations movement- Early twentieth-century development of a philosophy among managers that workers are human beings and should be treated with dignity in the workplace.


  • Hybrid layout- Layout that uses a combination of layout types, as an assembly line combined with a process layout.


  • Impulse response- In forecasting, the speed at which forecasts reflect changes in underlying data.


  • Incentive pay system- Pay system that makes the amount of workers' pay conditional upon job performance.


  • Incremental utilization (IU) heuristic- Adding tasks to a workstation one at a time in order of precedence until the worker utilization is either 100 percent or observed to fall, then repeating the process for the remaining tasks.


  • Independent demand- Demand for an item that is independent of the demand for any other item carried in inventory.


  • Industrial revolution- Widespread substitution of machine power and the establishment of the factory system.


  • Infinite loading- Assigning jobs to work centers without considering the capacities of the work centers.


  • In-process inventory- Inventory of partially completed products that are between processing steps.


  • Input rate capacity- Measure that allows rates of various inputs to be converted to a common unit of input measure.


  • Inputs- Any raw material, personnel, capital, utilities, or information that is entered into a conversion system.


  • Intermittent production- Production performed on products on a start-and-stop basis.


  • Internal customer- The next production operation.


  • International company- Company that engages in production sharing and sells its products in world markets.


  • Inventory cycle- Activities of sensing a need for a material, placing an order, waiting for the material to be delivered, receiveing the material, and using the material.


  • Inventory record- Display of all of the inventory transactions that have affected a material.


  • Inventory status file- Computerized file with a complete record of each material held in inventory.


  • Job shop- Factory whose departments of work centers are organized around particular types of equipment or operations; products flow through departments in batches corresponding to stock orders or customer orders.


  • Just-in-time (JIT) manufacturing system- Production and inventory control system based on small lot sizes, stable and level production schedules, and a pull system of production; system of enforced problem solving.


  • Kaizen- The goal of continuous improvement in every phase of manufacturing.


  • Kanban- Production system based on conveyance and production cards that determine the movement of production orders between work sations.


  • Labor intensive- Depending on labor rather than capital as the predominant resource in an operation.


  • Labor standard- Number of worker-minutes required to complete an element, operation, or product under ordinary operating conditions.


  • Latest finish (LF)- In project management, the lastest time that an activity can finish without delaying the entire project.


  • Latest start (LS)- In project management, the lastest time that an activity can start without delaying the entire project.


  • Lean manufacturing- Production and inventory control system that emphasizes the minimization of the amount of all the resources used (including time).


  • Level production- Stabilized production output levels from time period to time period.


Operation Management Notes