Management 3325 - Test 1

Front 1

Maximax

Back 1

(The Optimistic Gambler Approach)
This decision criterion is based upon the idea that we got at least our share of lucky or favorable breaks. This leads to an optimistic attitude to "go for it"

This procedure is to identify the best payoff in the entire payoff table and choose the alternative that corresponds to that payoff.

Front 2

Maximin

Back 2

(The Conservative or Pessimistic Approach)
This criterion assumes that we should always base our decisions on the validity of Murphy's Law.

The procedure is to determine the worst possible outcome for each alternative and choose the alternative that has the "best" of the worst possible outcomes.

Front 3

Minimax Regret

Back 3

(The Bad Loser Approach)
The procedure is to build a "regret matrix," determine the worst possible regret for each alternative, and choose the alternative that has the "best" of the worst regrets.

Front 4

Laplace

Back 4

The procedure is to calculate the average payoff for each alternative and choose the alternative with the highest average payoff.

Front 5

Expected Value

Back 5

The procedure is to compute the expected value of each alternative by summing the "weighted payoffs" for each alternative and select the alternative with the highest expected value. (The weighted payoffs are calculated by multiplying the payoff by the probability for the corresponding state of nature.)

Front 6

Expected Value of Perfect Information

Back 6

EVPI = Expected payoff under certainty - Expected payoff (of the best decision) under risk

Front 7

Three Basic Decision Environments
-Uncertainty

Back 7

Environment in which it is impossible to assess the probability of future events.

Front 8

Three Basic Decision Environments
-Risk

Back 8

Environment in which the probability of future events can be estimated.

Front 9

Three Basic Decision Environments
-Certainty

Back 9

Environment in which all relevant parameters have known values.

Front 10

Inventory

Back 10

A stock or store of goods

Front 11

Objective of inventory control

Back 11

To support the desired level of customer service while keeping inventory costs within reasonable limits.

Front 12

Inventory Turnover

Back 12

Ration of average cost of goods sold to average inventory investment.

Front 13

Types of Demand:
Dependent Demand

Back 13

Demand for items in inventory that are subassemblies or component parts to be used in the production of finished goods.

Front 14

Types of Demand:
Independent Demand

Back 14

Demand for items that are finished items.

Front 15

Lead Time (LT)

Back 15

Time interval between ordering and receiving the order

Front 16

Inventory Costs:
Holding (Carrying) Cost

Back 16

Cost to carry an item in inventory for a length of time, usually a year.

Front 17

Inventory Costs:
Ordering Cost

Back 17

Cost of ordering and receiving inventory.

Front 18

Inventory Costs:
Shortage Cost

Back 18

Cost resulting when demand exceeds the supply of inventory on hand; often unrealized profit per unit.

Front 19

Inventory Costs:
Purchase Cost

Back 19

The cost to actually purchase the inventory items. This cost is relevant in determining the order quantity only when the purchase cost is variable (because of considerations such as quantity discounts).

Front 20

A-B-C Classification System

Back 20

The classification of inventory items according to some measure of importance for the purpose of allocating control efforts accordingly.

Front 21

Economic Order Quantity (EOQ)

Back 21

The order size that minimizes total cost.

Front 22

Quantity Discounts

Back 22

Purchase price reductions for large orders.

Front 23

Blanket Order

Back 23

An agreement between buyer and seller, whereby the buyer agrees to buy a certain quantity of goods within a specified time period at a mutually agreeable price; and the goods are delivered as needed by the buyer.

Front 24

Reorder Point (ROP)

Back 24

When the quantity on hand of an item drops to this amount, the item is reordered.

Front 25

Safety Stock (SS)

Back 25

Stock that is held in excess of the expected demand due to variable demand rate and/or lead time.

Front 26

Service Level (SL)

Back 26

The probability of not running out of stock (i.e., demand will not exceed inventory supply) during the lead time.

Front 27

Q

Back 27

Order Quantity

Front 28

D

Back 28

Annual demand

Front 29

S

Back 29

Order cost per order

Front 30

H

Back 30

Annual carrying cost per unit

Front 31

P

Back 31

Purchase price per unit

Front 32

d

Back 32

Demand rate

Front 33

_
d

Back 33

Average demand rate

Front 34

LT

Back 34

Lead Time

Front 35

σ
d

Back 35

Standard deviation of demand rate

Front 36

z

Back 36

standard normal deviation

Front 37

Total Cost =

Back 37

Q/2 * H + D/Q * S

Front 38

Economic Order Quantity (EOQ) =

Back 38

√((2 * D *S)/H)

Front 39

Total Cost (only when there are quantity discounts) =

Back 39

Q/2 * H + D/Q * S + P * D

Front 40

Reorder Point (when constant demand and constant lead time) =

Back 40

ROP = d * LT

Front 41

Reorder Point (when variable demand and constant lead time) =

Back 41

_
ROP = d * LT + z√LTσ
d

Front 42

In many process:
Less than 1% of the total time is spent on value-added activites.

Back 42

In many process:
It is possible to take up 75% of the time out of the process.

Front 43

In most companies:
People are 99% busy

Back 43

In most companies:
Items are 99% idle

Front 44

In a value-added flow analysis, a step adds value to an item if:

Back 44

1. If the customer cares about it (recognizes that it is important)

Front 45

2. If the item physically changes.

Back 45

3. If it is done right the first time.

Front 46

In most processes, only about 10-15% of the steps add value.

Back 46

As non-value added steps are removed from the process:
Lead time decrease

Front 47

As non-value steps are removed from the process:
Problems become more evident and easier to track.

Back 47

As you remove steps from a process, you get a clearer view of the customer. It is easier to:
Deliver faster to the customer.

Front 48

As you remove steps from a process, you get a clearer view of the customer. It is easier to:
Design products and services to better fit customer needs.

Back 48

As you remove steps from a process, you get a clearer view of the customer. It is easier to:
Improve Quality.

Front 49

As you remove steps from a process, you get a clearer view of the customer. It is easier to:
Spend less time doing unnecessary tasks.

Back 49

As you remove steps from a process, you get a clearer view of the customer. It is easier to:
Get new products to market faster.

Front 50

As you remove steps from a process, you get a clearer view of the customer. It is easier to:
Add value in ways that you never thought of.

Back 50

We need to spend more time on the steps that customers really care about!

Front 51

The "goal" is to make money and anything that brings us closer to it is productive and anything that doesn’t isn’t.

Back 51

Three terms that will help him run his plant, throughput, inventory, and operational expense.

Front 52

Throughput is the rate at which the system generates money through sales.

Back 52

Inventory is all the money that the system has invested in purchasing things which it intends to sell.

Front 53

Operational expense is all the money the system spends in order to turn inventory into throughput.

Back 53

Throughput is money coming in.
Inventory is the money currently inside the system.
And operational expense is the money we have to pay out to make throughput happen

Front 54

Alex discovers the importance of "dependent events" in relation to "statistical fluctuations". Through the analogy between a single file hike through the wilderness and a manufacturing plant, Alex sees that there are normally limits to making up the downside of the fluctuations with the following "dependent events". Even if there were no limits, the last event must make up for all the others for all of them to average out.

Back 54

Finally, through the dice game or match bowl experiment, it becomes clear that with a balanced plant and because of "statistical fluctuations" and "dependent events" throughput goes down and inventory along with operating expenses goes up.

Front 55

A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it.

Back 55

A non-bottleneck is any resource whose capacity is greater than the demand placed on it.

Front 56

The Effect-Cause-Effect method is the process of speculating a cause for a given effect (hypothesis) and then predicting other effects from the same cause. Verifying each predicted effect builds a logical tree and provides a powerful way to determine core problems.

Back 56

The Socratic method is discussed as a way to overcome resistance to change. Using this approach involves asking questions that help a person invent their own solutions.

Front 57

Operations Management

Back 57

The management of systems or processes that create goods and/or provide services

Front 58

Craft Production

Back 58

System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods.

Front 59

Mass Production

Back 59

System in which low-skilled workers use specialized machinery to produce high volumes of standardized goods.

Front 60

Interchangeable parts

Back 60

Parts of a product made to such precision that they do not have to be custom fitted.

Front 61

Division of Labor

Back 61

The breaking up of a production process into small tasks, so that each worker performs a small portion of the overall job.

Front 62

E-business

Back 62

Use of the Internet to transact business.

Front 63

E-commerce

Back 63

Consumer-to-Business transactions.

Front 64

Supply Chain

Back 64

A sequence of activities and organizations involved in producing and delivering a good or service.

Front 65

Outsourcing

Back 65

Obtaining a product or service from outside the organization.

Front 66

Agility

Back 66

The ability of an organization to respond quickly to demands or opportunities.

Front 67

Six Sigma

Back 67

A process for reducing costs, improving quality, and increasing customer satisfaction.

Front 68

Lean production

Back 68

System that uses minimal amounts of resources to produce a high volume of high-quality goods with some variety.

Front 69

Strategies

Back 69

Plans for achieving organizational goals.

Front 70

Mission

Back 70

The reason for the existence of an organization.

Front 71

Mission statement

Back 71

States the purpose of an organization.

Front 72

Goals

Back 72

Provide detail and scope of the mission.

Front 73

Distinctive competencies

Back 73

The special attributes or abilities that give an organization a competitive edge.

Front 74

Quality-based Strategy

Back 74

Strategy that focuses on quality in all phases of an organization.

Front 75

Time-based strategy

Back 75

Strategy that focuses on reduction of time needed to accomplish tasks.

Front 76

Productivity =

Back 76

Output/Input

Front 77

Productivity Growth =

Back 77

((Current prod - Previous prod.)/Previous productivity) x 100%

Front 78

Multifactor Productivity =

Back 78

Output/(Labor + Materials + Overhead)