Term
| Justification of a Business |
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Definition
| For a business enterprise to succeed, it must serve an economic purpose within its political system. |
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Term
Economics:
Practical Economics:
Is it a zero-sum game? |
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Definition
The study of the allocation of scarce resources which have alternative uses.
Practical economics is the application of economic understanding to manage that allocation to achieve desired ends.
It is NOT a zero-sum game. |
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Term
| Describe Free Market Economics |
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Definition
1. Allocation made by price signals ("rationing")
2. Individual value decisions drive resource allocation ("greed")
3. No central planning ("anarchy")
4. Exchange for value , mutual benefit ("fair trade")
5. There is no "market" as such, only transactions
6. No "correct" or "incorrect" price
7. Property rights assumed |
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Term
|
Definition
Internal transaction costs include any expense accounted for within a specific company.
External transaction costs include any expenses between two or more institutions. |
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Term
|
Definition
Price
Search
Information
Security
Bargaining
Policing
Enforcement |
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Term
| Supply, Demand, Need & Competition |
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Definition
1. Low price leads to more demand
2. High price leads to more supply
3. Need is expressed by the buyer's top price
4. Competition limits the seller's top price |
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Term
|
Definition
| You don't have to outrun the bear; you just have to outrun the slowest person. |
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Term
Value:
Value Competition:
Are value & cost directly linked? |
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Definition
The value of your delivered product is determined solely by your customer
Value competition is from:
-Industry
-New entrants
-Substitutions
Value has NO direct link to cost |
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Term
|
Definition
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Term
|
Definition
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Term
|
Definition
1. An analytic result generated through appropriate manipulation of the parameters of a business model.
2. An essentially unpredictable, thought to some extent manageable, reward bestowed on a business by satisfied customers |
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Term
|
Definition
-Production of goods & services
-Key function in every business
-Equally important as other key functions |
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Term
| Profits are derived from what 3 business functions? |
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Definition
Finance
Operations
Marketing |
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Term
|
Definition
1. Plans for & provides capital resources
2. Monitors & evaluates corporate performance
3. Maintains financial audit & control |
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Term
|
Definition
1. Identifies & exploits markets
2. Establishes desired value proposition
3. Communicates value proposition |
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Term
|
Definition
1. Transforms component materials into finished goods & provides market access to them
2. Maintains conformance to established value norms
3. Manages the value proposition |
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Term
|
Definition
INPUTS >> PROCESS >> OUTPUTS >>CONTROL
land manufacture goods (all lead to
labor service services control w/
capital support feedback)
info
materials |
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Term
|
Definition
1. Transformation converts a thing of lesser value into one of greater value (greater value to the customer than it costs the seller)
2. If it can be done sufficiently cheaply it adds value in the economy
3. Adding value in the economy justifies profits |
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Term
| Major Operations Functions |
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Definition
1. Manufacturing
2. Purchasing
3. Industrial Engineering
4. Maintenance
5. Service & Support |
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Term
| Operations Responsibilities |
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Definition
1. Forecasting
2. Capacity Planning
3. Facilities Location
4. Process Control
5. Motivation
6. Cost Control
7. Inventory Management |
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Term
|
Definition
1. Global Economy
2. Innovation
3. Quality
4. Managing Risk
5. Competition
6. Technology |
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Term
|
Definition
1. Modeling
2. Optimization
3. Probability
4. Statistics
5. Systems |
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Term
|
Definition
| Abstractions of reality; a simplified picture |
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Term
|
Definition
Models:
-Are generally easier to use and less expensive than dealing with the real system
-Require users to organize & sometimes quantify information
-Increase understanding of the problem
-Enable managers to analyze "What if?" questions
-Serve as a consistent tool for evaluation & provide a standardized format for analyzing a problem
-Enable users to bring the power of mathematics |
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Term
|
Definition
1. Physical
2. Schematic
3. Mathematical/Digital |
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Term
| Which type of model is best described as "accessible"? |
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Definition
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|
Term
| Which type of model best explains the process on paper in a detailed manner? |
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Definition
|
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Term
| Which type of model is implemented with the DuPont Model? |
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Definition
| Mathematical/Digital Model |
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Term
| Name 2 examples of Schematic Models |
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Definition
1. Computer Network Diagram
2. Nail Production Flowchart |
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Term
| What are the 4 questions you should ask in order to successfully use a model for decision making? |
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Definition
1. What is its purpose?
2. How is it used to generate results?
3. How are the results interpreted & used?
4. What are the model's assumptions & limitations? |
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Term
|
Definition
1. the more complex & nuanced the model, the less likely its result is to be completely understood by the user
2. a simple, adequate model is almost always preferred for its accessibility to intuitive grasp by the user
3. a model that is not fully grasped by the user is highly prone to misinterpretation and misuse |
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Term
|
Definition
1. Quantitative information may be emphasized at the expense of qualitative information
2. Models may be incorrectly applied and the results misinterpreted
3. The use of proper models does not guarantee good decisions |
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Term
|
Definition
1. Linear- model can be expressed with constants multiplied by variables
2. Non-Linear- requires higher order powers of the variables in order to model |
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Term
|
Definition
-Linear algebra
-Graphical (2 variable)
-Excel Solver (Monte Carlo) |
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Term
|
Definition
-Requires calculus except in discrete cases
-Typically systems |
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Term
|
Definition
1. An integrated whole comprising interacting or interdependent component parts, which may themselves be systems, combined in a defined structure.
2. In systems, the interactions among components are as important as the nature of the components themselves. |
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Term
|
Definition
| to describe a situation with complex interdependent components |
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Term
| Practical System's Theory |
|
Definition
Communication/Culture
Feedback
-reinforcing
-damping
Delay
Synergies |
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Term
| Communication/Culture (Practical System's Theory) |
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Definition
1. Supply & Demand vs. Price
2. Psychology
3. Bandwidth |
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Term
| Feedback (Practical System's Theory) |
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Definition
1. Reinforcing/Positive or Damping/Negative
2. Amplification & Control |
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Term
| Time Factor (Practical System's Theory) |
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Definition
|
|
Term
| Synergy (Practical System's Theory) |
|
Definition
|
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Term
|
Definition
1. Numeric estimate of the likelihood of a given occurrence.
2. Used in structured decision making (Decision Theory). |
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Term
|
Definition
1. Expected return/payoff of a situation in which we do not have certain knowledge of which future state will obtain, but have knowledge of the relative likelihoods of all possible future states, and their individual payoffs.
2. The average of the individual payoffs, each weighted by its relative likelihood. And is usually understood as the long-term average payoff of many iterations of the situation. |
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Term
| Who said "The value of our expectation always signifies something in the middle between the best we can hope for and the worst we can fear." ? |
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Definition
|
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Term
|
Definition
1. Where probability deduces the likely value of sample data, statistics infers the characteristics of the population from the sample data collected.
2. We will typically use Gaussian statistics.
3. 'Gaussian', 'normal', and 'bell curve' mean the same thing and will be used interchangeably and with wild abandon in the course. |
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Term
| Gaus & Poisson Similarities |
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Definition
1. The applicable distributions are characterized by a small number of parameters
2. There are readily available tabular data that interpret the characteristics of the distributions |
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Term
|
Definition
formula!!
Std Normal Distribution- when u=0 & o=1 |
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Term
|
Definition
Gaussian
Parameters:
1.Centrality (mean, median, mode)
2. Dispersion (range, variance= std dev ^2, std deviation) |
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Term
|
Definition
-to infer probabilities from random data
-to identify non-random variation in a stream of data
-to communicate sophisticated numerical information to unsophisticated users |
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Term
|
Definition
-usually denoted as 'z' because the normal distribution is also called the z-distribution.
-enumerates the number of standard deviations between a distribution mean & a datum
-used mostly to infer the likelihood of a future datum to be beyond/within a given value of 'z'. |
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Term
|
Definition
1. It is symmetric about u.
2. The integral can be from (-infinity to -z), (z to infinity), (-infinity to z), (-z to infinity), or (-z to z).
3. Excel uses the functions NORMDIST, NORMSDIST, NORMINV, & NORMSINV to reproduce the table.
4. The value of the integral is equal to the probability of a datum falling within the indicated range. |
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Term
You should know:
1. Frederick Winslow Taylor
2. Mary Parker Follett
3. Walter Shewhart
4. W. Edwards Deming
5. Shigeo Shingo |
|
Definition
1. Taylor- Scientific Management
2. Follett- Human Resource Management
3. Shewhart- Statistical Process Control
4. Deming- Total Quality Management
5. Shingo- Toyota Production System |
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Term
| Pre-Industrial Revolution |
|
Definition
Craft Production- System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods
-From the Agricultural Revolution, most measures overall human welfare remained fairly constant
-Coke & Bacon, proper legal status of innovation, 1602. |
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Term
| Industrial Revolution Management |
|
Definition
1. Management theory & practice did not advance appreciably during this period.
2. Management was based on military/ecclesial hierarchies.
3. The term "Management" was first used by Henri Fayol, a French military engineer. |
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Term
|
Definition
| A movement led by Frederick Winslow Taylor (an efficiency engineer) in the 1900s |
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Term
|
Definition
1. Believed in a "science of management" based on observation, measurement, analysis, & improvement of work methods, and economic incentives.
2. Management is responsible for planning, carefully selecting and training workers, finding the best way to perform each job, achieving cooperate between management and workers, and separating management activities from work activities.
3. Emphasis was on maximizing output.
4. People are machines to be utilized. |
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Term
|
Definition
1. One Best Way
2. Workers Work & Management Thinks
3. People will do anything if you pay them enough.
4. People are lazy & prone to sloppy work. |
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Term
|
Definition
| Father of time & motion studies, the original "Efficiency Expert" (Principle of Motion Economy). |
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Term
|
Definition
-One of Taylor's students
-Concerned with sequences as opposed to time
-Developed the Gantt chart scheduling system & recognized the value of non-monetary rewards for motivating employees |
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Term
|
Definition
(list maker)
12 Principles of Efficiency
1. Clearly defined ideals
2. Common sense
3. Competent counsel
4. Discipline
5. The fair deal
6. Reliable, immediate & adequate records
7. Dispatching
8. Standards & schedules
9. Standardized conditions
10. Standardized operations
11. Written standard-practice instructions
12. Efficiency-rewards |
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Term
|
Definition
Employed scientific management
-Moving assembly line
-Mass production
-Job specialization |
|
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Term
|
Definition
| The human relations movement emphasizes the importance of the human element in job design |
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|
Term
| Human Relations Management |
|
Definition
1. If you're nice to everyone, everything will work out fine.
2. Everybody has his/her own way of working, so management should stay out of the way.
3. The goal of the firm is individual self-actualization.
4. Good perks make good companies. |
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Term
|
Definition
1. Law of Situation:Decisions should devolve to the one with the most immediate & intimate applicable knowledge.
2. Co-Management: Management is a task, not a job description.
3. Reciprocal Relationship: All employees have a responsibility to optimize the function of the firm |
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Term
|
Definition
1. Frank Gilbreth's wife.
2. One of the first female PhDs working as an engineer.
3. Founded industrial/organizational psychology.
4. Added worker satisfaction & fulfillment to efficiency as goals. |
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Term
|
Definition
| Hawthorne studies on worker motivation 1930 |
|
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Term
|
Definition
1. Social involvement
2. Personal stake in planning
3. Personal attention
4. Low motivation from money |
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Term
|
Definition
-Motivation theory 1943
-Hierarchy of needs 1954
Self-Actualizaton
Esteem
Love
Safety
Physiological |
|
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Term
|
Definition
Two Factor Theory 1959
Hygiene Factors vs. Motivating Factors
Hygiene: Pay & benefits, company policy & administration, relationships with co-workers, supervision, status, job security, working conditions, & personal life
Motivation: Achievement, recognition, work itself, responsibility, promotion, & growth |
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|
Term
|
Definition
|
|
Term
|
Definition
People:
1. Don't like work
2. Want direction
3. Hate ambiguity
4. Dislike responsibility
5. Have little ambition
6. Value security most |
|
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Term
|
Definition
People:
1. Work as naturally as play
2. Are naturally self-directed
3. Are naturally creative
4. Seek mutual commitment
5. Love to achieve
6. Value goal achievement |
|
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Term
|
Definition
Theory Z: People respond to 'harmony' of the workplace
So Management should:
1. Extend the employment relationship beyond the company doors.
2. Guarantee lifetime employment.
3. Provide a comprehensive compelling vision.
4. Maintain a distinct corporate culture.
5. Use consensus decision making. |
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Term
| Decisions Models & Management Science |
|
Definition
1. Objective approach to management.
2. Uses techniques and technologies to organize & control processes.
3. Recognizes that if the process is poor, the results are likely to be also, however motivated the personnel. |
|
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Term
|
Definition
1. Mathematical Model for Inventory Management 1915
2. Economic Order Quantity (EOQ) |
|
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Term
|
Definition
1. Statistical Control Chart 1924
2. Economic Control of Manufactured Product 1931
3. With Dodge & Romig, Statistical Process Control (SPC0 1930s
4. Students Deming & Juran 1940s
5. PDCA Cylcle- (plan, do, check, act) |
|
|
Term
|
Definition
1. LHC Tippett, Statistical sampling theory, 1935
2. OR applications in warfare 1940s
3. Especially used for military logistics
4. Early application of numeric methods to statistical problems
5. George Dantzig, linear programming 1947 |
|
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Term
|
Definition
"Profound Knowledge"
-Appreciation of the system
-Knowledge of variation
-Theory of knowledge
-Understanding of human psychology |
|
|
Term
| Influence on Japanese Manufacturers |
|
Definition
Shigeo Shingo
-credited with fueling the "quality revolution"
-TQM
-JIT
-Kanban
-Keiretsu
-Team Management |
|
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Term
|
Definition
1. High Reliability Organizations
2. Systematic Process Improvement
3. Statistical Process Control
4. Supply Chain Management
5. Systems Thinking
6. Enterprise (Re-)Engineering
7. Complexity Science |
|
|
Term
|
Definition
Important Factors:
-Better quality
-Higher productivity
-Lower costs
-Ability to respond quickly to customer needs |
|
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Term
|
Definition
What do customers want? (Marketing's Influence)
How can we best satisfy them? (Operations' Role) |
|
|
Term
| Marketing's Influence (Competitiveness) |
|
Definition
Demand
1. Identifying consumer wants &/or needs
2. Pricing
3. Advertising & promotion
4. In general, demand management |
|
|
Term
| Operation's Role (Competitiveness) |
|
Definition
Supply
1. Providing product for customers
2. Production & logistics
3. Cost & quality control
4. Service
5. In general, supply management |
|
|
Term
| Operations Functions (Competitiveness) |
|
Definition
1. Product & service design
2. Cost
3. Location
4. Quality
5. Quick response
6. Flexibility
7. Inventory Management
8. Supply Chain Management
9. Service
10. People |
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Term
| Management by Objectives (MBO) |
|
Definition
^ACTIVITIES
-CONTROL
Mission
Goals
Organizational Strategies
Functional Strategies
Tactics
Functions |
|
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Term
|
Definition
Tactics:
1. The methods & actions taken to accomplish strategies
2. The "how to" part of the process
3. Tie directly to specific goals
Operations/Functions:
1. The actual "doing" part of the process |
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Term
|
Definition
1. The approach, consistent with organization strategy, that is used to guide the operations function to achieve stated goals.
2. Provides both direction & constraint. |
|
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Term
|
Definition
Strategy that focuses on quality in all phases of an organization
-Pursuit of such a strategy is rooted in a number of factors:
1. Trying to overcome a poor quality reputation
2. Desire to maintain a quality image
3. A part of a cost reduction strategy |
|
|
Term
|
Definition
Strategies that focus on the reduction of time needed to accomplish tasks
-reduce time, lower costs, raise quality, increase productivity, quicken time-to-mkt, improve customer service |
|
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Term
|
Definition
A strategic approach for competitive advantag e the emphasizes the use of flexibility to adapt & prosper in an environment of change
__Involves the blending of several core capabilities:
Cost
Quality
Reliability
Flexibility
Resilience |
|
|
Term
|
Definition
| A performance measurement framework that adds strategic non-financial performance measures to traditional financial metrics to give managers & executives a more 'balanced' view of organizational performance. |
|
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Term
|
Definition
A top-down management system that organizations can use to clarify their vision and strategy and transform them into action
-Develop objectives
-Develop metrics & targets for each objective
-Develop initiatives to achieve objectives
-Identify links among the various perspectives
-Monitor results |
|
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Term
|
Definition
-Output/Input
-The primary index that measures the value added by a process |
|
|
Term
|
Definition
-Units per labor-hour
-Units per shift
-Value-added per labor-hour
-Output dollar value per labor-hour |
|
|
Term
|
Definition
-Dollar output per dollar input
-Units output per dollar input
-Dollar output per dollar invested |
|
|
Term
|
Definition
-Units per machine operating hour
-Units per shift
-Output dollar value per operating hour |
|
|
Term
| Service Sector Productivity |
|
Definition
Difficult to measure & manage because :
1. It involves intellectual activities
2. It has a high degree of variability
3. Its quality is hard to assess consistently |
|
|
Term
|
Definition
1. The ratio of actual output to available service inputs for a period
2. Often used for assessment of service industry productivity |
|
|
Term
| Factors that affect Productivity |
|
Definition
1. Methods
2. Quality
3. Management
4. Technology
5. Capital |
|
|
Term
Measurements:
1. Productivity
2. Partial Measures
3. Multifactor Measures
4. Total Measure |
|
Definition
1. Productivity= (output/input)
2. Partial Measures= (output/single input) OR (output/labor) OR (output/capital)
3. Multifactor Measures= (output/multiple inputs) OR (output/labor+machine) OR (output/labor+capital+energy)
4. Total Measure= (goods or services produced/all inputs used to produce them) |
|
|
Term
| Productivity Growth Measure |
|
Definition
| (Current productivity-Previous productivity)/Previous productivity * 100% |
|
|
Term
| Why is productivity different than efficiency? |
|
Definition
| improving the parts does not necessarily improve the whole |
|
|
Term
|
Definition
Productivity is the fundamental measure of value added in a business process & thus the wealth created by that process.
True wealth creation is measured over the long term. |
|
|
Term
|
Definition
• Limited Time
• Limited Data
• Limited Rationality
• Changeable Situation
• Necessary Action |
|
|
Term
|
Definition
False Positives (Type I)
False Negatives (Type II)
Psychology
Insurance |
|
|
Term
|
Definition
Accuracy/Precision
Ambiguity
Defensibility
Actionability |
|
|
Term
|
Definition
Economics
Objective/Subjective
Cost & Benefit
Risk vs. Reward
Errors
Satisficing |
|
|
Term
| Plausibility (statistics) |
|
Definition
Reasonable inference
Low-probability inference
Conspiracy Theories
Correlation vs. Cause
Economics |
|
|
Term
| Statistical Considerations |
|
Definition
In practice decreasing the false positive rate
(e.g making the test less sensitive) usually
increases the false negative rate and v.v.
• It is an economic trade‐off as to the benefit of
a more precise and sensitive test and the cost
of failing to catch problems or drawing false
of failing to catch problems or drawing false
conclusions.
• When the data are intermixed, the separation
of false negatives and positives can be done
only statistically.
• People marked by a false positive are
individuals, but are statistically indistinct. |
|
|
Term
|
Definition
• Every real world process exhibits variation,
including the process of measurement itself.
• Some variation is “random”, a summation of a
large number of minor influences.
• Some variation may be “assignable” or caused
by identifiable, discrete influences. |
|
|
Term
| Normal Distribution Variations |
|
Definition
1. Random Variation is described by a normal or Gaussian error function or by a Poisson distribution.
2. Assignable Variation does not, in general, fit a normal distribution.
Measurement is a process, it is not a discrete, independent result. |
|
|
Term
|
Definition
| Humans are pattern matchers by nature, we will discern patterns even in purely random data. |
|
|
Term
|
Definition
1. It is counter-intuitive to manage data statistically & objectively.
2. We often (usually) must act without sufficient data to be objective. |
|
|
Term
| Operational Rationality (4 needs) |
|
Definition
We need to:
1. Be as objective as economically feasible
2. Filter noise as best we can
3. Decide & act as required by the situation independent of analysis
4. Optimize our payoffs while minimizing our potential loss |
|
|
Term
|
Definition
Trend
Seasonality
Cycles
Irregular Variations
Random Variation |
|
|
Term
|
Definition
A long-term upward or downward movement in data
-Demographic profile: population movement, changing income, increasing age
-Market acceptance/rejection: product life cycle, network effect |
|
|
Term
|
Definition
Linear Trend: a simple data plot can reveal the existence & nature of a trend
Equation: F=a+bt (F @ t=0 plus slope times #periods from t=0)
Non-Linear Trends:
-Parabolic trend equation
-Exponential trend equation
-Growth curve trend equation |
|
|
Term
|
Definition
1. Short-term, fairly regular variations related to the calendar or time of day
2. Restaurants, service call centers, and theaters all experience seasonal demand.
Techniques:
-Seasonality is expressed in terms of the amount that actual values deviate from the average value of a series
Models:
Additive
Proportional |
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