Shared Flashcard Set


MGT 502
Final Exam
Not Applicable

Additional Business Flashcards




List and explain three ways to decrease process throughput
time. (from website and notes)
1) Perform activities in parallel:
If activities can be
simultaneously performed (the activities are alike, or require the
same team members, etc.), then doing those activities at the same
time will decrease total project time. For example, if activity B
builds off of activity A information, but activity A does not provide
the information to activity B (Activity B is re-performing
information gathered in activity A), then performing Activities A and
B together will reduce the time taken to complete both activities,
because work will not be re-performed.
2) Change the sequence of activities:
Changing the sequence of
activities can reduce the "waiting" time between activities (travel
time, set-up time, etc.) For example, if it takes 20 minutes to set-
up a product test, all products that need to be tested should be done
together to limit set-up time to 20 minutes. If products are not
tested together, set-up time will have to be repeated again and again
for each product tested.
3) Reduce interruptions:
By reducing the interruptions to the
process, you are reducing delays in throughput time. Reducing
interruptions can be anything from making sure employees know their
deadlines so they do not miss them to adding caller-ID to phones so
employees can screen out unimportant calls.
2. Define quality. List and explain the dimensions of quality.
(from notes, and pg276)
Definition of Quality: the ability of a product or service to
consistently meet or exceed customer expectations.
The dimensions of quality are:
1) Performance: main characteristics of the product or service
(ie. signal to noise ratio on stereo, friendliness for service)
2) Aesthetics: appearance, feel, smell taste (oak finished
3) Special Features: extra characteristics (i.e. remote control)
4) Conformance: how well product/service conforms to customer
expectations (can have high design, but low conformance quality)
5) Safety: Risk of injury (i.e. airbags)
6) Reliability: Consistency of performance (i.e. mean time to
7) Durability: useful life of the product/service (i.e. useful
life in miles for car)
8) Perceived Quality: indirect evaluation of quality (i.e.
market leader for 20 years)
9) Service after Sale: handling of customer complaints, or
checking on customer satisfaction
3. Define and explain benchmarking. (pages 289-90, notes)
Definition of Benchmarking: Looking outside the company to see what
excellent performers inside and outside the company's industry are
doing in the way of quality. It typically involves the following
i. Identify processes needing improvement:
ii. Identify company world leader in process
iii. Contact the managers of that company and make a personal
visit to them to interview them and workers.
iv. Analyze data: entails looking at gaps in what your company is
doing versus the benchmarking company. Then, you need to compare the
actual processes, the performance of these processes according to a
set of measures.
Explain the terms: design quality, conformance quality and
quality at the source. (page 276)
Design Quality: The inherent value of the product in the marketplace
Conformance Quality: The degree to which the product or service
design spec's are met. The activities to achieve conformance are of
tactical, day-to day nature. A product can have high conformance,
low design quality and visa-versa.
Quality at the source: The person who does the work makes sure
his/her output meets specs.
5. List and explain the consequences of poor quality and their
associated costs. (web post)
The cost of quality has been estimated at between 15 and 20 percent
of every sales dollar. Poor quality increases the costs of reworking,
scrapping, repeated service, inspections, tests and warranties.
4 types of costs of quality:
1) Internal Failure Costs: Costs incurred to fix problems that are
detected before the product/service is delivered to the customer
2) External Failure Costs: All costs incurred to fix problems that
are detected after the product/service is delivered to the customer
3) Appraisal Costs: All product and/or service inspection costs
4) Prevention Costs: All Total Quality training. Total Quality
planning, customer assessment, process control, and quality
improvement costs to prevent defects from occurring
6. Define and explain concurrent engineering. (midterm – I had
this marked correct on midterm)
Definition of Concurrent engineering (CE): the process whereby
organizations rely on cross-functional integration and "concurrent
development" of their products/processes (compared to a simple serial
approach where you go from one phase to the next).
Explanation: The primary benefit of using CE is the time savings that
result when each project management team works simultaneously at
developing market concepts, product design, the manufacturing
processes and product support structure.
7. Define and explain the four process flow structures. (pg's
1) Job shop – Production of small batches of a large number of
different products, most of which require a different set or sequence
of processing steps
2) Batch shop – Essentially, a somewhat standardized job shop. Such
a structure is generally employed when a business has a relatively
stable line of products.
3) Assembly line – Production of discrete parts moving from
workstation to workstation at a controlled rate, following the
sequence needed to build the product.
4) Continuous flow – Conversion or further processing of
undifferentiated materials such as petroleum, chemicals, or beer.
8. What are the seven generalizations about the nature of
services? (from website and notes)
1. Everyone is an expert on services
2. Services are idiosyncratic
3. Quality of work is not quality of service
4. Most services contain a mix of tangible and intangible attributes
that constitute a "service package".
5. High-contact services are "experienced", whereas goods
are "consumed".
6. Effective mgmt of services requires an understanding of marketing
and personnel, as well as operations.
7. Services often take the form of cycles of encounter involving face-
to-face, telephone, electromechanical, and/or mail interactions.
9. Explain the 6 behaviorally based principles for service
encounter design and mgt. (from website & notes)
1.The front-end and the back-end of the encounter are not created
equal. A company is likely to do better with a relatively weak start
and a strong finish than having a great start and a moderate ending.
2.Segment the pleasure; combine the pain. Break pleasant experiences
into multiple stages and combine
unpleasant experiences into a single stage.
3.Let the customer control the process. Giving people control over
how a process is to be conducted enhances their satisfaction with the
4.Pay attention to norms and rituals. Deviations from norms are
likely to be overly blamed for failures.
This is especially important in professional services where processes
and outcomes are not clearly ascertainable by the client, and hence
adherence to norms is the basis for evaluation.
5.People are easier to blame than systems. It is easier to blame the
server than the system when things go
wrong, because we want to put a human face on the problem.
6.Let the punishment fit the crime in service recovery. Appropriate
recovery action for an error depends on whether the error is a task
(outcome) error or a treatment (interpersonal process) error. A task
error requires material compensation, while poor treatment from a
server requires an apology.
10. What is the Malcolm Baldrige National Quality Award? Why is
it significant?
The Malcolm Baldrige National Quality Award is established by the
U.S. Department of Commerce given annually to companies that excel in
quality. It is significant because, research shows that the Baldrige
Award is responsible for making quality a national priority and
disseminating best practices across the United States.
11. Who is W. Edwards Deming? What was his contribution to the
quality movement? (notes, 275)
W. Edwards Deming is a quality "guru" who made a significant
contribution to the TQM (Total Quality Management) practices in the
United States in the 1980's and the 1990's. He is known for employing
a 14-point structure for management and special and common causes of
variation. The Deming prize is a highly coveted award in Japan and
its main focus is on statistical quality control.
12. What is ISO 9000 series? What steps are taken in the
certification and registration process? (pg 286-289)
What is ISO 9000 series: a set of international standards on quality
management and quality assurance, critical to international business.
The Steps taken include:
1.An organization that feels its quality system is acceptable, may
ask an accredited registrar or a third party audit team for a pre-
2.The final audit begins with a review of the company's quality
manual, which the audit team uses as its guide. During this step the
audit team investigates if the documented quality system meets the
requirements of ISO 9000 and if the organization practices what is
3.When the registrar is satisfied with a favorable recommendation of
the audit team it grants registration and issues registration
document to the company.
13. What is the ISO 14000 series? (pg. 286)
What is ISO 14000 series: a series of standards developed to control
the impact of an organization's activities and outputs on the
environment. These standards can lead to benefits such as: reducing
the cost of waste management, conserving energy and materials,
lowering distribution costs, and improving corporate image.
14. Define statistical process control. List and explain the
steps in the control process. (web post)
Definition of Statistical Process Control (SPC): involves testing a
random sample of output from a process to determine whether the
process is producing items within a preselected range.
1. Process control with attribute measurements by using p Charts
2. Process control with variable measurements by using X bar and R
When the charts are constructed we can determine if the process is
within the upper and lower acceptable limits. If the data plotted is
close to the mean the process is within the normal variation due to
chance. If the data trends upward or downward there may be a problem.
If the data is over the upper limits and under the lower limit then
there is a problem.
15. Define and contrast common (random) variation and assignable
Common variation is inherent in the production process.
Assignable variation is caused by factors that can be clearly
identified and possibly managed.
Assignable variation can be changed within a process but, common
variations will change the entire process.
16. Describe the utility of the capability index.
Definition of Capability Index (Cpk): the ratio of the range of
values allowed by the design specification
Capability index shows how well the parts being produced fit into the
range specified by the design limits. If the design limits are
larger than the three sigma allowed in the process, then the mean of
the process can be allowed to drift off-center before re-adjustment,
and a high percentage of good parts will still be produced.
17. What is the purpose of a control chart and what are the key
concepts that underlie their construction and interpretation?
Control Chart's purpose: to monitor the quality while the product or
service is being produced.
Key concepts of a Control Chart:
1. size of samples
2. number of samples
3. frequency of samples
4. the control limits
18. Why is order of observation important in process control?
The idea of process control is to monitor the number of samples
outside the LCL and UCL in a series of observations. If we get a
consecutive series of plots outside the limits or all below/above the
central line, the process needs to be investigated for cause of
sustained poor performance. Similarly, if a series of plots are
trending in one direction, it needs to be investigated for cause of
progressive change. Thus consecutive observation points have
significance in process control.
19. What factors need to be taken into account in an effective
sampling plan?
n: number of samples
c: maximum # of defective items
When figuring "n" and "c", the following Risk Factors must be taken
into account:
1) AQL (Acceptable Quality Level)
2) Producer's Risk
3) LTPD (Lot Tolerance Percent Defective)
4) Consumer's Risk
20. Define and contrast variables and attributes.
Variables: are measurements that allow a determination to be made
about a process based on those measurements.
- Are continuous and measure the deviation from a set of
- Use X-bar & R chart applications
Attributes: have quality characteristics that are classified as
either conforming or not conforming to specification.
- Have a clear Go/No Go
- Use p-chart applications
21. Explain the purpose of the following control charts: x-bar,
Range, p-chart
Ultimately, the purpose of each of these control charts is to
determine if a process is in control or not. Any unusual patterns
will indicate that some part of the process is abnormal and possibly
in need of fixing. Specifically:
X-bar charts: use plotted means of samples to determine process
Range charts: use a range to determine the validity of a process
p-charts: take samples and creates a single decision (go/no-go)
22. Define and contrast control limits and specifications.
Control limits: are three standard deviations above and below the mean
Specifications: define the target value of something and the
acceptable limits about the target
Specifications are more flexible than control limits and can be used
to create a greater quality threshold.
23. What level of inspection is optimal? What factors guide the
decision of how much to inspect? What points are the potential
candidates for inspection?
Optimal level of inspection: when the cost of inspection equals the
cost of passing defects
Factors guiding how much to inspect:
1) Total cost
2) Cost of inspections
3) Cost of passing defects
Points that are potential candidates for inspection:
1) When raw materials are purchased
2) When products are finished
3) Before a costly operation
4) Before an irreversible process
5) Before a covering process.
24. Define and explain TQM. (Pg. 274)
Definition of TQM: managing the entire organization so that it excels
on all dimensions of products and services that are important to the
Explanation: TQM is achieved by determining customer needs, creating
a product or service that meets or exceeds their needs, designing a
quality process, tracking the process, and then extending the quality
to the suppliers. TQM is used to (1) carefully design each
product/service and (2) to ensure that the organization's systems can
consistently produce that design
25. What is fail-safing? Give an example.
Definition of Fail-safing: (1) preventing workers from making an
error that leads to a defect before starting a process or (2) gives
rapid feedback of abnormalities in the process to the worker in time
to correct them.
Example 1: kitting parts from a bin (to ensure that the right number
of parts are used in assembly)
Example 2: sophisticated detection and electronic signaling devices
(pg. 286)
26. What is continuous improvement? (pg. 280)
Continuous improvement – seeking continual improvement of machinery,
materials, labor utilization, and production methods through company
team efforts (What is kaizen? Japanese term for continues
27. What is Six SigmaÔ? (pg. 279)
A statistical term to describe the quality goal of no more than four
defects out of every million units. Six Sigma programs seek to
reduce the variation in the processes that lead to these defects.
28. What is a supply chain?
The sequence of organizations- their facilities, functions, and
activities - that are involved in producing and delivering a product
or service.
29. Explain bullwhip effect. (Ch 9 p 368)
Changes in consumer sales amplify as they ripple upstream in the
supply chain due to lack of synchronization of supply chain members.
30. Define and explain mass customization. (Ch 9 p 377)
Ability to deliver highly customized products and services to
different customers around the world. Products are not
differentiated until the last possible step. Three principles of
mass customization are
1) Design modular products allowing for assembly in different
forms cheaply and easily.
2) Design modular mfg and svc processes that can be rearranged
to support different distribution network designs.
3) Supply network should be able to supply basic product to
facilities performing the customization cheaply and have
flexibility/responsiveness to handle individual customer orders
31. Define and explain logistics. (Ch 9 p 372 & notes)
Management functions to support movement of materials and info within
a facility and incoming and outgoing shipments of goods and
materials. Logistics uses tools such as bar coding, Electronic Data
Interchange, JIT deliveries to minimize inventory and handling to
increase efficiency of supply chain.
32. What is outsourcing and what are its benefits and
disadvantages? (Ch 9 notes, p 372)
Buying goods or services from outside sources rather than making or
providing in-house. Outsourcing moves some of a firm's internal
activities, resources and decision responsibility to an outside
Advantages: Allows firm to focus on core competencies, obtain skills
firms currently don't have. Improve image by associating with
superior suppliers,
Disadvantages: Loss of control, lower quality, idle capacity
available internally
Whether these are benefits/ disadvantages will vary depending on
circumstances, but the common decision points are cost, quality,
control, idle capacity available, stability of demand, stability of
technology, lead times, consistency, conflict with current operations.
33. Explain the increasing importance of purchasing. (Ch 9 notes?)
With higher focus on lean manufacturing and JIT, purchasing must
implement plans for obtaining goods and services to support
operations objectives. Purchasing is responsible for obtaining
materials, supplies and services need to produce a product or provide
a service. They identify sources, negotiate contracts, maintain
database of suppliers and manage suppliers.
34. Explain the benefits and disadvantages of centralized and
decentralized purchasing. (Ch 9 notes)
With centralized purchasing, all supplier info is managed from one
location allowing for more leverage on pricing, no duplication of
effort by multiple purchasing organizations, locus of expertise in
one commodity. A disadvantage is lack of uniformity in practices
across the company and speed may be sacrificed.
Decentralized purchasing could instead offer the advantages of
quicker response to local demands, more control over purchasing by
individual departments and customized processes.
35. Define inventory and information velocity. Why are they
important? (Ch 9)
The elapsed time it takes for a product or service to travel the
entire length of the supply chain. This is the time from sourcing
raw materials, inventory or information to shipping completed product
or completing the service. It is important to keep materials/info
moving through the supply chain to avoid holding costs, obsolescence,
insurances costs, shortage costs, etc. Inventory turnover is a
commonly used measure to divide cost of producing goods by aggregate
inventory value.
36. Compare and contrast independent and dependent demand. (Ch 14
notes, p 546)
Independent demand is demand for the final end product or demand not
related to other items. Dependent demand is demand driven by the end
item for all needed subcomponents or raw materials.
37. What are the primary reasons for holding inventory? (Ch 14
notes, p545)
1) To maintain independence of operations
2) To meet variation in product demand
3) To allow flexibility in production scheduling
4) To provide a safeguard for variation in raw material deliver
5) To take advantage of economic purchase order size
38. Describe the costs associated with inventory. (Ch 14 notes, p
Holding/Carrying costs for storage, handling, insurance etc
Setup/production change costs for arranging specific equipment
Ordering costs for someone to place order, order tracking system
maintenance etc
Shortage Costs for canceling an order, stockouts, lost profits, late
39. What is safety stock and what is its purpose? (Ch 14, p 554)
Safety stock is the amount of inventory carried in addition to
expected demand to protect against stockouts due to variations in
actual demand.
40. What are some of the ways that a company can reduce the needs
for inventory?
(1) Create a JIT system, if possible
(2) Use cycle counting
(3) Use ABC inventory planning, if cycle counting and/or JIT aren't
feasible (pg's 563-568)
41. Describe the utility of the economic order quantity or fixed-
order quantity model. When is it appropriate to use?
The fixed order quantity model determines when to reorder a fixed
quantity based on reaching a certain level of inventory. The
inventory position includes what is currently on order and in stock.
Safety stock may also be taken into account to protect against
stockouts. Every withdrawal and addition is logged making this a
perpetual system.
It is appropriate to use on expensive items where keeping a low
average inventory is desirable and critical components where
stockouts should be avoided.
42. Describe the utility of the fixed-time period model. When is
it appropriate to use?
In a fixed time period model inventory is counted and ordered after
every elapsed period. Order quantities generally vary by period.
Safety stock is generally higher than EOQ model.
Periodic order placing may be preferable when vendors make routine
visits and take orders for complete product lines or when buyers want
to combine orders to save transportation costs.
43. Explain ABC inventory classification. (Ch 14 pg 563)
Inventory items are identified based on percentage of total dollar
value. "A" items are approximately the top 15% of total dollar
value, "B" the next 35%, "C" the lower 65% of dollar value. Purpose
of classification is to allow available resources to establish the
appropriate degree of control over each item.
44. What is aggregate planning? What is its purpose?
Aggregate Planning (definition): process that helps keep demand and
supply in balance (pg. 514)
Purpose: To specify the optimal combination of (1) production rate
(2) workforce level & (3) inventory on hand (pg. 516-517)
45. What are the decision variables for aggregate planning in a
manufacturing setting? In a service setting?
Decision Variables in a Manufacturing setting:
(1) Production Rate
(2) Workforce level
(3) Inventory on hand
Decision Variables in a Service setting:
(1) Aggregate staffing level
(2) Workforce scheduling
(3) Customer scheduling (pg's 516-517)
46. Discuss the advantages and disadvantages of chase and level
workforce production planning strategies.
Chase Strategy – matching the production rate to the order rate by
hiring and firing employees as the order rate varies.
Advantages: simple to implement and easy to maintain (Note:
the success of this strategy is not guaranteed)
Disadvantage: When order backlogs low, employees may slow
down out of fear of being laid off
Level Strategy – maintain a stable workforce working at a CONSTANT
Advantage: Employees benefit from stable work hours
Disadvantages: (1) Potentially decreased customer service levels.
(2) Increased inventory costs. (3) Possibility of inventoried
products becoming obsolete (pg's 518 & 519)
47. What are the 4 major costs related to the aggregate production
(1) Basic production costs
(2) Costs assoc. w/ changes in production rate
(3) Inventory holding costs
(4) backordering costs (pg. 519)
48. Explain the cut-and-try approach to aggregate planning. When is
it appropriate?
Explanation: Costing out various production planning alternatives and
selecting the one that's best (pg. 520)
Appropriate when:
(1) You do not have a more advanced, and often times more accurate,
linear program available
(2) You need an answer quickly and have the spreadsheets available to
run results (frequently used program for cut-and-try approaches is:
Microsoft Excel) (pg. 522)
Note: The cut-and-try approach does no guarantee finding the lowest-
cost solution.
49. Explain the level scheduling approach to aggregate planning.
When is it appropriate?
Explanation: Maintaining a steady rate of regular-time output while
meeting variations in demand by a combination of options
When is it appropriate: For assembly line systems with excess
capacity and fixed output over the period. The workforce is multi-
skilled, equipment costs low, inventory carrying costs high.
50. Define and explain yield management?
Yield Management Definition: the process of allocating the right type
of capacity to the right type of customer at the right price and time
to maximize revenue or yield (pg. 531)
Explanation: Through appropriate forecasting, yield mgmt. is a tool
to shape demand patterns so firms can operate more efficiently.
E.g. The text used the example of American Airlines being able to
change their ticket prices hourly based on competing flight's prices.
(pg's 531 & 533)
51. What are the purpose, objective and philosophy of MRP? When is
MRP appropriate?
Purpose: to control inventory levels, assign operating priorities for
items, and plan capacity to load the production system.
Objective: to improve customer service, minimize inventory investment
and maximize production operating efficiency.
Philosophy: materials should be expedited when their lack would delay
the overall production schedule, and delayed when the schedule falls
behind and postpones their need. (pg. 589-590)
When is MRP appropriate? In assembly operations, where lead times
are predictable, and a company is producing a number of products in
batches using the same productive equipment. (taken from one of our
classmates answers posted on-line)
52. What are some of the main advantages and limitations of MRP?
(1) Identifies the specific parts and materials required to produce
end items
(2) Determines exact unit numbers needed
(3) Determines the dates when orders for those materials should be
released based on lead times
(1) Tries to do too much in light of the dynamic, often jumpy systems
they operate in
(2) Have not operated well in service applications (pg. 608)
53. What is the master production schedule (MPS)? What are the
inputs and outputs of the MPS?
MPS Definition: Time-phased plan specifying how many and when the
firm plans to build each end item (pg. 588)
(1) Aggregate production plan
(2) Firm orders from known customers
(3) Forecasts of demand from random customers
Outputs: (1) the MRP, including Primary & Secondary reports (pg. 590)
54. What is the bill of materials (BOM)?
BOM Definition: A computer file containing a product's complete
description and its created sequence. It is 1 of 3 main inputs into
the MRP (the other 2 are the master schedule and the inventory
records file). The BOM is also known as the "product structure file"
or the "product tree". (pg. 591)
55. Explain the concept of flow manufacturing?
Explanation: Combining the information integration and planning
capabilities of the MRP with the response of a JIT kanban system to
form a hybrid production planning system. (pg. 608)
56. What are some unforeseen costs of MRP?
From a long-term position, MRP may be abandoned because of e-business
and/or flow manufacturing. (pg. 608)
57. Explain the concept of time fences.
Time Fences Definition: Periods of time having some specified level
of opportunity for the customer to make changes.
Purpose: To maintain a reasonably controlled flow through the
production system
Explanation: Once a firm has established its master production
schedule (MPS), time fences define what type, if any, flexibility is
allowed in the MPS. The 3 types of time fences are: (1) Frozen (2)
Moderately Firm (3) Flexible (pg. 589)
58. Discuss and explain the 4 methods of lot sizing in MRP systems.
1. Lot-For-Lot: Most common technique. It (1) sets planned orders to
exactly match the net requirements (2) produces exactly what is
needed each week with none carried over into future periods (3)
Minimizes carrying cost (4) Does not take into account setup costs or
capacity limitations.
2. Economic Order Quantity (EOQ): A technique that explicitly
balances setup and holding costs whereby requiring either fairly
constant demand or safety stock must be kept to provide for demand
3. Least Total Cost (LTC): Technique that calculates the order
quantity by comparing the carrying cost and the setup (or ordering)
costs for various lot sizes and then selects the lot in which these
are most nearly equal.
4. Least Unit Cost: Technique that adds ordering and inventory
carrying cost for each trial lot size and divides by the number of
units in each lot size, picking the lot size with the lowest unity
cost. (pg.'s 604-607)
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