Shared Flashcard Set

Details

Operations Management ch. 7
Key terms for the chapter
20
Business
Undergraduate 4
07/06/2010

Additional Business Flashcards

 


 

Cards

Term
Constraint
Definition
Any factor that limits system performance and restricts its output.
Term
Capacity
Definition
is the maximum rate of output of a process or system.
Term
Bottleneck
Definition
An output constraint that limits a company’s ability to meet market demand.
Also called Capacity Constraint Resource or CCR
Term
Measures of Capacity
Definition
Output Measures
Input Measures
Utilization
Performance Measures in TOC
Inventory (I)
Throughput (T)
Operating Expense (OE)
Utilization (U)
Term
7 Key Principles of TOC
Definition
The focus is on balancing flow, not on balancing capacity.

Maximizing output and efficiency of every resource will not maximize the throughput of the entire system.

An hour lost at a bottleneck or constrained resource is an hour lost for the whole system.
An hour saved at a non-constrained resource does not necessarily make the whole system more productive.
Inventory is needed only in front of the bottlenecks to prevent them from sitting idle, and in front of assembly and shipping points to protect customer schedules. Building inventories elsewhere should be avoided.
Work should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. Pacing everything to the slowest resource minimizes inventory and operating expenses.
Activation of non-bottleneck resources cannot increase throughput, nor promote better performance on financial measures.

Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), inventory (I), and operating expense (OE).
Term
Application of TOC
Definition
Identify The System Bottleneck(s).
Exploit The Bottleneck(s).
Subordinate All Other Decisions to Step 2
Elevate The Bottleneck(s).
Do Not Let Inertia Set In.
Term
Throughput Time
Definition
is the total time from the start to the finish of a process
Term
Setup Time
Definition
is the time required to change a process or an operation from making one service or product to making another.
Term
Long-Term Capacity Planning
Definition
Deals with investment in new facilities and equipment.
Plans cover a minimum of two years into the future.
Economies of scale are sought in order to reduce costs through
Lower fixed costs per unit
Quantity discounts in purchasing materials
Reduced construction costs
Process advantages
Term
Economies of scale
Definition
occur when the average unit cost of a service or good can be reduced by increasing its output rate.
Term
Diseconomies of scale
Definition
occur when the average cost per unit increases as the facility’s size increases
Term
Capacity Timing and Sizing Strategies
Definition
Sizing Capacity Cushions

Timing and Sizing Expansions

Linking Process Capacity and other operating decisions.
Term
capacity cushion
Definition
is the amount reserve capacity a firm has available.
Term
A Systematic Approach To Long-Term Capacity Decisions
Definition
Estimate future capacity requirements.
Identify gaps by comparing requirements with available capacity.
Develop alternative plans for filling the gaps.
Evaluate each alternative and make a final choice.
Term
Capacity Requirement
Definition
is determined over some future period based on demand and desired capacity cushion.
Term
Planning Horizon
Definition
is a set of consecutive future time periods for planning purposes.
Term
Output Measures
Definition
are the simplest way to express capacity.
Products produced or customers served per unit of time
Term
Input Measures
Definition
are typically based on resource availability.
Availability of workers, machines, workstations, seats, etc
Term
Capacity Gap
Definition
is any difference, positive or negative, between forecast demand and current capacity.
Term
Evaluating Alternatives
Definition
Qualitative Concerns
The fit between alternatives and strategy
Demand uncertainty
Reactions of the competition
Changes in technology
Quantitative Concerns
Cash flows
The difference between the flows of funds into and out of an organization over time, including revenues, costs, and changes in assets and liabilities.
Supporting users have an ad free experience!