Operations and supply management (OSM)
Design, operation, and improvement of the systems that create and deliver the firm's primary products and services.
Building service activities in a manufacturer's product offerings for customers.
Doing something at the lowest possible cost.
Doing the right things to create the most value for the company.
Ratio of quality to price paid. Competitive "happiness" is being able to increase quality and reduce price while maintaining or improving profit margins. (This is a way that operations can directly increase customer retention and gain market share.)
Producing products to order in lot sizes of one.
Triple bottom line
A business strategy that includes social, economic, and environmental criteria.
Operations and supply strategy
Setting broad policies and plans for using the resources of a firm to best support the firm's long-term competitive strategy.
Occurs when a firm seeks to match what a competitor is doing by adding new features, services, or technologies to existing activities. This often creates problems if certain trade-offs need to be made.
A dimension that differentiates the products or services of one firm from those of another.
A dimension used to screen a product or service as a candidate for purchase.
A diagram that shows how a company's strategy is delivered through a set of supporting activities.
A measure of how well resources are used.
Medium and long-term forecasts that are used to make decisions related to design and plans for meeting demand.
Short-term forecasts used as input for making day-to-day decisions related to-meeting demand.
Requirements for a product or service caused by the demand for other products or services. This type of internal demand does not need a forecast, but can be calculated based on the demand for the other products or services.
Demand that cannot be directly derived from the demand for other products.
Time series analysis
A type of forecast in which data relating to past demand are used to predict future demand.
Linear regression forecasting
A forecasting technique that assumes that past data and future projections fall around a straight line.
A time series forecasting technique in which each increment of past demand data is decreased by (1 = α).
The parameter in the exponential smoothing equation that controls the speed of reaction to differences between forecasts and actual demand.
Smoothing constant delta (δ)
An additional parameter used in an exponential smoothing equation that includes an adjustment for trend.
Mean absolute deviation (MAD)
The average forecast error using absolute values of the error of each past forecast.
Mean absolute percent error (MAPE)
A new criterion that is calculated by taking the MAD and dividing by the average demand.
A measure that indicates whether the forecast average is keeping pace with any genuine upward or downward changes in demand.
A situation in which one event causes another. If the event is far enough in the future, it can be used as a basis for forecasting.
Collaborative Planning, Forecasting, and Replenishment (CPFR)
An Internet tool to coordinate forecasting, production, and purchasing in a firm's supply chain.
Aggregate operations plan
Translating annual and quarterly business plans into labor and production output plans for the intermediate term. The objective is to minimize the cost of resources required to meet demand.
Sales and operations planning
A term that refers to the process that helps companies keep demand and supply in balance. The terminology is meant to capture the importance of cross-functional work.
Activity typically done annually and focusing on a horizon of a year or more.
Activity that usually covers a period from 3 to 18 months with weekly, monthly, or quarterly time increments.
Planning that covers a period less than six months with either daily or weekly increments of time.
The number of units completed per unit of time.
The number of production workers needed each period.
Inventory on hand
Unused inventory carried from a previous period.
Production planning strategies
Plans that involve tradeoffs among workforce size, work hours, inventory, and backlogs.
A plan that uses just one of the options available for meeting demand. Typical options include chasing demand, using a stable workforce with overtime or part-time work, and constant production with shortages and overages absorbed by inventory.
A plan that combines options available for meeting demand.
Allocating the right type of capacity to the right type of customer at the right price and time to maximize revenue.
The stock of any item or resource used in an organization.
The demands for various items are unrelated to each other.
The need for any one item is a direct result of the need for some other item, usually an item of which it is a part.
Fixed-order quantity model
An inventory control model where the amount requisitioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory.
Fixed-time period model (or P-model)
An inventory control model that specifies inventory is ordered at the end of a predetermined time period. The interval of time between orders is fixed and the order quantity varies.
The amount on-hand plus on-order minus backordered quantities.
The amount of inventory carried in addition to the expected demand.
A physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.
Enterprise resource planning (ERP)
A computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm. This integration is accomplished through a database shared by all the application programs.
Material requirements planning (MRP)
The logic for determining the number of parts, components, and materials needed to produce a product.
Available to promise
This feature identifies the difference between the number of units currently included in the master schedule and firm customer orders.
Master production schedule (MPS)
A time-phased plan specifying how many and when the firm plans to build each end item.
Bill of materials (BOM)
A computer file that contains the complete product description, listing the materials, parts, and components and the sequence in which the product is created.
Net change system
An MRP system that calculates the impact of a change in the MRP data (the inventory status, BOM, or master schedule) immediately. This is a common feature in current systems.