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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.)

operations and supply management

design, operation, and improvement of the systems that create and deliver the firm's primary products and services

transformation process

system by which resources are used to convert inputs into desired output

mass customization

producing products to order in lot sizes of one

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.

order winner

a dimension that differentiates the products or services of one firm from those of another

order qualifier

a dimension used to screen a product or service as candidate for purchase

activity-system map

a diagram that shows how a company's strategy is delivered through a set of supporting activities

core capabilities

skills that differentiate a manufacturing or service firm from its competitors


a measure of how well resources are used


the amount of output that a system is capable of achieving over a specific period of time

strategic capacity planning

determining the overall capacity level of capital-intensive resources that best supports the company's long-range competitive strategy

best operating level

the level of capacity for which the process was designed and the volume of output at which average unit cost is minimized

capacity utilization rate

measures how close a firm is to its best operating level

capacity focus

can be operationalized through the plants-within-plants concept, where a plant has several suborganizations specialized for different products-even though they are under the same roof. this permits finding the best operating level for each suborganization

economies of scope

exist when multiple products can be produced at a lower cost in combination than they can be separately

capacity cushion

capacity in excess of expected demand

supply chain

how organizations are linked together, as viewed from a particular company

inventory turnover and weeks of supply

measures of supply chain efficiency that are mathematically the inverse of one another

cost of goods sold

the annual cost for a company to produce the goods or services provided to customers

average aggregate inventory value

the total value of all items held in inventory for the firm valued at cost

weeks of supply

a measure of how many weeks' worth of inventory is in the system at a particular point in time

bullwhip effect

the variability in demand is magnified as we move from the customer to the producer in the supply chain

functional products

stapled that people buy in a wide range of retail outlets, such as grocery stores and gas stations

innovative products

products such as fashionable clothes and personal computers that typically have a life cycle of just a few months

service supply chain

a term that stresses the unique role of the customer as a supplier of input and recipient of output for a service firm


moving some a firm's internal activities and decision responsibility to outside providers

logistics management

functions that support the complete cycle of material flow: from the purchase and internal control of production materials; to the planning and control of work-in-processes; to the purchasing, shipping, and distribution of the finished product

design for logistics

this concept involves consideration of material procurement and distribution costs during the product design phase

transportation mode

how an item is shipped

value density

the value of an item per pound of weight

mass customization

the ability of a company to deliver highly customized products and services to different customers around the world

process postponement

delay of the process step that differentiates a product to as late in the supply chain as possible

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