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Operations Mgmt.

Prof. Fandel; Chapter 3: Measuring Performance in Operations

Measurement The act of quantifying the performance criteria (metrics) of organizational units, goods and services, processes, people, and other business activities.
Types of Performance Measures: a) Financial b) Customer and Market c) Quality d) Time e) Flexibility f) Innovation and Learning g) Productivity and Operational Efficiency h) Sustainability
Customer-satisfaction Measurement System Provides a company with customer ratings of specific goods and service features and indicates the relationship between those ratings and the customer's likely future buying behavior.
Quality Measures the degree to which the output of a process meets customer requirements.
Goods Quality relates to the physical performance and characteristics of a good.
Service Quality Consistently meeting or exceeding customer expectations (external focus) and service delivery system performance (internal focus) for all service encounters.
Processing Time The time it takes to perform some task.
Queue Time Time spent waiting.
Flexibility The ability to adapt quickly and effectively to changing requirements.
Goods and Service Design Flexibility The ability to develop a wide range of customized goods or services to meet different or changing customer needs.
Volume Flexibility The ability to respond quickly to changes in the volume and type of demand.
Innovation The ability to create new and unique goods and services the delight customers and create competitive advantage.
Learning Creating, acquiring, and transferring knowledge, and modifying the behavior of employees in response to internal and external change.
Productivity The ratio of the output of a process to the input. * Productivity = (Quantity of Output) / (Quantity of input)
Operational Efficiency The ability to provide goods and services to customers with minimum waste and maximum utilization of resources.
Triple Bottom Line (TBL or 3BL) The measurement of environmental, social, and economic sustainability.
T/F: The cause and effect linkages between key measures of performance often explain the impact of operational performance on internal results. FALSE. *Managers must understand the cause and effect linkages between key measures of performance because they often explain the impact of operational performance on EXTERNAL results.
Interlinking The quantitative modeling of cause and effect relationships between external and internal performance criteria.
Value of a Loyal Customer (VLC) Quantifies the total revenue or profit each target market customer generates over a buyer's life cycle.
How do you find the total market value? By multiplying the VLC with the absolute number of customers gained or lost.
VLC Equation VLC = (P)(CM)(RF)(BLC) *P: Revenue per unit CM: Contribution Margin to profit and overhead (Fraction) RF: Repurchase Frequency BLC: Buyers Life Cycle
Buyer's Life Cycle Computed as 1/defection rate, expressed as a fraction *Defection rate = (1 - customer retention rate) ex) 1/0.2 = 5 Years, 1/0.1 = 10 Years
T/F:Operation Managers can positively influence the VLC by decreasing the contribution margin through reducing operating costs. FALSE. INCREASING the CM through reducing operating costs.
T/F: Operations Managers can positively influence VLC by decreasing Repurchase Frequency by better customer service. FALSE. INCREASING RF by better customer service.
T/F: Operations Managers can positively influence the VLC by reducing customer defection rates by creating and delivering consistently excellent system performance. TRUE
Actionable Measures Provides the basis for decisions at the level at which they are applied.
Criteria for Performance Excellence: 1) Leadership 2) Strategic Planning 3) Customer Focus 4) Measurement, Analysis, and knowledge Management. 5) Workforce Focus 6) Operations Focus 7) Results (Examining the organization's performance and improvement.
Four Performance Perspectives of the Balance Scorecard: 1) Financial Perspective 2) Customer Perspective 3) Innovation and Learning Perspective 4) Internal Perspective
Created by: KAzetapi
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