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Operations Mgmt.
Prof. Fandel; Chapter 3: Measuring Performance in Operations
Question | Answer |
---|---|
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 |