Operations and supply management (OSM): The design, operation, and improvement of the systems that create and deliver the firm’s primary products and
services. Functional field of business. Clear line management responsibilities. Concerned with the management of the entire system that produces a good or
delivers a service. The three major functions of an organization must work together for the organization to function successfully. 1.Operations.
2.Marketing. 3.Finance. Must understand their role and the roles of the other functions. Significant interface between the functions. Exchange of
information. Cooperative decision-making. Impact of decisions of one function on others. Four Basic Operations Management Functions. Planning: Provides
the basis for future activities by developing strategies, goals and objectives and establishing guidelines, actions and schedules to meet them. Organizing:
The process of bringing together the resources (people, material, equipment, technology, information and capital) necessary to perform planned activities.
Directing: The process of turning plans into realities by assigning specific tasks and responsibilities to employees, motivating them and coordinating
their efforts. Controlling: Evaluating performance and applying corrective measures to ensure that plans are achieved. Success in today’s global markets
requires a business strategy that matches the preferences of customers with the realities of supply networks. A sustainable strategy is critical 1.Meets
the needs of shareholders and employees. 2.Preserves the environment. Supply refers to processes that move information and material to and from the
manufacturing and service processes of the firm. Work Involved in Each Type of Process Planning: the processes needed to operate an existing supply chain
strategically. Sourcing: the selection of suppliers that will deliver the goods and services needed to create the firm’s product. Making: Where the major
product is produced or the service provided. Delivering: carriers are picked to move products to warehouses and customers. Returning: the processes for
receiving worn-out, defective, and excess products back from customers. Good: a physical product that you can see, touch, or possibly consume. Durable
good: a product that typically lasts at least three years. Non-durable good: perishable and generally lasts for less than three years. Service: any primary
or complementary activity that does not directly produce a physical product. Service encounter: an interaction between the customer and the service
provider. Service encounters consist of one or more “moments of truth” in which a customer comes into contact with any aspect of the delivery system, and
thereby has an opportunity to form an impression. Goods and services provide value and satisfaction to customers who purchase and use them. They both can
be standardized or customized to individual wants and needs. Operations and supply management creates and delivers good or service. 1.Goods are tangible
while services are intangible. 2.Customers participate in many service processes, activities, and transactions. 3.The demand for services is more difficult
to predict than the demand for goods. 4.Services are perishable, time dependent and cannot be stored as physical inventory. 5.Service management skills are
paramount to a successful service encounter. 6.Service facilities typically need to be in close proximity to the customer. 7.Patents protect goods, they do
not protect services. Quality: the degree to which the output of a process meets customer requirements. Goods quality: the physical performance and
characteristics of a good. Performance: a good’s primary operating characteristics. Features: the “bells and whistles” of a good. Reliability: the
probability of a good’s surviving over a specified period of time under stated conditions of its use. Conformance: the degree to which physical and
performance characteristics of a good match preestablished standards. Durability: the amount of use one gets from a good before it physically deteriorates
or until replacement is preferred. Serviceability: the speed, courtesy and competence of repair work. Aesthetics: how a good looks, feels, sounds, tastes
or smells. Service quality: consistently meeting or exceeding customer expectations (external focus) and service delivery system performance (internal
focus) for all service encounters. Tangibles: physical facilities, uniforms, equipment, vehicles, and appearance of employees. Reliability: ability to
perform the promised service dependably and accurately. Responsiveness: willingness to help customers and provide prompt recovery to service upsets.
Assurance: knowledge and courtesy of the service-providers, and their ability to inspire trust and confidence in customers. Empathy: caring attitude and
individualized attention provided to its customers. Quality of Goods and Services: Three types of attributes to evaluate the quality of goods and services.
1.Search attributes: are those attributes that a customer can determine prior to purchasing the goods and/or services. 2.Experience attributes: are those
attributes that can be discerned only after purchase or during consumption or use. 3.Credence attributes: are any aspects of a good or service that the
customer must believe in, but cannot personally evaluate even after purchase and consumption. Goods are easier to evaluate than services. Efficiency: Doing
something at the lowest possible cost. Effectiveness: Doing the right things to create the most value for the company. Value = Perceived benefits / Price
(cost) to the customer. If the value ratio is high, the good or service is perceived favorably by customers, and the organization providing it is more
likely to be successful. To increase value, an organization must either: 1. Increase perceived benefits while holding price or cost constant. 2.Decrease
price or cost while holding perceived benefits constant. 3.Increase perceived benefits while reducing price or cost. Value chain: a network of facilities
and processes that describes the flow of goods, services, information, and financial transactions from suppliers through the facilities and processes that
create goods and services and deliver them to customers. A value chain is a “cradle-to-grave” model of the operations function. The value chain begins with
suppliers that provide inputs. Inputs are transformed (value is added) into outputs. Value is added through processes or networks of work activities. The
value chain outputs are goods and services. Goods and services are delivered to customers and targeted market segments. Current Issues in Operations and
Supply Management 1.Coordinating the relationship between mutually supportive but separate organizations. 2.Optimizing global suppliers, production, and
distribution networks. 3.Managing customer touch points. 4.Raising senior management awareness of operations as a significant competitive weapon.
5.Sustainability: the ability to maintain balance in a system. Triple bottom line: relates to the economic, employee and environmental viability of the
firm. Strategy: a plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole. Core competencies: the
strengths unique to that organization. Strategic planning: the process of determining long-term goals, policies, and plans for an organization as a result
of hierarchical decisions about goals, directions, and resources. Vision: where the organization is headed and what it intends to be. Mission: the reason
for existence for an organization. Mission Statement: the purpose of an organization. Goals: provide detail and scope of mission. Strategies: plans for
achieving organizational goals. Tactics: methods and actions taken to accomplish strategies. Most large corporations have three levels of strategy:
1.Corporate Strategy: defines the businesses in which the corporation will participate and develops plans for the acquisition and allocation of resources
among those businesses. Businesses are often called Strategic Business Units (SBUs). 2.Business Strategy: defines the focus for the SBU and involves which
markets to pursue and how best to compete in those markets. 3.Functional Strategy: the set of decisions that each functional area develops to support its
particular business strategy. 4.Operations strategy: how an organization’s processes are designed and organized to produce the type of goods and services
to support the business strategies. The value chain can be leveraged to provide a distinct competitive advantage, and that operations is a core competency
for the organization. Whoever has superior operational capability over the long term is the odds-on-favorite to win the industry shakeout. A Sustainable
Strategy: The strategy should describe how a firm intends to create and sustain value for its current shareholders. Shareholders: individuals or companies
that legally own one or more shares of stock in the company. Sustainability: being able to meet current needs without compromising the ability of future
generations to meet their own needs. Stakeholders: individuals or organizations who are influenced, either directly or indirectly, by the actions of the
firm. An expanded view of business is that a firm must not only focus on the economic viability of its shareholders, but also consider the environmental
and social impact on key stakeholders. Triple Bottom Line: 1.Social Responsibility: pertains to fair and beneficial business practices toward labor, the
community, and the region in which a firm conducts its business. 2.Economic Prosperity: the firm’s obligation to compensate shareholders who provide
capital via competitive returns on investment. 3.Environmental Stewardship: the firm’s impact on the environment. Operations Management Decisions.
Strategic decisions are long-term decisions and concern the determination of broad policies and plans for using the resources of a company to best support
its long-term competitive strategy. Tactical decisions primarily address how to efficiently manage capacity, inventory and schedules within the constraints
of previously made strategic decisions. Operations decisions are narrow and short-term by comparison and act under the operation constraints set out by the
strategic and tactical management decisions. Three classes of customer requirements: 1.Dissatisfiers: requirements that are expected in a good or service.
If these features are not present, the customer is dissatisfied, sometimes very dissatisfied. 2.Satisfiers: requirements that customers say they want.
Exciters/delighters: new or innovative good or service features that customers do not expect. Order qualifiers: basic customer expectations (dissatisfiers
and satisfiers) are generally considered the minimum performance level required to stay in business. Order winners: goods and service features and
performance characteristics that differentiate one firm from another, and win the customer's business. Competitive advantage: a firm’s ability to achieve
market and financial superiority over its competitors. Driven by customer needs and aligns the organization's resources with its business opportunities. A
strong competitive advantage is difficult to copy often because of a firm’s culture, habits, or sunk costs. Competitive priorities: the strategic emphasis
that a firm places on certain performance measures and operational capabilities within a value chain. Price: make the product or deliver the service cheap.
Quality: make a great product or deliver a great service. Delivery speed: make the product or deliver the service quickly. Delivery reliability: deliver
it when promised. Coping with changes in demand: change its volume. Flexibility and new product introduction speed: change it. Other Product-Specific
Criteria: Technical liaison and support, meeting a launch date, supplier after-sale support, environmental impact. Competitive Priorities: 1)Cost Almost
every industry has a low price market segment. 2)Quality Researchers have found that: 1.Businesses offering premium quality goods usually have large market
shares and were early entrants into their markets. 2.Quality is positively and significantly related to a higher return on investment for almost all kinds
of market situations. 3.A strategy of quality improvement usually leads to increased market share, but at a cost in terms of reduced short-run
profitability. 4.High goods quality producers can usually charge premium prices. 3)Time Time is perhaps the most important source of competitive advantage.
Customers demand quick response, short waiting times, and consistency in performance. Reductions in flow time serve two purposes: 1.Speed up work processes
so that customer response is improved. Deliveries can be made faster, and more often on-time 2.Reductions in flow time can be accomplished only by
streamlining and simplifying processes and value chains to eliminate non-value-added steps such as rework and waiting time. Flow time reductions often
drive simultaneous improvements in quality, cost, and productivity. 4)Flexibility Mass customization: being able to make whatever goods and services the
customer wants, at any volume, at any time for anybody, and for a global organization, from any place in the world. High-levels of flexibility might
require special strategies such as modular designs, interchangeable components, and postponement strategies. Flexible operations require sharing
manufacturing lines and specialized training for employees. Flexible operations may also require attention to outsourcing decisions, agreements with key
suppliers, and innovative partnering arrangements, because delayed shipments and a complex supply chain can hinder flexibility. 5)Innovation: the discovery
and practical application or commercialization of a device, method, or idea that differs from existing norms. Innovations in all forms encapsulate human
knowledge. Innovations take many forms, such as: 1.Physical goods such as telephones, automobiles, refrigerators, computers, optical fiber, satellites, and
cell phones. 2.Services such as self-service, all-suite hotels, health maintenance organizations, and Internet banking. 3.Manufacturing such as computeraided design, robotic automation, and smart tags. 4.Management practices such as customer satisfaction surveys, quantitative decision models, and Six
Sigma. Trade-offs occur when activities are incompatible so that more of one thing necessitates less of another. Operations cannot excel simultaneously on
all competitive dimensions. Management must decide which parameters of performance are critical to the firm’s success and concentrate on those. Strategic
Fit: All the activities that make up a firm’s operation relate to one another. To be efficient, must minimize total cost without compromising on customer
needs. Activity-system maps: show how a company’s strategy is delivered through a set of tailored activities. Productivity: A measure of the effective use
of resources, expressed as the ratio of output of a process to the input. Productivity is a common measure of how well an organization is using its
resources and is fundamental to understanding operations-related performance. Planning workforce requirements, scheduling equipment, financial analysis.
Productivity is a relative measure. Can be compared with similar operations within its industry and/or over time. Productivity may be expressed as:
1.Partial measures: output to one input. 2.Multifactor measures: output to a group of inputs. 3.Total measures: output to all inputs. Managers must
understand the cause and effect linkages between key measures of performance to 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 some time frame. By multiplying the VLC
times the absolute number of customers gained or lost, the total market value can be found. How Does Wall Street Evaluate Operations Performance? Comparing
firms from an operations view is important to investors. Earnings growth is a function of profitability. Profits can increase through higher sales or lower
costs. Highly efficient firms shine during recession periods. When evaluating large productivity, it is important to look for unusual explanations, want to
avoid one-time events. Lead time: the time needed to respond to a customer order. Customer order decoupling point: where inventory is positioned to allow
entities in the supply chain to operate independently. The closer this point is to the customer, the quicker the customer can be served. Could be in either
raw materials at the manufacturing site or the supplier inventory. Types of Firms: Make-to-stock firms: firms that serve customers from finished goods
inventory. Assemble-to-order firms: firms that combine a number of preassembled modules to meet a customer’s specifications. Make-to-order firms: firms
that make the customer’s product from raw materials, parts, and components. Engineer-to-order firm: firm that will work with the customer to design and
then make the product. Make-to-stock firms:
firms that serve customers from finished goods inventory. Essential issue in satisfying customers is to
balance the level of inventory against the level of customer service. Easy with unlimited inventory but inventory costs money. Trade-off between the costs
of inventory and level of customer service must be made. Use lean manufacturing to achieve higher service levels for a given inventory investment.
Assemble-to-order firms: firms that combine a number of preassembled modules to meet a customer’s specifications. A primary task is to define a customer’s
order in terms of alternative components since these are carried in inventory. One capability required is a design that enables as much flexibility as
possible in combining components. There are significant advantages from moving the customer order decoupling point from finished goods to components. Maketo-order firms: firms that make the customer’s product from raw materials, parts, and components. Engineer-to-order firm: firm that will work with the
customer to design and then make the product. Production process mapping: develop a high-level map of a supply chain process. Useful to understand how
material flows and where inventory is held. First step in analyzing the flow of material through a production process. Types of Inventory Raw materials
(RM): component parts, subassemblies, and supplies are inputs to manufacturing and service-delivery processes. Work-in-process (WIP): partially finished
products in various stages of completion that are awaiting further processing. Finished goods (FG): completed products ready for distribution or sale to
customers. Total average value of inventory: the sum of the value (at cost) of the raw material, work-in process, and finished goods inventory. Commonly
tracked in accounting systems and reported in financial statements. Not particularly useful for evaluating the performance of a process. Inventory turns:
the cost of goods sold divided by the average inventory value. Provides a relative measure that has comparability. Days of supply: the inverse of inventory
turn scaled to days. Little’s law: there is a long-term relationship between the inventory (WIP), throughput (R), and flow time (T) of a production system
in steady state. WIP = R × T. Throughput (R): the long term average rate that items are flowing through the process. Flow time (T): the time that it takes
a unit to move through the process from beginning to end. Process Selection: the strategic decision of selecting which kind of production processes to use
to make a product or provide a service. Five basic structures: 1.Project: the product remains in a fixed location and manufacturing equipment is moved to
the product. 2.Workcenter (job shop): similar equipment or functions are grouped together. 3.Manufacturing cell: a dedicated area where products that are
similar in processing requirements are produced. 4.Assembly line: work processes are arranged according to the progressive steps by which the product is
made. 5.Continuous process: assembly line only the flow is continuous such as with liquids. Utilization (U):
the fraction of time a workstation or
individual is busy over the long run. Break-even analysis: a standard approach to choosing among alternative processes or equipment – the model seeks to
determine the point in units produced where total revenue and total cost are equal. Project Layout: the product remains in a fixed location. A high degree
of task ordering is common. A project layout may be developed by arranging materials according to their assembly priority. Workcenter: most common approach
to developing this type of layout is to arrange workcenters in a way that optimizes the movement of materials. Optimal placement often means placing
workcenters with large interdepartmental traffic adjacent to each other. Sometimes is referred to as a department and is focused on a particular type of
operation. Manufacturing Cell: formed by allocating dissimilar machines to cells that are designed to work on products that have similar shapes and
processing requirements. Three steps: 1.Group parts into families that follow a common sequence of steps. 2.Identify dominant flow patterns for each part
family. 3.Machines and the associated processes are physically regrouped into cells. Assembly Line: a layout design for the special purpose of building a
product by going through a progressive set of steps, done in areas called “stations”. Typically the stations are linked by some form of material handling
device. Continuous process: similar to an assembly line except the product continuously moves through the process. Service organizations are classified
according to who is the customer and the service they provide. Customer contact: the physical presence of the customer in the system. Service systems with
a high degree of customer contact are more difficult to control. Creation of the service: the work process involved in providing the service itself. In
services capacity becomes the dominant issue. Too much capacity leads to excessive costs. Insufficient capacity leads to lost customers. Waiting line
models provide a powerful mathematical tool for analyzing many common service situations. Service encounters can be configured in a number of ways using
the Service-System Design Matrix. Horizontal axis shows degree of customer/server contact. Left side addresses marketing – the great the amount of contact,
the greater sales opportunity. Right side addresses the impact on production efficiency as customers exerts more influence on the process. As the degree of
customer/service system contact changes, other changes are necessary. Pure virtual customer contact: where companies enable customers to interact with one
another in an open environment. Mixed virtual and actual customer contact: where customers interact with one another in a server-moderated environment such
as product discussion groups. In these environments, the operations management challenge is to keep the technology functioning and up to date and to
provide a policing function though monitoring the encounters that take place. Service blueprint: the standard tool for service process design is the
flowchart. A unique feature of the service blueprint is the distinction made between the high customer contact aspects of the service and those activities
that the customer does not see. Made with a “line of visibility” on the flowchart. Fail-Safe:
designed to make a machine or piece of equipment stop
working if part of it stops operating normally. Poka-yokes: procedures that block the inevitable mistake from becoming a service defect. Warning methods,
Physical or visual contact methods, The “Three T’s”: Task to be done. Treatment accorded to the customer. Tangible features of the service facility.
Quality management: systematic policies, methods, and procedures used to ensure that goods and services are produced with appropriate levels of quality to
meet the needs of customers. Total Quality Management (TQM): managing the entire organization so that it excels on all dimensions of products and services
that are important to the customer. Two fundamental operational goals: 1.Careful design of the product or service. 2.Ensuring that the organization’s
systems can consistently produce the design. W. Edwards Deming: Focus on bringing about improvements in product and service quality by reducing uncertainty
and variability in goods and services design and associated processes. Higher quality leads to higher productivity and lower costs. “14 Points” management
philosophy. Deming Cycle (PDSA): Plan: study current situation. Do: implement plan on trial basis. Study: determine if trial is working correctly. Act:
standardize improvements. Joseph Juran Wrote Quality Control Handbook in 1951, a comprehensive quality manual. Defined quality as “fitness for use”.
Advocated use of quality cost measurement. Quality Trilogy: quality planning, quality control, and quality improvement. Philip B. Crosby Wrote Quality is
Free in 1979, which brought quality to the attention of top corporate managers in the U.S. Crosby’s Absolutes of Quality Management include: 1.Quality
means conformance to requirements, not elegance. 2.There is no such thing as a quality problem. 3.There is no such thing as the economics of quality; doing
the job right the first time is always cheaper. 4.The only performance measurement is the cost of quality, which is the expense of nonconformance. 5.The
only performance standard is Zero Defects (ZD). Baldrige Award:
Annual award given by the U.S. government to recognize quality achievements of U.S.
companies. Purpose: to stimulate efforts to improve quality, to recognize quality achievements and to publicize successful programs. Mission: to improve
the competitiveness and performance of U.S. organizations. Benefits: The process provides a well-designed quality system. The process requires obtaining
data and provides feedback. Financial success. Winners share their knowledge. The process motivates employees. Design quality: inherent value of the
product in the marketplace. Performance, features, reliability/durability, serviceability, aesthetics, perceived quality. Conformance quality: degree to
which the product or service design specifications are met. Cost of quality: the costs associated with avoiding poor quality or those incurred as a result
of poor quality. Appraisal Costs: Costs of the inspection and testing to ensure that the product or process is acceptable. Prevention Costs: Sum of all
the costs to prevent defects from occurring. Failure Costs: costs incurred by defective parts/products or faulty services. Internal Failure Costs: Costs
incurred to fix problems that are detected before the product/service is delivered to the customer. External Failure Costs:
All costs incurred to fix
problems that are detected after the product/service is delivered to the customer. The International Organization of Standardization (ISO) promotes
worldwide standards for improvement of quality, productivity and operating efficiency through a series of standards and guidelines. Standardizes key terms
in quality and provides a set of basic principles for initiating quality management systems. Six Sigma: A philosophy and set of methods companies use to
eliminate defects in their products and processes. Seeks to reduce variation in the processes that lead to product defects. The name, “six sigma” refers to
the variation that exists within plus or minus three standard deviations of the process outputs. Having no more than 3.4 defects per million. Defects: any
mistakes or errors that are passed on to the customer. Defects Per Million Opportunities (DPMO): the Six Sigma metric to characterize quality performance
in terms of its variability. Six Sigma DMAIC Methodology: Define: identify customers and their priorities. Measure: determine how to measure the process
and how it is performing. Analysis: determine the most likely causes of defects. Improve: identify means to remove the causes of defects. Control:
determine how to maintain the improvements. Analytical Tools for Six Sigma: Flowchart: a diagram of the sequence of operations. Run Charts: a line graph
with data plotted over time. Pareto chart: arranges categories from highest to lowest frequency of occurrences to focus on the most important problem
areas. Checksheet: basic form to standardize data collection. Cause-and-effect diagram: show relationships between causes and problems, often called a
fishbone diagram. Opportunity flow diagram: used to separate value-added from non-value-added. Process control chart: used to assure that processes are in
statistical control. Failure Mode and Effect Analysis (FMEA): is a structured approach to identify, estimate, prioritize, and evaluate risk of possible
failures at each stage in the process. Design of Experiments (DOE): a statistical test to determine cause-and-effect relationships between process
variables and output. Quality Control (QC): to ensure that a good or service conforms to specifications and meets customer requirements by monitoring and
measuring processes and making any necessary adjustments to maintain a specified level of performance. Three components: 1.A performance standard or goal.
2.A means of measuring actual performance. 3. Comparison of actual performance with the standard to form the basis for corrective action. Quality at the
source: the people responsible for the work control the quality of their processes by identifying and correcting any defects or errors when they first are
recognized or occur. QC Practices in Manufacturing: 1.Supplier Certification and Management: ensures conformance to requirements before value-adding
operations begin. 2.In-process control: ensures that defective outputs do not leave the process and prevents defects in the first place. 3.Finished goods
control: verifies that product meets customer requirements QC Practices in Services: 1.Prevent sources of errors and mistakes in the first place by using
poka-yoke approaches. 2.Customer satisfaction measurement with actionable results. 3.Many quality control tools and practices apply to both goods and
services. Statistical Quality Control (SQC): the quantitative aspects of quality management. Common (or random) variation: variation that is inherent in
the process itself. Assignable variation:
variation that is caused by factors that can be identified and managed. Process control:
concerned with
monitoring quality while the product or service is being produced. Statistical process control: testing a sample of output to determine if the process is
producing items within a preselected range. Control charts: run charts to which two horizontal lines (called control limits) are added to monitor process
output to see if it is random. Control limits:
chosen statistically to provide a high probability that points will fall between these limits if the
process is in control (UCL and LCL). Stable system: a system governed only by common causes. In control: if no special causes affect the output of the
process. Out of control: when special causes are present in the process. Continuous metric: one that is calculated from data that are measured as the
degree of conformance to a specification on a continuous scale of measurement. Discrete metric: one that is calculated from data that are counted.
Continuous Metrics are measured. X-bar charts: a plot of the means of the samples taken from a process. Used to monitor the central tendency (mean) of a
process. R-chart: a plot of the range within each sample. The range is the difference between the highest and lowest numbers in each sample. Used to
monitor the process dispersion. Discrete Metrics are counted. p-Chart: Control chart used to monitor the percent (or proportion) of defectives in a
process. When observations can be placed into two categories. When the data consists of multiple samples of several observations each. c-Chart: Control
chart used to monitor the number of defects per unit. Used when not possible to compute population percentages. Use only when the number of occurrences per
unit of measure can be counted; non-occurrences cannot be counted. Process Capability: the determination of whether the variability inherent in the output
of a process that is in control falls within the acceptable range of variability allowed by the design specifications. Specification (or tolerance) limits:
Range of acceptable values established by engineering design or customer requirements. Process capability is the natural variation in a process that
results from common causes. Cp < 1: a significant percentage of output will not conform to the specifications. Cp = 1: the natural variation is the same
as the design specification width. Cp  1.33: indicates good capability. Off-Centered Processes, Cpk: Shows how well the parts being produced fit into the
range specified by the design specifications. Acceptance Sampling Purposes: Determine quality level; ensure quality is within predetermined level..
Advantages: Economy, less handling damage, fewer inspectors, upgrading of the inspection job, applicability to destructive testing, entire lot rejection.
Disadvantages: Risks of accepting “bad” lots and rejecting “good” lots. Added planning and documentation. Sample provides less information than 100-percent
inspection. Type I error:
Concluding a process is not in control when it actually is under control;
false negative. “Producer’s risk”: places an
unnecessary burden on the producer, who must search for something that isn’t there. Type II error: Concluding a process is in control when it is out of
control; false positive. “Consumer’s risk”: the producer doesn’t realize something is wrong and passes it onto the consumer.