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Operations management

Operations management is concerned with designing and controlling the production of goods and services, ensuring that businesses are efficient in using resources to meet customer requirements.

It is concerned with managing an entire production system that converts inputs (in the forms of raw materials, labor, consumers, and energy) into outputs (in the form of goods and services for consumers). Operations management covers sectors like banking systems, hospitals, companies, working with suppliers, customers, and using technology. Operations is one of the major functions in an organization along with supply chains, marketing, finance and human resources. The operations function requires management of both the strategic and day-to-day production of goods and services.

In managing manufacturing or service operations, several types of decisions are made including operations strategy, product design, process design, quality management, capacity, facilities planning, production planning and inventory control. Each of these requires an ability to analyze the current situation and find better solutions to improve the effectiveness and efficiency of manufacturing or service operations.

History
The history of production and operation systems begins around 5000 B.C. when Sumerian priests developed the ancient system of recording inventories, loans, taxes, and business transactions. The next major historical application of operation systems occurred in 4000 B.C., when the Egyptians started using planning, organization, and control in large projects such as the construction of the pyramids. By 1100 B.C., labor was being specialized in China; by about 370 B.C., Xenophon described the advantages of dividing the various operations necessary for the production of shoes among different individuals in ancient Greece:

""...In large cities, on the other hand, inasmuch as many people have demands to make upon each branch of industry, one trade alone, and very often even less than a whole trade, is enough to support a man: one man, for instance, makes shoes for men, and another for women; and there are places even where one man earns a living by only stitching shoes, another by cutting them out, another by sewing the uppers together, while there is another who performs none of these operations but only assembles the parts. It follows, therefore, as a matter of course, that he who devotes himself to a very highly specialized line of work is bound to do it in the best possible manner.""

In the Middle Ages, kings and queens ruled over large areas of land. Loyal noblemen maintained large sections of the monarch's territory. This hierarchical organization in which people were divided into classes based on social position and wealth became known as the feudal system. In the feudal system, vassals and serfs produced for themselves and people of higher classes by using the ruler's land and resources. Although a large part of labor was employed in agriculture, artisans contributed to economic output and formed guilds. The guild system, operating mainly between 1100 and 1500, consisted of two types: merchant guilds, who bought and sold goods, and craft guilds, which made goods. Although guilds were regulated as to the quality of work performed, the resulting system was rather rigid, shoemakers, for example, were prohibited from tanning hides.

Services were also performed in the Middle Ages by servants. They provided service to the nobility in the form of cooking, cleaning and providing entertainment. Court jesters were considered service providers. The medieval army could also be considered a service since they defended the nobility.

The industrial revolution was facilitated by two elements: interchangeability of parts and division of labor. Division of labor has been a feature from the beginning of civilization, the extent to which the division is carried out varied considerably depending on period and location. Compared to the Middle Ages, the Renaissance and the Age of Discovery were characterized by a greater specialization in labor, which was a characteristic of the growing cities and trade networks of Europe. An important leap in manufacturing efficiency came in the late eighteenth century as Eli Whitney popularized the concept of interchangeability of parts when he manufactured 10,000 muskets. Up to this point in the history of manufacturing, each product (e.g. each musket) was considered a special order, meaning that parts of a given musket were fitted only for that particular musket and could not be used in other muskets. Interchangeability of parts allowed the mass production of parts independent of the final products in which they would be used. An entire new market to fill the need for the sale and manufacturing of muskets began at this time.

In 1883, Frederick Winslow Taylor introduced the stopwatch method for accurately measuring the time to perform each single task of a complicated job. He developed the scientific study of productivity and identifying how to coordinate different tasks to eliminate wasting of time and increase the quality of work. The next generation of scientific study occurred with the development of work sampling and predetermined motion time systems (PMTS). Work sampling is used to measure the random variable associated with the time of each task. PMTS allows the use of standard predetermined tables of the smallest body movements (e.g. turning the left wrist by 90°), and integrating them to predict the time needed to perform a simple task. PMTS has gained substantial importance due to the fact that it can predict work measurements without observing the actual work. The foundation of PMTS was laid out by the research and development of Frank B. and Lillian M. Gilbreth around 1912. The Gilbreths took advantage of taking motion pictures at known time intervals while operators were performing the given task.

At the turn of the twentieth century, the services industries were already developed, but largely fragmented. In 1900 the U.S. service industry consisted of banks, professional services, schools, general stores, railroads and telegraph. Services were largely local in nature (except for railroads and telegraph) and owned by entrepreneurs and families. The U.S. in 1900 had 31% employment in services, 31% in manufacturing and 38% in agriculture.

The idea of the production line has been used multiple times in history prior to Henry Ford: the Venetian Arsenal (1104); Smith's pin manufacturing, in the Wealth of Nations (1776) or Brunel's Portsmouth Block Mills (1802). Ransom Olds was the first to manufacture cars using the assembly line system, but Henry Ford developed the first auto assembly system where a car chassis was moved through the assembly line by a conveyor belt while workers added components to it until the car was completed. During World War II, the growth of computing power led to further development of efficient manufacturing methods and the use of advanced mathematical and statistical tools. This was supported by the development of academic programs in industrial and systems engineering disciplines, as well as fields of operations research and management science (as multi-disciplinary fields of problem solving). While systems engineering concentrated on the broad characteristics of the relationships between inputs and outputs of generic systems, operations researchers concentrated on solving specific and focused problems. The synergy of operations research and systems engineering allowed for the realization of solving large scale and complex problems in the modern era. Recently, the development of faster and smaller computers, intelligent systems, and the World Wide Web has opened new opportunities for operations, manufacturing, production, and service systems.

Industrial Revolution

Before the First Industrial Revolution, work was mainly done through two systems: domestic system and craft guilds. In the domestic system merchants took materials to homes where artisans performed the necessary work, craft guilds on the other hand were associations of artisans which passed work from one shop to another, for example: leather was tanned by a tanner, passed to curriers, and finally arrived at shoemakers and saddlers.

The beginning of the industrial revolution is usually associated with the eighteenth-century English textile industry, with the invention of the flying shuttle by John Kay in 1733, the spinning jenny by James Hargreaves in 1765, the water frame by Richard Arkwright in 1769 and the steam engine by James Watt in 1765. In 1851 at the Crystal Palace Exhibition the term American system of manufacturing was used to describe the new approach that was evolving in the United States of America which was based on two central features: interchangeable parts and extensive use of mechanization to produce them.

Second Industrial Revolution and post-industrial society
Henry Ford was 39 years old when he founded the Ford Motor Company in 1903, with $28,000 capital from twelve investors. The model T car was introduced in 1908, however it was not until Ford implemented the assembly line concept, that his vision of making a popular car affordable by every middle-class American citizen would be realized. The first factory in which Henry Ford used the concept of the assembly line was Highland Park (1913), he characterized the system as follows: ""The thing is to keep everything in motion and take the work to the man and not the man to the work. That is the real principle of our production, and conveyors are only one of many means to an end""

This became one of the central ideas that led to mass production, one of the main elements of the Second Industrial Revolution, along with emergence of the electrical industry and petroleum industry.

The post-industrial economy was noted in 1973 by Daniel Bell. He stated that the future economy would provide more GDP and employment from services than from manufacturing and have a great effect on society. Since all sectors are highly interconnected, this did not reflect less importance for manufacturing, agriculture, and mining but just a shift in the type of economic activity.

Operations management
Although productivity benefited considerably from technological inventions and division of labor, the problem of systematic measurement of performances and the calculation of these by the use of formulas remained somewhat unexplored until Frederick Taylor, whose early work focused on developing what he called a "differential piece-rate system" and a series of experiments, measurements and formulas dealing with cutting metals and manual labor. The differential piece-rate system consisted in offering two different pay rates for doing a job: a higher rate for workers with high productivity (efficiency) and who produced high quality goods (effectiveness) and a lower rate for those who fail to achieve the standard. One of the problems Taylor believed could be solved with this system was the problem of soldiering: faster workers reducing their production rate to that of the slowest worker.

In 1911 Taylor published his "The Principles of Scientific Management", in which he characterized scientific management (also known as Taylorism) as:
 * 1) The development of a true science;
 * 2) The scientific selection of the worker;
 * 3) The scientific education and development of the worker;
 * 4) Intimate friendly cooperation between the management and the workers.

Taylor is also credited for developing stopwatch time study. This, combined with Frank and Lillian Gilbreth motion study, gave way to time and motion study, which is centered on the concepts of standard method and standard time. Frank Gilbreth is also responsible for introducing the flow process chart in 1921. Other contemporaries of Taylor worth remembering are Morris Cooke (rural electrification in the 1920s and implementer of Taylor's principles of scientific management in the Philadelphia's Department of Public Works), Carl Barth (speed-and-feed-calculating slide rules) and Henry Gantt (Gantt chart). Also in 1910 Hugo Diemer published the first industrial engineering book: Factory Organization and Administration.

In 1913 Ford Whitman Harris published a paper on "How many parts to make at once", in which he presented the idea of the economic order quantity model. He described the problem as follows: ""Interest on capital tied up in wages, material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time; "setup costs" on the job fix the minimum. Experience has shown one manager a way to determine the economical size of lots.""

Harris described his theory as "reasonably correct", although "not rigorously accurate". His paper inspired a large body of mathematical literature focusing on the problem of production planning and inventory control.

In 1924 Walter Shewhart introduced the control chart through a technical memorandum while working at Bell Labs, central to his method was the distinction between common cause and special cause of variation. In 1931 Shewhart published his Economic Control of Quality of Manufactured Product, the first systematic treatment of the subject of statistical process control (SPC). He defined control:

""For our present purpose a phenomenon will be said to be controlled when, through the use of past experience, we can predict, at least within limits, how the phenomenon may be expected to vary in the future. Here it is understood that prediction within limits means that we can state, at least approximately, the probability that the observed phenomenon will fall within the given limits.""

In the 1940s methods-time measurement (MTM) was developed by H.B. Maynard, J.L. Schwab and G.J. Stegemerten. MTM was the first of a series of predetermined motion time systems, predetermined in the sense that estimates of time are not determined in loco but are derived from an industry standard. This was explained by its originators in a book they published in 1948 called Methods-Time Measurement.

"The methods-time measurement may be defined as follows:

Methods-time measurement is a procedure which analyzes any manual operation or method into the basic motions required to perform it and assigns to each motion a predetermined time standard which is determined by the nature of the motion and the conditions under which it is made.

Thus it may be seen that methods-time measurement is basically a tool of method analysis that gives answers in terms of time without the necessity of making stop-watch time studies."

Up to this point in history, optimization techniques were known for a very long time, from the simple methods employed by Harris to the more elaborate techniques of the calculus of variations developed by Euler in 1733 or the multipliers employed by Lagrange in 1811, and computers were slowly being developed, first as analog computers by Sir William Thomson (1872) and James Thomson (1876) moving to the electromechanical computers of Konrad Zuse (1939 and 1941). During World War II however, the development of mathematical optimization went through a major boost with the development of the Colossus computer, the first electronic digital computer that was all programmable, and the possibility to computationally solve large linear programming problems, first by Kantorovich in 1939 working for the Soviet government and later in 1947 with the simplex method of Dantzig. These methods are known today as belonging to the field of operations research.

From this point on, a curious development took place: while in the United States the possibility of applying the computer to business operations led to the development of management software architecture such as MRP and successive modifications, and ever more sophisticated optimization techniques and manufacturing simulation software, in post-war Japan a series of events at Toyota Motor led to the development of the Toyota Production System (TPS) and lean manufacturing.

In 1943, in Japan, Taiichi Ohno arrived at Toyota Motor company. Toyota evolved a unique manufacturing system centered on two complementary notions: just in time (produce only what is needed) and autonomation (automation with a human touch). Regarding JIT, Ohno was inspired by American supermarkets: workstations functioned like a supermarket shelf where the customer can get products they need, at the time they need and in the amount needed, the workstation (shelf) is then restocked. Autonomation was developed by Toyoda Sakichi in Toyoda Spinning and Weaving: an automatically activated loom that was also foolproof, that is automatically detected problems. In 1983 J.N Edwards published his "MRP and Kanban-American style" in which he described JIT goals in terms of seven zeros: zero defects, zero (excess) lot size, zero setups, zero breakdowns, zero handling, zero lead time and zero surging. This period also marks the spread of total quality management (TQM) in Japan, ideas initially developed by American authors such as Deming, Juran and Armand V. Feigenbaum. TQM is a strategy for implementing and managing quality improvement on an organizational basis, this includes: participation, work culture, customer focus, supplier quality improvement and integration of the quality system with business goals. Schnonberger identified seven fundamentals principles essential to the Japanese approach:
 * 1) Process control: SPC and worker responsibility over quality
 * 2) Easy able-to-see quality: boards, gauges, meters, etc. and poka-yoke
 * 3) Insistence on compliance: "quality first"
 * 4) Line stop: stop the line to correct quality problems
 * 5) Correcting one's own errors: worker fixed a defective part if he produced it
 * 6) The 100% check: automated inspection techniques and foolproof machines
 * 7) Continual improvement: ideally zero defects.

Meanwhile, in the sixties, a different approach was developed by George W. Plossl and Oliver W. Wight, this approach was continued by Joseph Orlicky as a response to the TOYOTA Manufacturing Program which led to material requirements planning (MRP) at IBM, latter gaining momentum in 1972 when the American Production and Inventory Control Society launched the "MRP Crusade". One of the key insights of this management system was the distinction between dependent demand and independent demand. Independent demand is demand which originates outside of the production system, therefore not directly controllable, and dependent demand is demand for components of final products, therefore subject to being directly controllable by management through the bill of materials, via product design. Orlicky wrote "Materials Requirement Planning" in 1975, the first hard cover book on the subject. MRP II was developed by Gene Thomas at IBM, and expanded the original MRP software to include additional production functions. Enterprise resource planning (ERP) is the modern software architecture, which addresses, besides production operations, distribution, accounting, human resources and procurement.

Dramatic changes were occurring in the service industries as well. Beginning in 1955 McDonald's provided one of the first innovations in service operations. McDonald's is founded on the idea of the production-line approach to service. This requires a standard and limited menu, an assembly-line type of production process in the back-room, high customer service in the front-room with cleanliness, courtesy and fast service. While modeled after manufacturing in the production of the food in the back-room, the service in the front-room was defined and oriented to the customer. It was the McDonald's operations system of both production and service that made the difference. McDonald's also pioneered the idea of franchising this operation system to rapidly spread the business around the country and later the world.

FedEx in 1971 provided the first overnight delivery of packages in the U.S. This was based on the innovative idea of flying all packages into the single airport in Memphis Tenn by midnight each day, resorting the packages for delivery to destinations and then flying them back out the next morning for delivery to numerous locations. This concept of a fast package delivery system created a whole new industry, and eventually allowed fast delivery of online orders by Amazon and other retailers.

Walmart provided the first example of very low cost retailing through design of their stores and efficient management of their entire supply chain. Starting with a single store in Roger's Arkansas in 1962, Walmart has now become the world's largest company. This was accomplished by adhering to their system of delivering the goods and the service to the customers at the lowest possible cost. The operations system included careful selection of merchandise, low cost sourcing, ownership of transportation, cross-docking, efficient location of stores and friendly home-town service to the customer.

In 1987 the International Organization for Standardization (ISO), recognizing the growing importance of quality, issued the ISO 9000, a family of standards related to quality management systems. There standards apply to both manufacturing and service organizations. There has been some controversy regarding the proper procedures to follow and the amount of paperwork involved, but much of that has improved in current ISO 9000 revisions.

With the coming of the Internet, in 1994 Amazon devised a service system of on-line retailing and distribution. With this innovative system customers were able to search for products they might like to buy, enter the order for the product, pay online, and track delivery of the product to their location, all in two days. This required not only very large computer operations, but dispersed warehouses, and an efficient transportation system. Service to customers including a high merchandise assortment, return services of purchases, and fast delivery is at the forefront of this business. It is the customer being in the system during the production and delivery of the service that distinguishes all services from manufacturing.

Recent trends in the field revolve around concepts such as:

 * Business process re-engineering (launched by Michael Hammer in 1993 ): a business management strategy focusing on the analysis and design of workflows and business processes within an organization. BPR seeks to help companies radically restructure their organizations by focusing on the ground-up design of their business processes.
 * Lean systems is a systemic method for the elimination of waste ("Muda") within a manufacturing or service process. Lean also takes into account waste created through overburden ("Muri") and waste created through unevenness in work loads ("Mura"). The term lean manufacturing was coined in the book The Machine that Changed the World. Subsequently, lean services has been widely applied.
 * Six Sigma (an approach to quality developed at Motorola between 1985 and 1987): Six Sigma refers to control limits placed at six standard deviations from the mean of a normal distribution, this became very famous after Jack Welch of General Electric launched a company-wide initiative in 1995 to adopt this set of methods to all manufacturing, service and administrative processes. More recently, Six Sigma has included DMAIC (for improving processes) and DFSS (for designing new products and new processes)
 * Reconfigurable manufacturing system: a production system designed at the outset for rapid change in its structure, as well as its hardware and software components, in order to quickly adjust its production capacity and functionality within a part family in response to sudden market changes or intrinsic system change.
 * Project production management: the application of the analytical tools and techniques developed for operations management, as described in Factory Physics to the activities within major capital projects such as encountered in oil and gas and civil infrastructure delivery.

Production systems

A production system comprises both the technological elements (machines and tools) and organizational behavior (division of labor and information flow). An individual production system is usually analyzed in the literature referring to a single business; therefore it is usually improper to include in a given production system the operations necessary to process goods that are obtained by purchasing or the operations carried by the customer on the sold products, the reason being simply that since businesses need to design their own production systems this then becomes the focus of analysis, modeling and decision making (also called "configuring" a production system).

A first possible distinction in production systems (technological classification) is between continuous process production and discrete part production (manufacturing).
 * Process production means that the product undergoes physical-chemical transformations and lacks assembly operations, and therefore the original raw materials cannot easily be obtained from the final product. Examples include: paper, cement, nylon and petroleum products.
 * Part production (e.g. cars and ovens) comprises both fabrication systems and assembly systems. In the first category are job shops, manufacturing cells, flexible manufacturing systems and transfer lines. In the assembly category there fixed position systems, assembly lines and assembly shops (both manual and automated operations).

Another possible classification is one based on lead time (manufacturing lead time vs delivery lead time): engineer to order (ETO), purchase to order (PTO), make to order (MTO), assemble to order (ATO) and make to stock (MTS). According to this classification different kinds of systems will have different customer order decoupling points (CODP), meaning that work in progress (WIP) cycle stock levels are practically nonexistent regarding operations located after the CODP (except for WIP due to queues). (See Order fulfillment.)

The concept of production systems can be expanded to the service sector world keeping in mind that services have some fundamental differences in respect to material goods: intangibility, client always present during transformation processes, no stocks for "finished goods". Services can be classified according to a service process matrix: degree of labor intensity (volume) vs degree of customization (variety). With a high degree of labor intensity there are mass services (e.g., commercial banking bill payments and state schools) and professional services (e.g., personal physicians and lawyers), while with a low degree of labor intensity there are service factories (e.g., airlines and hotels) and service shops (e.g., hospitals and auto mechanics).

The systems described above are ideal types: real systems may present themselves as hybrids of those categories. Consider, for example, that the production of jeans involves initially carding, spinning, dyeing and weaving, then cutting the fabric in different shapes and assembling the parts in pants or jackets by combining the fabric with thread, zippers and buttons, finally finishing and distressing the pants/jackets before being shipped to stores. The beginning can be seen as process production, the middle as part production and the end again as process production: it is unlikely that a single company will keep all the stages of production under a single roof, therefore the problem of vertical integration and outsourcing arises. Most products require, from a supply chain perspective, both process production and part production.

Metrics: efficiency and effectiveness
Operations strategy concerns policies and plans of use of the firm productive resources with the aim of supporting long term competitive strategy. Metrics in operations management can be broadly classified into efficiency metrics and effectiveness metrics. Effectiveness metrics involve:
 * 1) Price (actually fixed by marketing, but lower bounded by production cost): purchase price, use costs, maintenance costs, upgrade costs, disposal costs
 * 2) Quality: specification and compliance
 * 3) Time: productive lead time, information lead time, punctuality
 * 4) Flexibility: mix (capacity to change the proportions between quantities produced in the system), volume (capacity to increase system output), gamma (capacity to expand the product family in the system)
 * 5) Stock availability
 * 6) Ecological Soundness: biological and environmental impacts of the system under study.

A more recent approach, introduced by Terry Hill, involves distinguishing competitive variables in order winner and order qualifiers when defining operations strategy. Order winners are variables which permit differentiating the company from competitors, while order qualifiers are prerequisites for engaging in a transaction. This view can be seen as a unifying approach between operations management and marketing (see segmentation and positioning).

Productivity is a standard efficiency metric for evaluation of production systems, broadly speaking a ratio between outputs and inputs, and can assume many specific forms, for example: machine productivity, workforce productivity, raw material productivity, warehouse productivity (=inventory turnover). It is also useful to break up productivity in use U (productive percentage of total time) and yield η (ratio between produced volume and productive time) to better evaluate production systems performances. Cycle times can be modeled through manufacturing engineering if the individual operations are heavily automated, if the manual component is the prevalent one, methods used include: time and motion study, predetermined motion time systems and work sampling.

ABC analysis is a method for analyzing inventory based on Pareto distribution, it posits that since revenue from items on inventory will be power law distributed then it makes sense to manage items differently based on their position on a revenue-inventory level matrix, 3 classes are constructed (A, B and C) from cumulative item revenues, so in a matrix each item will have a letter (A, B or C) assigned for revenue and inventory. This method posits that items away from the diagonal should be managed differently: items in the upper part are subject to risk of obsolescence, items in the lower part are subject to risk of stockout.

Throughput is a variable which quantifies the number of parts produced in the unit of time. Although estimating throughput for a single process maybe fairly simple, doing so for an entire production system involves an additional difficulty due to the presence of queues which can come from: machine breakdowns, processing time variability, scraps, setups, maintenance time, lack of orders, lack of materials, strikes, bad coordination between resources, mix variability, plus all these inefficiencies tend to compound depending on the nature of the production system. One important example of how system throughput is tied to system design are bottlenecks: in job shops bottlenecks are typically dynamic and dependent on scheduling while on transfer lines it makes sense to speak of "the bottleneck" since it can be univocally associated with a specific station on the line. This leads to the problem of how to define capacity measures, that is an estimation of the maximum output of a given production system, and capacity utilization.

Overall equipment effectiveness (OEE) is defined as the product between system availability, cycle time efficiency and quality rate. OEE is typically used as key performance indicator (KPI) in conjunction with the lean manufacturing approach.

Configuration and management
Designing the configuration of production systems involves both technological and organizational variables. Choices in production technology involve: dimensioning capacity, fractioning capacity, capacity location, outsourcing processes, process technology, automation of operations, trade-off between volume and variety (see Hayes-Wheelwright matrix). Choices in the organizational area involve: defining worker skills and responsibilities, team coordination, worker incentives and information flow.

In production planning, there is a basic distinction between the push approach and the pull approach, with the later including the singular approach of just in time. Pull means that the production system authorizes production based on inventory level; push means that production occurs based on demand (forecasted or present, that is purchase orders). An individual production system can be both push and pull; for example activities before the CODP may work under a pull system, while activities after the CODP may work under a push system.

The traditional pull approach to inventory control, a number of techniques have been developed based on the work of Ford W. Harris (1913), which came to be known as the economic order quantity (EOQ) model. This model marks the beginning of inventory theory, which includes the Wagner-Within procedure, the newsvendor model, base stock model and the fixed time period model. These models usually involve the calculation of cycle stocks and buffer stocks, the latter usually modeled as a function of demand variability. The economic production quantity (EPQ) differs from the EOQ model only in that it assumes a constant fill rate for the part being produced, instead of the instantaneous refilling of the EOQ model.

Joseph Orlickly and others at IBM developed a push approach to inventory control and production planning, now known as material requirements planning (MRP), which takes as input both the master production schedule (MPS) and the bill of materials (BOM) and gives as output a schedule for the materials (components) needed in the production process. MRP therefore is a planning tool to manage purchase orders and production orders (also called jobs).

The MPS can be seen as a kind of aggregate planning for production coming in two fundamentally opposing varieties: plans which try to chase demand and level plans which try to keep uniform capacity utilization. Many models have been proposed to solve MPS problems:
 * Analytical models (e.g. Magee Boodman model)
 * Exact optimization algorithmic models (e.g. LP and ILP)
 * Heuristic models (e.g. Aucamp model).

MRP can be briefly described as a 3s procedure: sum (different orders), split (in lots), shift (in time according to item lead time). To avoid an "explosion" of data processing in MRP (number of BOMs required in input) planning bills (such as family bills or super bills) can be useful since they allow a rationalization of input data into common codes. MRP had some notorious problems such as infinite capacity and fixed lead times, which influenced successive modifications of the original software architecture in the form of MRP II, enterprise resource planning (ERP) and advanced planning and scheduling (APS).

In this context problems of scheduling (sequencing of production), loading (tools to use), part type selection (parts to work on) and applications of operations research have a significant role to play.

Lean manufacturing is an approach to production which arose in Toyota between the end of World War II and the seventies. It comes mainly from the ideas of Taiichi Ohno and Toyoda Sakichi which are centered on the complementary notions of just in time and autonomation (jidoka), all aimed at reducing waste (usually applied in PDCA style). Some additional elements are also fundamental: production smoothing (Heijunka), capacity buffers, setup reduction, cross-training and plant layout.
 * Heijunka: production smoothing presupposes a level strategy for the MPS and a final assembly schedule developed from the MPS by smoothing aggregate production requirements in smaller time buckets and sequencing final assembly to achieve repetitive manufacturing. If these conditions are met, expected throughput can be equaled to the inverse of takt time. Besides volume, heijunka also means attaining mixed-model production, which however may only be feasible through set-up reduction. A standard tool for achieving this is the Heijunka box.
 * Capacity buffers: ideally a JIT system would work with zero breakdowns, this however is very hard to achieve in practice, nonetheless Toyota favors acquiring extra capacity over extra WIP to deal with starvation.
 * Set-up reduction: typically necessary to achieve mixed-model production, a key distinction can be made between internal and external setup. Internal setups (e.g. removing a die) refers to tasks when the machine is not working, while external setups can be completed while the machine is running (ex:transporting dies).
 * Cross training: important as an element of Autonomation, Toyota cross trained their employees through rotation, this served as an element of production flexibility, holistic thinking and reducing boredom.
 * Layout: U-shaped lines or cells are common in the lean approach since they allow for minimum walking, greater worker efficiency and flexible capacity.

A series of tools have been developed mainly with the objective of replicating Toyota success: a very common implementation involves small cards known as kanbans; these also come in some varieties: reorder kanbans, alarm kanbans, triangular kanbans, etc. In the classic kanban procedure with one card:
 * Parts are kept in containers with their respective kanbans
 * The downstream station moves the kanban to the upstream station and starts producing the part at the downstream station
 * The upstream operator takes the most urgent kanban from his list (compare to queue discipline from queue theory) and produces it and attach its respective kanban

The two-card kanban procedure differs a bit:
 * The downstream operator takes the production kanban from his list
 * If required parts are available he removes the move kanban and places them in another box, otherwise he chooses another production card
 * He produces the part and attach its respective production kanban
 * Periodically a mover picks up the move kanbans in upstream stations and search for the respective parts, when found he exchanges production kanbans for move kanbans and move the parts to downstream stations

Since the number of kanbans in the production system is set by managers as a constant number, the kanban procedure works as WIP controlling device, which for a given arrival rate, per Little's law, works as a lead time controlling device.

In Toyota the TPS represented more of a philosophy of production than a set of specific lean tools, the latter would include:
 * SMED: a method for reducing changeover times
 * Value stream mapping: a graphical method for analyzing the current state and designing a future state
 * lot-size reduction
 * elimination of time batching
 * Rank order clustering: an algorithm which groups machines and product families together, used for designing manufacturing cells
 * single-point scheduling, the opposite of the traditional push approach
 * multi-process handling: when one operator is responsible for operating several machines or processes
 * poka-yoke: any mechanism in lean manufacturing that helps an equipment operator avoid (yokeru) mistakes (poka)
 * 5S: describes how to organize a work space for efficiency and effectiveness by identifying and storing the items used, maintaining the area and items, and sustaining the new order
 * backflush accounting: a product costing approach in which costing is delayed until goods are finished

Seen more broadly, JIT can include methods such as: product standardization and modularity, group technology, total productive maintenance, job enlargement, job enrichment, flat organization and vendor rating (JIT production is very sensitive to replenishment conditions).

In heavily automated production systems production planning and information gathering may be executed via the control system, attention should be paid however to avoid problems such as deadlocks, as these can lead to productivity losses.

Project production management (PPM) applies the concepts of operations management to the execution of delivery of capital projects by viewing the sequence of activities in a project as a production system. Operations managements principles of variability reduction and management are applied by buffering through a combination of capacity, time and inventory.

Service operations
Service industries are a major part of economic activity and employment in all industrialized countries comprising 80 percent of employment and GDP in the U.S. Operations management of these services, as distinct from manufacturing, has been developing since the 1970s through publication of unique practices and academic research. Please note that this section does not particularly include "Professional Services Firms" and the professional services practiced from this expertise (specialized training and education within).

According to Fitzsimmons, Fitzsimmons and Bordoloi (2014) differences between manufactured goods and services are as follows: These four comparisons indicate how management of service operations are quite different from manufacturing regarding such issues as capacity requirements (highly variable), quality assurance (hard to quantify), location of facilities (dispersed), and interaction with the customer during delivery of the service (product and process design).
 * Simultaneous production and consumption. High contact services (e.g. health care) must be produced in the presence of the customer, since they are consumed as produced. As a result, services cannot be produced in one location and transported to another, like goods. Service operations are therefore highly dispersed geographically close to the customers. Furthermore, simultaneous production and consumption allows the possibility of self-service involving the customer at the point of consumption (e.g. gas stations). Only low-contact services produced in the "backroom" (e.g., check clearing) can be provided away from the customer.
 * Perishable. Since services are perishable, they cannot be stored for later use. In manufacturing companies, inventory can be used to buffer supply and demand. Since buffering is not possible in services, highly variable demand must be met by operations or demand modified to meet supply.
 * Ownership. In manufacturing, ownership is transferred to the customer. Ownership is not transferred for service. As a result, services cannot be owned or resold.
 * Tangibility. A service is intangible making it difficult for a customer to evaluate the service in advance. In the case of a manufactured good, customers can see it and evaluate it. Assurance of quality service is often done by licensing, government regulation, and branding to assure customers they will receive a quality service.

While there are differences there are also many similarities. For example, quality management approaches used in manufacturing such as the Baldrige Award, and Six Sigma have been widely applied to services. Likewise, lean service principles and practices have also been applied in service operations. The important difference being the customer is in the system while the service is being provided and needs to be considered when applying these practices.

One important difference is service recovery. When an error occurs in service delivery, the recovery must be delivered on the spot by the service provider. If a waiter in a restaurant spills soup on the customer's lap, then the recovery could include a free meal and a promise of free dry cleaning. Another difference is in planning capacity. Since the product cannot be stored, the service facility must be managed to peak demand which requires more flexibility than manufacturing. Location of facilities must be near the customers and scale economics can be lacking. Scheduling must consider the customer can be waiting in line. Queuing theory has been devised to assist in design of service facilities waiting lines. Revenue management is important for service operations, since empty seats on an airplane are lost revenue when the plane departs and cannot be stored for future use.

Mathematical modeling

There are also fields of mathematical theory which have found applications in the field of operations management such as operations research: mainly mathematical optimization problems and queue theory. Queue theory is employed in modelling queue and processing times in production systems while mathematical optimization draws heavily from multivariate calculus and linear algebra. Queue theory is based on Markov chains and stochastic processes. Computations of safety stocks are usually based on modeling demand as a normal distribution and MRP and some inventory problems can be formulated using optimal control.

When analytical models are not enough, managers may resort to using simulation. Simulation has been traditionally done through the discrete event simulation paradigm, where the simulation model possesses a state which can only change when a discrete event happens, which consists of a clock and list of events. The more recent transaction-level modeling paradigm consists of a set of resources and a set of transactions: transactions move through a network of resources (nodes) according to a code, called a process.

Since real production processes are always affected by disturbances in both inputs and outputs, many companies implement some form of quality management or quality control. The Seven Basic Tools of Quality designation provides a summary of commonly used tools:

 * check sheets
 * Pareto charts
 * Ishikawa diagrams (Cause-and-effect diagram)
 * control charts
 * histogram
 * scatter diagram
 * stratification

These are used in approaches like total quality management and Six Sigma. Keeping quality under control is relevant to both increasing customer satisfaction and reducing processing waste.

Operations management textbooks usually cover demand forecasting, even though it is not strictly speaking an operations problem, because demand is related to some production systems variables. For example, a classic approach in dimensioning safety stocks requires calculating the standard deviation of forecast errors. Demand forecasting is also a critical part of push systems, since order releases have to be planned ahead of actual clients’ orders. Also, any serious discussion of capacity planning involves adjusting company outputs with market demands.

Safety, risk and maintenance
Other important management problems involve maintenance policies (see also reliability engineering and maintenance philosophy), safety management systems (see also safety engineering and Risk management), facility management and supply chain integration.

Organizations
The following organizations support and promote operations management:
 * Association for Operations Management (APICS) which supports the Production and Inventory Management Journal
 * European Operations Management Association (EurOMA) which supports the International Journal of Operations & Production Management
 * Production and Operations Management Society (POMS) which supports the journal: Production and Operations Management
 * Institute for Operations Research and the Management Sciences (INFORMS)
 * The Manufacturing and Service Operations Management Society (MSOM) of INFORMS which supports the journal: Manufacturing & Service Operations Management
 * Institute of Operations Management (UK)
 * Association of Technology, Management, and Applied Engineering (ATMAE)

Journals
The following high-ranked academic journals are concerned with operations management issues:
 * Management Science
 * Manufacturing & Service Operations Management
 * Operations Research
 * International Journal of Operations & Production Management
 * Production and Operations Management
 * Transportation Research – Part E
 * Journal of Operations Management
 * European Journal of Operational Research
 * Annals of Operations Research
 * International Journal of Production Economics
 * International Journal of Production Research

title: Operations management


text: User talk:68.174.168.145

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/

title: User talk:68.174.168.145


text:
Jackie O (radio host)

Jacqueline Ellen Henderson (née Last; born 31 January 1975), better known as Jackie O, is an Australian radio and television presenter. She is best known for presenting The Hot Hits Live from LA, Hot30 Countdown, Take 40 Australia, two series of Australian Princess and The Kyle and Jackie O Show (with co-host Kyle Sandilands).

She has also hosted celebrity prank show Surprise Surprise Gotcha and appeared on the 2007 comedy series The Nation on the Nine Network. She also was the co-host of Big Brother (alongside Kyle Sandilands) after Gretel Killeen, the original host, resigned from the series.

On 1 November 2013, Jackie and co-host Kyle Sandilands announced they would not be returning in 2014 to host their 2Day FM breakfast show, which at that time was generating around 30 million AUD in advertising revenue yearly. On 29 November 2013, Kyle and Jackie O announced their move to rival radio network ARN and show on new 106.5 station, coming in 2014 with a nightly "Best Bits" program networked around ARN stations Australia-wide.

In 2018, Jackie O recorded a song titled "Honey Money" after being dared by Sandilands; it later reached number one on the Australian iTunes chart, with all proceeds being donated to Australian farmers affected by drought.

Radio career
Jackie O originally had no intentions to become a radio personality until meeting Phil O'Neil while he was the night host at the Gold Coast's Sea FM in early 1993. At the time, she had worked as an office girl and sandwich hand at a delicatessen. She moved to Canberra with O'Neil a few months later, after he accepted an offer to join FM104.7. After initial rejections by management to have her as his 'phone girl', they finally agreed, although no remuneration was offered.

Soon after, O'Neil accepted an offer to join Triple M Adelaide but only on condition that Jackie was to be his co-host and it was at this time that she adopted the stage name "Jackie O". When the next survey result came out, the duo's ratings had doubled, easily beating their main rivals SAFM in the same time slot. After another ratings rise in the following survey, Phil and Jackie were snapped up by Fox FM in Melbourne.

The duo co-hosted a Network Ten music show called Ground Zero and the Hot 30 radio show during the late 1990s until the couple divorced and O'Neil relocated to the United Kingdom. Henderson's career on radio rose to new heights after she was partnered with "shock jock" Kyle Sandilands on the Today Network (broadcasting from Sydney station 2Day FM). The pair moved from drive time to breakfast at the beginning of 2005. They continued to host the countdown show The Hot Hits until August 2009.

In addition to radio, TV and advertising appearances, Henderson has also done voice-over work for the animated movie Robots, voicing the character "Loretta Geargrinder" in the Australian release.

In August 2013, Kyle and Jackie O announced that they would be moving from 2Day FM to KIIS 106.5FM. By March 2014 they had more than doubled the number of breakfast listeners at KiiS FM, with their show being the most popular FM show in Sydney with 532,000 listeners, while 2Day FM lost 242,000 listeners during the move.

In 2018, Sandilands dared Jackie O to write and record a song in one day; the result, "Honey Money", written by Avalonia and produced by KIIS FM producer Kian Oliver (who also provided a rap), went to number one on the Australian iTunes chart (#13 on the ARIA Digital Sales chart, spending one week within the Top 50), with all proceeds being donated to Drought Angels, a charity set up to help drought-affected Australian farmers. The song was later removed due to a copyright infringement issue with the artwork, as Jackie O's face had been hastily Photoshopped onto that of Iggy Azalea's. Jackie O announced her intention to reupload the song for free.

In November 2023, it was revealed the pair had signed a 10-year, A$200 million deal, a record for the Australian market; in other words, Kyle and Jackie O would each get a base salary of $10 million, plus bonus total stock options valued at $14 million. The pair also negotiated a clause that allows them to broadcast from anywhere on earth; additionally, the show will be syndicated in the Melbourne market, leading to the cancellation of the Lauren & Jase show by the end of 2023.

Television career
Jackie O has hosted a variety of television shows, most prominently the Popstars series, in which televised auditions were held to select members of a vocal group. In 2005, Jackie O also hosted the Network Ten reality show, Australian Princess, in which they transformed a group of women to sophisticated "princesses". A second series of Australian Princess had gone to air during the non-ratings summer period on Network 10 starting in December. No reason was given by the Network as to why it was shown out of the official ratings period.

In June 2007, she was a cast member of The Nation airing on the Nine Network. She was also co-host of the comedy show Surprise Surprise Gotcha on the same network, the series has been called the Australian version of Punk'd which was made famous by pranking many celebrities. In October 2007, she along with her radio partner Kyle Sandilands would take Gretel Killeen's job in hosting the 2008 series of Big Brother Australia. Killeen hosted the show from its start in 2001 to 2007. Following poor ratings for this 2008 series, Network Ten announced on 14 July 2008 that Big Brother Australia would not return in 2009.

In 2019, it was announced that Jackie O would be one of the panellists on The Masked Singer Australia alongside Dannii Minogue, Dave Hughes and Lindsay Lohan. However, after the third season, she announced that she will be departing the show to spend more time with her daughter. She was replaced by fellow radio host Abbie Chatfield.

Personal life
She was married to her co-host Phil O'Neil during their combined radio career. After their divorce, O'Neil moved to the United Kingdom in the late 1990s. In 2003, she married UK photographer Lee Henderson. The couple announced their separation in October 2018.

In 2009, Jackie O was named as the second most hated celebrity in an annual list by Zoo Magazine, sharing the top two with her radio co-host.

Jackie O has been open about her struggles with weight management. In late 2019, she revealed that she had begun to drastically put on weight and was desperate to shed it back off before filming the second season of The Masked Singer. In late 2020 Jackie O joined became an ambassador for Weight Watchers and publicly lost 10 kilograms in 2021. However in 2022, Jackie revealed that she had put back on all of the weight that she had previously lost after joining Weight Watchers. Later that year, Jackie O took a personal hiatus from broadcasting to deal with long COVID complications after contracting COVID-19 in early 2022. She returned at the start of 2023 and had lost 12 kg during her hiatus with a Weight Watchers plan.

Discography
Singles
 * "Honey Money" featuring Kian Oliver (2018)

title: Jackie O (radio host)


text: Template:MLB Ballparks

title: Template:MLB Ballparks


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Unconscionability

Unconscionability (sometimes known as unconscionable dealing/conduct in Australia) is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract.

Overview
Unconscionability is determined by examining the circumstances of the parties when the contract was made, such as their bargaining power, age, and mental capacity. Other issues might include lack of choice, superior knowledge, and other obligations or circumstances surrounding the bargaining process. Unconscionable conduct is also found in acts of fraud and deceit, where the deliberate misrepresentation of fact deprives someone of a valuable possession. When a party takes unconscionable advantage of another, the action may be treated as criminal fraud or the civil action of deceit.

For a contract to be unconscionable, it must have been unconscionable at the time it was made; later circumstances that make the contract extremely one-sided are irrelevant. Criteria for determining unconscionability vary between jurisdictions and the question of whether a contract is unconscionable is regarded as a question of law rather than a question of fact; meaning that, in jurisdictions where juries are employed in civil cases, it is the judge and not the jurors who decide whether to apply the doctrine. Upon finding unconscionability, a court has significant flexibility on how it remedies the situation. It may refuse to enforce the contract against the party unfairly treated on the theory that they were misled, lacked information, or signed under duress or misunderstanding; it may refuse to enforce the offending clause, or take other measures it deems necessary to have a fair outcome and damages are usually not awarded. For instance, in Uber Technologies Inc v Heller (2020) the Supreme Court of Canada found an arbitration clause requiring gig workers in Ontario to litigate before the Dutch International Chamber of Commerce was unconscionable and so void.

Procedural unconscionability is seen as the disadvantage suffered by a weaker party in negotiations, whereas substantive unconscionability refers to the unfairness of terms or outcomes. Most often the former will lead to the latter, but not always. The existence of the procedural unconscionability without substantive unconscionability may be sufficient to set aside a contract, but the latter, by itself, may not. As with issues of consideration, the court's role is not to determine whether someone has made a good or bad bargain, but merely whether that party had the opportunity to properly judge what was best in their own interests.

There are several typical examples in which unconscionability are most frequently found:

 * Where a party that typically engages in sophisticated business transactions inserts boilerplate language into a contract containing terms unlikely to be understood or appreciated by the average person, such as a disclaimer of warranties, or a provision extending liability for a newly purchased item to goods previously purchased from the same seller.
 * Where a seller vastly inflates the price of goods, particularly when this inflation is conducted in a way that conceals from the buyer the total cost for which the buyer will ultimately be liable. A similar example would be severe penalty provisions for failure to pay loan installments promptly that are physically hidden by small print located in the middle of an obscure paragraph of a lengthy loan agreement. In such a case a court may find that there is no meeting of the minds of the parties to the contract and that the weaker party has not accepted the terms of the contract.
 * Where a seller offers a standardized contract of adhesion for the purchase of necessary goods or services (e.g. food, shelter, means of transportation) to consumers on a "take it or leave it" basis, without giving consumers realistic opportunities to negotiate terms that would benefit their interests. While there is nothing unenforceable or even wrong about adhesion contracts in themselves, specific terms may render them unconscionable. Examples of gross one-sidedness would be provisions that limit damages against the seller, or limit the rights of the purchaser to seek relief in the courts against the seller. In the 2009 case of Harris v. Blockbuster, Inc., the plaintiff argued that Blockbuster's provision to compel arbitration and forbid class action lawsuits was illusory and unconscionable. However, whether that contract was unconscionable is unknown, as the court ruled that it was illusory and therefore not enforceable, and disregarded all further consideration.

Australia
The leading Australian case is Commercial Bank of Australia Ltd v Amadio, in which an elderly Italian migrant couple guaranteed their builder son's business debts to the Commercial Bank. At the time the mortgage was executed, the bank manager was aware of the son's precarious financial position and knew that the Amadios, who did not speak English well, were not so informed, but did nothing to further explain the situation to them or suggest they get independent advice. In addition, the bank did not advise the Amadios that there was no limit on their liability under the guarantee; the Amadios believed their liability was limited to $50,000.

When the son's business failed, the Amadios had the contract set aside due to unconscionable dealing by the bank. The court held that the bank manager knew about the "special disability" of Amadios, referring to their advanced age, lack of business acumen, lack of fluency in written English, and their reliance on their son's [inadequate] disclosure of his finances. A special disability is one which seriously affects the ability of the person subject to it to make sensible decisions of their own best interest. This "disability" was sufficiently evident to the bank, as the stronger party, to make their acceptance of the weaker party's assent to the transaction manifestly unfair. The bank did not ensure that the Amadios fully understood the nature of the transaction; therefore, the bank's taking advantage of the opportunity that presented itself was unconscionable.

While Amadio is the leading authority on unconscionable dealing in Australia, courts have frequently relied upon other cases to help define what constitutes special disability. Courts have extended the scope of what is special disability to include infatuation causing vulnerability and mental disorder. In Louth v Diprose, the Respondent, a solicitor, was infatuated with Louth. He provided her with a multitude of gratuitous gifts and a marriage proposal, which Louth declined. Louth suffered from depression and threatened to commit suicide if she were to become evicted. In response, the Respondent bought her a house and put it in Louth's name. Following a deterioration of the relationship, the Respondent requested Louth to transfer the property in his name, which Louth refused. The Respondent initiated legal proceedings to recover the property, alleging he had suffered a special disability entitling rescission of the contract. Deane J, in the majority, held that Diprose's infatuation placed him in a position of emotional dependence which placed Louth in a position of ascendancy and influence. Louth was found to be aware of the special disability she had deliberately created and exploited it for her benefit, even though Louth articulated her lack of romantic interest in Diprose on numerous occasions.

Intoxication is generally not regarded as a special disability, although in Blomley v Ryan it was found that the severity of Ryan's drunkenness, in combination with Blomley's knowledge of his alcoholism, was enough to warrant special disability. In Blomley v Ryan, the Plaintiff purchased a property from the Defendant at a very low price. During the transaction, the Defendant was of old age and heavily intoxicated which was conspicuous to the Plaintiff. After the transaction, the Defendant refused to perform the transfer of property and so the Plaintiff sought specific performance while the Defendant sought to set aside the contract. The Court ruled that 'mere drunkenness' is not a defence to resist a contract. However, it stated that where there is knowledge of one party that the other party is seriously inebriated and that party takes advantage of such inebriation, equity will intervene to refuse specific performance.

Courts have also frequently relied upon the observation of the majority of the High Court in Krakowski v Eurolynx Properties Ltd when considering the amount of knowledge that can be imputed to a company.

Based on this case, the new concept of "unconscionability" in general and contractual law was passed by Australian legislation, defining it in two ways:
 * 1) Using undue influence or coercion, where the consumer is not in a position to make an independent decision based on the fact that undue influence is made to bear upon him/her.
 * 2) The stronger party is taking advantage of the fact that the consumer either does not have enough knowledge or understanding of the contract or is incapable of making an independent decision. The trader does not point out that the consumer has avenues in getting help in clearly understanding the contract. So, in this case, the trader is taking advantage of the consumer's lack of understanding for his own benefit.

Amadio and other cases have seen a greater willingness by courts to set aside contracts on the grounds of unconscionability. This has been partly influenced by recent statutory developments.

Canada
The doctrine of unconscionability is well-established in Canada, where it has branched from the older and more settled doctrine of undue influence. The leading case on unconscionability in Canada is Uber Technologies Inc v Heller (2020). As applied in Canada, the doctrine limits the enforceability of "unfair agreements that resulted from an inequality of bargaining power". The test for unconscionability applied by Canadian courts is to determine whether there was an inequality of bargaining power between the parties to the contract and, if so, whether this inequality resulted in the contract being an "improvident bargain" for the party with lesser bargaining power. The inequality criterion is satisfied where one party is unable to sufficiently protect its interests while negotiating the contract, while the improvidence criterion is satisfied where the contract "unduly advantages the stronger party or unduly disadvantages the more vulnerable". Improvidence must be measured with reference to the time of the contract's formation and involves a contextual assessment of "whether the potential for undue advantage or disadvantage created by the inequality of bargaining power has been realised". It is particularly relevant in the context of standard form contracts; especially with regard to choice of law, choice of court, or forum selection clauses. Where the disadvantaged party understood the improvident terms of the contract, the contract is unconscionable if they were so reliant on the advantaged party that they assented out of perceived necessity; meanwhile, where the disadvantaged party did not understand the improvident terms, "the focus is on whether they have been unduly disadvantaged by the terms they did not understand or appreciate". The intended purpose of the doctrine of unconscionability is "the protection of vulnerable persons in transactions with others".

 * In Uber v Heller (2020), a gig worker was attempting to bring a class action lawsuit against Uber arguing that drivers are employees and therefore entitled to benefits under the Ontarian Employment Standards Act and equivalent legislation in other provinces and territories. However, Uber attempted to invoke an arbitration clause included in its contracts with Canadian drivers which required that all disputes between Uber and the drivers be resolved by arbitration in the Netherlands. In an 8–1 decision, the Supreme Court of Canada held that the arbitration clause in Heller's contract with Uber was unconscionable. Further, the majority held that the contract was void because it attempted to contract out of the Employment Standards Act. As a result, the Court allowed Heller's class action lawsuit against Uber to proceed to trial. Justice Russell Brown, in a concurring opinion, argued that the arbitration clause was unenforceable because it effectively denied Heller access to justice and was therefore contrary to public policy.

 * In Harry v. Kreutziger (1978), Harry was a First Nations Aboriginal with a congenital partial hearing defect. A commercial fisherman, he had a grade 5 education and was not widely experienced in business matters.  He owned a boat worth only $1,000, but it came with a fishing license: since the British Columbia government had ceased issuing new licenses, one could only be obtained through transferral.  Due to this limitation and recent excellent salmon harvests, licenses were worth around $15,000, meaning that the total value of Harry's boat was $16,000.  Kreutziger first offered Harry a check for $2,000, which he returned through his brother. Kreutziger gave him back the cheque several times, assuring Harry that as an Aboriginal he would easily be able to get another license.  Harry finally agreed to sell for $4,500, but then Kreutziger unilaterally reduced the price by $570, deducting the cost of conversion of the boat license from an "AI" license (available only to Aboriginal peoples) into an "A" license. Harry then applied for another license, but was rejected on the grounds that he had left the fishing industry when he sold the boat. Harry sued to have the sale set aside, but was unsuccessful at trial. The British Columbia Court of Appeals found there was a clear inequality between the parties due to Harry's lack of education and physical handicap, as well as the difference in class, culture, and economic circumstances between the two parties. Kreutziger's actions clearly demonstrated his power; he was very aggressive in the negotiations and was able to unilaterally modify the price for his own benefit. Kreutziger was also unable to demonstrate that the deal was in any way fair, as the price was one-quarter of the true value of the boat and license. The court rescinded the contract because of the unconscionability of the underlying transaction, ruling that the buyer was trying to take advantage of the seller's lack of knowledge of the value of the license, and ordered Kreutziger to return the boat and license to Harry, and Harry to return the payment of $3,930 to Kreutziger.

England and Wales
"Inequality of bargaining power" is a term used in England and Wales to express essentially the same idea as unconscionability; which can in turn be further broken down into cases on duress, undue influence, and exploitation of weakness. In these cases, where someone's consent to a bargain was only procured through duress, out of undue influence or under severe external pressure that another person exploited, courts have felt it was unconscionable to enforce agreements. Controversy exists as to whether a contract should be voidable simply because one party was pressured by circumstances wholly outside the other party's control.

The leading case on undue influence is considered to be Lloyds Bank Ltd v Bundy which adopted the American position that all impairments of autonomy should fall under the single principle of "inequality of bargaining power". In this case, Bundy agreed to increase the mortgage on his farmhouse in order to maintain the line of credit being extended to his son's business. The question was whether the contract leading to the repossession of Bundy's farmhouse was voidable due to pressure brought by the bank. The Court of Appeal of England and Wales ruled that since the amount of the loan was already higher than the existing mortgage, Bundy received no direct benefit from the agreement to increase the mortgage amount; that the bank failed to notify him of the true financial condition of his son's business, and that it threatened to call in his son's loan if Bundy did not agree to the increase. Furthermore, since Bundy relied upon Lloyd's for the mortgage and his son's line of credit, the bank-customer relationship was found to have created a fiduciary duty; hence, the bank should have recommended that he seek independent legal advice. Lord Denning MR found that the contract was voidable owing to the unequal bargaining position in which Bundy had found himself, in that he had entered into the contract without independent advice and that unfair pressures were exerted by the bank. Essentially, the court ruled that only the bank benefitted from the agreement to raise the amount of the mortgage, and that it had exploited Bundy's weakness. The transaction was found to be unconscionable, and Bundy only had to honor the lower mortgage amount.

It is notable that Denning's judgment did not represent the law in National Westminster Bank plc v Morgan, in which a family home was likewise subjected to a second mortgage to secure a loan on the husband's business with Abbey National Bank. The Morgans got into arrears on the loan, and National Westminster Bank, commonly known as "NatWest", offered a rescue package to help the couple save their home, where they would pay off the existing mortgages and give the couple a bridge loan for the purposes of aiding the husband's business. In the limited time the NatWest manager spent alone with Mrs. Morgan, she stated that she did not want to be exposed to any extra risks, as she had no faith in her husband's business ability. The bank manager assured her that the risks were limited and did not advise her to get independent legal advice. She signed the contract, and the bank later called in the loan when the Morgans defaulted. Mrs. Morgan's defense was that the bank manager had exercised undue influence over her in procuring her signature. Unlike Lloyds Bank Ltd v Bundy, it was found that there was no undue influence since the transaction was not a "manifest disadvantage" to the couple, and that Mrs. Morgan had not established a relationship of trust and confidence in the brief time she spent with the NatWest manager.

Unconscionability is also an important element of the English law of trusts. A constructive trust arises, by operation of law, when the conscience of a legal owner is affected meaning they cannot deny the equitable interest of the beneficiary for whom they consequently hold the property as trustee. Additionally, unconscionability is a necessary element to the finding of proprietary estoppel.

United States
The leading case for unconscionability in the United States is Williams v. Walker-Thomas Furniture Co., in which the defendant, a retail furniture store, sold multiple items to a customer from 1957 to 1962. The extended credit contract was written so that none of the furniture was considered to be purchased until all of it was paid for. When the plaintiff defaulted and failed to make payments on the last item of furniture, the furniture store attempted to repossess all of the furniture sold since 1957, not just the last item. The District of Columbia Court of Appeals returned the case to the lower court for trial to determine further facts, but held that the contract could be considered unconscionable and negated if it was procured due to a gross inequality of bargaining power.

Under the Second Restatement of Contracts, a party may assert a claim for relief from unilateral mistake regarding the terms or conditions of a contract or a liquidated damages clause. Relief for unilateral mistake may be granted if the mistake would render enforcement of the contract unconscionable. The Restatement considers factors such as: 1) absence of reliance by the promisee; and 2) gross disparity in values exchanged. Despite the indication of these considerations, however, most challenges to liquidated damages clauses survive legal challenges based on unconscionability. The Restatement also has a separate provision on unconscionability at §208, "Unconscionable Contract or Term," which broadly allows a court to limit the application of an unconscionable term or contract in order to avoid an unconscionable result. Additionally, the concept as applied to sales of goods is codified in Section 2-302 of the Uniform Commercial Code.

title: Unconscionability


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External auditor

An external auditor performs an audit, in accordance with specific laws or rules, of the financial statements of a company, government entity, other legal entity, or organization, and is independent of the entity being audited. Users of these entities' financial information, such as investors, government agencies, and the general public, rely on the external auditor to present an unbiased and independent audit report.

The manner of appointment, the qualifications, and the format of reporting by an external auditor are defined by statute, which varies according to jurisdiction. External auditors must be members of one of the recognised professional accountancy bodies. External auditors normally address their reports to the shareholders of a corporation. In the United States, certified public accountants are the only authorized non-governmental external auditors who may perform audits and attestations on an entity's financial statements and provide reports on such audits for public review. In the UK, Canada and other Commonwealth nations Chartered Accountants and Certified General Accountants have served in that role.

For public companies listed on stock exchanges in the United States, the Sarbanes-Oxley Act (SOX) has imposed stringent requirements on external auditors in their evaluation of internal controls and financial reporting. In many countries external auditors of nationalized commercial entities are appointed by an independent government body such as the Comptroller and Auditor General. Securities and Exchange Commissions may also impose specific requirements and roles on external auditors, including strict rules to establish independence.

Organization & services
In some countries, audit firms may be organized as LLCs or corporate entities. The organization of audit firms has been a subject of debate in recent years on account of liability issues. For example, there are rules in EU member states that more than 75% of the members of an audit firm must be qualified auditors. In India, audit firms can only be partnerships of qualified members of The Institute of Chartered Accountants of India.

In the USA, the external auditor also performs reviews of financial statements and compilation. In review auditors are generally required to tick and tie numbers to general ledger and make inquiries of management. In compilation auditors are required to take a look at financial statement to make sure they are free of obvious misstatements and errors. An external auditor may perform a full-scope financial statement audit, a balance-sheet-only audit, an attestation of internal controls over financial reporting, or other agreed-upon external audit procedures.

External auditors also undertake management consulting assignments. Under statute, an external auditor can be prohibited from providing certain services to the entity they audit. This is primarily to ensure that conflicts of interest do not arise. The independence of external auditors is crucial to a correct and thorough appraisal of an entity's financial controls and statements. Any relationship between the external auditors and the entity, other than retention for the audit itself, must be disclosed in the external auditor's reports. These rules also prohibit the auditor from owning a stake in public clients and severely limits the types of non-audit services they can provide.

The primary role of external auditors is to express an opinion on whether an entity's financial statements are free of material misstatements.

Difference from internal auditor
Internal auditors who are members of a professional organization would be subject to the same code of ethics and professional code of conduct as applicable to external auditors. They differ, however, primarily in their relationship to the entities they audit. Internal auditors, though generally independent of the activities they audit, are part of the organization they audit, and report to management. Typically, internal auditors are employees of the entity, though in some cases the function may be outsourced. The internal auditor's primary responsibility is appraising an entity's risk management strategy and practices, management (including IT) control frameworks and governance processes. They are also responsible for the internal control procedures of an organization and the prevention of fraud.

Detection of fraud
If an external auditor detects fraud, it is their responsibility to bring it to the management's attention and consider withdrawing from the engagement if management does not take appropriate actions. Normally, external auditors review the entity's information technology control procedures when assessing its overall internal controls. They must also investigate any material issues raised by inquiries from professional or regulatory authorities, such as the local taxing authority.

 External Auditors' Liability to Third Parties

Auditors may be liable to 3rd parties who are damaged by making decisions based on information in audited reports. This risk of auditors' liability to third parties is limited by the doctrine of privity. An investor or creditor, for instance, can not generally sue an auditor for giving a favorable opinion, even if that opinion was knowingly given in error.

The extent of liability to 3rd parties is established (in general) by 3 accepted standards: Ultramares, restatement, and foreseeability.

Under the Ultramares doctrine, auditors are only liable to 3rd parties who are specifically named. The Restatement Standard opens up their liability to named "classes" of individuals. The foreseeability standard puts accountants at the most risk of liability, by allowing anyone who might be reasonably foreseen to rely on an auditor's reports to sue for damages sustained by relying on material information.

While the Ultramares doctrine is the majority rule, (to the relief of many new and budding accountants pursuing an auditing career!) the restatement standard is preferred in several states and is growing in popularity. The foreseeability standard will not likely be widely adopted anytime soon because the cost (time and financial) of litigation would be enormous.

CFOs, company accountants, and other employees are not provided the same luxuries of the doctrine of privity. Their material actions and statements open them (and their companies) up to liability from third parties damaged by relying on these statements.

title: External auditor


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