advanced cost ch20
Total Ordering and Carrying Costs
PD/Q+CQ/2
vendor Kanban
a card or marker that signals to a supplier the quantity of materials that need to be delivered and the time of delivery.
production Kanban
a card or marker that specifies the quantity the preceding process should produce.
withdrawal Kanban
a marker or card that specifies the quantity that a subsequent process should withdraw from a preceding process.
constraints
a mathematical expression that expresses a resource limitation.
Linear programming
a method that searches among possible solutions until it finds the optimal solution.
feasible solution
a product mix that satisfies all constraints.
total preventive maintenance
a program of preventive maintenance that has zero machine failures as its standard.
just-in-case inventory management
a traditional inventory model based on anticipated demand.
Ropes
actions taken to tie the rate at which raw material is released into the plant (at the first operation) to the production rate of the constrained resource.
simplex method
an algorithm that identifies the optimal solution for a linear programming problem.
Kanban system
an information system that controls production on a demand-pull basis through the use of cards or markers.
Electronic data interchange (EDI)
an inventory management method that allows suppliers access to a buyer's online database.
Constrained optimization
choosing the optimal mix given the constraints faced by the firm.
binding constraint
constraints whose limited resources are fully used by a product mix.
loose constraints
constraints whose limited resources are not fully used by a product mix.
linear programming model
expresses a constrained optimization problem as a linear objective function subject to a set of linear constraints.
Safety stock
extra inventory carried to serve as insurance against fluctuations in demand.
Lead time
for purchasing, the time to receive an order after it is placed. For manufacturing, the time to produce a product from start to finish.
Internal constraints
limiting factors found within the firm.
External constraints
limiting factors imposed on the firm from external sources.
theory of constraints
method used to continuously improve manufacturing activities and nonmanufacturing activities.
drum-buffer-rope (DBR) system
the TOC inventory management system that relies on the drum beat of the major constrained resource, time buffers, and ropes to determine inventory levels.
Shadow prices
the amount by which throughput will increase for one additional unit of scarce resource.
economic order quantity (EOQ)
the amount that should be ordered (or produced) to minimize the total ordering (or setup) and carrying costs.
constraint set
the collection of all constraints that pertain to a particular optimization problem.
feasible set of solutions
the collection of all feasible solutions.
Just-in-time inventory management
the continual pursuit of productivity through the elimination of waste.
Carrying costs
the costs of holding inventory.
Stock-out costs
the costs of insufficient inventory.
Ordering costs
the costs of placing and receiving an order.
Setup costs
the costs of preparing equipment and facilities so that they can be used for production.
objective function
the function to be optimized, usually a profit function; thus, optimization usually means maximizing profits.
time buffer
the inventory needed to keep the constrained resource busy for a specified time interval.
drummer
the major binding constraint.
Operating expenses
the money an organization spends in turning inventories into throughput.
Inventory
the money an organization spends in turning raw materials into throughput.
reorder point
the point in time at which a new order (or setup) should be initiated. RATE OF USAGE X LEAD TIME AVERAGE OF UDAGE X LEAD TIME
Throughput
the rate at which an organization generates money through sales. (Sales revenue-unit-level variance expense)/time
Continuous replenishment
when a manufacturer assumes the inventory management function for the retailer.
