MGMT 330

Dependent Demand

"dependent demand" means the demand for one item is related to the demand for another item.

The planning process

Aggregate planning is an operational activity that does an aggregate plan for the production process, in advance of 6 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organization is kept to the minimum over that period.

Pareto Chart

A Pareto chart, named after Vilfredo Pareto, is a type of chart that contains both bars and a line graph, where individual values are represented in descending order by bars, and the cumulative total is represented by the line.

Aggregate planning strategy (chase strategy)

A chase strategy implies matching demand and capacity period by period. This could result in a considerable amount of hiring, firing or laying off of employees; insecure and unhappy employees; increased inventory carrying costs; problems with labor unions; and erratic utilization of plant and equipment. It also implies a great deal of flexibility on the firm's part. The major advantage of a chase strategy is that it allows inventory to be held to the lowest level possible, and for some firms this is a considerable savings. Most firms embracing the just-in-time production concept utilize a chase strategy approach to aggregate planning.

Defining Quality

The operations manager's objective is to build a total quality management system that identifies and satisfies customer needs. Total quality management takes care of the customer. Consequently, we accept the definition of quality as adopted by the American Society for Quality. The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs. others, however, believe that definitions of quality fall into several categories. some definitions are user based. they propose that quality "lies in the eyes of the beholder." Marketing people like this approach and so do customers. to them, higher quality means better performance, nicer features, and other (sometimes costly) improvements. To production managers, quality is manufacturing based. They believe that quality means conforming to standards and "making it right the first time." Yet a third approach is product based, which views qualities as a precise and measurable variable. in this view, for example, really good ice cream has high butterfat levels. This text develops approaches and techniques to address all three categories of quality. the characteristics that connote quality must first be identified through research (a user-based approach to quality). These characteristics are then translated into specific product attributes (a product0based approach to quality).Then, the manufacturing process is organized to ensure that products are made precisely to specifications (a manufacturing-based approach to quality). A process that ignores any one of these steps will not result in a quality product.

Control Charts for Variables

Variables control charts plot continuous measurement process data, such as length or pressure, in a time-ordered sequence. In contrast, attribute control charts plot count data, such as the number of defects or defective units.

Histogram

A graphical representation, similar to a bar chart in structure, that organizes a group of data points into user-specified ranges. The histogram condenses a data series into an easily interpreted visual by taking many data points and grouping them into logical ranges or bins.

Aggregate planning strategy (level strategy)

A level strategy seeks to produce an aggregate plan that maintains a steady production rate and/or a steady employment level. In order to satisfy changes in customer demand, the firm must raise or lower inventory levels in anticipation of increased or decreased levels of forecast demand. The firm maintains a level workforce and a steady rate of output when demand is somewhat low. This allows the firm to establish higher inventory levels than are currently needed. As demand increases, the firm is able to continue a steady production rate/steady employment level, while allowing the inventory surplus to absorb the increased demand. A second alternative would be to use a backlog or backorder. A backorder is simply a promise to deliver the product at a later date when it is more readily available, usually when capacity begins to catch up with diminishing demand. In essence, the backorder is a device for moving demand from one period to another, preferably one in which demand is lower, thereby smoothing demand requirements over time. A level strategy allows a firm to maintain a constant level of output and still meet demand. This is desirable from an employee relations standpoint. Negative results of the level strategy would include the cost of excess inventory, subcontracting or overtime costs, and backorder costs, which typically are the cost of expediting orders and the loss of customer goodwill.

Dependent Inventory Model Requirements

Effective use of dependent inventory models requires that the operations manager know the following: 1. Master production schedule (what is to be made and when) 2. specifications or bill of material (materials and parts required to make the product) 3. inventory availability (what is in stock) 4. Purchase orders outstanding (what is on over, also called expected receipts) 5.Lead times (how long it takes to get various components)

Just-in-time (JIT)

Just-in-time (JIT) is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. This method requires producers to forecast demand accurately. This inventory supply system represents a shift away from the older just-in-case strategy, in which producers carried large inventories in case higher demand had to be met.

Aggregate planning strategy (Hybrid or Mixed strategy)

Most firms find it advantageous to utilize a combination of the level and chase strategy. A combination strategy (sometimes called a hybrid or mixed strategy) can be found to better meet organizational goals and policies and achieve lower costs than either of the pure strategies used independently.

Cause and Effect Diagram

One of the seven tools of quality, it shows the relationship of all factors (causes) that lead to the given situation (effect). It identifies major causes and breaks them down into sub-causes and further sub-divisions (if any). It is usually preceded by cause-and-effect analysis.

Statistical process control (SPC)

Statistical process control (SPC) is a method of quality control which uses statistical methods. SPC is applied in order to monitor and control a process. Monitoring and controlling the process ensures that it operates at its full potential.

Check Sheet

The check sheet is a form (document) used to collect data in real time at the location where the data is generated. The data it captures can be quantitative or qualitative. When the information is quantitative, the check sheet is sometimes called a tally sheet.

Flowchart

A flowchart is a type of diagram that represents an algorithm, workflow or process, showing the steps as boxes of various kinds, and their order by connecting them with arrows. This diagrammatic representation illustrates a solution model to a given problem. Flowcharts are used in analyzing, designing, documenting or managing a process or program in various fields.

Material Requirements Planning (MRP)

There are three primary functions of an MRP system. First, the system helps ensure that the appropriate materials are available for production and the necessary products are available for customers to avoid shortages. Second, MRP reduces waste by maintaining only the lowest possible materials and product levels in stock. Lastly, an MRP system helps plan manufacturing functions, delivery schedules and purchasing. When an MRP system is doing its job, it reduces material waste while also avoiding product shortages. Data integrity, however, is a major issue for successful material requirements planning. The data fed into the system must be accurate; otherwise, serious production and stock errors may occur. Material requirements planning (MRP) is a production planning and inventory control system. An MRP integrates data from production schedules with that from inventory and the bill of materials (BOM) to calculate purchasing and shipping schedules for the parts or components required to build a product.

The nature of aggregate planning

When inventories seem too large, the president complains about the investment tied up and the costs of carrying them. When inventories are low, the marketing vice president complains about poor service to customers. When top management decides to lay off workers during a sales slump, the Union President complains and sometimes makes threats and even manage to have visits from influential political officials pleading for whatever employment stabilization measures that are possible. This manufacturing vice president has the responsibility of producing high quality products at low cost and timed to be available when the market wants them. In addition, he must consider trade-offs between cost and employment stabilization, cost and market timing, and market timing and employment stabilization. When product demand is seasonal, the problem of achieving the needed balance among these factors is much more difficult.

Scatter Diagram

a graph in which the values of two variables are plotted along two axes, the pattern of the resulting points revealing any correlation present.