SOM 306 EXAM 2 JANE TIERNEY

Bullwhip Effect

Inventory fluctuations become larger moving backward through a supply chain

Supplier Selection

Use multiple criteria used, not solely on cost of goods but basedon Total Cost of Ownership (TCO) which includes freight, cost of quality, cost ofordering, inventory costs, and any other relevant costs

Purchasing Cycle

a. Requisition is generated and sent to purchasing (must have approved budget to process) b. Supplier selection c. Order placement d. Order monitoring e. Goods received or dock receipt

Logistics

Movement of goods, information, currency and services through the supply chain

Cycle Count

Physical count of inventory, usually a statistical sample, done to verify accuracy ofthe inventory records

Safety Stock

Amount of inventory over and above forecast requirements designed to covervariability of demand, unstable lead times or unreliable delivery, or risks such as poor quality,new product / unreliable forecasts, parts deemed as critical to a process or product

Inventory Turnover

COGS/Average Inventory

Reorder Point

Calculated as demand (d) (units per some time period) multiplied by lead time(LT) (same units of time), then adding safety stock if applicable ROP = (d x LT) + ss

Postponement

Delaying configuration until manufacture is as complete as possible

ROP (no safety stock)

Demand x Lead Time

ROP (with safety stock)

Demand x Lead Time + Safety Stock

Lean Operations

Flexible system that uses less resources than other systems. Produces greaterproductivity, lower costs, shorter cycle times and higher quality than other, non-lean systems

A-B-C Classification System

-A parts: highest inventory value (~60%) and lowest number of parts/skus (~10-15%) -B parts: medium inventory value (~25%), moderate number of parts/skus (~25%) -C parts: lowest inventory value (<15%), highest number of parts/skus (~60%

What are the 4 Process Types

1. Job Shop 2. Batch 3. Repetitive 4. Continuous

Characteristics of Job Shop

1. Low volume, high mix / variety of goods or services 2. Intermittent processing - small jobs, wide range of requirements, few similarities 3. High flexibility, general use equipment 4. Skilled workers needed due to range of requirements and general equipment 5. Usually results in high per unit cos

Goals of Lean Operations

1. Match supply to demand in a smooth, uninterrupted flow 2. Eliminate or reduce waste in all forms

Characteristics of Repetitive

1. Medium to high volumes, low mix / variety of goods produced 2. Goods are standardized to a great extent 3. Equipment is somewhat flexible 4. Worker skill level required is low - repeatable tasks, not a lot of variety in tasks 5. This is a good situation to use the mass customization strategy 6. Cost curves for this process are highly predictabl

Characteristics of Batch

1. Medium volume, moderate variety 2. Intermittent processing, but to a lesser extent 3. Less skill required than a job shop because there is less variety in jobs processed 4. Batch sizes present some opportunities for volume discount

What are the Inventory Functions?

1. Meet and satisfy customer demand 2. Smooth production requirements 3. Avoid stock outs 4. Take advantage of economic order quantities, volume discounts 5. Manage costs of materials, avoid or delay price increases 6. Support production requirement

Japanese Terms

1. Poka-yoke - fail safe or error proof - eliminate or reduce potential for errors in a process, ofteninvolves a tool or shop aid to ensure only the correct way will work 2. Kaizen - continuous improvement, continual reduction of waste 3. Kanban - a visual system, often uses cards to signal that more work is needed. Kanbans work asin a "pull" system, signaling or pulling the work to the next station. 4. Muda - waste or inefficiency, lean's goal is to eliminate waste

What is Considered an Inventory Cost?

1. Purchase cost - what was paid for the inventory 2. Holding costs - costs to carry item in inventory - usually annualized 3. Ordering costs - cost of purchasing and receiving inventory 4. Setup costs - cost of preparing equipment for a job 5. Shortage costs - cost of demand exceeding supply; opportunity cost, lost sales, factory shutdown

What are Types of Inventory?

1. Raw material 2. Work-in-process (WIP) 3. Finished goods 4. Tools and supplies (equipment) 5. Maintenance and repair (MRO) 6. in-transit (into and out of a production facility)

Characteristics of Continuous

1. Very high volumes, little to no mix changes, or consistent input like oil or waste water 2. Highly standardized 3. No equipment flexibility required because of the inputs' continuous flow 4. Manufacturing costs are low due to repetition and large economies of sca