WGU C720 Complete OA Prep Guide

The Theory of Constraints 5-step thinking process

1. Identify the system's constraint(s): Determine the bottleneck of improvement opportunity 2. Exploit the system's constraint: Ensure the bottleneck is at 100% capacity utilization or throughput. 3. Subordinate everything else to the above decision: Communicate the bottleneck 4. Elevate the system's constraint: Determine how to increase the bottleneck's capacity 5. If a constraint has been broken, go back to step 1. Do not allow inertia to cause a system's constraint. As indicated in the 5th step of the thinking process, TOC is about continuous improvement. Once one bottleneck has been identified and overcome, another constraint will become a bottleneck to the system.

Theory of Constraints (TOC)

5-step thinking process which helps a firm achieve optimal throughput in the current system, by identifying the bottleneck and coordinating the system around the bottleneck's capacity. Also helps identify ways of overcoming the bottleneck.

Kanban

A Japanese word that can refer to a sign or a marker and means "visible record." Most often associated either with the movement of a container of parts or with the production of parts to fill an empty container. Accordingly, two types of kanban are generally used, the conveyance kanban and the production kanban

Value Stream Mapping

A Technique used to analyze the flow of materials, ideas, and information to understand how processes function.

Third Party Logistics

A company outsources their distribution, warehousing, and fulfillment services.

Six Sigma

A continuous improvement strategy that relates to the firm's ability to produce error free products. Specifically - 3.4 defects per 1 million units. DMAIC o Define o Measure o Analyze o Improve o Control

Safety Stock

A cushion of inventory to protect against unexpected demand. In this way, they can continue to meet customer demand without delays.

Conveyance kanban, or C-kanban

A digital signal or electronic authorization to move a container of parts or replenishment of materials. E-kanban can also be used to authorize the production of parts or subassemblies. This is usually achieved by scanning barcodes with a mobile app or digital device to alert necessary parties of the materials needed.

Quantity discount model

A discount offered in price for ordering above a specified amount

Transportation discounts

A discount offered on shipping cost for ordering above a specified amount

Productivity

A mathematical calculation; it is the ratio of the outputs achieved divided by the inputs consumed to achieve those outputs.

Capacity

A measure of an organization's ability to sustainably provide customers with the demanded services or goods in the amount requested and in a timely manner, given current resources. Capacity also describes an organization's maximum sustainable rate of production.

Capacity Utilization

A metric, or measure, used to determine how much capacity is actually being used on an average basis. Capacity utilization = Actual Output / Design Capacity

Efficiency Rate

A metric, or measure, used to determine how much effective capacity is actually being used to achieve output. Efficiency = Actual Output / Effective Capacity

Durability

Ability of a product to function when subjected to hard and frequent use.

Reliability

Ability to perform the promised service dependably and accurately.

Material Requirements Planning (MRP)

Acomputerized information system used for planning and managing inventory for dependent demand items. Inputs include: Master schedule file, Bill of materials file, Inventory file. Deals with getting the right amount of raw material to the right place at the right time to support production. Systematically designed to plan for production and deliver product. MRP is widely considered to stop when materials are received

VIRAL

Acronym - A framework for competitive advantage. Viral, Inimitable, Rare, Aptitude, Lifespan. The advantage must provide Value to consumers; it should be Inimitable (not easily imitated), Rare, and an organization must have the Aptitude (capability) and Lifespan (sustainability) to earn appropriate returns on the advantage.

Match

Adds capacity in small incremental amounts in response to changing demands in the market

Lag

Adds capacity only after an organization is running at full capacity or is beyond due to increase in demand. This is the opposite of lead capacity strategy.

Lead

Adds capacity with the anticipation of an increase in demand. This strategy is considered aggressive and is primarily used in an effort to obtain customers from competitors by reducing the amount of lead time and improving service levels. Using this strategy ensures adequate capacity is available to meet all demands during high growth periods.

Adjustment

Adds or reduce capacity in small or large amounts as consumer demand changes; triggered by major changes to process or system

The Plan-Do-Check-Act Cycle

Also referred to as the Deming Wheel or Shewhart Cycle. o Plan - Make sure everything is documented and make a plan of action o Do - Implement the plan and document changes o Check - Analyze to see if goals have been achieved o Act - Standardize the changes and communicate the results. This is a cycle, back to the beginning.

Lead time

Amount of time it takes to plan, produce, and deliver a product

Strategic Alliance

An agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. Identify, Exploit, Subordinate, Elevate, Don't stop now.

Kaizen Event

An event to discuss process improvement opportunities using ideas from the people who are directly involved in the processes

Final Assembly Schedule

An exact statement of the _____ products that are to be assembled. ____________ is stated on a daily basis, but most often goes only about a week into the future

Value Stream Mapping

An overview of an entire process, from beginning to end, with regard to the VOC, and identifying what is required to meet the customer's needs.

Constraint

Any resource whose capacity is less than or equal to demand for that resource

Tangibles

Appearance of physical facilities, equipment, personnel, and communication materials, including access and effectiveness of Internet-based information.

Simple Moving Average

Applying a simple average based on a specific time period

Weighted Moving Average

Applying a simple average with based on a specific time period with assigned weights to each

Variable costs

Are those which change and can be adjusted as business conditions change

The master schedule or master production schedule (MPS)

Based on the "aggregated" plan. The master production schedule "disaggregates the aggregate plan" because it is a specific statement of exactly what will be produced and a specific date for production. The master schedule planning horizon is as long as the cumulative lead time of the product or product with the longest lead time. The MPS is usually between 12 and 16 weeks.

Time fences

Boundaries between periods in the planning horizon.

Economies of Scope

Can be expressed as "economies of scale through product line diversification." It implies building the volume necessary to cover fixed costs by producing a variety of products on the same equipment. Requires flexibility within the organization.

Product-oriented layout

Characterized by high demand for the same or similar products. Also called Sequential Layout.

Process-oriented layout

Characterized by the production of many different products with the same equipment and low volume of any individual product. Also called Functional Layout.

Six Sigma: Analyze

Charts and diagrams are used to visualize the measurements and the frequency of problems or defects, including scatter plots, pareto charts, histograms, and run charts. The main objective of the _________ phase is to determine the root causes of variation in the process that result in failures or defects.

Aggregate planning

Combining of individual end items into groups or families of parts for planning purposes.

Test Markets

Conducting a trial run with the product in a market region to determine forecast

Perpetual Inventory System

Continuously monitors inventory levels and is also called a continuous review system. Requires human input (i.e. cashier) and the ordering of more inventory is triggered by reorder point. o Requires an exact inventory balance at all times o Best for big businesses, retail stores, or banks o High value and high volume o Expensive to implement and maintain

Employee Empowerment

Defined as involving employees in every step--from product design, to process design, and system design. Creating a workforce of empowered employees can improve employee morale, organizational efficiency, product and service quality, and ultimately lead to higher customer satisfaction.

Sustainability

Defined broadly in operations and supply chain management as the ethical issues an organization faces to balance financial performance while maintaining social responsibility standards and a responsible environmental profile.

Conformance

Degree to which a product's design and operating characteristics match pre-established standards.

Seasonal Demand

Demand as shoppers adjust their purchase velocity in line with holidays, especially Christmas. But Halloween, Thanksgiving and even St. Patrick's Day also create seasonal demand for certain kinds of merchandise.

Chase Demand

Demand that occurs when a company has to adjust production by rates to match demand by varying the workforce and using overtime. Companies vary the workforce by adding or reducing the number of employees on duty at any given time. And they may choose to provide overtime by asking workers to stay on the job beyond their normally scheduled time.

Unexpected Demand

Demand which occurs due to a usually-unexpected event. For example, an underdog school may upset a favorite during the NCAA's basketball tournament, causing a run on their merchandise.

Peak Demand

Demand which occurs in response to planned events such as advertising, publicity or promotion. The release of a popular game franchise's latest version often causes peak demand for a few days or weeks.

Histograms (or box chart)

Demonstrate the frequency of data observations within a preset range of values.

Ishikawa

Developed Fishbone Chart (cause and effect diagram) Teamwork is essential for quality leadership Developed quality circles to solve problems lead by a champion (sr. manager) to oversee & approve

Internal orientation of quality

Directly measure characteristics of the product or service, such as the number of packages delivered on time or the thickness of an engine part based on manufactures specification.

Scatter Plot (diagrams)

Displays data as a relationship to show the correlation between two variables.

Supply chain

Encompasses all activities associated with the flow and transfer of goods and services, from raw material extraction through use by the final consumer.

External orientation of quality

Fitness for use for the customer or the capacity to satisfy customer's needs.

Juran

Focus was on the customer's perception of quality Quality must be built on three elements: o Quality planning o Quality control o Quality improvement. Focused on Fitness for use and Pareto Principle

Economic Order Quantity (EOQ)

For inventory that doesn't require production, when demand is constant and known, when cost per unit does not depend on order quantity. Most appropriate for retail stores or companies that order finished goods.

Economic Production Quantity (EPQ)

For inventory that will be used in production, When incremental ordering and depletion of inventory is allowed, Also called production order quantity. Most appropriate for manufacturing and production companies

Quantitative Methods (time series)

Forecasting technique using historical data to predict future. They are appropriate to use when past numerical data is available and when it is reasonable to assume that some of the patterns in the data are expected to continue into the future. Includes simple and weighted moving average.

Qualitative Methods

Forecasting techniques are subjective, based on the opinion and judgment of consumers and experts. They are appropriate when past data are not available. Most suitable for new products or products without historical data. Buildup method, Survey method, Test markets, Panel of experts

Medium-range Forecasts (operations planning)

Forecasts and operations planning that typically extend 6 to 18 months into the future

Run charts

Form of control chart plotted in real-time for processes that might have common features, a common scale, or some form of central tendency

Control charts

Graphical depictions of process output where the raw data is plotted in real-time within upper (UCL) and lower control limits (LCL).

Deming

Had a 14-point quality plan Statistical Process Control (SPC) "System" caused defects, not employees Endorsed the elimination of fear in the organization Modified Walter Shewart's Plan-Do-Check-Act (PDCA) to Plan-Do-Study-Analyze (PDSA)

ABC analysis

Has been developed to determine which inventory items should receive the highest level of control. By multiplying the dollar value of each item by its annual usage, a dollar usage value can be obtained. Dollar usage follows the Pareto Principle in that frequently, only 20% of all the items account for 80% of the total dollar usage, while the remaining items frequently account for only 20% of the dollar usage. This principle leads to the _____ classification, which is based on focusing efforts where the payoff is highest

Aesthetics

How a product looks, feels, sounds, tastes, or smells.

Six Sigma: Define

In this stage you _____ the problem or improvement opportunity. This stage includes: Project Charter, Voice of the customer, Value Stream Mapping.

Project Charter

Includes the scope of the project, the problem statement, time frame, boundaries, and team members.

Finished Goods

Items are ready to ship to the customer. No more work is required.

Independent demand

Items usually include finished products, such as the completed tricycle or replacement parts sold to customers.

Assurance

Knowledge and courtesy of employees and their ability to convey trust and confidence.

Reliability (quality of goods)

Length of time a product will function before it fails, or the probability it will function for a stated period of time.

Bill of materials (BOM)

Lists the materials needed and the quantities of each.

Six Sigma: Control

Maintaining and standardizing the improved performance through a _________ plan to document the requirements to reduce process variation. Another tool for ________ is the 5S methodology (sort, straighten, shine, standardize, sustain). The 5S methodology creates visual control of the workplace.

Logistics

Managing the movement of materials, components and information from point to point in the supply chain.

Just-in-time (JIT)

Manufacturing methodology aimed primarily at reducing flow times within production systems as well as response times from suppliers and to customers by receiving ordering and receiving inventory when ready for use or just in time for use. Fundamental Concepts include: Allows materials to flow in an assembly process similar to a continuous flow process Uses general-purpose machinery Produces in small batches or small lot sizes Uses a pull system Uses process facility layout Uses Kanban cards Produces in smaller batches and shorter planning horizons ( 2-3 months instead of 6-12) Simplifies the production process by: o Reducing set-up times o Having workers in close proximity o Using total preventive maintenance (preventing machinery breakdowns)

Group technology (GT) production system

May be used to make several different, but related, parts. Each part follows the same essential processing sequence. By keeping similar parts together, setup time is reduced, and the flow of materials is not interrupted.

Product facility strategy

Means that one facility is responsible for producing one product or product line and shipping that product throughout the country and the world. This approach is appropriate when the production process is complex and hard to control, such as making ceramic heat shields for spacecraft.

Cycle time

Measure of how often a particular product is made. Cycle time = working time per day/units

The goal of firms using the EOQ & EPQ model

Minimize the total annual costs of ordering and holding inventory by varying the order quantity.

ERP (Enterprise Resource Planning)

More robust data driven system that stems from MRP II. Used when all corporate data needs to be accessible to all employees.

Pull system

Moves materials through a system to work-stations as they are needed. Daily builds are scheduled only when there are orders for the products.

Push system

Moves materials through the processing operations based on a schedule. Uses a master schedule to plan builds out in time, and parts (raw materials, subassemblies, etc.) are ordered based on this build plan.

Capacity planning

Needed to support customer demand and maintain production capacity as demands for products change

Level Assembly Schedule

Number of units of each end product produced at a time is as small as possible, and that total production of each matches average demand during the scheduling horizon.

Stock Out

Occurs when inventory is depleted.

MRP II - Manufacturing Resource Planning

Often called manufacturing resource planning, builds on the foundation of MRP. Also includes production planning, machine capacity scheduling, demand forecasting and analysis and quality tracking tools into the mix. Also features tools for tracking employee attendance, labor contribution and productivity, project management, inventory management, service and maintenance, and transportation

Pareto Principle

Only 20% of all the items account for 80% of the total dollar usage, while the remaining items frequently account for only 20% of the dollar usage. This principle leads to the ABC classification, which is based on focusing efforts where the payoff is highest

Vertical Integration

Owning multiple assets in a supply chain.

Supplies

Parts or materials are used to support the production process but not usually a component of the product. These items, such as lubricant and cutting tools, are consumed in the production process.

Inputs

People, capital, material, money

Time-bucket

Period of time, usually one week, in which demand and requirements are grouped for master scheduling and material requirements planning.

Total Quality Management (TQM)

Pertains to: focus on the customer, quality function deployment, responsibility for quality, team problem solving, employee training, fact-based management.

Long-range operations planning

Planning for facility location, technologies, and capacity that typically extends 5 to 10 years

Performance

Primary operating characteristics of a product.

Benchmarking

Process by which a company compares its performance to the performance of other companies.

Forecasting

Process of making predictions of the future based on past and present data and most commonly by analysis of trends. Steps include: o Determine the objectives of the forecast o Develop and test model o Applying the model - Consider real-world constraints on the model's application o Revising and evaluating the forecast

Reverse Logistics

Process of returning defective products to the manufacturer for repair or replacement, and/or efforts to reuse and recycle materials.

Assembly Line

Process selection most appropriate to produce high volume with little to no variation. Uses product facility layout (i.e. car manufacture)

Continuous Flow

Process selection most appropriate to produce high volume with no variation. Uses product facility layout (i.e. oil refinery). Also called continuous inventory flow

Batch Flow

Process selection most appropriate to produce high volume with some variation. Uses product facility layout: requires equipment or tool changes

Job Shop

Process selection most appropriate to produce low volume with little to high variation. Uses process facility layout (i.e. customized furniture)

Empathy

Provision of caring, individualized attention to customers.

Periodic Inventory System

Randomly monitors inventory levels and is also called the fixed order interval system. o Requires a physical count periodically o Used when a supplier will only deliver at specific time intervals o Low value and volume o Used for small businesses o Inexpensive to implement and maintain

Just in Time 2 (JIT II)

Relationships with suppliers are further strengthened beyond vendor managed inventory in which the supplier places a representative on the customer's site that is dedicated to the customer's products only. Although an employee of the supplier, this person is authorized to purchase material for the customer.

Pareto charts

Represents data values in a descending (highest to lowest) order to visualize the most frequent occurrences.

Regional facility strategy

Requires that each production facility has a defined marketing area and each facility produces a complete line of products for that area. This is often done when customer convenience and access are important, or when outbound transportation costs are very high.

Features

Secondary characteristics that supplement the product's basic functioning.

Outputs

Services and goods

Cause-and-effect diagrams or fishbone diagrams or Ishikawa diagrams

Show the impact of various inputs into the result of a process. They help organizations isolate the root causes of problems such as bottlenecks in their processes.

Panel of Experts (Delphi Technique)

Soliciting info from people who are knowledgeable about the subject being considered to determine the forecast

Serviceability

Speed, courtesy, and competence of repair.

Buildup Method

Starting at the bottom of the organization and working to the top to solicit info to determine forecast

Total Cost Formula

TC = VC(x) + FC o VC = variable cost o x = number of units o FC = fixed costs. Total Cost = variable cost * number of units plus fixed costs.

Supply Chain Management

Taking actions to have all members of the supply chain work together to coordinate their activities and share information

Quality Function Deployment (QFD)

Taking customer expectations and transforming them into specific actions designed to meet those expectations

Economies of scale

The ability to produce more goods at a lower cost by better utilizing the same fixed costs.

Six Sigma: Improve

The current process is changed by addressing the root causes identified to ________ process performance through simulations, or in real-time through Design of Experiments (DOE). Often made through kaizen teams.

Outsourcing

The goods and services are obtained from outside suppliers

Insourcing

The goods and services are provided by the organization itself

Perceived Quality

The image, advertising, or brand name of a product.

Design capacity

The maximum achievable output of a process or system.

Effective capacity

The maximum capacity given the product mix, equipment changeovers, and scheduled downtime of the production schedule. Always less than design capacity.

Throughput

The maximum rate of output possible

Check sheets

The means used to record data points in real-time at the site where the data is generated. This is often the first tool used to assess a process and often the data is "raw" meaning it is straight from the source and without any interpretation.

Bottleneck

The most limiting constraint on the system

Facility location

The placement of a facility with regard to a company's customers, suppliers, and other facilities with which the company interacts based on quantitative and qualitative factors. Quantitative factors are easily measurable and are usually assigned a numerical value, while qualitative factors are more subjective and are usually not enumerated.

Transportation (pipeline):

The portion of inventory that is in the process of being shipped through the distribution system.

Dual Card Kanban

The two-kanban system, which combines the C-kanban and the P-kanban, is known as a dual-card kanban system. Its major advantage over single-card kanban is that it allows greater control over production, as well as over inventory, because both production and withdrawal of inventory are directly connected to need.

Agile

The use of responsiveness, competency, flexibility, and quickness to manage how well a supply chain entity operates on a daily basis. Suitable for innovative products like cell phones and computers. Focus: Speed and flexibility. For products with short lifespan and unpredictable demand.

Statistical process control (SPC)

The use of statistical methods to determine when a process that produces a good or service is getting close to producing an unacceptable level of defects.

Vendor Managed Inventory

The vendor, or supplier, can better coordinate its own production with the replenishment of supplier inventory, thus reducing costs and improving delivery performance between the supplier and the retailer. To make this work, the suppliers receive daily point-of-sale (POS) data from the retail stores, and they also have access to the retailer's inventory files.

Replacement parts inventory

These are maintained to replace other parts in machinery or equipment as those parts wear out

Work-in-process (WIP)

These are partly finished parts, components, sub-assemblies, or modules.

Raw Materials

These parts and materials are obtained from suppliers and are used in the production process.

Voice of the Customer (VOC)

This is includes feedback regarding characteristics that are critical for satisfaction of the customer.

Six Sigma DMADV

This is used specifically for new products or processes and is also known as Design for Six Sigma (DFSS). The five steps of DMADV are summarized as: o Define o Measure o Analyze o Design o Verify.

Actual Output

Total amount produced during a given time period.

LEAN

Traditional "factory" chain, which focuses on producing high volume at low cost. The goal is to add value for customers by reducing the cost of goods and lowering waste or non-value added activities. Most suitable for traditional products with minimal innovation such as curtain rods or can openers. Focus: Eliminate waste and reduce costs. For products with long life cycles and stable demand.

Taguchi

Used Robust Design Parabolic Quality Loss Function Perfecting of experiments to create higher quality products and processes Argues that quality must be designed into a product

Crosby

Used the phrase "Do it right the first time." Wrote a book in 1979 entitled "Quality is Free" Concept of zero defects as a measurable object Emphasized the importance of considering all costs of quality

Survey Method

Using questionnaires, phone interviews, or the internet to solicit info to determine forecast

Dependent demand

Usually demand for an item that is generated by a company's production process.

Revenue Sharing

When 2 or more companies partner and divides the profits received based on an agreement between all parties involved.

Forward Vertical Integration

When a company owns the retailer or retail process in the supply chain.

Backward Vertical Integration

When a company owns the supplier or supply process in the supply chain.

Reserve Capacity

When a company stores, or pays another company to store, excess inventory to be used for unexpected demand

Responsiveness

Willingness to help customers and provide prompt service.

Six Sigma: Measure

__________ current state or "as is", process performance is accomplished with a process map of the activities performed at each step of the process. Each step is assessed to determine the ability to meet customer specification in a capability analysis.

MPS Inputs

o Demand Forecast o Inventory Level o Customer Orders o Production Capacity o Inventory/Production Costs

4 Types of Demand

o Peak o Seasonal o Unexpected o Chase

6 Types of Inventory

o Raw Materials o Work In Progress o Finished Goods o Replacement Parts Inventory o Supplies o Transportation

Quality

the degree to which a specific product conforms to its design characteristics or specifications The amount of a specific, desired attribute The capacity to satisfy customers' needs Consistently meeting or exceeding the customer's needs and expectations Is everyone's responsibility in the organization