Intro Supply Chain Exam 1
Which of the following is NOT one of the ways that carrying too much inventory can become a significant liability? Too much inventory ties up capital. More inventory means more space is needed to hold it, and space costs money. Holding more inventory usually means that a company can provide a higher level of customer service. Holding inventory too long may cause it to be unusable due to expiration, obsolescence, damage, or spoilage
Holding more inventory usually means that a company can provide a higher level of customer service.
Fixed-Time Period System
Inventory is checked in fixed time periods against a target inventory level. If the inventory is less than target, a quantity necessary to bring inventory back up to the target level is ordered. The amount of inventory ordered will potentially vary from period to period based on the remaining inventory at each time interval checked.
time bucket
Unit of time / time period used in MRP, e.g., days, weeks, months
Dependent Demand is demand for an item that is unrelated to the demand for other items, such as a finished product, a spare part, or a service part.
false
are the following absolute deviations correct? 500 (actual) - 300 (forecast) = 200 absolute 500 (actual) - 700 (forecast) = -200 absolute
no
The term "Logistics" refers to a network of independent companies that work together and coordinate their actions to deliver product(s) or service(s) to the market for the benefit of all companies in the network.
false
production lot size
The supplier may require the company to order an item in full production lot sizes
planned order release
Specific order to be released to the shop or to the supplier.
Mean Absolute Deviation (MAD)
a measure of the overall forecast error for a model
total market stockout
no inventory anywhere
which of the following is NOT one of the fundamentals of forecasting? -all trends will eventually end -the more "granular" the forecast is, the more accurate it is -technology is not the solution to better forecasting -a correct forecast does not prove your forecast method is correct
the more "granular" the forecast is, the more accurate it is
Functions of Inventory
1. meeting expected customer demand (cycle stock) 2. buffer against uncertainty in demand or supply (safety stock) 3. to decouple/separate supply from demand (strategic stock) 4. decouple dependencies in SC (strategic stock)
Types of Inventory systems
ABC system - company classifies categories based on importance A items (20% of total stock, 80% of income) - expensive/highest priority B/C items (80% stock, 20% income) bin system- uses 1 or 2 bins to hold quanitity of item (used for small or low value items) when first bin finished, go to 2nd until 1st is refilled base stock level system- whenever withdrawl is made from inventory, immediately replaced (for very expensive stock) single period model - inventory only ordered for a one time stocking, used to maximize profits (magazines/xmas trees)
A company that is adjusting the production rate and capacity to exactly match demand by increasing and decreasing labor, materials, or necessary resources as needed, is using which basic production strategy? Chase Production Level Production Minimal Production Full Capacity Production Hybrid Production
Chase Production
Which of the following is NOT one of the ways that carrying too much inventory can become a significant liability?
Holding more inventory usually means that a company can provide a high level of customer service
Bill of Materials (BOM)
One of the 5 primary inputs of MRP; a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product. single level: display components directly used in parent item w quantity required of each component (dependent & independent demand) multilevel: display of all components directly or indirectly used in a parent item, w the quantity required of each component planning ; artificial grouping of items in BOM format to facilitate master scheduling & master planning
Which of the following inventory types is characterized as "inventory used for a very specific purpose or future event, and for a defined period of time"?
Strategic Stock
Material Requirements Planning (MRP) requires all of the following EXCEPT? The parent-component relationships from the Bill of Materials (BOM) The Rough-cut Capacity Planning information The independent demand information, i.e., finished product forecast The Inventory status of final product and each of the components and materials
The Rough-cut Capacity Planning information
Unitization
The supplier may require the company to order an item in full pack, case, or pallet configurations
net requirements
The unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory.
When creating a quantitative forecast, if you detect a pattern of demand data that shows a movement of a variable over time. This is known as what type of variation? Random Variation - instability in data caused by random occurrences Cyclical Variation Trend Variation Seasonal Variation
Trend Variation Random Variation - instability in data caused by random occurrences cyclical variation - wavelike pattern that lasts longer than 1 year trend variation- movement of variable over time seasonal variation - repeating patterns of demand at certain points of year
tracking signal
a measurement of how well a forecast is predicting actual values, determines if forecast within acceptable control limited
Available to Promise (ATP)
calculation to provide a response to customer order inquiries based on product availability
bullwhip effect
erratic shifts in orders up and down the supply chain eliminate it by: collaboration, synchronizing SC, reducing inventory
forecast
estimate of future demand, want to minimize forecast errors short term forecast - less than 3 months (tactical decisions) medium term forecast - 3 months - 2years (used to develop strategy) long term forecast - greater than 2 years (used to detect trends) qualitative forecast - based on opinion, used when data is limited, best use for long-range forecasts quantitative forecast- math models & historical data,
For every forecasting problem, there is one best forecasting technique.
false
Qualitative forecasting techniques generally take advantage of the knowledge of experts and therefore do not require much judgement.
false
Service firms offer intangible products (meaning products that cannot be physically touched), therefore, they do not have a supply chain. (SC)
false
The Economic Order Quantity (EOQ) is the optimal order size because it maximizes the annual total inventory cost.
false
The most commonly used forecasting accuracy measures are Mean Absolute Deviation (MAD), Mean Multiple Regression (MMR), and Mean Absolute Percentage Error (MAPE)
false
S&OP If capacity is _______ than demand, firm may choose to increase demand
greater
Pegging
gross requirements for a component part to the planned order releases of the parent item
Which type of demand is forecasted -dependent demand -conditional demand -independent demand -tentative demand
independent demand
demand adjustments
influencing demand so it aligns to available production capacity
If capacity is _______ than demand, firm may subcontract a portion of workload to outside 3rd party
less
components
parts demanded by a parent
which term used in MRP is defined as the number/quanitity of each component or material needed to produce a single unit of the parent item -lot size -safety stock -net requirements -planning factor
planning factor
Capacity Planning
process of determining amount of production capacity needed by organization to produce goods or services required by its customers
projected available inventory
projected closed inventory @ end of period, beginning period - gross requirements + scheduled receipts + planned receipts from planned order releases
Companies that adjust the production rate and capacity to exactly match demand by increasing or decreasing labor, materials, or necessary resources, is using the Chase Production Strategy True False
true
The lowest inventory level at which a new order must be placed to avoid a stockout is known as the Reorder Point
true
The top two primary functions of inventory are to meet customer demand, and to buffer against uncertainty in demand and/or supply.
true
Continuous Review System
updates inventory balances after each inventory transaction
Firmed Time Period
- From the current date out several weeks into future - A Firmed Time Fence is established as the period when changes can no longer be made by the planning system - Changes during this period must be reviewed and approved
Planned Time Period
- From the end of the Firmed Time Period to the end of the planning horizon - The planning system is free to create or make changes to planned orders in this time period.
Production strategies
1. level production strategy - const. production rate, fluctuating demand, no increases for decreases in labor materials or resources, works well with Make to stock when skill level, cost of hiring & terminating is HIGH 2. chase production strategy- adjusts production rate & capacity to exactly match demand, Make to order, used when skill level or cost of hiring/terminating is LOW 3. hybrid production strategy - sets baseline production rate as close to demand, goal of minimizing costs while still meeting demand
Materials Requirement Planning (MRP)
A computer-based operations management system that calculates exact quantities, need dates & planned order releases for all component parts & materials
Resource Requirement Planning (RRP)
A long-range capacity planning module used to check whether aggregate resources (i.e., labor and manpower) are capable of satisfying the Aggregate Production Plan.
gross requirements
A time-phased requirement prior to netting out on-hand inventory and lead-time
Which inventory system classifies inventory based on the degree of importance in order to determine which inventories should be counted and managed more closely?
ABC System
Periodic Review System
An inventory system that is used to manage independent demand inventory where the inventory level for an item is checked at regular intervals and restocked to some predetermined level.
What is the term for the type of inventory system that issues an order whenever a withdrawal is made from inventory, and the replenishment order quantity is equal to the quantity withdrawn from inventory? Base Stock Level System Bin System Single-Period Inventory System ABC System
Base Stock Level System
To calculate the Economic Order Quantity, you need all of the following elements
Carrying Cost, Order Cost, Annual Demand Volume
parent
Item generating demand for lower-level components.
Which one of the following is NOT a type of qualitative forecasting? Jury of Executive Opinion Naïve Method Customer Survey Historical Analogy
Naïve Method Types are : personal insight, jury of executive opinion, delphi method, historical analogy, customer survey
Firmed Planned Order
Planned order that can be frozen in quantity and time so the MRP computer logic system cannot automatically change when conditions change.
MRP Explosion
Process of converting planned production of parent item into component gross requirements
The lowest inventory level at which a new order must be placed to avoid a stockout is known as?
Reorder Point
To calculate the Economic Order Quantity, you need all of the following elements, EXCEPT? Order Cost Reorder Point Annual Demand Volume Carrying Cost
Reorder Point
Which of the following is NOT one of the constraints on the practical use of EOQ? Unitization Obsolescence Production Lot Size Safety Stock
Safety Stock
Which of the following MRP terms represents a committed order awaiting delivery for a specific period? Net Requirements projected on-hand inventory Scheduled Receipt Time Bucket
Scheduled Receipt
One of the main differences between Barcodes and RFID is that Barcodes require direct line of sight to read the information, and RFID does not
True
Distribution Requirements Planning (DRP)
a time-phased finished good inventory replenishment plan in a distribution network
as the SC continues to evolve its critical for companies to -increase inventory levels throughout the supply chain -outsource their core competencies to trading partners that they can trust -adapt to emerging technologies and strategies
adapt to emerging technologies and strategies
which SC planning process is defined as a hierarchical planning process that translates annual business plans, marketing plans, and demand forecasts into a production -master production scheduling (MPS) -sales and operations planning (S&OP) -aggregate production planning (APP) -material requirements planning (MRP)
aggregate production planning (APP)
finished product inventory
allows to fill customer orders immediately
Which model is depicted in the following diagram? (top pic)
anticipatory/push model (make to stock) used for 95% of products
supply adjustments
change inventory levels, change capacity
which production strategy would you use if required skill level needed was low, the training requirements are low, and the cost of hiring and terminating people is low -level production strategy -chase production strategy -hybrid production strategy
chase production strategy
scheduled receipts
committed order quanitity delivery for a specific period
what are the 2 basic SC capability models? -effective model and resilient model -efficient model and resilient model -efficient model and responsive model -effective model and responsive model
efficient model and responsive model efficient model - large volume of product ASAP @ lowest cost (for functional products - lots of suppliers/competition, don't change much over time) responsive model- fast & flexible, respond quickly, dynamic market (innovative products - rapidly changing, great variety, unpredictable demand)
Pipeline Inventory
inventory that is created when an order for an item is issued but not yet received
Logistics vs Supply Chain Management
logistics- art & science of obtaining, producing, and distributing material & product in the proper place and quantities SCM - network of independent companies working together *logistics focuses more on your own organizations operations
SC is hierarchical: long range, intermediate range, short range
long range - planning for actions like construction of facilities (top management) intermediate range - shows the quantity& timing of end items (operations - middle management) short range - detailed planning process for components to support the MPS (operations - managers, supervisors)
Mean Squared Error (MSE)
magnifies the errors by squaring each one before adding them up and dividing by the number of forecast periods.
The business model that consists of producing finished products on the basis of anticipated demand is? -make to order -assemble to order -make to stock -just in time
make to stock - (PUSH model) used for 95% of products, producing finished product on anticipated demand before customer order adv. - product immediately available dis- high inventories (& money tied in) make to order - (PULL model) used for 5% of products, producing product AFTER customer order adv- customization possible dis- every order is rushed
capacity
max amount of work an organization is capable of completing in given time period
S&OP If capacity and demand are _______ emphasis should be placed on meeting demand as efficiently as possible
nearly equal
demand
need for particular product dependent demand - for products that is RELATED to other items or finished products, is calculated (ex. bike handles) independent demand- for products UNRELATED to other items, is forecasted (ex. finished bike)
Are the following two absolute deviations correct? (1) 500 Actual - 400 Forecast = 100 Absolute, (2) 500 Actual - 600 Forecast = -100 Absolute?
no
lot size
order size for MRP logic
The part of supply chain management (SCM) that deals with the process of moving goods specifically from the point of consumption back to the point of origin for return, repair, reclamation, remanufacture, recycling, or disposal, is known as
reverse logistics
What part of supply chain management (SCM) deals with the process of moving goods specifically from the point of consumption back to the point of origin for repair, reclamation, remanufacture, recycling, or disposal? -distribution -forward logistics -reverse logistics -freight forwarding
reverse logistics
which type of forecast variation involves a pattern of variation within one year that can be repeated from year-to-year? Typically has some period of considerably higher demand -trend variation -random variation -seasonal variation -cyclical variation
seasonal variation
Capacity Requirements Planning (CRP)
short range module used to check feasibility of MRP
The type of inventory that is used; to take advantage of a price discount, to take advantage of a business opportunity, or for life cycle changes, is known as
strategic stock
Safety Stock
the amount of inventory carried in addition to the expected demand (protects against fluctuations)
cycle stock
the amount of inventory needed to meet expected demand depleted gradually, replenished cyclically
What is supply chain management? SCM
the coordination of a network of independent organization all involved in creating a desired product or service, where the partners function together as one seamless organization 4 foundations - purchasing, operations, integration, distribution
What is a supply chain? SC
the group of firms that make and deliver a given set of goods and services
inventory
the quantity of goods or materials that a firm holds in stock 4 categories: raw materials - purchased items or extracted materials that are converted into components & products work in process - goods in various stages of completion throughout the plant, from raw materials to fully processed material awaiting final inspection finished goods - items that have been completed, products are available for sale & shipment to customer maintenance, repair and operation (MRO) - items used in support of general operations and maintenance service inventory- activities carried out in advance of the customer's arrival
lead time
time taken to produce product & transport to customer
Just-in-Time is a philosophy of manufacturing based on the planned elimination of all waste and continuous productivity improvement.
true
Supply Chain Planning is the element of SCM responsible for determining how best to satisfy the requirements created by the Demand Plan
true
Supply chain management (SCM) starts with understanding the flow.
true
The Economic Order Quantity (EOQ) is the optimal order size because it minimizes the annual total inventory cost.
true
The key disadvantages of the Material Requirements Planning (MRP) system include; loss of visibility, and the fact that MRP ignores capacity and shop floor conditions. True False
true
the master production schedule (MPS) represents -the maximum amount the company can produce in any time period -what the company plans to produce -what the customer wants -the component parts and materials required to manufacture a product
what the company plans to produce
safety stock
A quantity of stock planned to be in inventory to protect against fluctuations in demand or supply
Strategic Stock
Additional inventory beyond cycle and safety stock, generally used for a very specific purpose or future event, and for a limited period of time.
The process of converting a parent item's planned order releases into component gross requirements, is called? Bill of Materials Pegging MRP Explosion Lot Sizing
MRP Explosion
SC planning
SCM responsible for determining how best to satisfy requirements created by the demand plan
Inventory Management
The function of planning and controlling inventories, goal- be profitable by lowering costs or increasing sales
Tiers of SC
Tier 1 - supplier; manufactuter has DIRECT relationship Tier 2 (& on) - manufacturer has INDIRECT relationship to supplier
Which of the following is not one of the four reasons to hold inventory?
To avoid obsolescence
logistics is another name for transportation
false
the bullwhip effect occurs because suppliers and manufacturers do not make enough inventory to satisfy demand
false
Advanced Planning and Scheduling (APS)
A manufacturing management process by which raw materials and production capacity are optimally allocated to meet demand.
Rough-Cut Capacity Planning (RCCP)
A medium-range capacity plan used to check the feasibility of the Master Production Schedule. Converts MPS from the production needed to the capacity required, then compares it to capacity available.
Aggregate Production Plan
A period-by-period plan of production, workforce and inventory levels, used to establish production rates, planning for APP is at least 1 year
Costs for physically having inventory on-site, and for maintain the infrastructure needed to store the inventory and to secure and insure it over time are referred to as?
Carrying Costs
Costs for physically having inventory on-site, and for maintaining the infrastructure needed to store the inventory and to secure and ensure it over time, are referred to as? Fixed Costs Variable Costs Order Costs Carrying Costs
Carrying Costs
Obsolete Inventory
Inventory that can no longer be sold because the product has expired, been redesigned, was over-ordered, or is at the end of its product life.
MRO supplies (maintenance, repair, operating)
The everyday items that a company needs to keep running
obsolescence
The model may generate an order quantity that creates spoilage
storage capacity
The model may generate an order quantity which the company does not have storage for
Limited Capital
The model may generate an order quantity which the company does not have sufficient available funds to purchase at one time
Which of the following is NOT an example of an ordering cost for products purchased from a supplier? The cost of handling the product The cost of transmitting the order The cost associated with processing the invoice The opportunity cost of not ordering from a least cost supplier The cost of receiving the product
The opportunity cost of not ordering from a least cost supplier
Sales and Operations Planning (S&OP)
a process to develop tactical plans by integrating customer-focused marketing plans for new and existing products with the operational management of the supply chain
fixed order quantity
an order for the same amount each time
The Supply Chain Operations Research Model is? (SCOR) -produce, source, make, deliver, return and enable -plan, source, make, deliver/return, enable -plan, source, deliver, return, enable -plan, supply, make, distribute, enable
ans. produce, source, make, deliver/return, enable 1. plan - establishes parameters w how SC operates, 2. source- identifies suppliers, build good relationships w them 3. make- operations to convert materials to finished products 4. deliver- logistics phase, oversees planning & execution of forward flow of goods 5. return- reverse logistics , moving goods back to pt of origin, must create flexible network 6. enable- (happens throughout whole process), facilitate companies abilility to manage SC
Which one of the following is NOT one of the four Foundations of Supply Chain Management? (SCM) -operations management -supply management -integration -demand management -logistics management (warehousing, distribution...)
demand management
Costs related to inventory
direct - directly traceable to unit produced indirect - not directly traceable to unit produced variable - dependent on unit of volume produced vary 1 output level fixed- independent of unit volume produced carrying - costs for storing inventory on site order- labor costs associated w placing an order
which of the following is described as an information system connecting all the functional areas and operations of an organization via common software infrastructures and database? -distribution requirements planning system -enterprise requirement planning system -resource requirements planning system -advanced planning and scheduling system
enterprise requirement planning system
Companies in the Service Industry do not actually have a real supply chain (SC) because they offer intangible products.
false
The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services is known as Collaborative Planning, Forecasting, and Replenishment (CPFR)
false CPFR reduces Bull Whip effect, share forecasts among firms
Master Production Scheduling (MPS) is a process that brings all the demand and supply plans for the business (sales, marketing, development, production, sourcing, and finance) together to provide management with the ability to strategically direct the business to achieve a competitive advantage. True False
false MPS - represents what the company plans to produce
Which of the following is NOT a Time Series Forecasting Technique? -Simple moving average -naive forecast -historical analogy -weighted moving average
historical analogy naive forecast - sets demand for next time period to be exactly the same as demand in last time period simple moving average - uses a calculated avg of historical demand during speicifc # of recent time periods weighted moving avg- same as ^ but not all time periods are valued/weighted equally exponential smoothing - like WMA, but requires : last periods actual demand, last period forecast, a smoothing factor linear trend forecast- best fit line across demand data cause & effect forecast - simple linear regression, multiple linear regression
which of the following is NOT one of the advantages of Material Requirements Planning -facilitates lower inventory levels -helps to optimize the use of production resources and lowers costs -ignores capacity. focuses on what is needed and when regardless of capacity -on time availability of the right materials required for production
ignores capacity. focuses on what is needed and when regardless of capacity
Goals of supply chain management (SCM) -increase customer satisfaction through increased inventory and reduced operating expenses -increase customer satisfaction while reducing inventory and operating expenses -increase customer satisfaction while increasing
increase customer satisfaction while reducing inventory and operating expenses
Enterprise Requirements Planning Systems (ERP)
information system connecting all functional areas and operations of an organization and in some cases, suppliers and customers via common software infrastructure and database 2 types: 1. best of breed- picks best application for each individual function 2. single integrator solution- pick the desired applications from a single vendor
companies establish time fences to -limit the amount of time production planners have to create orders -measure how long it takes to produce products -minimize the impact of changes and costly disruptions
minimize the impact of changes and costly disruptions
Running Sum of Forecast Errors (RSFE)
provides a measure of forecast bias. RSFE indicates the tendency of a forecast to be consistently higher or lower than actual demand.
which forecasting techniques uses mathematical models and historical data to make forecasts -approximate -conditional -qualitative -quantitative
quantitative
a supply chain consists of (SC) -product flow and payment flow -suppliers, manufacturers, and customers -suppliers, manufacturers, and customers facilitated through the use of logistics -suppliers and customers
suppliers, manufacturers, and customers facilitated through the use of logistics
Cause and Effect Forecast models use the historical relationship between an independent variable and dependent variable to predict the future values of the dependent variable
true
companies today are focused on vertical integration encompassing the ownership and coordination of all supply chain activities while outsourcing their core competencies (SC)
false
Economic Order Quantity (EOQ)
quantitative decision model based on trade off b/w annual inventory order costs & carrying costs order costs- each time order placed carrying costs- for holding inven. in storage
