Operations Management Final

Supply chain structural improvements

1. Forward and backward integration 2. Major process simplification 3. Change configuration of factories, warehouses or retail locations (can include supply base reduction, outsourcing, off-shoring 4. Major product redesign

Costs of Chase Strategy

1. Hiring and firing costs 2. Overtime and undertime costs 3. Subcontracting costs 4. Part-time labor costs

Costs of Level Strategy

1. Inventory carrying costs 2. Cost of stockout or back order

Lean systems

A system through which organizations seek to eliminate waste. Lean tenets: 1. Create product/service value from customer perspective 2. Identify, study, improve the value stream 3. Ensure simple, smooth, error-free flow 4. Produce only what is pulled by customer 5. Strive for perfection

Bottlenecks

A work center whose capacity is less than the demand placed on it and less than the demand of all other resources

Resilience

Ability to quickly respond to unexpected disruptions in supply or demand, either natural or manmade

Which of the following does the Supply Chain Operations Reference (SCOR) model NOT include?

All are included (Make, Deliver, Return)

Reducing setup time is important because it:

All of the above (Increases available capacity, increases flexibility to meet schedule changes, reduces inventory)

Backward or upstream supply chain flows include:

All of the above (Information, monetary payments, materials)

Economic Order Quanity

Calculation: - Ordering cost per year = SD/Q - Carrying cost per year = iCQ/2 - Total annual cost = SD/Q + iCQ/2 - EOQ = √2SD / iC Purpose: To find order quantity that minimizes total cost of managing inventory; used for independent demand items; answers question "How much should we order?" ; widely used and very robust

Weighted moving average

Calculation: Purpose:

Which of the following is a form of infrastructure change?

Changes in information systems

Q systems

Check inventory position each time there is demand (i.e. continuously) - If inventory drops below reorder point, place an order for the EOQ - Also called fixed-order-quantity system

Purchasing

Choosing suppliers, negotiating contracts, and managing buyer-supplier relationships

Supplier management - lean systems

Close relationship with suppliers - Frequent deliveries, co-location - Considered external factory - Fewer suppliers - Integrated supplier programs - Early supplier selection - Family-of-parts sourcing - Long-term strategic relationship - Reduce paperwork and inspection

Concerning outsourcing, which of the following is considered a qualitative cost?

Costs of work stoppages and supply chain disruptions

Capacity cushion

Cushion = 100% - utilization 3 strategies: 1. Large cushion (make-to-order) 2. Moderate cushion (cost of running out balanced w/ cost of excess capacity) 3. Small cushion (make-to-stock)

Cash-to-cash cycle

Days in inventory + Days in AR - Days in AP

The average cash-to-cash cycle is defined as

Days in inventory + Days in AR - Days in AP

Sourcing

Deciding if a product, part, or service should be outsourced or insourced by the firm. Establishes inputs for making products and services

Set-up time - lean systems

Goal: reduce set-up time. Results in: 1. Increases available capacity 2. Increases flexibility to meet schedule changes 3. Reduces inventory Setup types: 1. Single (single-digit minutes) 2. One-touch (less than 1 min; 2-step process) a. Internal (while machine stopped) b. External (while machine operating)

Lean emphasizes all of the following except:

Increased utilization of machines

Bullwhip effect (aka accelerator effect)

Increased variability in upstream orders, resulting in more inventory upstream.

Independent demand inventory

Influenced by market conditions outside the firm; independent of demand for any other inventory items (ie finished goods, replacement spare parts)

Which of the following is NOT a specific measure of supply chain performance?

Innovation

Which of the following is included in the supply chain risk mitigation framework?

Postdisruption recovery

Which of the following would typically carry the most weight in supplier selection decisions?

Price

Capacity utilization

(Actual output / Capacity) * 100%

Inventory carrying costs

- Cost of capital (market rate or internal rate of return) - Cost of storage (space, insurance, taxes) - Cost of obsolescence, deterioration, and loss (shrinkage)

Capacity strategies

- Large cushion (MTO) - Moderate cushion (cost of stockout & cost of excess inventory = balanced) - Small cushion (MTS)

Periodic review system (P)

- Review inventory level at fixed interval (P) - Inventory brought up to a target level - Order quantity varies according to demand - Also called fixed-order-interval system

Gantt Charting

- Scheduling multiple jobs through a set of work centers, minimizing completion time - Used to monitor progress of jobs - Optimal schedule can be computationally intensive for multiple jobs/multiple machines - Machine performance measures 1. Makespan = total time to complete a set of jobs 2. Machine utilization = percent of makespan time machine (or person) is used

Goals of sourcing

1. Access technology and innovation 2. Decrease total costs 3. Minimize risk of quality and delivery problems 4. Require social responsibility and ethical behavior

Supply chain system improvements

1. Cross-functional teams and partnerships w/ suppliers and customers to increase coordination 2. Lean systems for producers, suppliers and distribution 3. Integrated information system upstream and downstream

Measurement of supply chain performance

1. Delivery 2. Quality 3. Flexibility 4. Time 5. Cost

Measures of supply chain performance

1. Delivery 2. Quality 3. Flexibility 4. Time 5. Cost

Forms of waste

1. Overproduction 2. Waiting time 3. Unnecessary transportation (materials) 4. Excess processing 5. Too much inventory 6. Unnecessary motion (people) 7. Defects

SCOR functions (SCOR model)

1. Plan 2. Source 3. Make 4. Deliver 5. Return

Elements of lean system

1. Stabilizing the master schedule 2. Controlling flow with kanban system 3. Reducing setup time (quick changeover) 4. Small lot sizes (goal lot size of single unit) 5. Efficient layout (linear flow, low inventories) 6. Preventative maintenance 7. Cross-training, rewarding workers 8. Quality and continuous improvements 9. Close relationships with suppliers (frequent deliveries)

The seven forms of waste include all of the following except:

Bottleneck

The triple bottom line of supply chain performance refers to:

Environmental, social, and financial performance

5 Whys technique

Explores cause-and-effect relationships that underlie problems (root causes) - Enables root causes to be identified/resolved - Ask why until root cause is determined

Safety stock

Inventory that is maintained to protect against uncertainties (demand, supply, lead times, schedule changes)

Kanban - lean systems

Kanban = marker/sign - Pull production system - Visual control system of cards containers - Signals the need for more parts - Prevents build up of inventory - Reduces lead time - Extends to receiving - # of containers = DT / C - D = demand rate - T = time for container to complete circuit - C = container size (# units)

Which of the following is NOT true of vertical integration?

Leads to greater flexibility to changing technology

Materials handling, transportation, and warehousing are elements of:

Logistics

With regards to suppliers, lean systems typically require:

Long-term relationships and commitments

Commonly employed forms of supply chain structural improvement include all of the following EXCEPT:

Longer-term contracts

Spend analysis includes

Looking at what the company is buying, from whom, in what quantities, and at what price (?)

To reduce the risk of supply disruption, a company should:

Make sure single suppliers have multiple geographically separated locations

Capacity

Maximum output that can be produced over a given period of time

Supplier management in a lean system:

May require co-location of supplier goods close to plants that receive delivery

Sustainability

Meeting present needs without sacrificing the needs of future generations

5S Technique

Organize workspace to improve employee morale, safety, process efficiency 1. Sort 2. Straighten 3. Shine 4. Standardize 5. Sustain

Purpose of lean systems

Overarching purpose - to eliminate waste

One of the main objectives of a lean system is:

Reduction of waste

Managing quality in a lean system:

Requires continuously exposing and correcting quality problems

Facilities decisions

Short range: Medium range: Long range:

Re-order point

Tells when to order additional inventory. Reorder point is independent of EOQ (EOQ is how much to order, reorder point is when to order).

Dispatch rules

Specifies which job should be selected for processing next from among a queue of jobs 1. First come, first served 2. Priority rule 3. Preemptive rule 1. Critical ratio 2. Shortest processing time

Risk mitigation

Stage 1. Proactive plan Stage 2. Minimize damage during disruption Stage 3. Post-disruption recovery

Aggregate planning

Strategies: 1. Level strategy - Constant workforce size - Inventory as buffer 2. Chase strategy - Vary workforce size - Produce to meet demand - Typical for services

The design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer is called:

Supply chain management

Which of the following statements is NOT true regarding supply chain operations?

With perfect information at all levels of the supply chain, there will not be a bullwhip effect