OPS Exam 3

what are some examples of uncertainty in service operations?

uncertainty in task times uncertainty in demand customers' production roles

when the order is held and filled at a later date when the inventory for the item is replenished

backorder

fixed-order quantity model

used to maintain an item "in stock" and when the item is resupplied, a certain # of units must be ordered each time inventory for the item is monitored until it gets down to a level where the risk of stocking out is great enough that we are compelled to order

the single-period model

used when making a one-time purchase of an item example: purchasing T-shirts to sell at a one-time sporting event

fixed-time period model

used when the item should be in stock and ready to use the item is ordered at certain interval sof time, for example every Friday morning convenient when a group of items is ordered together example: the delivery of bread to a grocery store

how can a firm keep accurate, up to date records?

using barcodes and RFID tags keeping storeroom locked convey importance of accurate records to all personnel cycle counting

responsive supply chains

utilize strategies aimed at being responsive and flexible

efficient supply chains

utilize strategies aimed at creating the highest cost efficiency

risk-hedging supply chains

utilize strategies aimed at pooling and sharing resources in a supply chain to share risk

lean warehousing

warehouse facility management that employs lean principles in order to streamline day to day operations

vendor managed inventory

when a customer allows the supplier to manage the inventory policy of an item or group of items

backflush

calculating how many of each part were used in production and using these calculations to adjust actual on-hand inventory balances, eliminates the need to actually track each part used in production

a process is ___________ when the mean and standard deviation of the process are operating such that the upper and lower control limits are acceptable relative to the upper and lower specification limits

capable

less stringent view of cost of quality:

considers only those costs that are the difference between what can be expected from excellent performance and the current costs that exist

non-value-adding activities

consume resources and do not directly contribute to the end result desired by the customer

outsourcing allows a firm to focus on activities that make up its ____________________

core competencies

Co =

cost per unit of demand overestimated

Cu =

cost per unit of demand underestimated

internal failure costs

costs for defects incurred within the system: scrap, rework, repair

external failure costs

costs for defects that pass through the system: customer warranty, replacements, loss of customers or goodwill, handling complaints

appraisal costs

costs of the inspection, testing, and other tasks to ensure that the product or process is acceptable

shortage costs

costs resulting when demand exceeds the supply of inventory often unrealized profit per unit

assignable variation

deviation in the output of a process that can be clearly identified and managed

common variation

deviation in the output of a process that is random and inherent in the process itself

ABC inventory classification

divides inventory into dollar volume categories that map into strategies appropriate for the category

in the context of supply chains, lean production refers to a focus on...

eliminating as much waste as possible

the two philosophies that the Toyota Production System was developed upon:

elimination of waste respect for people

total cost of ownership (TCO)

estimate of the cost of an item that includes all the costs related to the procurement and use of the item including disposing of the item after its useful life

fixed-order quantity models are "_______________________" and fixed-time period models are "___________________"

event triggered, time triggered

cost of quality (COQ)

expenditures related to achieving product or service quality, such as the costs of prevention, appraisal, internal failure, and external failure

what are some reasons to outsource?

financially driven reasons improvement driven reasons organizationally driven reasons

relates to how the customer views quality dimensions of a product or service

fitness for use

the tools common to all quality efforts are...

flowcharts, run charts, Pareto charts, histograms, checksheets, cause and effect diagrams, and control charts

agile supply chain

focuses on an organization's ability to respond to changes in demand with respect to volume and variety

ISO 9000

formal standards for quality certification developed by the International Organization for Standardization

products can be classified as either primarily ______________ or primarily _____________

functional or innovative

the Supply Chain Uncertainty Framework is designed to...

help managers understand the nature of demand for their products and then devise the supply chain that can best satisfy that demand

(A)

high dollar volume

there are 6 widely recognized modes of transportation:

highway, water, air, rail, pipelines, and hand delivery

what is the major differense between an RFP and a request for bid?

how the bid price is negotiated in the RFP, the bid is included in the proposal in a request for bid, vendors actually bid on the item in real time

inventory accuracy refers to...

how well the two agree

the benefits of a lean supply chain primarily are in the....

improved responsiveness to the customer

customer value

in the context of lean production, something for which the customer is willing to pay

holding costs

includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital

ownership costs

incurred after the initial purchase and are associated with the ongoing use of the product or material - energy costs - maintenance and repair - financing - supply chain

lean production

integrated activities designed to achieve high-volume, high quality production using minimal inventories of raw materials, work-in-process, and finished goods

distribution inventory

inventory is classified as in-transit, meaning that it is being moved in the system and warehouse, which is inventory in a warehouse or DC

ISO 14000

is primarily concerned with environmental management

how significant is the cost of quality?

it has been estimated at between 15 and 20 % of every sales dollar

what is the key difference between a fixed-order quantity model where demand is known and one where demand is uncertain?

it is in computing the reorder point -> the order quantity is the same in both cases

manufacturing inventory

items that contribute to or become part of a firm's product output typically classified into raw materials, finished products, component parts, supplies, and work in process

kaizen

japanese philosophy that focuses on continuous improvement

SQC can be applied to...

logistics, manufacturing, and service processes

external benchmarking

looking outside the company to examine what excellent performers inside and outside the company's industry are doing in the way of quality

(C)

low dollar volume

quality at the source

making the person who does the work responsible for ensuring that specifications are met

logistics

management functions that support the complete cycle of material flow: from the purchase and internal control of production materials; to the planning and control of work-in-process; to the purchasing, shipping, and distribution of the finished product

total quality management (TQM)

managing the entire organization so that it excels on all dimensions of products and services that are important to the customer

purist view of cost of quality:

means all of the costs attributable to the production of quality that is not 100% perfect

the root cause of supply chain problems is a ...

mismatch between the type of product and type of supply chain

(B)

moderate dollar volume

outsourcing

moving some of a firm's internal activities and decision responsibility to outside providers

what specific costs make up the cost of holding inventory?

obsolescence, insurance, and opportunity costs

inventory position =

on-hand + on-order - backorder

preventive maintenance

periodic inspection and repair designed to keep equipment reliable

the fixed-order quantity model is a _______________ system

perpetual

group technology

philosophy in which similar parts are grouped into families, and the processes required to make the parts are arranged in a specialized workcell group tech cells eliminate movement and queue time between operations, reduce inventory, and reduce the number of employees required

if safety stock is positive, the effect is to...

place a reorder sooner

weeks of supply

preferred measure of supply chain efficiency that is mathematically the inverse of inventory turn times 52

weeks of supply =

(average aggregate inventory value / COGS) x 52 weeks

increases in _______________ occur as a by-product of efforts to reduce the cost of quality

productivity

innovative products

products such as fashionable clothes and high-end personal computers that typically have a life cycle of just a few months

criteria that influence manufacturing plant and warehouse location planning

proximity to customers business climate total costs infrastructure quality of labor other facilities free trade zones political risk government barriers tradings blocs environmental regulation host community competitive advantage

attributes

quality characteristics that are classified as either conforming or not conforming to specifications

variables

quality characteristics that are measured in actual weight, volume, inches, centimeters, or other measure units

specificity

refers to how commonly available the material is and whether substitutes can be used

uniform plant loading

smoothing the production flow to dampen schedule variation

functional products

staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations

inventory is expensive mainly due to...

storage, obsolescence, insurance, value of money invested

the bullwhip effect indicates a lack of ________________ among supply chain members

synchronization

hub-and-spoke systems

systems that combine the idea of consolidation and that of cross-docking

In services, inventory generally refers to any ____ good and the ____ necessary to administer the service.

tangible, supplies

statistical process control (SPC)

techniques for testing a random sample of output from a process to determine whether the process is producing items within a prescribed range

safety stock

the amount of inventory carried in addition to the expected demand

inventory position

the amount on-hand + on-order - backordered quantities in the case where inventory has been allocated for special purposes, the inventory position is reduced by these allocated amounts

value chain

the concept that each step in the supply chain processes that deliver products and services to customers should create value

setup costs

the costs involved in preparing equipment for a job arranging specific equipment setups, filling out the required papers, appropriately charging time and materials, and moving out the previous stock of material

strategic control refers to...

the degree of loss that would be incurred if the relationship with the partner were severed

conformance quality

the degree to which the product or service design specifications are met

independent demand

the demands for various items are unrelated to each other

strategic sourcing

the development and management of supplier relationships to acquire goods and services in a way that aids in achieving the needs of a business

the optimal stocking level, using marginal analysis, occurs at the point where...

the expected benefits derived from carrying the next unit are less than the expected costs for that unit

transaction costs

the expenses of negotiating and executing a deal

design quality

the inherent value of the product in the marketplace

acquisition costs

the initial costs associated with the purchase of materials, products, and services they represent an immediate cash flow - purchase planning costs - taxes - financing costs - quality costs

the basis of lean thinking came from...

the just-in-time (JIT) production concepts pioneered in Japan at Toyota

what is one of the drawbacks to outsourcing

the layoffs that often result

ordering costs

the managerial and clerical costs to prepare the purchase or production order\include all the details such as counting items, calculating order quantities, maintaining the system needed to track orders are also included in ordering costs

dependent demand

the need for any one item is a direct result of the need for some other item, usually an item of which it is a part

waste-reduction

the optimization of value-adding activities and elimination of non-value-adding activities that are part of the value stream

freeze window

the period of time during which the schedule is fixed and no further changes are possible

logistics

the process of coordinating and moving material and other resources from one location to another

upper and lower specification limits

the range of values in a measure associated with a process that is allowable given the intended use of the product or service

inventory system

the set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be

the greater the safety stock...

the sooner the order is placed

inventory

the stock of any item or resource used in an organization

prevention costs

the sum of all the costs to prevent defects, such as the costs to identify the cause of the defect, to implement corrective action, train personnel, redesign the product or system, to purchase new equipment or make modifications

the bullwhip effect

the variability in demand is magnified as we move from the customer to the producer in the supply chain

value stream

these are the value-adding and non-value adding activities required to design, order, and provide a product from concept to launch, order to delivery, and raw materials to customers

price-break model

this model is useful for finding the order quantity of an item when the price of the item varies with the order size

optimal order quantity (Qopt)

this oder size minimizes total annual inventory-related costs

what is the purpose of classifying items into groups?

to establish the appropriate degree of control over each item

value-adding activities

transform materials and info into something the customer wants

k =

(expected demand during lead time + safety stock) / (size of the container)

DPMO =

(number of defects / number of opportunities for error per unit x number of units) x 1,000,000

lean suppliers

- able to respond to changes - prices are generally lower due to efficiency - deliver on time - culture built on continuous improvement

lean procurement

- key is automation - suppliers must be able to "see" into the customers' operations -customers must be able to "see" into their suppliers' operations

lean logistics

- optimized mode selection and pooling orders - combined multi-stop truckloads - optimized routing - cross docking - import/export transportation processes - backhaul minimization

lean manufacturing

- produce what the customers want, in the quantity they want, when they want it, and with minimum resources

lean customers

- understand their business needs - specify meaningful requirements - value speed and flexibility - establishing effective partnerships with suppliers

capability index

- used to measure how well our process is capable of producing relative to the design specifications - shows how well the parts being produced fit into the range specified by the design specification limits

name 4 of the 7 quality management principles that the ISO 9000 standards are based on

1) customer focus 2) leadership 3) involvement of people 4) process approach

the basic purpose of inventory analysis is to...

1) specify when items should be ordered 2) how large the order should be

the calculation of DPMO requires 3 pieces of data:

1. Unit - the item produced or being served 2. Defect - any item or event that does not meet the customer's requirements 3. Opportunity - a chance for a defect to occur

the costs of quality are generally classified into 4 types:

1. appraisal costs 2. prevention costs 3. internal failure costs 4. external failure costs

what are the six steps in green sourcing?

1. assess the opportunity 2. engage sourcing agents 3. assess the supply base 4. develop the sourcing strategy 5. implement sourcing strategy 6. institutionalizing the sourcing strategy

the 2 fundamental operational goals of total quality management:

1. careful design of the product or service 2. assurance that the organization's systems can consistently produce the desgin

what are the four types of supply chain strategies?

1. efficient supply chains 2. risk-hedging supply chains 3. responsive supply chains 4. agile supply chains

what three basic assumptions justify an analysis of the costs of quality?

1. failures occur 2. prevention is cheaper 3. performance can be measured

what are the three forms of ISO certification?

1. first party: a firm audits itself against ISO 9000 standards 2. second party: a customer audits its supplier 3. third party: a "qualified" national or international standards agency serves as an auditor

what are the 2 types of multiperiod inventory systems?

1. fixed-order quantity models (EoQ, Q-model) 2. fixed-time period models

in making any decisions that affect inventory size, the following costs must be considered:

1. holding costs 2. setup costs 3. ordering costs 4. shortage costs

benchmarking typically involves these steps:

1. identify processes needing improvement 2. analyze data

some examples of Toyota's respect for people

1. lifetime employment for permanent positions 2. maintain level payrolls even when business conditions deteriorate 3. company unions 4. bonuses 5. view workers as assets

what are the 5 S's in lean?

1. sort 2. set in order 3. shine 4. standardize 5. sustain

all firms (including JIT operations) keep a supply of inventory for the following reasons:

1. to maintain independence of operations 2. to meet variation in product demand 3. to allow flexibility in production scheduling 4. to provide a safegaurd for variation in raw material delivery time 5. to take advantage of economic purchase order size

7 types of waste (TIMWOOD)

1. transportation 2. inventory 3. motion 4. waiting (queues) 5. over processing 6. over production 7. defects (and rework)

a Six Sigma process that is running at the center of its control limits would expect this defect rate

2 parts per billion units

most retailers figure that the cost to carry the inventory of a given product for a year equals at least _________ % of what they paid for the product

25

the logistics business accounts for ______________ percent of the US gross domestic product

8 to 9

inventory turn =

COGS / Avg inventory value

the standard quality improvement methodology developed by GE

DMAIC cycle

T/F: it is generally believed that the correct cost for a well run quality management program should be under 5.5 percent

False, 2.5

T/F: a major problem with simple point-rating schemes is that they account for the wide range of costs that may occur within each factor

False, do not

T/F: the fixed-order quantity model has a larger average inventory

False, fixed-time period model

T/F: a kanban system produces zero inventory

False, it DOES NOT produce zero inventory

T/F: the best certification of a firm is through a first party audit

False, third party

________________ has become an international reference in business-to-business dealing

ISO 9000

TQM became a national concern in the US in the 1980s primarily as a response to ________________ quality superiority in manufacturing automobiles and other durable goods

Japanese

___ -charts and ______-charts are used to monitor attribute characteristics

P, C

T/F: overemphasis on acquisition cost or purchase price frequently results in failure to address other significant ownership and post-ownership costs

true

an alternative to viewing an item as simply good or bad due to it falling in or out of the tolerance range

Taguchi loss function

T/F: Six Sigma supporters see variation as the enemy of quality

True

T/F: Taguchi argued that being within specification is not a yes/no decision, but rather a continuous function

True

T/F: a product or service can have high design quality but low conformance quality, and vice versa

True

T/F: a rule of thumb says that for every dollar you spend in prevention, you can save $10 in failure and appraisal costs

True

T/F: companies with Six Sigma processes insist that a process making a part be capable of operating so that the design specification limits are six standard deviations away from the process mean

True

T/F: finished goods inventory is more expensive than raw material inventory

True

T/F: for many businesses, inventory is the largest asset on the balance sheet at any given time

True

T/F: functional products tend to have a more mature and stable supply process

True

T/F: in just in time manufacturing an ideal lot size or production batch is one

True

T/F: inventory records usually differ from the actual physical count

True

T/F: it is impossible to have zero variability

True

T/F: it is usually a good idea to try to keep inventory levels down as far as possible

True

T/F: lean production and Six Sigma work best in repeatable standardized operations

True

T/F: manual two-bin systems depend on human posting of the the transactions to replenish inventory

True

T/F: manufacturing operations, compared to service operations, are far more controllable

True

T/F: multiperiod inventory systems are designed to ensure that an item will be available on an ongoing basis throughout the year

True

T/F: strategic activities are a key source of competitive advantage

True

T/F: the ISO 9000 and ISO 14000 are standards that were originally published in 1987 by the International Organization for Standardization (ISO)

True

T/F: the centroid method assumes that inbound and outbound transportation costs are equal, and it does not include special shipping costs for less than full loads

True

T/F: the closer the customer order decoupling point is to the customer, the quicker the customer can be served

True

T/F: the factor-rating system is useful when nonquantitative factors are important whereas the centroid method is quantitative

True

T/F: the location decision for service facilities is closely tied to the market selection decision

True

T/F: the more off center the capability index, the greater the chance to produce defective parts

True

T/F: when inventory levels are low, quality problems become very visible

True

`T/F: the inventory management techniques describe in chapter 11 are MOST appropriate when demand is difficult to predict with great precision

True

T/F: a firm considers inventory an investment

True, the intent is for it to be used in the future

____-charts and _____-charts are used when the characteristic is a variable measure

X\, R

free trade zone

a closed facility (under the supervision of government customs officials) into which foreign goods can be bought without being subject to the payment of normal import duties

third-party logistics company

a company that manages all or part of another company's product delivery operations UPS, FedEx, DHL

value stream mapping

a graphical way to analyze where value is or is not being added as material flows through a process

trading bloc

a group of countries that agree on a set of special arrangements governing the trading of goods between member countries. companies may locate in places affected by the agreement to take advantage of new market opportunities

inventory turn

a measure of the expected number of times inventory is replaced over a year

defects per million opportunities (DPMO)

a metric used to describe the variability of a process

statistical quality control (SQC)

a number of different techniques designed to evaluate quality from a conformance view

cycle counting

a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year

sourcing

a process suitable for procuring products that are strategically important to the firm

evolving supply process

a process where the underlying technology changes rapidly

stable supply process

a process where the underlying technology is stable

continuous replenishment

a program for automatically supplying groups of items to a customer on a regular basis

level schedule

a schedule that pulls material into final assembly at a constant rate

kanban

a signaling device used to control production

request for proposal (RFP)

a solicitation that asks for a detailed proposal from a vendor interested in supplying an item

Six Sigma

a statistical term to describe the quality goal of no more than 3.4 defects out of every million units refers to a quality improvement philosophy and program

when the demand is not met and the order is canceled, this is referred to as.....

a stockout

centroid method

a technique for locating single facilities that considers the existing facilities, the distances between them, and the volume of goods to be shipped

forward buying

a term that refers to when a customer, responding to a promotion, buys far in advance of when an item will be used

what are the three main costs that should be considered in a TCO analysis?

acquisition costs, ownership costs, post-ownership costs

post-ownership costs

all costs related to the customer's use and disposition of a purchased item - disposal - environmental costs - warranty costs - product liability costs - customer dissatisfaction costs

international logistics

all functions concerned with the movement of materials and finished goods on a global scale

DMAIC

an acronym for the Define, Measure, Analyze, Improve, and Control improvement methodology followed by companies engaging in Six Sigma programs

factor-rating system

an approach for selecting a facility location by combining a diverse set of factors - point scales are developed for each criterion - each potential site is then evaluated on each criterion and the points are combined to calculate a rating for the site

cross-docking

an approach used in consolidation warehouses where, rather than making larger shipments, incoming shipments are broken down into small shipments for local delivery in an area

Malcolm Baldrige National Quality Award

an award established by the US Department of Commerce given annually to companies that excel in quality

fixed-time period (P-model)

an inventory control model that specifies inventory is ordered at the end of a predetermined time period, the interval between orders is fixed and the order quantity varies

fixed-order quantity model (Q-model)

an inventory control model where the amount requisitioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory

kanban pull system

an inventory or production control system that uses a signaling device to regulate flows

examples of when records and inventory may not agree:

an open stockroom area allows items to be removed for both legitimate and unauthorized reasons misplaced parts stock replenishments recorded as received when they never were

reorder point

an order is placed when the inventory position drops to this level

single-period problem

answers the question of how much to order when an item is purchased only one time and it is expected that it will be used and then not reordered

waste

anything that does not add value from the customer's perspective defective products, overproduction, inventories, excess motion, processing steps, transportation, and waiting