Chapter 7- The Conversion Cycle

inventory control system

-EOQ model- economic order quantity: designed to reduce total inventory costs -ROP - reorder point: lead time x demand time -Safety stock- additional inventories added to the reorder point to avoid unanticipated stock-out conditions.

Goals of the MRP (3)

-Ensure the adequate raw materials are available to the production process. -Maintain the lowest possible level of inventory on hand -Produce production and purchasing schedules and other information needed to control production

Benefits of the MRP II

-improved customer service -reduced inventory investment Increased productivity Improved cash flow Assistance in achieving long-term strategic goals Help in managing change Flexibility in the production process.

What's wrong with Traditional Accounting Info

1-Inaccurate Cost allocations 2-Promotes nonlean Behavior 3-Time Lag 4-Financial Orientation

Computer Numerical Control (CNC)

A numerical control method in which one computer is linked with one machine tool to perform NC functions.

ABC

Activity-based costing: accounting technique that provides managers with information about activities and cost objects

Value Stream Accounting

An accounting technique that captures cost data according to value stream rather than by department

BOM

Bill of materials: A structured list of all the materials or parts and quantities needed to produce a particular finished product, assembly, subassembly, or manufactured part, whether purchased or not. A "recipe" for final product

CAD

Computer Aided Design: use of computers to design products to be manufactured.

CAM

Computer aided manufacturing: use of computers in factory automation.

ERP

Enterprise Resource Planning: a system assembled of prefabricated software components

MRP II

Expanded approach to production resource planning, involving other areas of a firm in the planning process and enabling capacity requirements planning.

Toyota Production System (TPS)

Framework of concepts and methods to reinforce the health of companies. The 2 pillars are Jidoka and Just in Time

Electronics Data interchange (EDI)

Is an inter-company exchange of computer- processable business information in standard format.

MRP

Material Requirements Planning

just-in-time production (JIT)

Philosophy that addresses manufacturing problems through process simplification

Pull Processing

Principle characterizing the lean manufacturing approach where products are pulled into production as capacity downstream becomes available. Products are pulled from the consumer end (demand).

move ticket document

Records work done in each work center and authorized the movement of the job or batch from one work center to the next

EOQ formula

Sqrt( 2*(Cost per order)*Annual sales volume/ (Annual inventory carrying cost *Cost per unit))

production schedule

The calendar that shows the preproduction, production, and postproduction dates and who is doing what when and where.

Value Stream and Value Stream Map

Value Stream: includes all steps in the process that are essential to producing a product. Map: graphical representation of the business process to identify aspects that are wasteful and should be removed.

Principles of Lean Manufacturing

Waste Minimization Inventory Reduction Production Flexibility Established supplier relations Team Attitude

work order

a detailed document that illustrates all requirements of the event

Manufacturing Flexibility

ability to physically organize and reorganize production facilities and the employment of automated technologies

computer-Integrated

completely automated environment

Automated Storage and Retrieval System (ASRS)

computer-controlled warehouses that provide for the automatic placement of parts into and from designated places in a warehouse

islands of technology

describes an environment where modern automation exists in the form of islands that stand alone within the traditional setting.

Activity Driver

factor that measures the activity consumption by the cost object

Lean Management

improves efficiency and effectiveness in product design, supplier interactions, factory operations, employee management, and customer relations.

Route Sheet

lists the operations necessary to produce the component

MRP

materials requirements planning -a time-phased net requirements for assemblies and parts

materials requisition

request for the transfer of raw materials to the production floor

Product Families

share common processes from the point of placing the order to shipping the finished goods to the customer