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