SCM 301 Exam 1

forecast laws

1. Forecasts are (almost) always wrong 2. The future gets harder to predict as the time horizon moves further ahead 3. Predictions for a group of products are more accurate than those for individual items 4. Forecasts must not substitute calculated values when these are available

Marketing Research, Delphi Method

A firm has a new service idea, which has no current customers. The firm has no prior experience in this area. It wants to test the idea before committing the resources. The firm has resources to invest in two judgment forecasting techniques. Which of the following techniques will provide a rational forecast in this scenario?

fixed-position layout

A manager is overseeing the assembly of a ship on a shop floor. All the parts and components of the ship are brought together to the location where the assembly takes place. This scenario is an illustration of a:

strategic profit model

A model that shows how operational changes affect the overall performance of a business unit

serial structure

A process structure where the activities occur one after the other in sequence is called a(n) _____.

false (Although the product-process matrix can be used to describe services, it does not address the fact that customers often participate in service processes.)

A product-process matrix can be used to address the fact that customers often participate in service processes.

overutilization

An effective operations manger has to maintain the balance between maintaining his capacity utilization while avoiding unsustainable

learning curve

As the production volume doubles, the labor hours required decrease by a constant proportion. This is known as _____.

economies of scale

As the production volumes increase with addition of capacity, the unit costs to produce a product decreases to an optimal level. This is known as the _____.

yes (when the feature becomes standard among competitors)

Can an order winner become an order qualifier eventually?

need for extra capacity resources, backlog, customer dissatisfaction, system buffering

Fluctuating customer demand causes operational inefficiencies, such as: (these are the reasons why there is demand management)

exponential smoothing

In the _____ approach, an exponentially smaller weight is applied to each demand that occurred farther back in time. forecasting technique that computes a weighted average of the current actual demand and forecast; includes alpha ex: alpha = 0.7; Forecast for F5 = 2630; Actual Demand for F5 = 2264 F6 = 0.7 x 2264 + 0.3 x 2630 = 2373.8

grassroots forecasting

It a technique that seeks inputs from people who are in close contact with customers and products.

executive judgement

It is a technique used by high-level managers for long-term sales and business patterns.

internal

SCOR model: basic level of performance where the customer DOES not see the service; inward facing includes: - costs (all fixed and variable costs of the supply chain) - asset management (effectiveness of assets in supporting demand fulfillment)

external

SCOR model: basic level of performance where the customer observes the service; outward facing includes: - delivery reliability (right product, right place, right time) - responsiveness (supply chain velocity to customer) - flexibility (ability to respond to change)

true

System buffering means has three different ways of buffering to cushion demand: capacity (bigger plant), time (quicker), and inventory (more inventory produced)

executive judgement

The chairman of a company has an idea for a new product. Which of the following forecasting techniques can be used in this scenario?

bottleneck

The constraining activity in a process that limits the overall output is called a: ________

law of variability

The further the you move the customization point downstream, the more productive you become (make to stock is the most productive whereas engineering to order is the least productive)

strategic capacity change

The manager of a manufacturing unit decides to outsource a certain part of the firms production as it is economical to do so. In this scenario, the manager's decision to outsource is an example of a(n) _____.

theory of constraints

The principles that every process must be managed as a system and that performance measures are crucial to a process's success are the basic principles of the

order qualifier

The product traits such as availability, price, or conformance quality that must meet a certain level (at least as well as competitors' offerings) in order for the product to even be considered by customers fall under the _____ category.

order winner

The product traits that cause a customer to choose a product over a competitor's offering fall under the ________ category

marketing research

This approach bases forecasts on the purchasing patterns and attitudes of current or potential customers.

historical analogy

This approach to forecasting uses data and experience from similar products to forecast the demand for a new product.

linear regression

Using time series or CAUSAL modeling to find explanations for observed demand behavior ex: hedge fund type shit seeing the average temperature and how many dairy queen ice creams are purchased

flexible manufacturing system

a combined automated machines, robots, and materials handling system that is controlled by a single computer.

timeliness

a dimension for product-related outcome, is associated to the degree to which a product is delivered or available when the customer wants it

naive model

a forecasting approach that simply assumes that tomorrow's demand will be the same as today's. assumes demand for the current period as a forecast for the next period forecast for the next period = demand for the current period

SCOR (Supply Chain Operations Reference) Model

a model for assessing and describing supply chain processes and their performance identifies basic management practices for benchmarking and strategy deployment applicable to any industry

project

a one-time or infrequently occurring set of activities that create outputs within prespecified time and cost schedules. one-of-a-kind very hard to move products; highly flexible resources moved to where needed, finite duration a. extremely tied to the type of product b. mainly linked to a product that is too big, bulky products c. unmovable products d. one-of-a-kind products Advantages: high product customization capability Disadvantages: very high cost per unit ex: construction projects, shipbuilding

repetitive process

a process in which discrete products flow through the same sequence of activities. process type of a product-process matrix in which all products follow the same sequence, standard materials and methods are used, and low-skilled workers specialize in completing a limited number of activities; product based layout a. standardized products b. product based layout: things are set up sequentially and run down line towards completion c. specialized equipment and workers d. high volumes e. paced tasks f. married to the product Advantages: low variable costs, high volume, routine planning Disadvantages: high fixed costs, low flexibility ex: car manufacturing, fast food

back office process

a process that is not seen by the customer.

parallel structure

a process where there are two or more resources doing the same task simultaneously.

core competency

a set of knowledge and skills that make the organization superior to competitors and create value for customers ex: Nintendo focusing on understanding the market and developing video games instead of worrying about operating its supply chain internally)

effective capacity

achievable level under normal conditions, for an extended time; reality

forecasting

activities integrate information gathered from the market, from internal operations, and from the larger business environment to make predictions about future demand. predicting customer demand

Little's Law

an empirically proven relationship that exists between flow time, inventory, and throughput inventory in the system (work in progress) flow time (how long does it go from inputs to finished goods) throughput rate (volume of output per unit of time) Inventory = Throughput Rate x Flow Time

push

anticipation; predicting how many customers will order the product; typically you produce inventory in advance and hope that the demand for the product matches the amount of inventory you made benefits: timeliness, availability

weighted moving average

assigns different weights to each period's demand based upon its importance weights add up to one and typically use fractional values ex: 3 period; Jun (W1) = 0.6, May (W2) = 0.3, Apr (W3) = 0.1 280 x 0.6 + 177 x 0.3 + 221 x 0.1 = 3 Month WMA

zone of nonservice

bad place; lamda is greater than mu (rho is greater than 100%); more people are arriving at your facility than you can actually serve

qualitative forecasting

best when sufficient reliable data is not available often primarily on intuition and experience; includes: grassroots (ppl in close contact with customers/products) market surveys (input from potential customers) executive judgement (input from experts; better for LT sales or business patterns) delphi method (asking a panel of experts)

true

cost efficiency and responsiveness have a tradeoff, the more cost efficient you are, the less responsive you probably will be

engineer to order

customization point that is UNIQUE, customized products

make to stock

customization point that is goods made and held in inventory in advance of customer orders

assemble to order

customization point that is produced from standard components and modules when customization occurs AT THE END of PRODUCTION

make to order

customization point that is similar design, customized during production

cost

defined as the expenses incurred in acquiring and using a product. expenses incurred in producing, distributing, and selling the product the key factor in the classic manufacturing process

speed

delivery or availability when and where the customer wants

autocorrelation

describes the relationship of current demand with past demand. If values of demand at any given time are highly correlated with demand values from the recent past, then we say that demand is highly aurocorrelated

quality

fitness for consumption or use in terms of meeting customer needs or desires

job shop

flexible process structure for products that require different inputs and have different flows through the process. a. customized products b. functional layout: things that are set up in stations throughout facility, not a sequential way c. broadly skilled workers able to adjust tasks to customer's needs Advantages: high variety of products, one-of-kind product items, low fixed costs Disadvantages: slow, high variable costs, complex planning ex: gourmet restaurant, commercial printer, custom bicycles, catering company

eaches

for job shop, batch, and repetitive processes, these units can be considered ________. They are the most common choices for discrete (noncontinuous) processes.

process

forecasting is considered a _______

functional layout

groups together similar resources.

leader strategy

have capacity a size-able amount of demand; capacity is set to be higher the demand making sure that you have more than enough capacity to make demand risks that inventory may not be used if there is not enough demand

laggard strategy

have capacity trail behind demand; increase it in steps as needed ensures that whatever capacity that you are paying for is getting used to generate revenue very high utilization of capacity disadvantages: shortages, missed business opportunity

demand planning

helps operations managers know what customers they should serve and at what levels of service? both forecasting and managing customer demand to reach operational and financial goals

responsiveness

how quickly can the company provide and deliver the service to the customer

value proposition

is a collection of product and service features that are both attractive to customers and different from what the competitors offer. "why would someone choose you over your other competitors?" fulfills company's strategic objectives

continuous process

is a single-flow process that is used for high-volume nondiscrete, standardized products. the process type of a product-process matrix in which all products follow sequence, operations often run 24/7, line stoppages are very costly, and highly specialized equipment and low-skilled operators are used. a. extremely tied to the type of product b. automated flow-based products, not individual products c. continuous in nature d. highly standardized e. specialized equipment Advantages: very low variable costs, high volume, routine planning Disadvantages: very high fixed costs, low flexibility ex: oil-refinery, paper pulp production, public utilities

utilization

is defined as the percentage of process capacity that is actually used.

maximum capacity

is the highest level of output that a process can achieve under ideal conditions in the short term. highest achievable level under ideal conditions, for a limited time; the UTOPIA of capacity

yield rate

is the percentage of units successfully produced as a percentage of inputs.

forecast error

is the unexplained component of demand that seems to be random in nature. Et = Actual Demand - Forecast shows whether you overestimated (negative) or underestimated (positive) demand

choice, product

job shop, batch, and repetitive manufacturing processes are all oriented around _________. Whereas project and continuous flow processes are oriented around ________.

rate of arrival of customers

lambda =

customization

occurs when a customer's unique requirements directly affect the timing and nature of operations and supply chain activities

true

process capacity is not the volume of output, but it is the rate at which that volume is produced; capacity = volume/time ex: 300 tons of paper *per day* is the capacity of Dunder Mifflin (need to know the timeframe)

pull

reaction; waiting until customer places the order and then producing inventory accordingly; no guessing involved, just match inventory with demand benefit: don't overproduce inventory disadvantage: longer delivery speed ex: Boeing

process capacity

refers to the limit or the amount of output per period of time that a process can generate or store given a level of inputs and resources. the ability of a worker, machine, work center, plant, or organization to produce output *per period of time.* It determines the ability that a firm has to meet demand (time and volume) for its goods or services establishes the rate of output that a firm can produce; SPECIFIES resources necessary to do so

product layout

resources are arranged according to a regularly occurring sequence of activities.

moving average (simple)

simple average of demand from some number (Demand 2020 + Demand 2019 + Demand 2018) / 3 year = 3yr MA (Jun + May + Apr + Mar + Feb + Jan) / 6 months = 6 mth MA

core capabilities

skills, processes, and systems that are unique to a firm and that enable it to deliver products that are both valued by the customer and difficult for competitors to imitate.

lead time

the amount of time that passes between the beginning and ending of a set of activities

mean absolute percent error (MAPE)

the average error represented as a percentage of demand. the Mean Absolute Deviation (MAD) adjusted to measure how large errors are relative to the actual demand ex: E (mar) = 100; E (apr) = -100; D (mar) = 300; D (apr) = 300 MAPE = [ |100| / 300 x 100% + |-100|/300 x 100% ] / 2

mean absolute deviation (MAD)

the average size of forecast errors, irrespective of their directions; allows you to measure accuracy but not bias or order of magnitude Takes the absolute value of the mean forecast error ex: E (mar) = 100; E (apr) = -100 MAD = ( |100| + |-100| ) / 2 = 100 ---> on average, you are off by 100

key customer

the customer or customer segment receiving priority because it is highly important to the firm's current and future success.

cost efficiency

the inverse of the cost associated with making and delivering the product to the customer

forecast accuracy

the measurement of how closely the forecast aligns with the observations over time. how closely forecast aligns with demand

throughput rate

the output rate that the process is expected to produce over a period of time

theory of constraints

the overall management system that strives to improve system performance by identifying, focusing, and managing constraints. A specific approach used to identify and manage constraints in order to achieve the company's goals. the output rate of a supply chain process is constrained by the step/station with the lowest capacity (bottleneck)

customer contact

the presence of the customer in a service process.

demand management

the process of changing demand patterns using one or more demand options INFLUENCING customer demand use pricing, promotions or incentives to influence timing or quantity of demand encourage shifting to alternate products manage timing of order fulfillment

cellular manufacturing

the production of products with similar process characteristics on small assembly lines called cells increases flexibility and lowers lead time and costs

tracking signal

the ratio of a running total of forecast error to MAD that indicates when the pattern of forecast error is changing significantly. proportion of bias to accuracy ∑ (D - F) / MAD considered normal if in the [-4, 4] range

perfect order fulfillment, order fulfillment lead time

the supply chain manager has decided to use SCOR model metrics to help assess their supply chain performance. Their goal is to build a robust balance between internal-facing and external-facing metrics. Which among the following SCOR metrics they selected are external-facing? A. perfect order fulfillment B. Cash-to-cash cycle time C. Asset turnover D. Order fulfillment lead time E. Returns processing costs

cycle time

the time a unit spends being processed at a given operation in the overall process.

flow timeterm-57

the time it takes one unit to get through a process.

true

there is a tradeoff between quality, speed, and cost (hard to maximize all three)

delphi method

this approach develops forecasts by asking a panel of experts to individually respond to a series of questions.

time series analysis

this method extrapolates forecasts from past demand data

causal studies

this method looks for causal relationships between lending variables and forecasted variables

simulation models

this method tries to represent past phenomena in mathematical relationships and then evaluate data to project future outcomes

artificial intelligence

this method uses a smart computer program to learn from a combination of causal and simulation analyses using a wide array of data

batch process

type of process in which goods or services are produced in groups and not in a continuous stream moderate volumes and variety production occurs; functional layout a. moderate volumes and variety (mix between job shop and assembly line) b. produce products in batches c. makes several units of the same product d. functional layouts with sequential tasks Advantages: flexibility, higher volume, lower unit cost than job shop Disadvantages: moderate planning complexity ex: can manufacturing, hospital kitchens, college classrooms

mass customization

uses advanced technologies to customize products quickly and at a low cost

Planning (everything you do has to be planned)

what is the overarching process for SCOR model?

rate of service

µ =