Operations Midterm #2

What is the difference between independent demand and dependent demand?

Independent - demand that does not depend on the demand of another item Dependent - demand calculated based on the demand of a parent or sibling item (bike tires and bikes)

__________ are customers within a firm, such as the users of a company print shop.

Internal customers

What is the difference between internal customers and external customers?

Internal customers exist within the same firm as the provider. External customers are beneficiaries outside of the company.

What is a store of goods and stocks for some future (either near-term or long-term) use?

Inventory

__________ is the period between placing and receiving an order.

Lead time

How do you engender customer loyalty?

Meet a customer's needs in a way that goes above and beyond the competition's methods and creates a "superior customer experience" i.e. greater convenience, higher quality, more customized, lower cost

Weighted Moving Average (WMA)

Multiply periods by weighted factors, giving the more recent periods heavier weights

How to calculate NPS?

NPS = # of promoters - # of detractors Detractors: 0-6 Neutral: 7-8 Promoters: 9-10

Which inventory model is used to calculate order quantities (Q) when orders are placed at fixed intervals?

Periodic inventory system

__________ is a fail-proof mechanism, or method, for preventing quality failures in manufacturing.

Poka yoke

How can inventory be used in production smoothing?

Producing extra inventory during periods of low demand which is then consumed during periods of high demand

What are the different types of inventory?

Raw materials - inputs to production Work-in-process - inventory that is waiting to be processed, that is being processed, or that is waiting to be moved for future processing Finished goods - products waiting to be sold to the customer Made-to-stock - placed into inventory to be sold at a later date Make-to-order - sent directly to customer Supplies - supplementary materials that aid in production but are not part of the final product

What is the difference between customer satisfaction and customer loyalty?

Satisfaction means meeting customer needs/expectations. Loyalty is a feeling of affiliation with the firm or future behavior which favors the firm.

Which of the following describes systematic occurrences that result in dissatisfied customers?

Service failures

Which of the following describes a collaboration between service providers and customers to create value?

Service supply chains

________ is a regression model with only one independent variable.

Simple linear regression

What is the definition of outsourcing?

The act of moving production to a supplier

What is the definition of mean absolute deviation (MAD)?

The average amount that the forecast is off-target

What is the definition of a customer?

The beneficiary of a specific supply chain or operation

What is churn?

The expected loss of customers that must be replaced with new customers

What is satisfaction?

The extent to which customer needs are met

What is value?

The extent to which customer's needs are met

What is a good description of loyalty?

The feeling of affiliation a customer has with a firm

________ is the explanatory variable in a regression model.

The independent variable

What is economic order quantity (EOQ)?

The order quantity (Q) at which total annualized inventory-related costs are minimized

What is service level?

The probability that an item will be available in stock for order fulfillment when it is needed

What is servitization?

The process of integrating service offerings with manufactured products.

__________ is a method for computing seasonal indexes.

The ratio-to-moving-average method

What is the smoothing effect?

The result of reducing random variation in a time series

What is the definition of bias?

The tendency to forecast either too high or too low

What are regression models?

They are causal (try to explain why). Identify independent and dependent variables.

What are naive forecasting models?

They are quantitative and make no attempt to explain why demand fluctuates

What is a stockout?

When a customer places an order and there is no stock available to fulfill the order

What is forward integration?

When a firm moves forward in the supply chain not only to provide products, but also to help customers with the use of the products

__________ inventory has been received and is in the production phase.

Work-in-process

A quantity discount is __________.

a lowered price given when more of an item is purchased

Pricing is __________.

a method for managing demand by adjusting costs temporarily

With regard to naive forecasting, double exponential smoothing (DES) is __________.

a model that gets closer to a trend by smoothing out the irregular component in a time series with stable demand

Service recovery is __________.

a process for responding to service failures

Seasonality is __________.

a variation pattern that is repetitive and occurs during some fixed time period

Vendor-managed inventory is __________.

an arrangement by which the supplier manages the inventory items and the buyer houses the inventory (P&G)

Make-to-stock inventory is __________.

completed and placed into inventory for sale at a later date

The proactive balancing of scarce business resources with demand is known as __________.

demand management

A company like Arctic Cat that produces snowmobiles during the summer and ATVs during the winter uses what demand management​ tool?

designing counterseasonal products

Placing orders, preparing and delivering shipments, receiving and stocking products on retail shelves, recording sales transactions, and making payments describe the __________ step of CPFR.

execution

The outside-of-company end beneficiaries of work are known as __________.

external customers

What is the role of enhancement in the context of customer relationship management systems​ (CRMS)?

improving the experiences of current customers

The bullwhip effect is manifested by​ _____________ variation in the supply chain.

increasing upstream

What is the rate at which firms use up their inventory?

inventory velocity

Retention is __________.

promoting ongoing and increased business with current customers

Deterministic reorder points are __________.

reorder points computed when there is no variation in demand

To redefine their relationship with their customers, firms may employ __________, which is the process of integrating service offerings with manufactured products.

servitization

Hedging is __________.

the building up of inventory in anticipation of unforeseen global supply chain interruption

Value is __________.

the extent to which a firm meets customer needs

Enhancement is __________.

the improvement of the experience of current customers

Mass customization is __________.

the process in which standard components and modules are produced and then assembled or configured only when customers need them

The end consumer is __________.

the ultimate beneficiary or the individual(s) whose needs are satisfied by an operation

What are assumptions of the economic order quantity​ (EOQ)?

- the item price is fixed and does not change - there is no variation in lead times - demand is known and constant

What are some ways to measure service performance?

- throughput (number of items produced per time period) - productivity (output per unit resource, such as per employee) - utilization (percentage of capacity kept occupied in production)

What are Christopher​ Hart's essential elements of an unconditional service​ guarantee?

- unconditional, without exceptions - easy to understand and communicate - meaningful​ (valued by the​ customer) - easy and painless to evoke - easy to collect

What are the steps of ABC analysis?

1) Determine a criterion for classifying stock 2) Find the value of items in stock multiplied by their annual volume of usage 3) Calculate the percentage of total usage per dollar item 4) Rank the items based on your calculations 5) Classify items as A, B, or C

What are the steps in time series forecasting?

1) Identify the purpose for your forecast 2) Determine the time horizon for your forecast 3) Select a forecasting technique/system 4) Get good data, fit the models, choose the right model 5) Build out the forecast 6) Check your forecast periodically

What is ABC analysis?

A method for categorizing inventory based on criteria such as usage or value

What is customer relationship management (CRM)?

A methodology for creating mutually beneficial relations between consumers and service providers

With regard to naive forecasting, what describes the simple moving average (SMA)?

A model in which prior demand is averaged

What is cycle counting?

A repetitive procedure for counting inventory on a regular basis—often quarterly or annually

What is the net promoter score (NPS)?

A service feedback rating system

What is collaborative planning, forecasting, and replenishment (CPFR) and what are its steps?

A strategic tool with the objective of reducing inventory levels throughout the supply chain by sharing planning and scheduling information. 1) Strategy and planning 2) Demand and supply management 3) Execution 4) Analysis

What is the process of finding new customers?

Acquisition

What are the three applications of CRMS?

Acquisition Enhancement Retention

What is Pareto's law and how does it affect ABC analysis?

Also known as the 80/20 rule, suggests that 80% of your profit comes from 20% of your SKUs. A items are inventoried frequently and counted weekly

With regard to a time series, what is a trend?

An average rate of change

Which of the following describes a customer relationship management system (CRMS)?

An information system used to manage customer-related data

What is a fixed time period model?

An inventory model for ordering in regular time intervals, such as weekly or monthly, to stabilize purchasing and shipping schedules

What describes the Delphi method of forecasting?

An iterative forecasting method that uses professional judgment

What does the operating doctrine of inventory management do?

Answers the questions "How much do we order?" and "When do we place the order?"

Simple Moving Average (SMA)

Calculates the mean of recent periodic demand Average the last 3 periods

What is the use of differing marketing channels to complement each other to level demand?

Channel management

__________ inventory is stock that is owned by the supplier but is in the physical possession of the buyer.

Consignment (Fender)

Which inventory model is used in monitoring inventory levels for items held in stock until the items reach a predetermined level?

Continuous review system

Single Exponential Smoothing (SES)

Creates a forecast by multiplying actual and forecasted demands by a smoothing factor Ax + (1 - x) F

What are the 6 CRM processes?

Customization Service poka yokes Service guarantees Measuring service performance Customer feedback Complaint resolution Service recovery

What is inventory velocity?

(cost of goods sold)/(average inventory)

What are the key demand management tools?

- Advertising and promotion (use promotions to increase demand during slow periods) - Pricing (offer discounts to increase demand) - Designing counter-seasonal products (Arctic Cat) - Channel management (selling online, in big box stores, on TV etc) - Outsourcing (increasing seasonal capacity to keep up with demand) - Product phasing (moving production overseas once products are no longer strategic) - Supply chain management

What are the components of a time series?

- Irregular - Seasonal - Cyclical

Which are some examples of poka​ yokes?

- Parking garages that have a lightweight overhead bar or signal at the entrance to prevent people from entering with tall vehicles that might hit the ceiling at parts of the garage. - Automatic teller machines​ (ATMs) that require users to take their ATM cards before they are given their cash withdrawal so as to prevent people from forgetting their cards. - Websites that require users to type their​ e-mail address twice so as to avoid typographical errors.

What are the purposes of carrying inventory​?

- managing production lead times - improving service levels - creating economies of scale - tempering uncertainty

What are the measures of forecasting error?

- mean squared error (the squared amount that the forecast is off target) - mean absolute deviation (the average amount that the forecast is off target) - mean average percent error (the average percent error) - bias (tendency to forecast too high or too low)

What is the act of removing seasonal variation from a time series to better estimate trend?

Deseasonalizing a forecast

What are greenfield forecasting methods? What are some examples?

Forecasting methods used for new product launches: - Delphi (professional panel consensus) - Nominal group techniques (group brainstorm) - Grassroots (input from regional managers)