C720 - Operations and Supply Chain Management (12-13)
Which of the following is a philosophy of operation that strives to maximize efficiency and eliminate all forms of waste?
Just-in-time
________ is a philosophy of operation that strives to maximize efficiency by simplifying production processes and eliminating waste.
Just-in-time
Which term refers to a business running out of inventory?
Stockout
A company would use an ABC analysis for the purpose of ________.
determining which inventory items should be closely controlled
A company that is implementing JIT would benefit from all of the following strategies except ________.
increasing overtime
The time that it takes for an order to reach the supplier's offices, the time to fill the order, and the shipping time is collectively known as ________.
lead time
For a JIT firm to function efficiently, inventory levels should be kept --------.
low
From the perspective of JIT practitioners, if setup time can be reduced, then it is considered ----------.
non-value-added activity
What information would Speedway Gas Stations use to trigger new inventory levels?
order point
Please consider the unique attributes of both periodic and perpetual inventory systems. Which of the following best applies? A ----------.
perpetual system can keep track of inventory balances with human input only
A ---------- moves materials and parts based on actual needs at successive work centers.
pull system
The JIT process of inventory reduction would reveal ----------
raw material shortage
A firm that uses JIT would most likely use a group technology production system to ________.
reduce set-up time
In a manufacturing facility that uses JIT, changing and adjusting equipment are aspects of ________ that can disrupt the steady flow of materials.
set-up time
A firm can minimize its total annual costs of ordering and holding inventory by using ----------
the EOQ model
A midsize cereal manufacturer uses a periodic inventory system for raw materials because ---------.
the supplier only delivers during an open order window
TPS is a pull system. It is a just-in-time system customized to Toyota's requirements. In order to maintain a smooth flow of production, each work station in the Toyota factory needs a way to communicate when it needs more parts with its ----------.
upstream work stations
In a JIT environment, the master schedule usually has a ________ planning horizon.
2-3 month
What type of time frame is used in the planning horizon of a master schedule when JIT is used?
2-3 months
A new efficiency program is being started at Aunt Sally's restaurant. The store manager has noticed the ---------- varies dramatically and should be analyzed as a variation problem. The manager knows that customer specifications include ----------
6 oz. steak serving size quality, cost, and timeliness
What type of company would most likely use the EQP model when calculating inventory needs?
A car manufacturer
Which of the following companies might have adopted TPM?
A company that practices JIT
Uncle Bill's Barber Shop has determined that customers are waiting in line too long in the shop. Bill has decided to hire two additional barbers to provide faster service. However, Bill is concerned that customers have a favorite barber and the new employees may actually hurt sales. Which of the following should be important in Bill's thought process?
A strength of Bill's shop is loyal customers, which overrides the weakness of wait time issues. Bill does not need to hire more barbers.
What variable(s) are common to both the formula for EOQ and EPQ?
Annual Demand (Annual Demand (D) is required in both models.)
The Atlantic Furniture Store has been experiencing severe product shortages for several months. The company makes custom wood tables and chairs. Frank Maloney, operations manager, wants to implement a JIT system. What is a good reason for the Atlantic Furniture Store to implement a JIT system?
As inventories are lowered, inefficiencies in operations will be uncovered.
Toyota uses a signalling system or instructional cards called kanban to support their production scheduling system based on a JIT approach. Why is a tool called kanban used to support scheduling in Toyota production systems?
Because the visual cues that represent kanban help pull the right materials at the right time to the right place to support a continuous flow in a JIT environment
Big Jim's Custom Surfboards initiated quality improvement because the CEO attended a conference. Which of the following situations might have alerted him or the company to a quality management issue earlier?
Big Jim's customers' surfboard returns for refund or replacement increased by 11% year-over-year.
The perpetual inventory system is used in the banking community at ATMs for several reasons. ---------- is the most important reason why banks use this type of system.
Checking that sufficient funds are in the account
Acme Manufacturing has a container full of parts that needs to be moved through the production cycle. However this container lacks proper documentation that prevents it from moving forward in the production cycle. What document needs to be attached to the container to authorize its movement to the next cycle in the process?
Conveyance kanban
How does she expect you to interpret "safety-stock"?
Extra inventory
True or false? Although inventory can help companies meet demand, maintaining inventory hinders a company's efficiency and increases costs.
False (Inventory can help businesses meet demand and work more efficiently. Inventory can be used when demand accelerates and increasing the production level is not possible or is not economically feasible.)
Please consider the impact of producing multiple products on finished-goods inventory. In a JIT environment, the elimination of necessary finished-goods inventory is harder when making only one finished product.
False (It is harder to do when making more than one finished product.)
True or False JIT implementation is limited to production processes.
False (JIT (which is used synonymously with lean systems) can be implemented in all parts of a company and a supply chain.)
True of False When Amazon.com offers its customers free shipping on orders of $25 or more, this is an example of quantity discounts.
False (Offering free shipping for purchasing a certain dollar amount is an example of a transportation discount.)
True or false? The aggregate production plan for JIT firms and MRP firms is nearly the same, except that the JIT planning horizon is typically longer.
False (The aggregate production plan for a company using JIT is nearly the same as that for any other company that doesn't use JIT, except that the JIT planning horizon may be somewhat shorter.)
Understanding how to use the equation to calculate safety stock will guarantee a company will not incur high inventory holding costs or lost sales due to stock-outs.
False (The calculation is based on probabilities that are OFTEN realistic. It still could result in too much safety stock, which can lead to high inventory costs or too little safety stock that results in lost sales.)
JIT inventory systems are different from traditional systems. Morton Manufacturing has decided to implement a JIT system. Which of the following statements best describes the difference between JIT inventory management and other systems?
In a just-in-time system, there is a much faster pace of inventory flowing through the production process.
What does kanban do?
It signals one production process to pull from another preceding process based on a demand driven system.
What three things define TPM efforts?
Preventive maintenance, shift maintenance, and operator maintenance
Which statement about inventory in JIT systems is correct?
Problems and inefficiencies in operations are identified quickly in JIT systems.
What type of batch sizes are planned in a JIT environment?
Small ones
Which of the following statements describes an advantage of the periodic inventory system?
The cost to implement a periodic inventory system is relatively low.
How do shorter lead times affect master scheduling when JIT is used?
The master schedule is frozen for less time.
What is one of the factors that determines the successful implementation of a single-card kanban system?
The standardization of containers (For a single-card kanban system to work, standard containers must be used.)
True or false? Set-up time refers to the time required to readjust a machine to make one part after using the machine to make another part.
True
True or false? The pull system involves moving materials based on actual needs at successive work centers, while the push system moves materials based on a preplanned schedule.
True
---------- is a method of analyzing the flow of materials, ideas, and information to understand how processes function.
Value stream mapping
Which of the following is a technique used to analyze the flow of materials, ideas, and information to understand how processes function?
Value stream mapping
When a customer is not being served or a good is not being processed, what type of waste is occurring?
Waiting
Which of the following statements points out an advantage of the perpetual inventory system?
The perpetual inventory system more accurately measures the dollar value in inventory.
Inventory is often characterized in just in time as a way of concealing the rocks in a stream. Getting rid of inventory uncovers the rocks. In this analogy, the stream represents a smooth flow of production. Which of the following best fits as the rock in this analogy?
Delays in shipments by suppliers
What might have caused Apple to incur a stock-out or run out of inventory of the iPhone 4 when they first released it?
Demand and lead times were more than expected.
Which of the following statements is true for a "fixed order-up-to level" in a periodic inventory system?
Demand must be taken into account when determining an order-up-to level in a periodic inventory system.
Fact Only variable costs are considered when determining this value. An amount of inventory above current required levels. A measure of inadequate demand forecasts. Balances inventory holding costs against average fixed ordering costs.
EOQ Safety Stock Stock Out Production Order Quantity
The ---------- model assumes that a company will produce its own quantity or parts while the ---------- model assumes the order quantity arrives complete from another company that has produced them.
EPQ EOQ
Which of the following best explains what is meant by EOQ = 500?
Each time West Coast Furniture Distributors places an order with this manufacturer, it should order 500 sofas. This will result in minimizing the annual variable costs for holding and ordering inventory.
True or false? A periodic inventory system continuously monitors inventory levels and records inventory transactions as they occur.
False (A perpetual inventory system, not a periodic inventory system, continuously monitors inventory levels. Under a perpetual system, inventory transactions are recorded as they occur.)
True or false? A periodic inventory system enables a firm to keep a running balance at all times of the amount of capital invested in inventory; however, it is a costly system to implement.
False (A perpetual inventory system, not a periodic system, has high implementation costs and provides a running balance of how much capital is invested in inventory at all times.)
True or False The person who prepares the current-state value stream map should prepare the future-state value stream map.
False (A team of people, preferably including representative for all stakeholders of the process, should be involved in developing the future-state value stream map.)
True or False Push systems, unlike pull systems, work best in producing high volume, standardized products.
False (Both types of systems work with medium to high volumes of production and with customized or standard products.)
Is the following statement true or false? Capacity planning is not necessary in a JIT environment.
False (Capacity planning involves determining the resources required to support just in time.)
True of False Holding cost is another name for setup cost.
False (Holding cost is another name for carrying cost.)
True or False Apple will definitely never incur a stock-out again and does not need to inventory any safety stock.
False (The determination of order point works well when demand rate and lead times are known. If demand or lead times exceeds expectations, they still might run out of stock. A buffer of safety-stock might help avoid the situation.)
True or False The Production Order Quantity is different than EPQ.
False (The production order quantity is also known as the EPQ (Economic Production Quantity).)
True or False The maintenance department of an organization is solely responsible for TPM efforts.
False (When a company adopts TPM, operators are trained to perform all but the most complicated maintenance on the machines they operate.)
Delta, Southwest, and other airlines engage in hedging against possible price increases. Which of the following is a likely example of something an airline would hedge?
Fuel
Which of the following is an advantage of the periodic inventory system?
Having low implementation expenses.
Henry Ford is credited with developing one of the first modern automated assembly lines, to build the Model T. His assembly line was able to produce a Model T in just 93 minutes. Toyota credits Henry Ford's assembly line as the root of the just-in-time (JIT) concept. Fifteen million Model Ts were produced from 1908 to 1927, and the fifteen millionth car used the same design as the first car. Given that the assembly line gave rise to the concept of JIT, which of the following concepts do assembly lines and JIT have in common?
High volume production
Which of the following is most important about inventory systems?
Inventory systems should allow a company to meet demand and work more efficiently.
In the fixed order interval model, what does the formula M = D(R + L) calculate?
Order-up-to level
The Acme Retail Company is aware of the importance of maintaining inventory. Acme consistently brings inventory back up to a level sufficient to cover anticipated demand before the next order is received. This is an example of what?
Order-up-to level
Which of the following best describes work-in-process inventory?
Partially finished components
A local gasoline station uses TexGas as its gasoline supplier. TexGas will only refill the station's gasoline storage tanks on Mondays. Based on this information, which type of inventory systems does the gasoline station most likely use?
Periodic inventory system
At Sportz Sporting Goods, the bar code of every product sold is scanned at the register and recorded in the retailer's computer system. With this system, managers always know the store's inventory levels and can avoid running out of products that are in high demand. Which of the following does Sportz most likely use?
Perpetual inventory system
In which of the following ways is a service business most similar to the concepts underlying JIT?
Products are made when the customer orders them.
Prentis Photo Printers manufactures 12 brands of photo printers. The sales and marketing department updates its sales forecast each month. A list of customer orders is posted daily, and the daily builds are planned to ship those orders.
Pull
Which of the following is not one of the ways companies simplify production processes in a JIT system?
Purchasing customized machines to make each part
Panther Printers manufacturers seven brands of laser printers. The sales and marketing department updates its sales forecast each month. The forecast and customer orders are used to update the master schedule. Weekly production planning meetings ensure that enough materials are available for that week's production, and then the build plan is used to plan daily builds.
Push System
Which of the following statements is true regarding perpetual inventory systems?
The items in inventory are counted as transactions occur.
One of the most important steps in any process improvement activity is understanding the current process. In value stream mapping, first develop a map of the current process to identify the value-added and non-value-added activities in the process. Identify which of the following would be a value-added activity in the value stream map for the current process of making a dinner reservation with a restaurant employee over the phone for an upscale restaurant.
The restaurant employee records information about the reservation (how many are in the party, time of the reservation, and contact information for the caller).
Which of the following statements would be true for the furniture manufacturer?
The seat cushions would be bar coded as work in process. (The furniture manufacturer would place bar codes on the cushions as they are considered work-in-process inventory.)
Which of the following is true of the EOQ graph?
The total variable cost curve will always be larger than the annual variable holding costs.
What assumptions can be made about their safety-stock levels and stock-outs?
Their level of safety-stock will help guard against stock-outs 99 percent of the time.
What is the underlying reason that companies need to build up inventory for peak demand and seasonal demand?
To keep production levels constant
---------- inventory is in the process of being shipped through the distribution system.
Transportation
True of False When Amazon.com ships products to customers using FedEx, from the time the item leaves its warehouse until it is delivered to the customer, it is considered pipeline inventory.
True
True or False A complete implementation of JIT would include a company and its suppliers.
True
True or False Setup time should be reduced for a machine that is the bottleneck in a process.
True
True or false? By maintaining a safety stock of inventory, a firm is able to meet customer demand and gain protection against supplier delays.
True
True or false? Carrying costs include the costs for storage space, while ordering costs include the costs of replenishing raw materials.
True
Inventory Description Material cut in pieces Finished goods at a loading dock in China Cutting tools used to create custom golf clubs Natural rubber obtained from Malaysia
Type of Inventory Work in process Transportation Supplies Raw Materials
Advantage Better accounting alignment Inexpensive to maintain
Type of Inventory Model Perpetual Periodic
Disadvantage Expensive to implement Inventory levels unclear
Type of Inventory Model Perpetual Periodic
Which of the following businesses and inventory types should use a perpetual inventory system?
Walmart should use a perpetual system to avoid costly stock-outs. (A large retailer with high volume sales needs daily inventory level management.)
"Fill in the blank" question: select the correct answer. The economic order quantity is divided by the ---------- to determine the economic order interval..
annual demand EOQ/Demand.
On the Move might replenish its inventory of athletic shoes at a higher than necessary level to -----------. In addition, On the Move knows it can ---------- with large purchases.
avoid price increases from suppliers get a discount
When one of the EOQ assumptions is violated, the EOQ model _______.
can still be used with some modifications.
Understanding the difference between value-added and non-value-added activities is critical in value stream mapping. Whether an activity is value-added should be considered from the perspective of the ----------. Reducing or eliminating non-value-added activities should also ----------.
customer simplify the production process.
A dual-card kanban system allows ---------- control over production and inventory when compared to a single-card system that has ---------- control of -----------.
greater less inventory
On the Move has studied ABC analysis and come up with the following information. Products that have ---------- will require close inventory monitoring.
high value and high usage
A stable inventory primarily helps businesses to ________.
meet customer demand
Toyota uses the Toyota production system (TPS) to manage production in its factories. TPS is the Toyota version of JIT or lean. A car is not manufactured until an order is received for that car. Once a car has been ordered, the order is sent to the factory where parts are pulled to build the vehicle to the exact specifications of the customer. This single-piece flow enables Toyota to ----------.
minimize work-in-process inventory
The LEGO Group develops branded Lego kits for "block"-buster movies, such as The Hobbit and Disney's Frozen. Inventory will be built up ahead of the movie release to manage ----------. Each year at Christmas, sales of Lego kits increase. Inventory will be built up ahead of the holidays to manage ----------. Retail shops in tourist areas will often carry safety stock of Lego kits throughout the year, to manage ----------.
peak demand seasonal demand unexpected demand
A ________inventory system is used when a supplier will only deliver raw materials on a monthly basis.
periodic
If a firm's suppliers will only deliver raw materials and replacement parts every two weeks, then the firm should use a ---------- inventory system.
periodic
A ---------- inventory system continuously monitors inventory levels and records inventory transactions as they occur.
perpetual
A key advantage of a ________ system is that a firm can keep a running balance at all times of the amount of capital invested in inventory.
perpetual inventory
For Maine Woods Company, a seat is considered ----------. A scooter is considered -----------. A front axle assembly for a toy wagon is considered ----------.
raw material (Seats are at the lowest level of the bill of materials and are purchased from a supplier, making a seat a raw material for Maine Woods Company.) finished goods (Maine Woods Company makes tricycles as a finished good to be sold to the end customer.) WIP (Work-in-process inventory is assembled from raw materials (and sometimes from other subassemblies). The front assembly is created by joining wheel, front axle supports, and other raw materials.)
The ________ is the time between assessments that will determine average order quantity because the annual demand must be met during one year.
review interval
The Acme Retail Company knows that it takes two days for its supplier to deliver 200 T-shirts. Acme also knows that when there are 50 shirts left in inventory, stockout will occur in four days. To prevent a stockout, Acme Retail keeps an extra 70 T-shirts in its inventory, which is known as ________.
safety stock
The planning horizon for an aggregate plan in a JIT environment is ________.
somewhat shorter
TPM is known as __________.
total preventive maintenance and total productive maintenance
Larry and Connie have been studying the EOQ formula and wish to practice computing it by using the following numbers: D = demand rate (units/year) Q = order quantity or lot size (units) Co = variable ordering cost ($/order) Ch = variable holding cost ($/unit/year) If D = 100, Q = 10, Co = 10 and Ch = 5 , what is the EOQ in this case?
20 Q* =√ 2(100)(10)/5 = 20
Which of the following best explains why reducing setup time simplifies the production process?
A reduction in setup time means less complexity and therefore fewer human errors in the production process.
What type of company would most likely use the EOQ model when calculating inventory needs?
A retail store.
Consider the typical activities and costs of owning an automobile. Which of the following items, which many people have in the trunk of a vehicle, is the best example of replacement parts inventory?
A spare tire
Which of the following items should be classified as a supply in inventory?
A stress ball for a line supervisor (The stress ball is a necessary part of the line supervisor's productivity as he oversees operations but is not directly linked to the manufacturing process.)
Which of the following would prioritize the inventory items that should be tracked closely?
ABC analysis
When West Coast Furniture Distributors agreed to the offer by one of its sofa manufacturers, what relationship was demonstrated between the variable costs for ordering and holding inventory?
An inverse relationship (s one type of inventory cost increases, the other decreases, demonstrating an inverse relationship. West Coast Furniture Distributors accepted the offer to save $10 shipping per sofa, which is offset by a 7 cent increase per purchase order, but overall ordering costs have decreased. Variable holding costs have increased.)
----------- is associated with the movement of container of parts and ---------- is associated with the production of parts to fill an empty container.
C-kanban P-kanban
In an ABC analysis system, ________ items warrant closest control and monitoring through a perpetual inventory system.
Class A (The first 20% of the items are assigned to class A in an ABC analysis. These are the items that warrant closest control and monitoring through a perpetual inventory system.)
Which of the following is one reason that implementing JIT into a supply chain can cut costs?
JIT enables reduced inventory throughout the supply chain.
Which statement about JIT planning and scheduling is correct?
JIT firms only use the master schedule when ordering items with long lead times.
Why are small batches planned in a JIT environment?
JIT requires having only what is needed when it is needed.
John has begun to realize that the master schedule is affected by the use of JIT inventory management. Why is the time period for freezing the master schedule shorter under JIT systems?
JIT systems have shorter product completion lead times.
John is ready to put all his knowledge of lean systems and JIT into a recommendation for Strong Manufacturing. In the article, "Transformation at Harley-Davidson," John learned how that company was able to dramatically improve its competitive advantage. Question: Which of the following statements best describes how a company can use JIT to gain an advantage over its competitors?
A JIT system recommends the implementation of employee cross-training, fast inventory turnover, and use of level production schedules.
Which of the following is an indication that an automaker uses JIT?
An exhaust pipe arrives as a car is ready to have it installed on the assembly line.
Which of the following best describes value stream mapping?
Analyzing the flow of materials, ideas, and information to understand how processes function.
In order to operate its auto showrooms, automobile dealers must display many types of vehicles for sale. If these vehicles will not be sold, how can they be classified?
As necessary but non-value added
Which of the following is not one of the three main components of total preventive maintenance (TPM)? Assigning managers to implement maintenance. Giving operators responsibility for maintenance. Allocating time each day for maintenance. Emphasizing preventive maintenance.
Assigning managers to implement maintenance.
What type of requirements for component parts are included in the final assembly schedule in a JIT environment?
Daily requirements
Is the following statement true or false? A final assembly schedule is not necessary in a JIT environment.
False (The final assembly schedule is an exact statement of the final products that are to be assembled. This type of information is needed in a JIT environment.)
True or false? The single-card kanban allows more extensive control over production and inventory than the dual-card kanban system.
False (The major advantage of the dual-card kanban system over the single-card kanban is that it allows greater control over production, as well as over inventory, because both production and withdrawal of inventory are directly connected to need. In contrast, a single-card system bases production on a plan, which may lead to excess inventory if actual need does not match the plan.)
Why is order release planning eliminated when scheduling in a JIT environment?
In such a pull system, parts and materials will only be produced in response to a downward signal.
If a firm manufactures large batches of products due to high setup times and costs, what type of waste will most likely occur?
Over-production
Description of Waste A large volume of specialty windshield wiper blades Misaligned custom golf clubs Final assembly of vehicles stranded in another state
Overproduction Defects Transportation
The Top Toy Company has launched a new product that has had more success than expected. Top Toy now must respond to market demand rather than operate from forecasts. What production technique is Top Toy employing?
Pull system
What characteristic of a JIT environment impacts the final assembly schedule?
The elimination of unnecessary inventory
Johnson Meats is a retail store in Cleveland, Ohio. The manager of the store is introducing lean processes in order to improve all operations. What is a good way for the manager to identify which activities are important?
The manager can ask the customers.
Please consider the nature of products or projects that may require long or short lead times and how JIT might impact their scheduling. The master schedule in a JIT environment is only used when items with long lead times need to be ordered.
True
True or false? In a JIT environment, the master schedule is primarily only used when a firm must order items that have long lead times.
True
True or false? In a manufacturing environment, keeping low levels of inventory can enable operations managers to identify workflow inefficiencies and problems quickly.
True
Tasty Cake Mix Company has wished to utilize JIT systems for several years. The company has been losing business to larger bakeries who sell many types of cakes. Tasty feels JIT will help them ----------
better meet changes in demand
In general , a JIT environment makes scheduling and planning ----------- because requirements for materials and parts are ---------- through the production system.
easier pulled
Mason's managers have determined that, from the customer's perspective, ----------- are least valuable to the company. The chemical company has planned many cost reductions, but has also adopted a policy to invest in long term productivity. Mason Chemical will best enhance long term performance if it
executive assistants schedules machine maintenance
According to the article "Transformation at Harley-Davidson," Vaughn Beals used JIT to ----------.
train employees to measure quality and recommend change.
In Dallas, Texas, many street intersections have a gas station on every corner. If Steven's Filling puts in another tank to hold gas, it is using JIT processes to improve ----------
volume flexibility
A new restaurant has just opened in East Jersey City. The restaurant has received fabulous reviews and is extremely busy all the time. However, the restaurant is experiencing a wasteful situation known as -----------.
waiting
A company that adopts TPM _________________________________.
can maintain and improve productivity