OMIS 320. Exam 3. SELU. Henderson.

Master black belt

-A proven mastery of process variability reduction, waste reduction and growth principles and can effectively present training at all levels

The economic order quantity (EOQ) model

-A quantitative decision model based on the trade-off between annual inventory holding costs & annual order costs -Seeks to determine an optimal order quantity, where the sum of the annual order cost & the annual inventory holding cost is minimized

Six sigma

-A statistics-based decision-making framework designed to make significant quality improvements in value-adding processes -Near quality perfection (the statistical likelihood of no defects 99.99966% of the time, 3.4 DPMO) -Pioneered by Motorola in 1987

Yellow belt

-Basic understanding of Six Sigma Methodology and tools in the DMAIC problem solving process. -Team member on process improvement project

Inventory

-Can be one of the most expensive assets of an organization -May account for more than 10% of total revenue or 20% of total assets

Feasible EOQ's Price break point

Due to the step-wise shape of the total inventory cost curve, the optimal order quantity lies on either one of the _______ or at the _______

Waste (Muda) reduction

Firms reduce costs & add value by eliminating waste from the productive system

Inventory investment

Firms should diligently measure ________ to ensure that it does not adversely affect competitiveness

Sort Set in order Sweep Standardize Self-discipline

Five-S's to reduce waste

Independent demand

The demand for final products & has a demand pattern affected by trends, seasonal patterns, & general market conditions

Order cost

The direct variable cost associated with placing an order

Order costs

direct variable costs for making an order; In mfg, setup costs are related to machine setups

Cargo rates

Which of the following is not a rate category?

Lean six sigma

-Describes the melding of lean production and Six Sigma quality practices -Both use high quality input materials, WIP, and finished goods and Continuous Improvement (Kaizen)

Small batch scheduling

-Drives down costs by reducing purchased, WIP & finished goods inventories -Makes the firm more flexible to meet customer demand

ISO 9000 and ISO 14000

-Located in Switzerland has more than 155 member countries. -Govern quality and environmental certification standards of production, respectively. -More than 1,000,000 organizations in 175 countries have one or both certifications

Lean layouts

-Move people & materials when & where needed, ASAP -Are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another

Manufacturing cells (work cells)

-Process similar parts or components (part families) saving duplication of equipment & labor -Are often U-shaped to facilitate easier operator & material movements

Lean green practices

-Reduces waste & the cost of environmental management -Leads to improved environmental performance -Increases the possibility that firms will adopt more advanced environmental management systems

The quantity discount model or price-break model

-Relaxes the constant price assumption by allowing purchase quantity discounts -Considers the tradeoff between purchasing in large quantity to take advantage of the price discount and issuing fewer orders, against holding higher inventory

The economic manufacturing quantity model or production order quantity model

-Relaxes the instantaneous replenishment assumption by allowing usage during production or partial delivery -Is especially appropriate for a manufacturing environment with simultaneous manufacture and consumption -Inventory builds up gradually during the production period rather than at once as in this model

Radio frequency identification (RFID)

-Successor to the barcode for tracking individual unit of goods. -Does not require direct line of sight to read a tag and information on the tag is updatable

Black belt

-Thorough knowledge of Six Sigma philosophies and principles -Coaches successful project teams -Identifies projects and selects project team members

Green belt

A trained team member allowed to work on small, carefully defined Six Sigma projects, requiring less than a Black Belt's full-time commitment

Statistical process control

Allows firms to visually monitor process performance, compare the performance to desired levels or standards, and take corrective action

Lean production

An operating philosophy of waste reduction & value enhancement & was originally created as Toyota Production System (TPS) by key Toyota executives

Flow diagrams

Annotated boxes representing process to show the flow of products or customers

A items

Are given the highest priority with larger safety stocks. These items, which account for approximately 20% of the total items, are about 80% of the total inventory cost

Manufacturing

Assembly instructions encoded on RFID tag provide information to computer controlled assembly devices

Work in process (WIP)

Partially processed materials not yet ready for sales

ABC inventory control system

Determines which inventories should be counted & managed more closely than others

Indirect costs (ex. overhead)

Cannot be traced directly to the unit produced

Direct costs (ex. labor)

Directly traceable to unit produced

Kaizen (Continuous Improvement)

Continuous approach to reduce process, delivery, & quality problems, such as machine breakdown problems, setup problems, & internal quality problems

Continuous review system

Costly to conduct but requires less safety stock than the

-The definition of quality is conformance to requirements -The system of quality is prevention -Performance standard is zero defects -The measure of quality is the price of nonconformance

Crosby's four absolutes of quality:

Safety stock

Demand and delivery lead time are never certain and require:

Taiichi Ohno

Described the seven wastes

Dependent demand (Subassemblies, components, & raw materials are examples of dependent demand items)

Describes the internal demand for parts based on the demand of the final product in which the parts are used

Quality control

Determine what to control, establish standards of performance, measure performance, interpret the difference, & take action

JIT (now lean)

Emphasizes reduction of waste, continuous improvement, synchronization of material flows within the organization, and channel integration

Natural variations

Expected and random (can't control)

Channel integration

Extending alliances to suppliers' suppliers and customers' customers

Pareto charts

For presenting data in an organized fashion, indicating process problems from most to least severe

Inventory management models

Generally classified as dependent demand and independent demand models

Kanbans

Generate demand for parts at all stages of production creating a "pull" system

Materials management

Goods automatically counted and logged as they enter the supply warehouse

Assignable variations

Have a specific cause (can control)

C items

Have the lowest value and hence lowest priority

Inventory turnover/turnover ratio

How many times inventory "turns" in an accounting period

Quality planning

Identify internal/external customers & their needs, develop products that satisfy those needs. Mangers set goals, priorities, & compare results

-Quick response -Efficient Consumer Response -JIT: Continuous reduction of waste Keiretsu Relationships: Including suppliers in JIT/TQM efforts

In 1990's, supply chain management combined:

Lean purchasing

Includes delivering smaller quantities, at the right time, delivered to the right location, in the right quantities

Holding or carrying costs

Incurred for holding inventory in storage

Fixed costs (ex. buildings, equipment, and plant security)

Independent of the output quantity

Cost of revenue / average inventory

Inventory turnover ratio:

-Quality planning -Quality control -Quality improvement

Juran's quality trilogy

Toyota

Lean production was originally created by key ____ executives:

Workforce commitment

Managers must support Lean Production by providing subordinates with the skills, tools, time, & other necessary resources to identify problems & implement solutions

Maintenance, repair, & operating (MRO) (ex. cleaners and brooms)

Materials used in production

-Absolute value of inventory (found on balance sheet) -Inventory turnover or turnover ratio-More is better because its faster!

Measures of inventory investment

Retail store

No check out lines as scanners link RFID tagged goods in shopping cart with buyers credit card

Carbon-neutral

Offsetting the carbon footprint of a firm's operations

-Buffer from uncertainty in the marketplace & -Decouple dependencies in the supply chain (e.g., safety stock)

Primary functions of inventory

Finished goods

Products ready for shipment

Equipment setups

Reducing inventory through reduced batch sizes causes increased:

B items

Require closer management since they are relatively more expensive (per unit), require more effort to purchase/make, & may be more prone to obsolescence

Periodic review system

Reviews physical inventory at specific points in time and requires higher level of safety stock

Distribution center

Shipment leaving DC automatically updates ERP to trigger a replenishment order and notify customer for delivery tracking

Quality improvement

Show need for improvement, identify projects for improvement, implement remedies, provide control to maintain improvement

1. Internally focused 2. Functional integration 3. Internal integration 4. External integration

Stages of supply chain management evolution:

Lean supply chain relationships

Suppliers & customers work to remove waste, reduce cost, & improve quality & customer service

-Cross-training, -Satisfying internal customer demand -Quickly moving products in the production system -Communicating demand forecasts & production schedules up the supply chain -Optimizing inventory levels across the supply chain

Supply chain management seeks to incorporate lean elements using:

Schedule

The 5 english "S" terms include all of the following except:

Holding cost or carrying cost

The cost incurred for holding inventory in storage

The statistical reorder point (ROP)

The lowest inventory level at which a new order must be placed to avoid a stockout

To minimize the sum of ordering cost and holding cost

The primary purpose of the basic economic quantity model?

Overproducing Waiting Transportation Over-processing Excess inventory Excess movement Scrap & Rework

The seven wastes:

Independent demand

The type of demand for final products which has a demand pattern that is affected by trends, seasonal patterns, and general market conditions:

Statistical reorder point model

This is the lowest inventory level at which a new order must be placed to avoid a stockout:

Inventory turnover ratio

This measure is computed by dividing the cost of revenue by the average inventory:

Fixed costs

This type of cost is independent to the output quantity:

Check sheets

To determine frequencies for specific problems

Raw materials

Unprocessed purchase inputs

Cause and effect diagrams (fishbone or ishikawa diagrams)

Used to aid in brainstorming & isolating the causes of a problem

Variable costs (ex. materials)

Vary with output level

Waste

Wait times, inventories, material & people movement, processing steps, scrap losses, rework, variabilities, and any other non-value-adding activity

Define Measure Analyze Improve Control

What is the DMAIC improvement cycle?

Common carriers

What offers transportation services to all shippers at published rates between a designated location without discrimination?

Kaizen

Whats the continuous approach to reduce process, delivery, and quality problems such as machine break down problems, set up problems, and internal quality problems (continuous improvement approach):

Waste reduction and value enhancement

Which of the following are the most important elements of the lean production philosophy?

Stock outs are allowed

Which of the following is not an assumption of the economic order quantity model?

Large batch scheduling

Which of the following is not an element of just in time (JIT) manufacturing?

Automobiles

Which of the following is not an example of a dependent demand item?

Crosby

Which of the following quality guru's believe the company should strive for zero defects and that the measure of quality was nonconformance:

Silo effect

Works against channel integration

Deregulation

____ encourages competition and allows prices to adjust as demand and negotiations dictate?

Crossdocking

____ refers to the term to receive, breakdown, repackage, and distribute components to a manufacturing location or finished products to customers warehouse:

Private carrier

_____ are not subject to economic regulation and typically transport goods for the company that owns the carrier:

B and C items

items account for the other 80% of total items & only 20% of costs