operations final
Which of the following is not a type of inventory? reorder point stock pipeline stock safety stock cycle stock
reorder point stock
three pure aggregate plans
*at least one resource has to move to accommodate changes in sales forecast -companies usually implement some plan which falls somewhere in the middle CHASE -production and manpower fluctuate (FREEZE INVENTORY) -favorable is temporary employees are paid lower than full time -unfavorable is employees are highly skilled/in high demand, require lots of training/less experience LEVEL -inventory levels fluctuate (FREEZE WORKFORCE AND PRODUCTION LEVEL -favorable is raw material deliveries must be determined will in advance, inventory storage is cheap -when demand is low, store more in inventory for busy season -no backorders (demand > production)-in one of time buckets, ending inventory will be zero (if it never falls to zero, we are keeping more inventory than needed) STABLE WORKFORCE -number of hours worked fluctuates (FREEZE SIZE OF WORKFORCE)
dimensions of quality (garvin)
*customer ultimately defines quality (both explicitly and implicitly) *possible mix and match ways customers judge quality PERFORMANCE -primary operating characteristics FEATURES -supplements to a product's basic function -what the product offers -"bells and whistles" -ie: bluetooth in car RELIABILITY -time until a product malfunctions -needs repair when? DURABILITY -time until a product needs replacement -needs replacement when? -ie: batteries, lightbulbs CONFORMANCE -degree to which a product conforms to established standards -ie: McDonald's fries always the same SERVICEABILITY -ease of maintaining and repairing a product AESTHETICS -overall appearance/appeal -how it looks, feels, sounds, tastes, or smells PERCEIVED QUALITY -consumers perceptions of a product, based on inferences from reputation, brand image, advertising, marketing approach, packaging, etc.
costs of quality
*hierarchy- as list does down, cost goes up exponentially *increase prevention cost-> decrease external failure exponentially-> save money *can choose to invest a lot of money in conformity or take the cost of non-conformity (trade-off) *"quality is free"-the expenditures to improve quality typically are less than the savings returned in the form of fewer failures PREVENTION -costs associated with improving quality -ie: worker training, design for quality/manufacturability, supplier certification, maintenance, etc. APPRAISAL -costs associated with evaluating quality -ie: inspecting incoming materials, testing finished products, and quality audits INTERNAL FAILURE -cost of product or process failing before it reaches the customer -ie: defective metal scrap, rework, machine repair -discovered before customer gets it EXTERNAL FAILURE -cost of product failure after it has reached the customer -ie: warranty costs, field maintenance and repair, loss of customer good will and reputation, and product liabilities -most expensive *the closer a failure occurs to the customer, the more expensive it is *the father removed from its course that a quality problem is discovered, the more expensive it is
special cause variation
-"bad" variation-> want to remove -assign a cause/reason for variation -special causes are factors that are not always present in a process but that appear because of some particular circumstance -special causes are not usually present -they may come and go sporadically; may be temporary or long-term pronounced effect on the process -we can't predict when a special cause will occur or how it will affect the process -the process is unstable, or unpredictable, when special causes contribute to the variation -also called "assignable cause" variation
common cause variation
-"good" variation-> still want to minimize -common causes are the process inputs and conditions that contribute to the regular, everyday variation in a process -common causes are a part of the process -they contribute to output variation because they themselves vary -each common cause contributes a small part of the total variation by looking at a process over time, we know how much variation to expect from common causes -the process is stable, or predictable, when all the variation is due to common causes -ie: sampling error
Deming's 14 points to management
-1950s-Japan created recognition for highest quality manufacturing plants (Deming prize)-American's wouldn't listen CEASE DEPENDENCE ON INSPECTION TO ACHIEVE QUALITY -engage in statistical sampling (more accurate) -not every defect will be caught, no correction -don't just weed out- must eliminate cause -not 100% reliable -acceptance sampling: determines if entire batch is acceptable -cost: expensive -destructive: destroy product to test quality (ie: crash testing cars, can't crash test all) END THE PRACTICE OF AWARDING BUSINESS TO THE LOWEST BIDDER. INSTEAD, REDUCE COST BY REDUCING VARIATION -okay to pay more for consistency -don't choose cheapest INSTITUTE TRAINING ON THE JOB DRIVE OUT FEAR -employees don't have to worry about safety, be proud -"I would never want to work for someone I could not argue with, and respect" ELIMINATE SLOGANS, EXHORTATIONS, AND TARGETS -wrong emphasis as to who is most responsible -fake slogans: "we are number 1" REMOVE BARRIERS TO PRIDE OF WORKMANSHIP -what is my job? -allow employees to speak up to make changes
pareto analysis
-a coordinated approach for identifying, ranking, and working to permanently eliminate defects. focuses on important error sources *80% of the problems may be attributed to 20% of the causes -rank order histogram -makes it clear what are the greatest payback opportunities for your efforts
histogram
-a distribution showing the frequency of occurrences between the high and low range of data -see frequency of problems
aggregate production planning
-a managerial statement of time-phased production rates, work-force levels, and inventory investment (3 capital intensive resources), which takes into account customer requirements and capacity limitations -varying levels of each resource to meet customer requirements and limitations -helps us attain our goals -plan with longest time horizon NATURE OF APP AGGREATE (combine) -classes of products -labor or other inputs -geographic location of production -aften abstract TIME HORIZON -medium term (tactical) TIME BUCKETS -divisions of horizons (ie: month, day, week, etc.) ROLLING HORIZON -always moving forward NATURE OF BUSINESS DETERMINES -typically one year with one month buckets
process flow chart
-a picture which describes the main steps, branches, and eventual outputs of a process -sketch showing how everything connects -help understand the overall process -facilitate communication among the different stages
total annual purchasing cost (TAPC)
-actual cost/value of a year's demand -cost of item x annual demand for item -C x D -C=cost of item -D=annual demand for item -cost doesn't differ with lot size
lower levels of planning
-after APP -manufacturing MASTER PRODUCTION SCHEDULING (MPS) -medium range (tactical) -1st level of disaggregation -break-down into more real end-items -horizon and buckets are no larger than APP (often shorter) -formulated and evaluated at a lower organizational level than the APP MATERIAL REQUIREMENTS PLANNING (MRP) -extreme detail, down to each nit and bolt -medium range (tactical) SHOP FLOOR SCHEDULING -detailed, actual production schedule -short range (operational) *as you go down list, level of detail increases and flexibility decreases
PCDA
-another Deming contribution -before engaging in cycle, need to see where you currently are PLAN -identifying and analyzing the problem -what do you want to improve? DO -developing and testing a potential solution CHECK -measuring how effective the test solution was, and analyzing whether it could be improved in any way ACT -implementing the improved solution fully
scatter diagram
-correlation chart -a graph of the value of one characteristic versus another characteristic -relationship and behavior of different variables -indicates relationships, but not causes and effects
checksheet
-count number of times type of problem occurs -an organized method for recording data -direct interpretation of the data -easy to interpret and encourage the involvement of process operators
why is inventory an important issue?
MATERIAL AVALIABILITY -assuring customer orders are met *INVENTORY COSTS MONEY -expensive **must find a solution that insures customer demand is met while minimizing costs
control limits
-defines the bounds of common cause variation in the process -a control limit is a tool we use to help us take the right actions: -if all points are between the limits, assume only common cause variation is present (unless one of the other signals or a special cause is present) -if a point falls outside the limit, you treat it as a special cause
specification limits
-different from control limits -any observation outside those limits would be classes as defective, while anything within those would be considered non-defective
FOQ with gradual replenishment (usage)
-eliminate assumption of instantaneous replenishment -in-house manufacture vs partcial delivery -create inventory yourself -don't make one product at time, sell at same time -inventory fluctuating -ie: don't make one donut at a time -use inventory as build inventory -never attain highest point of Q in instantaneous-> new Imax is Q(P-D)/P -holding cost decreased -Q increased -TAHC=((Q/2)(iC))((P-D)/P) -Q=sqrt((2DS)/iC)(P/(P-D))
type 1 error
-false positive -when a system that is in control is judged to be out of control and adjustments are made -producer's risk- the risk a producer takes when adjusting system -overreact -to reduce probability, increase control limits (as you increase the limits, it increases the chance of a type 2 error)
cause and effect diagram
-fishbone or ishikawa -a tool that uses a graphical description of the process elements to analyze potential sources of process variation -effect you want to improve
in control
-functioning as it has historically, exhibiting only common cause of variation (sampling error) -stable, only variation from common cause -desired -process needs no adjustment -if you make an unneeded adjustment-> increase variation->decrease quality -H0: null hypothesis
Total Quality Management (TQM)
-history: focused used to be on output, NOT quality -managing the entire organization so that it excels on all dimensions of products and services that are important to the customer -processes in all areas of firm must be high quality -latest approach: six sigma
total annual holding cost (TAHC)
-holding=carrying: cost of storing item -cost of insurance, capital, warehousing, shrinkage (inventory reduction due to theft, decreased sales, etc.), and others -if increases inventory increases cost->holding -TAHC= avg inventory level x per unit annual cost -(Q/2)iC -Q/2= avg inv (max-min)/2 -i=% value of cost to hold for one year -C=value of item -order smaller quantity to minimize cost
optimal Q
-minimization of TAHC+TASC -intersection at point TAHC=TASC -if you know one of these values at Q, you know the other -if you know these combined at Q, you divide in half -Q=sqrt(2DS/iC) -D=annual demand -S=cost of one setup -iC=% of cost of item to hold in inventory (holding cost) -i and D must be for the same time frame -D and C must be for the same size product -reorder point (RP)= demand during lead time (DLT)
Baldrige Award
-national quality award in U.S. (U.S. late to quality) -similar to Deming in Japan -established by Raegan in 1987 -rated on 7 core values -externally rated on customers' rate of quality/satisfaction and strategic position -every December in white house CATEGORIES -manufacturing companies or subsidiaries that: -produce and sell manufactured products or manufacturing processes or -produce agricultural, mining, or construction products -service companies or subsidiaries that sell service -small businesses -health care organizations -educational institutions -not for profits -cyber security firms CHARACTERISTICS OF WINNER -companies formulated a vision of what they thought quality was and how they would achieve it -senior management was actively involved -companies carefully planned and organized their quality effort to be sure it would be effectively initiated -vigorously controlled the overall process -responsibilities of the winner include full disclosure of their practices to the general public
control charts
-very popular -a time sequence chart showing platted values of a statistic, including a central line and one or more statistically derived control limits -measure and plot any variable overtime that shows the resulting type of variability -uses actual variation in observed data to determine if a process is "in control" (common cause variation) or "out of control" (special cause variation) -categorizes/analyzes variation
ISO 9000
-overseen by organization of standardization (predetermined minimum quality standards of processes within industry) -different set of standards for each step in production flow -international -doesn't limit the number of firms that can be recognized -rapidly becoming standard that is required to do business in the European Community NOT AN AWARD: QUALITY CERTIFICATION PROCESS LESS BROAD THAN BALDRIGE -are processes documented, consistently performed, and suited to task? INTERNALLY FOCUSED ON PROCESSES -not external result -a lot of companies don't apply because they don't want to reveal secretes CRITICISM -no central certification body exists (often achieved through one of several independent certification "agents") STRENGTH -flexible due to vague guidelines-> audit can be tailored to fit each firm
benchmarking
-potential quality tool -identify those processes needing improvement -identify a firm that is the world leader in performing the process -contact the managers of that company and make a personal visit to interview managers and workers -analyze data -compare against best in class and learn from their techniques -identify what we want to improve and study competitors
out of control
-process is not functioning as it has in the past, exhibiting evidence that a special or attributable cause of variation has entered the process -needs some type of attention or adjustment -Ha: alternative hypothesis DATA PATTERNS TO SUGGEST OUT OF CONTROL: -a single ample statistic that is outside of the control limits -two consecutive sample statistics near control limits -five consecutive points above or below the central line -a trend of five consecutive points -very erratic behavior
FOQ with uncertain demand
-remove assumption of certain demand (still constant) -demand is assumed normally distributed -instantaneous replenishment -service level: % chance no stockout during a given inventory cycle (no backorders) -RP-Dlt=SS -D differs between inventory cycles -Zsl=(RP-Dlt)/SDlt -RP=Dlt+ZslSDlt *remember- can't add SD, must convert to variance -SS=z*SDlt -ROP=expected lead time demand+SS **higher service level and inventory cycles have relationship -more inventory levels-> greater chance of running out -high service level doesn't guarantee not running out (depends on other things too) **if lead time is anything other than 1 day, need to convert it
basic FOQ assumptions
-restrictive to isolate movement in single cost -demand is constant -item is produced or purchased in lots -independence between orders -no uncertainty in demand or supply -*replenishment is instantaneous (drives model, you receive all of your order at once-no partial shipment) -holding, setup, and purchasing are the only relevant costs
total annual setup cost (TASC)
-setup=ordering: acquisition costs -administrative charges, delivery charges, labor costs, defects, testing, etc. -if costs increase with frequency of ordering->setup cost -ie: cost to have amazon prime -TASC=# of setups per yr x cost of a setup -(D/Q)S -D=annual demand rate -Q=size of lot/batch/order -S=cost per setup/order (fixed) -inverse of TAPC -as lot size increases-> cost decreases -order large quantities to minimize costs
six sigma
-six sigma quality: goal of firms to produce at the highest quality possible METHODOLOGY (DMAIC cycle) 1. DEFINE -identify customers and their priorities 2. MEASURE -determine how to measure the process and how it is performing 3. ANALYZE -determine the most likely causes of defects 4. IMPROVE -identify the means to remove the causes of defects 5. CONTROL -determine how to maintain the improvements
continuous improvement
-small, incremental changes over time to existing processes to improve quality in the long run (collectively add up exponentially) -treats no process as one that is complete and perfected, a process is considered to be at all times a work in progress, with constant effort to analyze and improve -7 tools of quality (magnificent seven) -process flow charts -cause and effect diagrams -control charts -histograms -check sheet -pareto charts -scatter diagrams
type 2 error
-when a system that is out of control is judged to be in control, and we fail to intervene in the system -false negative -consumer's risk- the risk a consumer tasks when buying a product from an out of control process -greater risk of external defect -to reduce probability, decrease control limits (as you decrease the limits, it increases the chance of a type 1 error)
It is quite common in Statistical Process Control to track both the sample average and the sample range. Which of the following statements are accurate with respect to why both measures are considered? Since the sample mean and range are independent measures, each must be tracked separately. The sample average must always be used when using the sample range since either used separately only convey part of the situation. For a given sample, the sample mean can be in control while the range can be out of control. It is necessary to control both the sample average and the sample variation in order to assure the process is in control. All of the above are correct.
All of the above are correct.
Which of the following are the characteristics of a Baldridge Award winner or a company that emphasizes on customer satisfaction and business results? The company formulates a vision of what quality is and how to achieve it. Senior management is actively involved The company carefully plans and organizes its quality effort. The company vigorously controls the overall process. All of the above.
All of the above.
Which of the following is NOT a method used in aggregate planning to cope with fluctuations in demand? Backordering demand in peak periods Building inventory in advance of peak periods Hiring additional workers in peak periods Construction of a new plant and/or finished goods warehouse All of the above are methods used to cope with fluctuating demand in
Construction of a new plant and/or finished goods warehouse
Suppose a company is using pure chase strategy for its aggregate production planning. Which of the following policies would a manager use to deal with (or hedge against) the fluctuation in demand? Hire additional workers when demand increases and outplace them when demand decreases Stock up excessive inventory during the periods of low demand. Purchase the shortages from subcontractors. Allow the employees to work overtime when the demand is low. All of the above
Hire additional workers when demand increases and outplace them when demand decreases
Which of the following are characteristic of the companies who have won the Malcolm Baldrige National Quality Award?I. A strategic vision for the organization was developed.II. Senior management was actively involved in improvement efforts.III. They produced highly profitable, high technology products.IV. Quality control and improvement efforts were carefully planned and implemented. I only I, II, and III I, III, and IV I, II, and IV I, II, III and IV
I, II, and IV
Which of the following statements best describe one a basic difference between the Malcolm Baldrige Award and ISO 9000 certification? One originated in Japan, the other in Europe There is essentially no difference between the two ISO 9000 is more important in international commerce One applies to only U.S. firms, one applies to only European firms ISO 9000 focuses on customer satisfaction, unlike the Baldrige Award
ISO 9000 is more important in international commerce
The Shingo system relies on which of the following approaches? Introduction of numerically controlled machine tools into the process. Introduction of quality control checks at the end of the process. Introduction of quality controls within the process so feedback can occur immediately. Utilization of statistical quality control. Utilization of fishbone or cause-and-effect diagrams.
Introduction of quality controls within the process so feedback can occur immediately.
A X-bar control chart has an upper control limit of 0.65 inch and a lower control limit of 0.35 inch. The results of the next six samples are 0.60, 0.37, 0.45, 0.48, 0.53, and 0.62 inches. What should you do? Nothing, the process is in control Investigate because three observations are above the mean. Investigate because there is a run. Investigate because there is a trend. increase the sample size.
Investigate because there is a trend.
Which of the following statements is not true about the continuous improvement process? Results are usually accumulated as a series of small improvements. It utilizes tools such as the Deming Wheel, Pareto analysis, and Histograms It requires creative thinkers to come up with break-through innovations. It utilizes team and employee involvement It utilizes control charts.
It requires creative thinkers to come up with break-through innovations.
A pure level strategy for aggregate production planning: Maintains a stable workforce working at a constant output rate. Varies the output by changing the number of hours worked through flexible work schedules or overtime Matches the production rate to monthly demand by hiring and laying off Uses a part-time workforce when the demand exceeds the production rate. Never uses inventory to buffer against the changes in demand.
Maintains a stable workforce working at a constant output rate.
measures of inventory
NUMBER OF UNITS -absolute measure -not very useful from evaluative standpoint DOLLAR VALUE OF UNITS -(units x value per unit) -cost measure WEEKS OF SUPPLY -a relative measure -inventory equivalent of ROI -(units of inventory/weekly demand rate) INVENTORY TURNS -a relative measure -inverse of the "years of supply" measure -(annual sales volume/units of inventory)
Which of the following is not a cost associated with cost of quality ? Scrap cost Test equipment cost Inspection cost Warranty cost None of the above, all are a cost of quality.
None of the above, all are a cost of quality.
What is one of the fundamental differences between the Malcom Baldridge Award and ISO9000 certification? One applies to manufacturing and the other applies to only purchasing. One is fairly simple to achieve and the other is extremely difficult. There is essentially no difference between the two. One applies to U.S. firms, while the other applies to companies anywhere in the world. One originated in Canada and the other in Europe.
One applies to U.S. firms, while the other applies to companies anywhere in the world.
Which one of the following lists best describes the four steps of the Deming Wheel? Purchase, Distribute, Coordinate, Account. Plan, Do, Check, Act. Plan, Direct, Critical, Align. Plan, Do, Critique, Articulate None of the above is an accurate description for the Deming Wheel method.
Plan, Do, Check, Act.
In a saw tooth diagram, the peak of each inventory cycle represents? Q ROP SS DLT
Q
types of inventory (transformation stage)
RAW MATERIAL -inventory which has not yet undergone any transformation by the company -overseen by sourcing department of organization WORK-IN-PROGRESS (WIP) -inventory which has undergone some transformation but not yet completed -overseen by those involved in scheduling FINISHED GOODS -inventory which has undergone all transformations and it ready to be passed to the customer -controlled by marketing
reasons for holding inventory
SAFETY STOCK -a buffer against some form of uncertainty -ie: uncertainty of demand or supply CYCLE STOCK -due to the supply/source of product is not continuous -batching: some resource required must be shared with more than one product (ie: plastic injection molding), may not be economically efficient to produce the product continuously -ie: store-self PIPELINE STOCK -inventory that is located somewhere in the production or delivery process -"in the pipeline" -transit stock -ie: raw materials SEASONAL STOCK -to buffer against seasonality -what aggregate plan does
Fail-Safe Design: The Shingo System
SHINGO'S ARGUEMENT -SQC methods do not prevent defects -defects arise when people make errors -defects can be prevented by providing working with feedback on errors -mechanism of immediate feedback-> know they aren't making error POKA-YOKE INCLUDES: -fail proof systems -safety -ie: car won't start if foot not on brake
Which of the following circumstances would provide an incentive for employing a level (vs. chase) plan? The product is perishable Warehouse space for finished goods is limited. Inventory carrying costs are very high. The production process requires highly trained labor. None of the above (i.e., all are incentives for a chase plan).
The production process requires highly trained labor.
Which of the following measures is most appropriately monitored by a p chart? The weight of a 3 month old baby. The diameter of a piston. The proportion of students absent from class each day. The weight of a bushel of wheat. The temperature of a class room
The proportion of students absent from class each day.
Converting quarterly and annual business plans into broad output and labor requirements for the intermediate term is known as: Aggregate planning. Master production scheduling. Rough-cut capacity planning. Materials requirements planning. Capacity requirements planning.
aggregate planning
Comparing an organization's performance on critical business processes against the best performance on the same or similar processes in other organizations is known as: Root cause analysis. Value engineering. Quality function deployment. Benchmarking. Walking the cat backwards.
benchmarking
The degree to which the product or service design specifications are met during the transformation process is known as: Design quality Conformance quality Quality function deployment Fitness for use None of the above
conformance quality
Which of the following costs are NOT considered in developing an aggregate production plan? Inventory holding costs. Basic production costs (fixed and variable). Hiring and training costs. Layoff and firing expenses Depreciation costs.
depreciation costs
Which aggregate planning strategy typically results in greater inventory carrying costs? Level strategy. Chase strategy. Subcontracting strategy. Material requirements production strategy It depends on other factors
level strategy
Which of the following control charts is(are) most appropriate for detecting process failure with attribute measurements? p chart R chart X-bar chart Both Rchart and X-bar chart Both pchart and R chart
p chart
