SCM 470 - Process Fundamentals and Inventory Management Review
What is the major difference between Cycle Inventory and Seasonal Inventory?
- Seasonal Inventory is due to Temporary Imbalances in Supply and Demand due to Variable Demand or Variable Supply - Cycle Inventory is created due to a Cost Motivation
What are the consequences associated with companies maintaining a position below the diagonal of the Product Process Matrix?
- Lack of Flexibility - High Capital Investment - Threat of the Product Life Cycle "Reversing Direction"
List the Qualities of a Process Located in the Top Left of the Product Process Matrix
- Low Capital Intensity - General Purpose Equipment - Incentive Wages - Tailored Products - Flexible Workflow
What are the 4 Stages of the Product Life Cycle?
- Market Development / Introduction - Market Growth - Market Maturity - Market Decline
According to Lecture, what are the 5 Main Reasons to Hold Inventory?
- Meet Customer Demand - Reduce Uncertainty - Economies of Scale - Profit During Inflation - Manage Lead Times
According to Lecture, what are the 5 Main Reasons to Minimize Inventory Levels?
- Obsolescence, Breakage, Theft - Storage and Handling Costs - Taxes and Insurance - Opportunity Costs of Money - Hidden Costs of Quality
Describe the state of Product Inflow and Product Outflow when Cycle Inventory is held
- Product Inflow: Uneven - Product Outflow: Smooth
What are the main characteristics of the Decline Stage in the Product Life Cycle?
- Production is concentrated into fewer hands - Prices and margins get depressed - Customers get bored
Empirical Research in Operations Management has identified Five Primary Types of Processes. What are these 5 Processes?
- Project - Job Shop - Batch - Line - Continuous Flow
What are the benefits associated with companies maintaining a position above the diagonal of the Product Process Matrix?
- Reduced Capital Needs - Increased Flexibility
What are the 5 Main Forms of Inventory?
- Safety Stock (Buffer) - Decoupling Inventory - Anticipatory Inventory - Cycle Stock - Pipeline Inventory
True or False: As long as it takes an operation even a minimum amount of time to work on a Flow Unit, the process will always exhibit Pipeline Inventory
True
True or False: Even if a Task/Resource is relatively slow, it is NOT a Bottleneck if the process is still able to meet Customer Demand
True
True or False: Even when a company limits itself to fairly narrow product and process activities, periodic changes will be required as markets and technologies occur
True
True or False: If a Task is close to 100% Utilization, we may have problems with meeting customer demand when there is fluctuation/variability in our demand
True
True or False: Typically, the Market Maturity Stage forces the producer to concentrate on holding his distribution outlets, retaining shelf space, and trying to secure even more intensive distribution
True
True or False: When Seasonal Inventory is held, Production and Product Outflow is nearly constant, while the Product Inflow is zero
True
True or False: The Cycle Time of the overall process determines the Capacity of the Process
True - Cycle Time limits the volume of the product that the process is able to produce and determines the maximum revenue that a process can generate
List the Qualities of a Process Located in the Bottom Right of the Product Process Matrix
- High Capital Intensity - Special Purpose Equipment - Hourly Wages - Standardized Products - Expensive to Change Capacity
Example: Assume that Task 1 has an Output Rate of 80 Units per Minute and Task 2 has an Output Rate of 75 Units per Minute. Given this information, How many FGs will be produced in 8 hours?
36,000 Units
Example: Given the following information, what is the average inventory cost of this Logistics Alternative? - It takes 6 Weeks to move the product from China to the U.S. - An order is placed every two months - The ship contains $3,000,000 worth of Inventory
$2,076,900 Average Inventory In-Transit 1) 6 Orders per Year (each worth $3 Million) x 6 Weeks of Travel (per Order) = 36 Weeks of Expenses 2) Of the 52 Weeks in a year, 36 of them have a shipment of $3 Million 3) (36/52) x $3 Million = $2,076,900
Example: Assume that Task 1 has an Output Rate of 5 Units per Hour and Task 2 has a Cycle Time of 20 Minutes per Unit. Answer the following questions: - 1) If one employee is performing both of these tasks, what is the Resource Utilization Rate? - 2) Calculate the Output Rate in 8 Hours - 3) Determine the Bottleneck
- 1) 100% (Task 1: 60%, Task 2: 100%) - 2) 15 Units - 3) The Employee (They are performing both Tasks)
Example: Assume that Task 1 has a Cycle Time of 12 Seconds per Unit and Task 2 has an Output Rate of 15 Units per Minute. Answer the following questions: - 1) If one employee is performing both of these tasks, what is the Resource Utilization Rate? - 2) Calculate the Output in 8 Hours - 3) Determine the Bottleneck
- 1) 100%(Task 1: 100%, Task 2: 25%) - 2) 1800 Units - 3) The Employee (They are Performing both Tasks)
Describe the Trade-Off Between Resource Capacity and Warehouse Capacity
- A Chase Production Process means Less Inventory and Less Variable Resources - A Level Production Process means More Inventory and More Variable Resources
No matter how tightly focused and coordinated a company might be, any change in the relative positioning of either its products or its production processes will expose it to two kinds of danger. What are these dangers?
- A change in one dimension of the PPM without an corresponding change in the other (i.e., changing the product without changing the process) - Responding to a change in one dimension of the PPM by broadening activity on the other (e.g., responding to a product shift by adding a new process instead of changing the existing production process)
Describe the Trade-Off Between Batch Size and Inventory
- As Batch Size Increases, Inventory levels Increase at a more significant rate - As Batch Size Decreases, Inventory levels decrease
Describe the Trade-Off Between Batch Sizes and Ordering Costs
- As Batch Size Increases, Order Costs Decrease - As Batch Size Decreases, Order Costs Increase
Describe the Trade-Off Between Batch Sizes and Setup Time
- As Batch Size Increases, the number of Setups Decrease - As Batch Size Decreases, the number of Setups Increases
How can Little's Law be expressed?
- Average WIP = Flow Time x Throughput Rate - Average Flow Time = Average WIP / Throughput Rate - Average Work-in-Process = Average Flow Time / Average Cycle Time
What are the two types of Production Strategy?
- Chase Strategy - Level Strategy
Generally, Demand has to be "created" during the product's Initial Market Development Stage. How long this process takes depends on what 4 qualities?
- Complexity - Newness - Fit with Customer Needs - Presence of Competitive Substitutes
Hayes and Wheelwright attribute two main causes to a company's lack of perspective. What are these causes?
- Coordination and mutual understanding between the marketing and manufacturing functions have broken down - One or both of these functions have lost their sense of focus
From an Accounting Perspective, what are the two classifications of Inventory? What types of Inventory do these classifications consist of?
- Direct Materials: Raw Materials, Work-In-Process, Finished Goods - Indirect Materials: Supplies
According to Hayes and Wheelwright (1979): - From the perspective of the product, Demand-Supply Mismatches take the form of __________ - From the perspective of the process, Demand-Supply Mismatches take the form of ___________
- From the perspective of the product, Demand-Supply Mismatches take the form of Waiting Times - From the perspective of the process, Demand-Supply Mismatches take the form of Inventory
What are the general characteristics of the Maturity Stage of the Product Life Cycle?
- General Growth is on par with Population Growth - No more Distribution Pipelines need to be Filled - Price Competition becomes Intense
According to Hayes and Wheelwright (1979), the usefulness of the Product-Process Matrix lies in what two different points?
- Similar Processes tend to have similar Problems - The "natural shift" of industries towards the lower right of the Product-Process Matrix enables you to predict how processes are likely to evolve in a particular industry
According to Hayes and Wheelwright, what are the four major types of Growth that companies pursue?
- Simple Growth of Sales Volume within an Existing Product Line and Market - Product Proliferation - Vertical Integration - Expansion into New Products and Markets
What are the main components of Operations Management?
- Strategy - Process Flow (Capacity, Utilization, Bottleneck) - Forecasting - Quality
Example: Assume that Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.8 Seconds per Unit. If there are 4 employees working at Task 1 and 2 employees working at Task 2, what is the Idle Time for the employees at each Task?
- Task 1: 15 Minutes 1) (1 - 0.9375) x 60 = 3.75 Minutes 2) 3.75 Minutes x 4 Employees = 15 Minutes - Task 2: 0 Minutes
Example: If Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.80 Seconds per Unit, what is the Idle Time for each Task?
- Task 1: 3.75 Minutes of Idle Time (93.75% Utilization; 6.25% Non-Utilized) - Task 2: 0 Idle time (100% Utilization)
Example: If Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.80 Seconds per Unit, what is the Utilization Rate for each Task?
- Task 1: 93.75% - Task 2: 100% (Bottleneck)
What are the four general categories for all activities within a process?
- Tasks - Resources - Flows - Storage
What is the difference between a Line Process and Continuous Flow Process?
- The Output of a Line Process can be Counted (e.g., cars, cereal boxes, phones) - The Output of a Continuous Flow Process cannot be Counted (e.g., electricity, oil refinery, water treatment facility)
According to De Groote (1994), there are Five Primary reasons for holding Inventory. What are they?
- The Time a Flow Unit Spends in the Process - Seasonal Demand - Economies of Scale - Separation of Steps in a Process - Stochastic Demand
Describe the Meaning behind the components of a Process Flow Diagram: - Triangle - Rectangle - Diamond - Arrow
- Triangle: Inventory - Rectangle: Operating Step - Diamond: Decision Point - Arrow: Flow / Movement
What are the 7 Classifications of Waste (Muda)?
- Waiting - Overproduction - Rejections - Motion - Inventory - Transportation - Overprocessing - Note: WORMITO
EX: If an Automobile Assembly line is available for 16 hours per day and Customer Demand is 1,000 cars per day, what is the Takt Time (in Minutes)?
0.96 Minutes per Car - This means that for the process to fully meet demand, it must be designed so that the Process Cycle Time (Bottleneck) is no more than 0.96 minutes
How is the Output Rate of a Process Calculated?
1) For each Task and Resource in the Process, we determine the Cycle Time 2) The Cycle Time of the entire process is determined by the Cycle Time of the Bottleneck Task or Resource 3) The Output Rate of a Process is calculated as the inverse of its Cycle Time (OR = 1/CT)
Example: If you want a customer service level of 90%, how much inventory should be held each week? Assume the following when performing your calculations: - Each week, customers order 500 units on average - Standard Deviation of Demand is 100 Units - Inventory is replenished Weekly (LT = 1 Week)
1) Inventory to be Held = Demandt + (z x σd x √Lead Time) 2) 500 + (1.28 x 100 x √1) 3) Inventory to be Held = 628 Units Note: The Z-Value is found on the Z-Table Note: Be certain that Demand is in the same units as Lead Time
Example: Assume that Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.8 Seconds per Unit. Given this information, how long does it take to produce a single Unit?
1.55 Seconds
Example: On an assembly line, each station takes 1 Minute, and the vehicle passes through 100 stations. How much WIP exists in this process?
100 Units of WIP 1) Throughput Rate = 1 Unit/Min 2) Flow Time = (100 Stations x 1 Minute per Station) 100 Minutes
Example: A company uses a batch size of 300 units. What is the average Cycle Stock?
150 - Cycle Stock = Q/2 (Where "Q" is Lot Size or Batch Size)
Example: Assume that Task 1 has an Output Rate of 80 Units per Minute and Task 2 has an Output Rate of 75 Units per Minute. Given this information, How much WIP will be produced in 8 hours?
2,400 Units 1) 80 Units/Min - 75 Units/Min = 5 Units of Decoupling Inventory per Minute 2) 5 Units x 480 Minutes (8 hours) = 2,400 Units
Example: Assume that the Cycle Time for Task 1 is 0.75 Seconds per Unit and the Cycle Time for Task 2 is 0.80 Seconds per Unit. If the batch size is 30 Units for Task 1, what is the Throughput Time for a single batch?
23.3 Seconds per Unit - (30 Units x 0.75 Seconds/Unit) + (0.8 Seconds)
Example: If Task 1 utilizes a batch size of 30 units and Task 2 utilizes a batch size of 12 units, how much time does it take to produce one item (the batch)? - Task 1: 0.75 seconds per unit - Task 2: 0.80 seconds per unit
32.1 Seconds per Batch
Example: Assume that Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.8 Seconds per Unit. Given this information, How many FGs will be produced in 8 hours?
36,000 Units
Example: Assume that Task 1 has an Output Rate of 20 Units/Min and Task 2 has an Output Rate of 14 Units/Min. How much Decoupling Inventory will accumulate between these two tasks within an hour?
360 Units 1) 20 Units - 14 Units = 6 Units per Minute 2) 6 Units/Minute x 60 Minutes = 360 Units
Example: In a Batch Process, the Throughput Time is 7 hours on average during a two-shift operation (8 hours/shift). Demand for the product is 100 units per day. Given this information, how much WIP exists?
44 Units of WIP - 1) (7 Hours x 100 Units)/16 Hours - 2) 44 Units of WIP Note: The Flow Time and the Output Rate must be in the same units
Example: Assume that Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.8 Seconds per Unit. If the batch size is 30 units, how much time does it take to produce one batch?
46.5 Seconds - (0.75 Seconds x 30 Units) + (0.8 Seconds x 30 Units) = 46.5 Seconds
Example: Assume that Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.8 Seconds per Unit. If the batch size is 30 Units, how much Cycle Stock is associated with this process?
60 Units
Example: Assume that Task 1 has a Cycle Time of 0.75 Seconds per Unit and Task 2 has a Cycle Time of 0.8 Seconds per Unit. If there are 4 employees working at Task 1 and 2 employees working at Task 2, what is the Labor Utilization Rate for the entire Process?
95.83% - 1) Task 1: 0.75/0.80 = 93.75%, Task 2: 0.80/0.80 = 100% - 2) ((4 x 93.75%) + (2 x 100%)) / 6 employees = 95.83%
What is Little's Law?
An equation that describes the relationship between the averages of three operating metrics: Work-in-Process Inventory, Flow Time, Throughput Rate - Note: Flow Time is also referred to as Throughput Time - Note: Throughput Rate is also known as Demand or Processing Rate
What is a Bottleneck?
Any resource that limits the ability of a system to meet Customer Demand
Example: Calculate the EOQ with the following information: - Demand: 100 bottles per day - Cost per Order: $100 - Inventory Carrying Cost Factor: 25% - Bottle Cost: $20
Approximately 1208 Bottles
Example: Demand for Easter Candy is 500,000 Units, and production begins 26 weeks prior to the holiday. Using a Level Production Strategy, how many units should be produced each week to meet demand?
Approximately 19,230 Units each Week
According to Cachon and Terwiesch, how does Little's Law point us toward the best way to reduce Pipeline Inventory?
As reducing Throughput Rate is typically not a desirable option, the only other method of reducing Pipeline Inventory is reducing Flow Time - If the Throughput Rate of a Process is reduced, so is the Demand and Profit associated with it
How can the Cycle Time be used to find the Output Rate?
By taking the Reciprocal of the Cycle Time, one can determine the Output Rate - Output Rate = 1/Cycle Time - EX: The Cycle Time for Task 1 is 4 Min/Unit. The Output Rate of this step is 1 Unit every 0.25 Minutes.
What is the Cycle Stock Formula?
Cycle Stock Formula: 1) X = Batch Size / Number of Processing Steps 2) Y = Number of Processing Steps x 2 (Cycle Stock Inventory on Either Side) 3) Total Cycle Stock = X * Y
How does Decoupling Inventory serve as a "buffer" in a Process?
Decoupling Inventory between Processing Steps can be used to absorb variations in Throughput Rates by acting as a source of Supply for a Downstream Process Step
What is the Market Growth Stage of the Product Life Cycle?
Demand begins to accelerate and the size of the total market expands rapidly - AKA "Takeoff Stage"
What is the Market Maturity Stage of the Product Life Cycle?
Demand levels off and grows, for the most part, only at the replacement and new family-formation rate
Describe the Trade-Off Between Batch Size and Throughput Time
Every unit in the Batch must be complete before the Batch is considered to be complete - As Batch Size Increases, Throughput Time Increases - As Batch Size Decreases, Throughput Time Decreases
What is Vertical Integration?
Expansion of the Process Structure
What is Product Proliferation?
Expansion of the Product Line within a Single Market, using an existing Process Structure
According to Hayes and Wheelwright, how do external forces typically impact a company's position on the Product-Process Matrix?
External forces tend to change a company's position on the Product-Process Matrix, whether or not the company makes any changes in its own product or process structures
True or False: Anticipatory Inventory is created when a facility uses the Chase Production Strategy
False - Anticipatory Inventory is created when a facility uses the Level Production Strategy
True or False: Companies tend to make Product Structure Changes and Process Structure Changes at the same time
False - Companies tend to make only one kind of change (i.e., Product Structure Change or Process Structure Change) at a time
True or False: If Task 1 has an Output Rate of 80 Units per Minute and Task 2 has an Output Rate of 75 Units per Minute, adding Capacity to Task 1 will increase the Output capabilities of the entire Process
False - Given that Task 2 is the Bottleneck, adding Capacity to Task 1 would not affect the Output capabilities of the process at all - We would need to add Capacity to Task 2 in order to increase the Output capabilities of the Process
True or False: In today's market, almost every new product has a Classical Life Cycle Curve
False - Most new products do not have any sort of Classical Life Cycle Curve at all - Instead, they have an infinitely descending curve from the outset
True or False: Producing in batches reduces the Throughput Time of a Process
False - Producing in batches increases the Throughput Time of a process because each unit in the batch must be processed before it can be moved to the next task
True or False: Stochastic Demand and Seasonality are the same
False - Seasonality refers to Variations in Predictable Demand
True or False: If Task 1 has an Output Rate of 80 Units per Minute and Task 2 has an Output Rate of 75 Units per Minute, Task 1 is the Bottleneck
False - Task 2 is the Bottleneck
True or False: The Market Maturity Stage cannot be passed through rapidly
False - The Market Maturity Stage can be passed through rapidly, persist for generations with per capita consumption neither rising nor falling, or persist in a state of gradual per capita decline
True or False: At times, it may be favorable to shut down a Continuous Flow Operation
False - We never want to shut down a Continuous Flow Operation due to the considerable expense in starting or stopping that process - A Line Process, however, may be operated more/less often depending on our needs
How does Decoupling Inventory accumulate in a Process?
If a Preceding Task operates Faster Than (i.e., has an Output Rate Larger than) its Subsequent Task, there will be Decoupling Inventory - EX: If Task 1 is Faster than Task 2 (i.e., Task 2 is Slower than Task 1), there will be Decoupling Inventory - EX: Task 1 (80 Units/Min) and Task 2 (75 Units/Min). Between these Tasks, there will be 5 units of Decoupling Inventory generated each minute.
What is the "Used Apple Policy"?
Instead of aspiring to be the first company to see and seize an opportunity, they systematically avoid being first - That is, companies are willing to "eat off of a used apple", but they try to be alert enough to make sure it is only slightly used
Relative to the Market Development/Introduction Stage of the Product Life Cycle, what new problems are introduced during the Market Growth Stage?
Instead of seeking ways of getting consumers to try the product, the originator must now convince consumers to prefer their brand
What is Pipeline Inventory?
Inventory that is In-Transit from Origin to Destination
How is Decoupling Inventory generated?
It is created by differences in processing rates
What is Cycle Stock?
It is the average batch or lot size - Cycle Stock = Q / 2
What is the purpose of Anticipatory Inventory?
It is used to pre-build Inventory in anticipation of future demand
How is the Economic Order Quantity (EOQ) Calculated?
Q* = √(2 x D x S) / ( I x C)
When is Seasonal Inventory typically generated?
Seasonal Inventory is generated when Capacity (i.e., equipment and labor) is Rigid and Demand is Variable
What is Stochastic Demand?
Stochastic Demand refers to the fact that we need to distinguish between the Predicted Demand and the level of Demand that is Actually Realized - That is, we typically face Variation in Demand Relative to our Demand Prediction/Forecast
How is Takt Time Calculated?
Takt Time can be Calculated by taking the Time Available to Produce a certain product and dividing by the Customer Demand for that Product
What Takt Time?
The Cycle Time at which a process would need to be paced in order to meet Customer Demand
Calculate the Cycle Time for each Task: - Task 1: 80 Units/Min - Task 2: 75 Units/Min
The Cycle Time is simply the Inverse (i.e, the reciprocal) of the Output Rate - Task 1: 0.75 Minutes/Unit - Task 2: 0.80 Minutes/Unit
How can one determine the Cycle Time of an entire Process?
The Cycle Time of the Bottleneck is the Cycle Time of the entire Process
At what point in the Product Life Cycle do competitors typically enter the fray?
The Market Growth Stage
According to Hayes and Wheelwright (1979), how does a Product progress through the Product-Process Matrix over its Life Cycle?
The Product-Process Matrix stipulates that over its Life Cycle, a Product tends to be initially produced in a Job Shop Process - As the Production Volume of the Product Increases, the Production Process for the Product moves from the upper-left of the Product-Process Matrix to the Bottom Right
What is Throughput Time / Flow Time? What are the elements of Throughput Time?
The amount of time each Unit spends in the process from the Start of the Process to the End of the Process - Processing Time - Wait Time - Wasted Time - Setup Time - Transit Time
What is Cycle Time?
The amount of time needed to produce a single unit - That is, it is the average time between successive completion of units - EX: Minutes per Unit
What are the consequences associated with companies maintaining a position above the diagonal of the Product Process Matrix?
The company will be vulnerable to competitors who can undercut its price, offer greater delivery dependability and tighter product specification
What is the first sign that a product has reached the Maturity Stage of the Product Life Cycle?
The first sign that a product has reached the Maturity Stage is when the market becomes saturated - This means that most consumer companies/households that are sales prospects will already be owning or using the product
What is a Batch Size (or Lot Size)?
The number of units a particular product type that is produced before beginning production of another product type
What is Output Rate?
The number of units that can be produced within a specific amount of time - Units per (Period of Time)
What is Utilization?
The percent of time that a resource is being used - Ranges between 0 and 100%
What is Logistics?
The process of Moving and Storing Inventory (Raw Materials, WIP, and Finished Goods) while Minimizing the Waste of Resources (i.e, People, Cost of Materials, Energy)
According to Lecture, what is Supply Chain Management (SCM) / Operations Management (OM)?
The process of transforming Raw Materials into Finished Goods while minimizing wasted resources (i.e, People, Cost of Materials, Energy)
What is the Market Decline Stage of the Product Life Cycle?
The product begins to lose customer appeal and sales drift downward
What is the Economic Order Quantity (EOQ)?
The quantity that minimizes total annual inventory costs (i.e., Annual Inventory Holding Costs and Annual Ordering Costs)
What is the Learning Curve / Experience Effect?
The reduction in product costs as cumulative production volume increases - It depicts the Total Improvement in Unit Costs obtainable by combining Product Evolution with Process Evolution
Describe the relationship between Annual Inventory Holding Costs and Annual Ordering Costs
There is an inverse relationship between Annual Inventory Holding Costs and Annual Ordering Costs - If a firm places small orders frequently, it will incur High Ordering Costs and Low Inventory Holding Costs - If a firm places large orders infrequently, it will incur High Inventory Holding Costs and Low Ordering Costs
What is the Market Development Stage of the Product Life Cycle?
This is when a new product is first brought to the market, before there is a proven demand for it, and often before it has been fully proved out technically in all respects - Sales are Low and Steadily Increase
When is a Chase Production Process used?
This method is used when we ramp up and ramp down production based on sales demand - Resource Utilization and Labor Employment will adjust accordingly
When is a Level Production Process used?
This method is used when we want to pre-build inventory for future demand (e.g., Anticipatory Inventory) - Resource Utilization and Labor Employment are stabilized
On the Product-Process Matrix, the "Off-Diagonals" (i.e., the Lower Left and Upper Right) are empty. What does this reflect?
This reflects that it is not Economical to produce High Volumes of a Customized Product or Low Volumes of a Standardized Product
What market conditions are necessary for companies to achieve Simple Growth?
This type of growth opportunity requires that extremely stable conditions exist with respect to competitors, technology, market tastes, etc - Only a change in the size of the market would be conducive to this method of growth
What is Idle Time?
Time where a Resource is NOT being used
What is Purchasing?
To acquire Goods and Services for the Use or Resale of an Organization while Minimizing the Waste of Resources (i.e, People, Cost of Materials, Energy)
What is the purpose of Safety Stock?
To hedge against underlying Demand Uncertainty
True or False: Progression along the product life cycle alone, without any change in the process used (i.e., proceeding horizontally or vertically across the matrix), would still provide numerous opportunities for cost reduction
True - EX: Product redesign, product-line simplification, development of improved raw materials and parts, increased sales volume, use of less costly distribution channels, the experience effect, etc
True or False: It is seldom possible for a company to move smoothly down the diagonal of the Product Process Matrix
True - However, a company can "lean" in one direction or the other through consistency in its decisions over time
True or False: Even when a company is at capacity, it can sometimes be extremely difficult to get a consensus on a decision to narrow the product line
True - This is due to the natural confrontation that occurs between a firm's Marketing and Manufacturing divisions
True or False: When converting units, you must always begin with the Lowest/Smallest Unit in the Process
True - You must always work with the same units in a conversion problem - EX: If the Lowest/Smallest Unit in the process is expressed in Seconds, convert other Task Times into seconds and proceed with the problem
How is the Utilization Rate calculated?
Utilization Rate = Cycle Time of Task / Cycle Time of the Bottleneck
