SCM Exam 2

In Japanese, Kanban means continuous improvement non-visual signal card communicating what is needed between various stages of production mistake proof

communicating what is needed between various stages of production

Always getting better, adapting to external demands and employee insight describes which lean operation competitive advantage? low inventory zero-waste continuous improvement respect for all employees

continuous improvement

MRP

Material Requirements Planning A computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.

What is the goal of theory of constraints? Maximize throughput while minimizing inventory and operating expense Maximize Operating expense while minimizing accounts payable, and throughput Minimizing Activity analysis, while maximizing throughput and Inventory Minimizing throughput while maximizing inventory and operating expense

Maximize throughput while minimizing inventory and operating expense

Inventory Turnover is defined as Current Inventory/Average Daily Usage

False

Quality must be defined by engineers. They are the only one who know what it means to be fit for use.

False

Types of business processes

-strategic planning -innovation -customer service -resource management -human resource management -supply management -performance measurement

Theory of constraints

1. Every process has a constraint 2. Every process has variance that consumes capacity 3. Every process must be managed as a system 4. Process measures are crucial to the process's success 5. Every process must continually improve

Statistically, six-sigma performance produces fewer than _____ defects per million opportunities for an error for defect. 5.6 6 3.4 4

3.4

Pull system (Kanban)

A workstation pulls output from the preceding workstation as it is needed Output of the final operation is pulled by customer demand or the master schedule

Scale economics

Allocation of fixed costs Equipment and construction costs Lower costs for purchases As volume increases, learning occurs

A bill of material is A piece of legislation that applies to raw materials procurement. A nickname for materials inventory manager. An illustration of how a finished product is manufactured. A supplier's invoice for a shipment of raw material.

An illustration of how a finished product is manufactured.

Which of the following is true if annual demand for a given product is 1,800 units, and the EOQ is 300 units? The average length of an order cycle will be five months. An order will be placed once per quarter. There will be three order placements per year. An order will be placed every two months.

An order will be placed every two months.

Automobile production is an example of which process? Job Shop Batch Process Assembly Line Continuous Flow

Assembly Line

_______ is good for moderate volume and variety. Examples of this process is bakery, cinema, and university. Project Job Shop Batch Process Continuous Flow

Batch Process

Inventory turnover

COGS / avg inventory

Which of the following is not one of the steps in W. Edward Deming's PDCA cycle? Plan Do Calculate Act

Calculate

How many calls a customer service agent can handle per hour is an example of what? Inventory Capacity Hurdle Rate Infinite Loading

Capacity

What needs to be done to prove a process' capability? Place customer-specific stickers on boxes of product Make decisions or activities to make a product secure Assess a supplier's available capacity and meet the investigating organization's requirements Collect data on the process by performing a trial run or pilot test

Collect data on the process by performing a trial run or pilot test

Which "Quality of Product" dimension would you be assessing when asking the question, "Does the product conform to design specifications?" Durability Performance Conformance Serviceability

Conformance

In Japanese, Kaizen means: a. Continuous Improvement b. Go and see c. Wasteful activity d. Mistake proof

Continuous Improvement

As companies started to seek scale economies and efficiency, their goal was to take advantage of ____________ in functional areas? a. ABC classification b. Deep skills c. Activity Based Costing d. Common costs

Deep skills

Materials Requirement Planning deals with which of the following: Independent demand Dependent demand End-user demand Uncertain demand

Dependent demand

Days of Supply is calcuated by Dividing average daily use by performance usage Dividing current inventory by average daily usage Dividing current inventory by performance usage Dividing current inventory by inventory ordered

Dividing current inventory by average daily usage

EOQ

Economic Order Quantity--minimizes total acquisition costs; point at which holding and orders costs are equal

Eliminating process waste includes: Go and see for yourself and increasing efficiency Increasing effectiveness and go and see for yourself Eliminating all activities that don't add value and increasing efficiency Increasing efficiency and increasing effectiveness

Eliminating all activities that don't add value and increasing efficiency

A good inventory manager will strive to minimize inventory holdings.

False

In the metaphor of the bottle for theory of constraints, to get water to flow out at a faster rate, you need to make the neck more narrow.

False

Which of the following is NOT a heuristic or rule of thumb used to make inventory decisions? Period order quantity Flexible order quantity Fixed order quantity Lot for lot

Flexible order quantity

The key question inventory management is concerned with is: How much inventory do you need? How do you move inventory faster through the supply chain? How do you reduce inventory carrying costs? How do you price inventory for quick sale?

How much inventory do you need?

Which of the following is NOT a danger of too high turnover rates Increased cost of goods sold due to inability to produce Increased costs and time related to purchasing, ordering, and receiving Increased excessive inventory Possible lowered sales volume due to running out of needed items

Increased excessive inventory

Which of the following is NOT a benefit of high turnover rates Less risk of obsolescence Less risk of out-of stock Increased sales volume Decreased expenses related to holding inventory

Less risk of out-of stock

The "flow the process" step of lean production includes: Moving to a continuous flow production line Level out the amount of work done at each work station Using more automated equipment Eliminating wastes

Level out the amount of work done at each work station

Which of the following does the basic EOQ model help inventory managers accomplish? Minimize inventories Maximize total logistics costs Maximize revenues Minimize the sum of inventory holding and order placement costs

Minimize the sum of inventory holding and order placement costs

Holding costs vs order costs (concepts and how to calculate them)

Ordering • Purchased items: placing and receiving orders • Make items: change-over between items Holding • Opportunity cost (including cost of capital) • Storage and warehouse management • Taxes and insurance • Obsolescence, spoilage, & shrinkage • Material handling, tracking and management

To improve the process capability ratio, you may need to find a supplier that operates a better or different process that can produce to your quality requirements. This is called? Modify the process Outsource Change the specifications Use the rule of eight

Outsource

PDCA cycle

Plan Do Check Act

Which of the following is NOT a potential source of variation in the Ishikawa cause-and-effect diagram? a. Materials b. Measurements c. Environment d. Prices

Prices

Building a one-of-a-kind output is an example of which process? Project Job Shop Batch Process Assembly Line

Project

Product-process matrix (types of process and layout)

Project Job Shop Batch Repetitive Process Continuous Process

Which of the following is the most effective and productive way to reduce the optimal order quantity (Q)? Increase the unit price Reduce order or set-up costs Reduce total demand Reduce the cost of carrying inventory

Reduce order or set-up costs

Whiich of the following is NOT a good reason to carry inventory? Meet customer demand quickly Reduce wastes Manage supply/demand uncertainty Prepare for demand growth

Reduce wastes

Which of the following would occur if a firm chose not to hold inventory for a given product? Holding costs would increase. Stockout costs would increase. Order placement costs would increase. None of the above

Stockout costs would increase.

Which of the three processes define and deploy business strategies? Strategic Processes Operational Processes Enabler Processes Human Processes

Strategic Processes

If annual demand is 24,000 units, and the order quantity is 3,000 units, then which of the following is true? The annual number of order placements will be 8, and average inventory levels will be 1,500. The annual number of order placements will be 8, and average inventory levels will be 3,000. The annual number of order placements will be 12, and average inventory levels will be 12,000. The annual number of order placements will be 24, and average inventory levels will be 12,000.

The annual number of order placements will be 8, and average inventory levels will be 1,500.

The International Organization for Standardization (ISO) built its quality certification ISO 9000 on which core principles? Total Quality Management (TQM) Automated Manifest Systems (AMS) Automated Storage/Retrieval System (AS/RS) Business Continuity Planning (BCP)

Total Quality Management (TQM)

How did Toyota outproduce some of the largest carmakers in the world? Toyota managed processes not functions Toyota used a global strategy Toyota used a green strategy Toyota used the human factor design

Toyota managed processes not functions

Which of the following is not a dimension of quality? Performance Conformance Reliability Traceability

Traceability

ABC classification relies on the Pareto Principle

True

The theory of constraints argues that all processes possess constraints that limit their capacity.

True

Lean operations should begin with Understanding customer needs Eliminating process waste Eliminating waste in time and space Applying continuous improvement

Understanding customer needs

What is a source of uncertainty that comes from on the supply side? The fast changing customer needs Unpredicted customer demands Internal process inefficiency Unreliable suppliers

Unreliable suppliers

Wastes and value-added activities

Waste: anything that interfered with, or did not add value to

What is guardbanding? Capturing mutual agreements on the work activity deliverables When engineers set product specifications tighter than they need to be Keeping the workplace clean and neat by making cleaning a daily activity A practice that uses point-of-sale scanner data to manage payment, promotion and replenishment

When engineers set product specifications tighter than they need to be

Continuous improvement (kaizen)

Workers in lean systems have greater responsibility for quality, and they are expected to be involved in problem solving and continuous improvement. 1. Waste is the enemy, and to eliminate waste it is necessary to get the hands dirty 2. Improvement should be done gradually and continuously; the goal is not big improvements done intermittently 3. Everyone should be involved 4. Kaizen is built on a cheap strategy, and it does not require spending great sums on technology or consultants 5. It can be applied everywhere 6. It is supported by a visual system 7. It focuses attention where value is created 8. It is process oriented 9. It stresses that the main effort for improvement should come from new thinking and a new work style 10. The essence of organizational learning is to learn while doing

A bill of materials (BOM)

a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product. • It shows the quantity of each item needed to complete one unit of its parent item.

Six-sigma

a management approach that seeks to improve the quality of process outputs by using projects to identify and remove the causes of defects and variation in the various processes.

Total quality management (TQM)

an integrated business management strategy aimed at embedding awareness of quality in all organizational processes.

The roles of inventory

balancing supply and demand buffers against uncertainties enabling economies of buying enabling geographic specialization

Recognizing that many customers want their shoes made in the USA is an example of this step in the continuous lean journey? identity customer value map the value stream flow the process pull demand through the system

identity customer value

The dimensions of quality

performance features reliability conformance durability serviceability aesthetics perceived quality

The main components of inventory holding costs are warehousing and housekeeping costs. order and backorder costs. storage and stockout costs. physical and financial carrying costs.

physical and financial carrying costs.

Making product when you only have demand is an example of this step in the continuous lean journey? map the value stream flow the process pull demand through the system continuous improvement

pull demand through the system

Creating a positive work environment creating longevity in employee retention describes which lean operation competitive advantage? the customer rules low inventory zero-waste respect for all employees

respect for all employees

Visual management refers to seeing and making sense of an activity or process inventory buffers cross-training Six-sigma

seeing and making sense of an activity or process

The objective of inventory management

strike a balance between inventory investment and customer service

The economic order quantity minimizes the hidden costs the combined of orders and days of supply the combined costs of ordering and holding inventory the ordering costs

the combined costs of ordering and holding inventory

Days of supply

the number of days of business operations that can be supported with the inventory on hand

The primary objective of inventory management is inventory minimization. warehouse utilization. warehouse expansion. total cost minimization.

total cost minimization.

The types of inventory decisions

• ABC analysis: ranking inventory by importance • Pareto's Law: small percentage of items have a large impact on sales, profit or costs

Visual management

• Card or other device that communicates demand for work or materials from the preceding station • Kanban is the Japanese word meaning "signal" or "visible record" • Authority to pull, or produce, comes from a downstream process • No part or lot can be moved or worked on without Kanban cards

Benefits and drawbacks of High turnover

• Increased sales volume due to having rapid flow of new or fresh items • Less risk of obsolescence or need to mark down or discount prices • Decreased expenses related to holding inventory • Lower asset investment and increased asset productivity • Possible lowered sales volume due to running out of needed items • Increased cost of goods sold due to inability to produce or purchase in quantity (failure to achieve economies of scales) • Increased costs and time related to purchasing, ordering, and receiving