SCM Final Exam CSU

• Explain all the elements of LEAN Production - Partnerships, Layout, Continuous Improvement, Workforce Involvement, Scheduling, Inventory Reduction -and how these can be achieved

- Pull method of material flow (customer or system signals production) - Quality at the source (Poka Yoke) - Small lot sizes (ultimate goal is batch size of one) - Uniform workstation loads - Preventative maintenance (Low inventory increases importance of reliability) - Close supplier ties (frequent, small deliveries) - Flexible workforce - Line flows - Automated production - Standardized components and work methods

• Advantages and disadvantages of customer contact

Advantages: Increased customer net value Better quality, faster delivery, greater flexibility and lower cost Reduction in costs (product, shipping and inventory) Coordination across the supply chain Disadvantages: Potentially disruptive Managing timing and volume can be challenging Quality measurement can be difficult Requires interpersonal skills Multiple locations

• Define Statistical Process Control (SPC)

Allows firms to visually monitor process performance and compare to desired levels or standards. Take corrective steps quickly before process variability gets out of control and damages products, services, and customers

• How does Lean Scheduling improve flexibility and what is the connection between set up times and small batch scheduling

Allows the firm to produce only what the customer wants as quickly and with the features requested by the customer. Small batch scheduling reduces lead time, increases quality, and limits wasted resources.

• Describe the quality philosophies of Crosby and Taguchi

Believed quality was a measure of the conformance to requirements and that quality was free. But low quality, defects, and reworks cost more money. Goal of quality improvement was to have 'zero defects' in order for the savings to pay for themselves. Taguchi believed the further a part was from perfect, the more costly it will be.

• Explain the steps in the DMAIC process

Define the problem or project based on customer needs and priorities. Measure the process, output and defects (SPC). Analyze the data collected to discover and verify causes of the problem. Improve the process using quality tools. Control the process going forward to maintain progress

• Describe the quality philosophies of Juran

Shift from the statistics-based Quality Control to an overall management principle incorporating previous ideas, Focused on the cost of quality and data to shock management into action, Users should expect the service or product to provide what they need or want, Categorized the costs of quality Detection and appraisal costs, prevention costs, internal failure costs, external failure costs

• Explain the relationship of forecast accuracy to time horizon and level of detail

Shorter time and a less detailed product would yield less forecast error

• Know and apply the Product Process Matrix (process structure in manufacturing)

o Job Process: Low volume products made to customer order. Customized process with flexible and unique sequence of tasks. o Small & Large Batch Process: Multiple products with low to moderate volume. Disconnected line flows, moderately repetitive work. o Line Process: Few major products in higher volume. Connected line, highly repetitive work. o Continuous Flow Process: High volume, and standardization of commodity goods. Process continuously flows without stopping to fix defects.

• Calculate the Mean Absolute Percentage Error (MAPE)

Abs. Value of forecast error divided by Actual Demand then all sums divided by number of periods

• Calculate the Mean Absolute Deviation (MAD)

Absolute Value of the sum of all forecast error divided by number of periods

• Calculate an exponential moving average forecast

Actual demand from previous period subtracted from forecasted demand of previous period. Multiplied by smoothing factor then forecast of previous period is added

• Calculate a simple moving average forecast

Add previous period actual demand and divide by the number of periods added

• Mass Customization (MC)

- Achieves both Economy of Scale and Economy of Scope - Postponement - technique that delays differentiation. Generic items in high volumes then a final customization is done for the final order

• ATO Competitive Priorities

- Delivery speed - Variety

• Efficient Supply Chain Environment

- Demand is predictable with low forecast error. - Competitive priorities are low cost, consistent quality, and on time delivery. - New service or product introduction are infrequent - Contribution margins and product variety are low

• Responsive Supply Chain Environment

- Demand is unpredictable with high forecast error - Competitive priorities are development speed, fast delivery, customization, volume flexibility, variety and top quality - New service or product introduction are frequent - Contribution margins and product variety are high

• Engineered to Order (ETO)

- Heavily focused on customization and tailoring to customer needs - Won't do anything until an order is placed by the customer - Long lead times and expensive

• What is an innovative Product (market mediation)

- High: cost, profit margin, and forecast variability - Short life cycle - Fashion items - Many product options and variety - Seasonal demand

• MTS Competitive Priorities

- Low cost - Delivery Speed

• What is a functional Product (physical)

- Low: cost, profit margin, forecast variability - Long life cycle - Staple items - Limited product options and variety - Stable demand

• Made To Stock (MTS)

- Many consumer goods that are mostly based on forecast - Will stock the shelves, consumer pays for it, then leaves - No flexibility or ability for customization - Assembly line with capital equipment and lower skilled labor

• Assembled to Order (ATO)

- Many electronics are made this way - A lot of decisions based on forecasting - Wait until get an order to make the final assembly and final testing - Shorter lead times and cheaper products

• Responsive SC Design Features

- Operation strategy: ATO, MTO, or customized services or goods. Emphasizes variety - Capacity Cushion: High - Inventory Investment: As needed to enable fast delivery times - Lead Time: Shortens aggressively - Supplier Selection: Emphasizes fast delivery time, customization, variety, volume flexibility, top quality

• Efficient SC Design Features

- Operation strategy: MTS or standardized services and products. Emphasizes high volumes. - Capacity Cushion: Low - Inventory Investment: Low, enables high inventory turns - Lead Time: Shortened LT, but doesn't increase costs - Supplier Selection: Emphasizes low prices, consistent quality, on time delivery.

• Know what factors can reduce capacity

- Product mix - Worker skill level - Product changeovers - Preventative maintenance - Machine and tool breakdowns - Quality problems - Machine starvation and blockage

Service vs Manufactured Goods

- Services cannot be inventoried - Services are often unique (tax service) - Services have high customer-service interaction - Services are decentralized

• ETO Competitive Priorities

- Top quality - Customization - Variety

• MTO Competitive Priorities

- Top quality - On-time delivery - Flexibility

• Manufactured to Order (MTO)

- Will get product sooner for cheaper but with restricted customization - General purpose equipment with highly skilled labor

• Deming's 14 Points

1. Create constancy of purpose towards improvement of service or product 2. Adopt the new philosophy 3. Cease dependence on mass inspection 4. End the practice of awarding business on the basis of price tag alone 5. Improve constantly and forever the system of production 6. Institute modern methods of on-the-job training 7. Adopt and institute leadership 8. Drive out fear 9. Break down barrier 10. Eliminate numerical goals, slogans, exhortations 11. Eliminate work standards and numerical quotas 12. Remove barriers that rob people of pride and workmanship 13. Institute a vigorous program of education and self-improvement 14. Structure top management to empower employees to achieve above 13 points

• Know the various aspects of the Theory of Constraints

1. Identify the system bottlenecks 2. Exploit the bottlenecks 3. Subordinate all other decisions to step two 4. Elevate the bottlenecks long term 5. Don't fall back to old ways

• Explain the hierarchical resource planning model -master production planning (MPS) and materials resource planning (MRP)

1st Calculate the Master Production Schedule for the product. When there are Planned Order Releases, they drop down and are multiplied by the planning factor to give the Gross Requirements for the Master Resource Planning of the component

• Understand the connection between the bottleneck and a system's capacity

A bottleneck constrains the system, meaning the system can only produce as fast as the bottleneck process

• Calculating Available to Promise

ATP(1) = Beginning inventory + MPS - Customer Orders Following ATP = MPS - Customer Orders. If the ATP is negative must reduce previous weeks ATP to cover the shortages

• Define LEAN and its principles

A systematic approach to identifying and eliminating waste or non-value-added activity in business processes (Examples of N-V-A A: Fixing defects, overproducing, bottlenecks). Principles: Precisely specify value for each product, identify value stream, make value flow without interruption, Let customer pull value from producer, pursue perfection

• Understand and apply the Taguchi loss function

Any variation away from the target performance will begin to incur customer dissatisfaction and cause $ loss. As the variation increases, the customer will gradually (exponentially) become dissatisfied.

• Low-level Coding

Assigns the lowest level on BOM to all common components to avoid duplicate MRP computations

• Apply and interpret an associative forecasting model

At least one external variable(s) is identified relating to demand. Uses simple regression which means only one explanatory variable is used and is similar to the previous trend model, difference is variable is no longer a time but explanatory variable. Y = B0 + B1*X ; Y = forecast, B0= Intercept, B1= Slope, X=explanatory variable

• Calculate the Tracking Signal (TS)

Average total sum of all forecast errors divided by average Abs. Value of forecast error. TS determines if forecast is within acceptable control limits (Range is +4 or -4) if outside pre-set limits, bias exists and a forecast evaluation is required

• Production Planning for Made To Order (MTO):

Chase Strategy - Adjusts capacity to match the demand pattern - Firm hires & lays off workers to match production demand - Workforce fluctuates but finished goods inventory remains constant - Works well for Make to Order and Service firms

• Explain the challenges of resource planning and its importance

Challenge is achieving a rough balance between available capacity and required workload over time. Answers how much of each output we should produce, when it should be produced, and what resources are available, and which will be needed

• Scheduled Receipt

Committed order awaiting delivery for a specific period

• Define Master Resource Planning (MPR)

Computer based material management system that calculates the exact quantities, dates needed and planned order releases for subassemblies and other materials needed to produce a final product. Needs independent demand info, parent-component relationships from BOM, and inventory status of final products and components to produce planned order releases

• How do statistical variability and dependent events impact a system's capacity

Dependent events: Event that must take place before other ones can take place. Forms a chain of events where Event A must occur before Event B Statistical variability: statistical fluctuations in each event's ability to produce a result at a specified capacity

• Dependent Variable

Describes the internal demand for parts based on the demand of the final product in which the parts are used. Subassemblies, components, and raw materials are examples.

• Know the costs of quality and how those costs grow as variability increases.

Detection and appraisal costs, prevention costs, internal failure costs, external failure costs. Where the defect is detected determines the cost of correction. (Lowest cost in production, highest at consumer)

• Apply and interpret process capability (Cp)

Determined by inherent common causes of variation (will remain unchanged unless process change is made by management). (Examples that influence Cp: poor hiring and training, stress, poor management or products)

• Matching Product to Efficient and Responsive Supply Chain

Efficient: Made-to-Stock Responsive: Engineered To Order, Made To Order, Assembled To Order

• Define the Bill of Materials (BOM) and apply the planning factor to determine how many components are needed to produce the product.

Engineering document that shows an inclusive listing of all component parts and assemblies that make up the final product. Planning factor accounts for number of components needed to make a parent item (Bike wheels have PF of 2 )

• List 8 sources of waste

Excess inventory Overproduction Defects Waiting Over-processing Unnecessary transportation Underutilized people

• Define and apply the tools of SIX SIGMA

Flow Diagrams: Allow team members to see actual flow of process, able to capture all steps rather than just what can be seen from one spot. Check Sheets: Structured lists of likely causes which can be systematically solved. Pareto Diagrams: List and score each problem and group them together based on cause. Work towards finding a solution to the cause of the highest scoring, most important problem. Cause-and-effect diagrams. Histograms: Used to represent information in visual form. Scatter Diagrams: Used to plot variables against each other and help identify correlations or other patterns. Control Charts (SPC): Application of statistical techniques to determine whether the output of a process conforms to what the customer wants. Focuses on understanding and controlling defects to build in quality at the source.

• Define forecasting and the goals of forecasting.

Forecasting provides an estimate of future demand. Its goal is to minimize forecasting error in order to match supply and demand

• Customer Contact Matrix

Front Office: High interaction with customer and highly customizable service. Uses flexible flows with individualized processing. Hybrid Office: Some interaction with customer and standardized service with some variable options. Uses flexible flows with some dominant paths with some exceptions as to how work is performed. Back Office: Low interaction with customer and standardized service. Uses line flows with routine work performed the same for all customers

• Discuss Service Processes

Intangible, perishable output that cannot be inventoried. High customer contact with short response time. Labor intensive and hard to measure quality.

• Parent

Item generating demand for lower level components

• Calculate a naive forecast

Last period's actual demand is current period's forecast

• Describe the quality philosophies of Deming

Led Japanese quality revolution, believed quality was a management responsibility that required change over a long term horizon, focused on reducing variation through tools like SPC, Comprised the 14 Point's, Believed variation decreases a customer's ability to rely on the dependability and uniformity of outputs but common variation is a part of all processes, managers are the only ones responsible for common variation and change in systems by setting policies and procedures.

• Production Planning for MTS:

Level Strategy - Relies on a constant output rate & capacity - Vary Inventory & backlog levels according to fluctuating demand pattern - Workforce levels stay constant & firm relies on fluctuating finished goods inventories backlogs to meet demand - Works well for Make to Stock firms - To calculate: Ending Inventory 1 = Beginning Inventory + Monthly Production - sales. Total production = total demand + Ending Inventory - Beginning Inventory. Monthly production = Total Production divided by # Months

• Discuss the process layout

Low production volume with a high mix of products. Groups like processes to determine the path of a product, Expensive and slow due to bottleneck and extended SC time

• List the benefits of improved forecasts.

Lower inventories, Reduced stock-outs, Smoother production plans, Reduced costs, Improved customer service

• Why is Mass Customization difficult to achieve and how can postponement help achieve MC?

MC requires highly flexible production technology, requires elaborate system to reveal customer needs and wants, requires strong direct-to-consumer logistics, people not always willing to pay more for customization. Postponement delays differentiation and allows firms to hold generic items in high volumes before final customization

• List the elements of Lean • Define Muda and Poka-yoke

Muda: Means waste in Japanese Poka-Yoke: mistake proofing

• Calculate a weighted moving average forecast

Multiply the actual demand by the weights given then add together for next period

• Compare and contrast natural and assignable variation

Natural: Random, expected environmental noise. Assignable: Is fixed and can be traced to a specific cause

• Define Six Sigma

Near quality perfection or the statistical likelihood of non-defects 99.99966% of the time. Statistics-based decision-making framework designed to make significant quality improvements in value-adding processes

• Define Collaborative Planning, Forecasting and Replenishment (CPFR) and explain its benefits and process

Nine-step process for supply chain integration that allows a supplier and customers to collaborate on forecasting by using the internet. Combines the intelligence of multiple trading partners in the planning & fulfillment of customer demand which leads to increased availability, decreased inventory, transportation and logistics costs

• Planning Factor

Number of components needed to produce a unit of parent item

• Lot Size

Order size for MRP logic

• Component

Parts demanded by a parent

• Discuss Manufacturing Processes

Physical, durable output that can be inventoried. Lower customer contact with long response time. Capital intensive but quality is easily measured.

• Explain Deming's PDCA improvement cycles

Plan: Determine goals and methods. Do: Educate and implement. Check: Check the effects. Act: Adjust or standardize

• Firmed Planned Order

Planned order that the MRP computer logic system does not automatically change when conditions change to prevent system nervousness

• Competitive Priorities: Top-quality, On-time delivery, Flexibility

Process choice: Job or small batch processing

• Competitive Priorities: Low cost, Consistent quality, Delivery speed

Process choice: Large batch, line, or continuous flow

• Explosion

Process of converting a parent item's planned order releases into component gross requirements

• Discuss the product layout

Produces in high volumes with limited product mix, low cost and fast production but limited variability.

• Projected on-hand Inventory

Projected closing inventory at the end of a period. Beginning inventory minus gross requirement plus scheduled & planned receipts and planned order releases

• Safety Stock

Protects against uncertainties in demand, supply, quality, & lead time

• Apply and interpret x-charts and r-charts

R = Measures quality variability X = Measure if quality is on target or centered

• Pegging

Relates gross requirements for a part to the planned order releases

• Explain the limitations of smoothing models when there is trend in the sales data

Smoothing models use 2 data points to produce forecasts that lag behind the actual trend of the data. It neglects ups and downs associated with random variation

• what are the 5S's and why are they important.

Sort, Straighten, Shine, Standardize, Sustain. Minimizes worker distractions and uses visual indicators to determine if people are in standard. Important because it promotes quality, safety and productivity.

• Planned Order Releases

Specific order to be released to the shop or supplier

• Calculate the Mean Squared Error (MSE)

Squared value of the sum of all forecast error divided by number of periods

• Discuss the underlying assumption of time series forecasting and what to do if that assumption is not upheld

The past is not a good predictor of the future as demand can be variable. Works best when demand is expected to remain stable and we use qualitative data when assumption is not upheld

• Define Available to Promise and interpret the results of the ATP calculation

The MPS decides whether additional orders can be accepted for difference between confirmed orders and the quantity the firm planned to produce

• Independent Variable

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

• Define capacity

The maximum average rate of output from an operations management system. Is a variable in the long term and a constraint in the short term

• Apply and interpret a linear trend forecasting model

The trend can be estimated using simple linear regression to fit to a time series. Y = B0 + B1*t ; Y = forecast, B0= Intercept, B1= Slope, T=time

• Time Bucket

Time period used on the MRP in days or weeks

• Quantitative Forecast

Time series forecasting uses historical data to predict future demand. Assumes the future is an extension of the past

• Gross Requirements

Time-phased requirement prior to netting out on hand inventory and lead time

• Calculate the Running Sum of Forecast Error (RFSE)

Total sum of all forecast errors

• Time Series Analysis components. Data should be plotted to detect:

Trend Var.: Increasing or decreasing Cyclical Var.: Wavelike movements longer than a year Seasonal Var.: Show peaks and valleys that repeat over a consistent interval such as hours, days, weeks, etc. Irregular Var.: Outliers Random Var.: Unexpected and unpredictable causes

• Net Requirements

Unsatisfied item requirement for a specific time period. Gross requirement for period minus current on hand inventory

• Qualitative Forecast

Usually used when data is limited, unavailable, or irrelevant. Depends on skill & experience of forecaster and availability of information

• Define Master Planning Schedule (MPS)

Weekly build schedule for each product, plans our cumulative lead time and provides production quantity to meet demand from all sources

• Understand how to identify a bottleneck in a process

Where demand exceeds process capacity, characterized by long lines or lots of inventory before bottleneck /