SOM 306 EXAM 2 JANE TIERNEY
Bullwhip Effect
Inventory fluctuations become larger moving backward through a supply chain
Supplier Selection
Use multiple criteria used, not solely on cost of goods but basedon Total Cost of Ownership (TCO) which includes freight, cost of quality, cost ofordering, inventory costs, and any other relevant costs
Purchasing Cycle
a. Requisition is generated and sent to purchasing (must have approved budget to process) b. Supplier selection c. Order placement d. Order monitoring e. Goods received or dock receipt
Logistics
Movement of goods, information, currency and services through the supply chain
Cycle Count
Physical count of inventory, usually a statistical sample, done to verify accuracy ofthe inventory records
Safety Stock
Amount of inventory over and above forecast requirements designed to covervariability of demand, unstable lead times or unreliable delivery, or risks such as poor quality,new product / unreliable forecasts, parts deemed as critical to a process or product
Inventory Turnover
COGS/Average Inventory
Reorder Point
Calculated as demand (d) (units per some time period) multiplied by lead time(LT) (same units of time), then adding safety stock if applicable ROP = (d x LT) + ss
Postponement
Delaying configuration until manufacture is as complete as possible
ROP (no safety stock)
Demand x Lead Time
ROP (with safety stock)
Demand x Lead Time + Safety Stock
Lean Operations
Flexible system that uses less resources than other systems. Produces greaterproductivity, lower costs, shorter cycle times and higher quality than other, non-lean systems
A-B-C Classification System
-A parts: highest inventory value (~60%) and lowest number of parts/skus (~10-15%) -B parts: medium inventory value (~25%), moderate number of parts/skus (~25%) -C parts: lowest inventory value (<15%), highest number of parts/skus (~60%
What are the 4 Process Types
1. Job Shop 2. Batch 3. Repetitive 4. Continuous
Characteristics of Job Shop
1. Low volume, high mix / variety of goods or services 2. Intermittent processing - small jobs, wide range of requirements, few similarities 3. High flexibility, general use equipment 4. Skilled workers needed due to range of requirements and general equipment 5. Usually results in high per unit cos
Goals of Lean Operations
1. Match supply to demand in a smooth, uninterrupted flow 2. Eliminate or reduce waste in all forms
Characteristics of Repetitive
1. Medium to high volumes, low mix / variety of goods produced 2. Goods are standardized to a great extent 3. Equipment is somewhat flexible 4. Worker skill level required is low - repeatable tasks, not a lot of variety in tasks 5. This is a good situation to use the mass customization strategy 6. Cost curves for this process are highly predictabl
Characteristics of Batch
1. Medium volume, moderate variety 2. Intermittent processing, but to a lesser extent 3. Less skill required than a job shop because there is less variety in jobs processed 4. Batch sizes present some opportunities for volume discount
What are the Inventory Functions?
1. Meet and satisfy customer demand 2. Smooth production requirements 3. Avoid stock outs 4. Take advantage of economic order quantities, volume discounts 5. Manage costs of materials, avoid or delay price increases 6. Support production requirement
Japanese Terms
1. Poka-yoke - fail safe or error proof - eliminate or reduce potential for errors in a process, ofteninvolves a tool or shop aid to ensure only the correct way will work 2. Kaizen - continuous improvement, continual reduction of waste 3. Kanban - a visual system, often uses cards to signal that more work is needed. Kanbans work asin a "pull" system, signaling or pulling the work to the next station. 4. Muda - waste or inefficiency, lean's goal is to eliminate waste
What is Considered an Inventory Cost?
1. Purchase cost - what was paid for the inventory 2. Holding costs - costs to carry item in inventory - usually annualized 3. Ordering costs - cost of purchasing and receiving inventory 4. Setup costs - cost of preparing equipment for a job 5. Shortage costs - cost of demand exceeding supply; opportunity cost, lost sales, factory shutdown
What are Types of Inventory?
1. Raw material 2. Work-in-process (WIP) 3. Finished goods 4. Tools and supplies (equipment) 5. Maintenance and repair (MRO) 6. in-transit (into and out of a production facility)
Characteristics of Continuous
1. Very high volumes, little to no mix changes, or consistent input like oil or waste water 2. Highly standardized 3. No equipment flexibility required because of the inputs' continuous flow 4. Manufacturing costs are low due to repetition and large economies of sca