SUPPLY CHAIN TAITT EXAM 1

The four broad categories of inventory are raw materials, work-in-process, MRO, and finished goods A. True B. False

A. True

The goal of supply chain planning is to balance supply and demand in a way that realizes the financial and service objectives of the company. A. True B. False

A. True

Types of inventory systems

ABC system BIN system Base stock level system single period inventory model

Which of the following is an engineering document that shows an inclusive listing of all the component parts and assemblies making up the final product? a. Master Production Schedule b. Bill of Materials c. Distribution Requirement Plan d. Resource Requirement Plan

B. Bill of Materials

Which one of the following is NOT a common modes of transportation in the supply chain? a. Air b. Bus c. Pipeline d. Rail e. Truck f. Water

B. Bus

Forecasts are more accurate the farther out into the future that you forecast. A. True B. False

B. False

Independent Demand is demand for an item that is directly related to other items or finished products, such as a component or material used in making a finished product. A. True B. False

B. False

Material Requirement Planning is the system intended to develop long-range plans (more than a year away) concerning product families manufactured by the organization A. True B. False

B. False

Service firms offer intangible products (meaning products that cannot be physically touched), therefore, they do not have a supply chain. A. True B. False

B. False

The Chase Production Strategy relies on a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern A. True B. False

B. False

The goal of Supply Chain Management is to increase customer service by increasing inventory and reducing costs. A. True B. False

B. False

The medium-range capacity planning technique used to check the feasibility of the Master Production Schedule (MPS) is called: a. Resource Requirement Planning (RRP) b. Rough-cut Capacity Planning (RCCP) c. Capacity Requirement Planning (CRP) d. None of the above

B. Rough-cut capacity planning

Which of the following statements is TRUE? A. Supply chain management was invented by the auto manufacturing industry B. Strategic partnerships are seen as one of the foundations of supply chain management C. Purchasing is seen as the final and most difficult step in the supply chain D. Logistics and Supply Chain Management are synonymous terms (i.e., they mean the same thing).

B. Strategic Partnerships are seen as one of the foundations of supply chain management

In the absence of any other information or visibility, individual supply chain participants can begin second-guessing what is happening with ordering patterns, and potentially start over-reacting. This is know as? a. Forecast Bias b. The Bullwhip Effect c. A Tracking Signal d. The Running Sum of Forecast Errors

B. The Bullwhip Effect

A type of inventory system that issues an order whenever a withdrawal is made from inventory is known as? a. ABC System b. Bin System c. Base Stock Level System d. Single Period Inventory Model

C. base stock level system

Integration -Managing all of the enabling systems necessary to facilitate the complete integration of the operations, supply, and logistics functions outlined above

Enabling Systems Supply Chain Risk and Security Management Performance Measurement Project Management

Rough Cut Capacity Planning (RCCP)

a medium range capacity planning module used to check the feasibility of the master production schedule

Manufacturing Resource Planning (MRP II)

computer based system can create detailed production schedules using real time data

Five models of Time Series

Naive forecasting, simple moving average forecasting, weighted moving average, exponential smoothing, and linear trend

Push or Make-to-stock

Producing stock on the basis of anticipated demand. Demand forecasting can be done via a variety of sophisticated techniques.

Two models of Cause and Effect

Simple linear regression and multiple linear regression

Inventory Turnover ratio

cost of goods sold/average inventory @ cost

Methods of calculating the available-to-promise quantities

- Discrete Available-to-promise ( on hand + supply -ordered per period - Cumulative available-to-promise ( on hand +supply - ordered) - all future ordered/ forecast demand until next MPS quantity.

2 common inventory ordering systems?

- Fixed-Time Period System - Fixed-Order Quantity System

Periodic Review System

- Inventory levels are reviewed at a set frequency, e.g., weekly, monthly - At the time of review, if the stock levels are below the pre-determined level (i.e., a reorder point), an order for replenishment is placed, otherwise no action is taken until the next cycle.

What are the three basic production strategies?

- Level production strategy, - chase production strategy - mixed production strategy

Reorder Point (ROP)

- The lowest inventory level at which a new order must be placed to avoid a stockout - This is when to order inventory Calculation: ROP= Demand* Lead Time + safety stock

Master Production Schedule (MPS)

- detailed disaggregation of the aggregate production plan (APP), listing the exact end items to be produced by a specific period. - It is a statement of production not demand - individual products can be finished ahead of time (i.e., before they are required to meet demand) and held in inventory rather than only finished as needed. - The planning horizon must be longer than the lead-time to produce the item. Typically, the MPS planning horizon is 3 to 18 months.

Continuous Review System

- inventory levels are continuously reviewed. - As soon as inventory falls below a pre-determined level (i.e., a reorder point), a replenishment order automatically is triggered.

How to review inventory?

-Periodic Review System - Continuous Review System

Four Main categories of inventory

-Raw materials, - work-in-progress, - finished goods, - maintenance, repair, and operating supplies

Two types of Implementing ERP

-best of breed - single integrator solution

How to alleviate bullwhip effect

-collaboration -synchronizing the supply chain -reducing inventory

What are the five major inputs of MRP

1. Master Production Schedule 2. Bill of Materials Data 3. Item Master Data 4. Inventory Status 5. Purchasing Data

Functions of Inventory- Why hold inventory?

1. to meet customer demand (cycle Stock) 2. to buffer against uncertainty in demand and/or supply (safety stock) 3. to decouple supply from demand (strategic stock) 4. to decouple dependencies in the supply chain (strategic stock)

Material Requirements Planning (MRP)

A computer-based materials management tool that calculates the exact quantities, need dates, and planned order releases for all the component parts and materials required to manufacture a product.

Fixed-Time Period System

The order quantity is the difference between the on-hand stock on the review day, and the pre-determined target inventory level.

Types of Variations in Quantitative Forecasting

Trend : a movement of a variable over time. Random: instability in the data caused by random occurrences. Seasonal: repeating patterns of demand. Cyclical: wavelike pattern that last longer than 1 year and can extend over multiple years.

What are the 5 modes of transportation?

Truck, Rail, Air, Pipeline, Water

Simple Moving Average Forecasting

Uses a calculated average of historical demand during a specified number of the most recent time periods to generate the forecast.

Logistics Management -Managing all of the movement and storage of products and materials within the supply chain, whether the flow is forward or reverse

Warehousing & Distribution Transportation International Trade Management Customer Relationship Management Service Response Logistics

Service Inventory

activities carried out in advance of the customers arrival

Strategic stock

additional inventory beyond cycle and safety stock, generally used for a very specific purpose or future event or defined period of time

Chase production strategy

adjusts capacity to match demand exactly. firm hires and lays off workers to match finished output to demand. finished goods inventory remains constant. works well for make- to -order firms

Forecast

an estimate of future demand

Enterprise Requirements Planning (ERP)

an extension of MRP II and includes DRP which determines the need to replenish finished product inventory

Cause and Effect

assumes that one or more factors predict future demand

What does the acronym CPFR represent? a. Coordinated Planning & Forecasting Relationships b. Collaborative Planning, Forecasting, & Replenishment c. Centralized Purchasing & Forecasting Relationships d. Collaborative Purchasing, Forecasting, & Receivables

b. Collaborative Planning, Forecasting, & Replenishment

Time Series

based on the assumption that the future is an extension of the past. Historical data is used to predict future demand ( most frequently used amount all the forecasting models)

Safety stock

buffer stock, inventory that is above and beyond what is actually needed to meet anticipated demand

Available-to-Promise (ATP)

business function that provides a response to customer order inquiries, based on resource availability. It generates available quantities of the requested product and delivery due dates

Dependent Demand

demand for an item that is directly related to other items or finished products, such as a components or material used in making a finished product

Independent Demand

demand for an item that is unrelated to the demand for other items, such as finished product, a spare part, or a service part

Short Range

detailed planning process for components and parts to support the master production schedule (Materials requirement planning) -Planner, 1st line supervisor

Bill of Materials (BOM)

document that shows an inclusive listing of all raw materials, component parts, and assemblies making up the final product.

Jury of executive opinion

forecast from people who know the most about the product and the marketplace that would likely form a jury to discuss and determine the demand

Personal Insight

forecast is based on the inside of the most experienced, most knowledgeable, or most senior person available

Sales force estimation

forecast performed specifically with a group of salespeople

Customer survey

forecast where customers are directly approached and asked to give their opinions about the particular product

Delphi Method

forecast where the input of each of the participants is collected separately so that people are not influenced by one another

Quantitative Forecasting

forecasting which uses mathematical models and historical data to make forecasts

Aggregate Production Plan (APP)

hierarchical planning process that translate annual business, marketing plans, and demand forecasts into a production plan for a product family in a plant or facility

Enterprise Requirement Planning System (ERP)

information system connecting all functional areas and operations of an organization, and in some cases suppliers and customers, via common software infrastructure and database

Cycle stock

inventory a company builds to satisfy its immediate demand

Pipeline inventory

inventory in transit. inventory held/owned by suppliers, or by wholesalers, distributors, retailers, and customers

Obsolete Inventory

inventory items that have met the obsolescence criteria established by the company. - stock that is expired, damaged, or no longer needed. - never be used or sold at full value.

Long Range

involves planning for actions such as construction of facilities and major equipment purchase -executive level

Maintenance, Repair, and operating (MRO)

items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations

Mean Squared Error (MSE)

magnifies the errors by squaring each one before adding them up and dividing by the number of forecast periods. MSE = ∑ (A-F) ² / n

Hybrid Production stategy

maintains stable core workforce while using other short term means, such as overtime, subcontracting, and part time helpers to mange short term demand

Mean Absolute Percent Error (MAPE)

measures the size of the error in percentage terms. It is calculated as the average of the unsigned percentage error. MAPE = ∑ ((|A - F|)/ A) / n

Mean absolute deviation (MAD)

measures the size of the forecast error in units. It is calculated as the average of the unsigned, i.e., absolute, errors over a specified period of time. MAD = ∑(|A - F|) / n A- Actual Demand F- Forecast Demand n- Number of time periods

simple linear regression

models the relationship between a single independent variable and a dependent variable (demand) by fitting a linear equation (straight line) to the observed data.

Multiple Linear Regression

models the relationship between two or more independent variables and a dependent variable (demand) by fitting a linear equation to the observed data.

The Bullwhip Effect

occurs when distorted product-demand information/overreaction ripples from one partner to the next throughout the supply chain

Types of external inventory

pipeline inventory and obsolete inventory

Running Sum of Forecast Error (RSFE)

provides a measure of forecast bias. RSFE indicates the tendency of a forecast to be consistently higher or lower than actual demand. Positive RSFE means forecast was too low and negative means forecast was too high.

Raw Materials

purchased items or extracted material that are converted via the manufacturing process into components and products

Inventory

quantities of goods and materials that are held in stock. includes all of the raw materials and work in process items used to support production, all of the finished products needed to provide customer service and all of the other materials and supplies needed to run a business

Level production strategy

relies on a constant output rate while varying inventory and backlog according to fluctuating demand. firm relies on fluctuating finished goods and backlogs to meet demand. works well for make- to-stock items. constant production rate regardless of demand

Capacity Requirement Planning (CRP)

short range capacity planning module used to check the feasibility of the material requirements plan

Intermediate Range

shows the quantity and timing of end items (master production schedule) -Mid level

Closed Loop MRP

synchronizes the purchasing or materials procurement plans with the master production schedule

Forecasting

the business function that estimates future demand for products so that they can be purchased or manufactured in appropriate quantities in advance of need

Supply Chain Planning

the element of supply chain management responsible for determining how best to satisfy the requirements created by the demand plan

Inventory Management

the function of planning and controlling inventories. goal is to help a company be more profitable by lowering the cost of goods sold and/or by increasing sales

Capacity

the maximum amount of work that an organization is capable of completing in a given period.

Demand

the need for a particular product or component

Demand Planning

the process of combining statistical forecasting techniques and judgement to construct demand estimates for products or services

Capacity Planning

the process of determining the amount of production capacity needed by an organization to produce the goods or services required by its customers.

Finished Goods

those items on which all manufacturing operations, including final testing, have been completed. These produces are available for sale and/or shipment to the customer

Time fencing

to minimize the impact of changes in the MPS

Exponential Smoothing

weights past observations with exponentially decreasing weights to forecast values Calculate: Last period's (Actual * smoothing factor) + (Forecast* (1-smoothing factor)).

Linear Trend Forecasting

A simplistic forecasting technique that imposes a line of best fit to time series historical data.

Cause-and-Effect Models can have multiple independent variables. A. True B. False

A. True

It was intense global competition that led manufactures to adopt Supply Chain Management (SCM) and other practices such as Just-in-Time (JIT) A. True B. False

A. True

Supply chain management starts with understanding the flow A. True B. False

A. True

The Economic Order Quantity (EOQ) is the optimal order size because it minimizes the annual total inventory cost. A. True B. False

A. True

The Qualitative forecasting method is based on opinion & intuition A. True B. False

A. True

The three basic production strategies for addressing the aggregate planning problem are the chase production strategy, the level production strategy, and the mixed production strategy A. True B. False

A. True

The top 2 primary functions of inventory are (1) To meet customer demand, and (2)To buffer against uncertainty in demand and/or supply . A. True B. False

A. True

Forecast Error Value

Acutal demand - Forecast demand

Successful modern supply chain management typically includes the practice of ? a. Keeping high inventories throughout the supply chain b. Always purchasing materials with the lowest per unit cost c. Collaborating and sharing information between supply chain partners d. Issuing ultimatums to your supply chain partners

C. Collaborating and sharing information between supply chain partners

Which one of the following is NOT one of the four Foundations of Supply Chain Management? a. Logistics Management b. Operations Management c. Demand Management d. Supply Management e. Integration

C. Demand Management

Inventory costs which are independent of the output quantity are called? a. Indirect Costs b. Variable Costs c. Fixed Costs d. Carrying Costs

C. Fixed Costs

When creating a quantitative forecast, data should be evaluated to detect for a repeating pattern of demand from year to year, or over some other time interval, with some periods of considerably higher demand than others. This is known as a? a. Trend Variation b. Random Variation c. Seasonal Variation d. Cyclical Variation

C. Seasonal Variation

Organizations that choose to implement one single system with all of the desired applications from a single vendor is said to have chosen a: a. Best-of-breed solution b. Elite integrator solution c. Single integrator solution d. Premier application solution

C. single integrator solution

Three levels of internal inventory

Cycle stock, safety stock, and strategic stock

Which one of the following is NOT a type of qualitative forecasting? a. Sales force composite b. Consumer survey c. Jury of executive opinion d. Naïve method

D. naive method

Which of the following MRP terms represents a committed order awaiting delivery for a specific period? a. Projected on-hand inventory b. Time bucket c. Net requirement d. Scheduled receipt

D. schedule receipt

Which of the following is NOT an example of an ordering cost for products purchased from a supplier? a. The cost of transmitting the order b. The cost of receiving the product c. The cost associated with processing the invoice d. The opportunity cost of not ordering from a least cost supplier e. The cost of handling the product

D. the opportunity cost of not ordering from a least cost supplier

The primary purpose of the basic economic order quantity model is a. To calculate the reorder point, so that replenishments take place at the proper time b. To minimize the sum of carrying cost and holding cost c. To maximize the customer service level d. To minimize the sum of ordering cost and holding cost

D. to minimize the sum of ordering cost and holding cost

Operations Management -Managing Internal Resources

Forecasting and Demand Planning Planning Systems Inventory Management Process Management

Qualitative Forecasting

Forecasting which is based on opinion and intuition

Three board categories of supply chain planning

Long range, intermediate range, and short range

What are the 4 foundations of supply chain management?

Operations management, supply management, logistics management, and integration

What are the five qualitative forecasting models?

Personal insight, Jury of executive opinion, delphi method, sales force estimation, and customer survey

Pull or Make-to-order

Producing stock in response to actual demand

Supply Management -Managing all of the supplies and suppliers that are needed to run the business

Purchasing Management Strategic Sourcing Supplier Relationship Management

What are the two basic forecasting techniques?

Qualitative and Quantitative

Forecast Accuracy Tracking Signal

RSFE/MAD -falls within vs falls outside (bias problem)

Naive forcasting

Sets the demand for the next time period to be exactly the same as the demand in the last time period.

Aggregate Production Planning (APP) Strategies

The APP can be revised as needed to meet the business plan objectives through adjustments to the Demand, or Supply, or both. Demand Adjustments: - Advertising - Promotional plans - Pricing Supply Adjustments: -Change inventory levels - Change Capacity

Supply Chain Management (SCM)

The coordination of the network of otherwise independent trading partners who are creating a desired product or service, and then moving it through the supply chain out to customers, when and where the customer wants it.

Forecast Error %

(Actual Demand-Forecast Demand / Actual Demand) * 100

What are the goals of Supply Chain Management?

Increase customer service and reduce inventory investment and operating expenses

What are the 2 types of Demand? Describe.

Independent Demand: Demand for an item that is unrelated to the demand for other items. EX: Bicycle Dependent Demand: Demand for an item that is directly related to other items or finished products. EX: Seat, handles,Frame

What are the types of quantitative forecasting?

Time Series and Cause and effect

Collaborative Planning, Forecasting, and Replenishment (CPFR)

a business practice that combines the intelligence of multiple trading partners who share their plans, forecasts, and delivery schedules with one another in an effort to ensure a smooth flow of goods and services across a supply chain.

Weighted Moving Average

a forecasting model that assigns a different weight to each period's demand according to its importance

Work-in-Process (WIP)

a good or goods in various stages of completion throughout the plant, spanning from raw material that has been released for initial processing up to fully processed material awaiting final inspection and acceptance as finished goods.

Resource Requirement Planning (RRP)

a long range capacity planning module used to check whether aggregate resources are capable of satisfying the aggregate production plan

Sales & Operations Planning (S&OP)

a process that brings all the demand and supply plans for the business (sales, marketing, development, production, sourcing, and finance) together to provide management with the ability to strategically direct the business to achieve a competitive advantage

Economic Order Quantity (EOQ) Model

a quantitative decision model based on the trade off between annual inventory carrying costs and annual order costs

Distribution Requirements Planning (DRP)

a time phased finished good inventory replenishment plan in a distribution network. the function of determining the need to replenish inventory at branch warehouses