SCM 300 Davila Module 2 Study Guide
SCM 300 Davila Module 2 Study Guide SCM 300
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This 17 page Study Guide was uploaded by Nicolle Desmarais on Monday February 16, 2015. The Study Guide belongs to SCM 300 at Arizona State University taught by eduardo davila in Fall2014. Since its upload, it has received 688 views.
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Date Created: 02/16/15
SCM 300 Module 02 Study Guide amp Problem Set Module 02 Buv It Inventory is an expense yet it is a required cost of doing business In order to satisfy customer expectations inventory is a requirement This module discussed the different types of inventory and the physical and mental processes that need to be considered in developing an inventory policy How much inventory is too much Too little What types of costs need to be considered What else needs to be considered In order to develop an appropriate level of inventory supply it is required that you understand demand What are some of the more basic demand forecasting models Stuff Our lives are are consumed by managing inventory Like all of the stuff we own and putting it into categories Inventory The items that are owned by a company for the purpose of present or future sale or for use in day to day operations Lead time The period of time between when an order is placed and when an order is received When pizza is order and when it is delivered Lot Size An accepted order size Sometimes also refers to a possible order size increment Example lot size of 100 units Inventory carrying inventory can have a hefty price but not having inventory can cause a company to not meet consumer needs Company risks Theft or damage to inventory late shipments from supplier employee sickness employee strike machine malfunctions Supplier risks Employee sickness or strikes sudden increases in demand for your company s supplies the risks posed by their suppliers Customer risks Sudden increase in demand damage to customer s inventory Demand Forecasting A predictive analysis andor estimation of consumer demand in future period Some techniques are quantitative typically using historical data to predict future demand Qualitative using queries of experts to predict future demands Consumers executives salespeople and industry experts SKU A specific product or service s identification code used to track inventory or catalog sales barcode Independent vs Dependent Demand 0 Independent an item for which demand levels is not directly impacted by the demand of another elated item 0 Dependent An item for which demand levels are directly impacted by the demand of another related item All 8 Inventory Classifications 0 Raw materials typically refers to material parts or components that will be used to create an end item or service These materials have not yet begun their manufacturingtransformation into finished good or service in reference to snow shovels handles shafts shovel blades 0 Work In Progress Items that have begun the manufacturing process but are not yet completed Partially completed shovels Instructor Eddie DavilIa SCM 300 Module 02 Study Guide amp Problem Set Finished goods FG Items that are completed and ready for shipment at a manufacturing facility or assembly plant fully assembled shovels Maintenance Repair and Operations MRO Items that are not intended as part of the finished goods but are important to the daily operations of the company Desks computers cleaning supplies oillubricants factory equipment Market inventory Inventory that is readily available on the shelf shovels on shelf at home depot Safety stock Inventory kept to account for variationuncertainty of demand100 shovels sold per week Sunday to Saturday Shipments arrive Sunday morning Stores always wants to start Sunday with 125 units 25 extra are safety stock Anticipation inventory Inventory that is created and stored for future use Typically used to absorb uneven rates of demand that may be related to seasonal demand or planned price reductions Shovels assembled in summer and stored through fall in anticipation of large inter demand would be classifies as anticipation inventory Pipeline inventory Inventory in transit between two points Those two points establish the pipeline So the inventory does not necessarily need to be on a truck or a train Pipeline inventory periodic demand x lead time The cost of buying a car Sometime the low cost item may actually cost you more than other options High vs Low Inventory Pros of high 0 higher levels of customer service having high inventory helps address their immediate demand for product 0 Quantity discounts may be possible lower per unit costs 0 Few orders will be needed to be placed possible lower ordering costs and transportation costs 0 Greater security against unexpected demand variability Pros of low inventory levels Less storage space required costs of holding inventory may be lower Lower chance of inventory obsolescence and shrinkage Less inventory typically means less materials handling requirements Less money invested means more money available for other investment opportunities 0000 All 4 Costs of Inventory Cost to purchase the cost to purchase inventory Holding cost the cost of holding the inventory Some of the costs this may include are rent for the storage facility energy and equipment required to keep inventory in an acceptable environment insurance security personnel employees that handle inventory Ordering costs the costs associated with placing an order for inventory This might include the cost to research suppliers negotiate purchase the cost to have items shipped and the upkeep of any electronic ordering system Stockout cost the costs associated with not having enough inventory on hand to meet customer demand This might include loss of unmet sale in the present the loss of any future sales from this customers cost of expedited shipment and the cost of altering operational plans to expedite production Inventory Calculations O lot size D annual demand 0 cost to purchase one unit of inventory H cost to hold one unit of inventory for one year S cost to place a single order SCM 300 Instructor Eddie IDavila SCM 300 Module 02 Study Guide amp Problem Set 0 DC cost to purchase inventory 0 Average amount of inventory 02 c Number of orders per year D2 12000 units per year and a company orders 1000 12 orders per year 0 Time between orders in weeks OD52 using info above 1 0001200052 433 TC Formula total annual inventory cost calculation TC DC O2H DOS l TC DC AHC AOC 0 Annual cost to purchase inventory DC 0 Annual holding cost O2H 0 Annual ordering cost DOS EOO economic Order Quantity the lot size O that will minimize total annual inventory cost TC it is therefore seen as the optimal lot size The formula for Economic Order Quantity EOO sqrt2DSH EOO is where AHC and AOC intersent If AHC is greater than AOC holding costs are too hifgh Reduce lot sizr to reduct TC AOC is greater than AHC holding costs too low In crease lot size to reduce TC Purchasing a etxbook for a course With our past exoerineces with the procurement process we are well qualified to study the procurement processes of corporations Making vs Buying 0 Reasons for making 0 Proprietary technology not only can others not make it but our company does not want to tell anyone else how to make it o No competent supplier Others can make it but not as good as we can 0 Better quality control we like it made a certain way and are concerned other will not be as detail oriented o Idle capacity we have the machines and people to make it Why not take advantage of the idle capac y 0 Control we want it faster cheaper better than others are willing to make it Perhaps the demands of our supply chain do not allow us to have suppliers that can dictate so much control over our supply chain flexibility 0 Reasons for buying outsourcing 0 Insufficient capacity we could make it but we don t have time and resources to make it 0 Lack of expertise we don t know how to make it o No competent supplier we know how to make it but not up to the standards we like 0 Better use of resources we know how to make it but outside suppliers can produce it to acceptable standards faster andor at a lower cost TCO Total cost of ownership cost of owning an item over the entire lifetime of the item Vertical Integration The act of a company taking on additional supply chain responsibilities that were formerly done by outside parties There are two classes of vertical integration FonNard and Backward Integration 0 FonNard taking over supply chain responsibilities formerly performed downstream by supply chain partners example a bakery decides to open a sandwich shop they now fonNard integrate and use their own bread for the sandwich shop 0 Backward taking over supply chain responsibilities formerly performed by upstream supply chain partners A bakery decides to purchase a flour company Rather than purchase flour from flour supplier Instructor Eddie IDavila SCM 300 Module 02 Study Guide amp Problem Set they now use their own flour branch to both sell flour to other companies and they use it in their own bakery Steps in purchasing process 0 Requisition someone discovers they need something item A A materials requisition MR is issued by the person in need to inform procurement to get item A 0 Supplier Selection Procurement searches their supplier base to see if one of their present suppliers sells item A IF no one does they must find a supplier If more than one company sells the item they will need to choose a supplier In either case procurement may send out a request for quotation RFQ to get a price for item A A negotiation may ensue 0 Place order Once a supplier is chosen and a price has been agreed upon a purchase order PO may be issued by procurement to formally order the item 0 Track order In an effort to inform the eventual user of Item A as to when Item A will be available procurement will likely track the order to see of it is due to when promised 0 Received order Once item A arrives it will likely be inspected scanned into inventory and moved either to where it will be used or onto a shelf for storage MR RFQ PO 0 Material requisition MR The document used to initiate the purchasing process It is filled out by the intended user and then sent to their procurement office to communicate that need May also show quantity needed productservice description andor specifications 0 Request for Quotation RFQ Detailed to quote that might include more than justa per unit price may include delivery date and payment terms 0 Purchase order PO formal request that states terms and condition of a order Eprocurement system can aid in submitting requests for materials making material orders negotiating with suppliers tracking shipments and receiving shipments Can lead to better future decisions Centralized vs Decentralized purchasing 0 Centralized a purchasing system where all corporate employees send material requisitions to a single purchasing department The centralized purchasing department is then responsible for all purchasing decisions including supplier choice order size and paymemt terms Advanatages are 0 Avoid duplication 0 Volume discounts 0 Consolidated shipping 0 Established supply baseL allows for deep supplier relationships to form 0 Supply specialization can develop expertise o Decentralized where material requisitions are sent toa departmental purchasing department May have a purchasing department in each department or perhaps each office Advanatages are 0 Closer knowledge of requirments o Closer knowledge of suppliers 0 Speed of purchase The gift making transactions between suppliers can be very special similar to receiving a nice gift As you build buyersupplier relationships in your career remember this Great sppliers can make your products better but it only with both parties understand and appreciate each other that the transaction and relationship become special Supplier base An established group of suppliers from which a company makes most of its purchases Choosing a supplier Consumer needs do they have the part Instructor Eddie IDavila SCM 300 Module 02 Study Guide amp Problem Set Cost quality speed and flexibility what do you and your customer want Are your goals similar to theirs Technology capability do they offer something no one else can Location will their be distance that increases lead time or supply chain risk Information technology system will your system and their sbe able to share data Ability to innovate money to invest in RampD Capacity potential can their capacity help you reach your demand 2nd and 3rd tier suppliers are we comfortable with these suppliers Are they willing to let us develop a relationship with them as well Reliability do they deliver their promises Service what else do they offer Supplier scorecards a repot card that can be used to communicate desires before a sales presentation or shipment Also performance outcomes Results can be used to discuss changes Supplier certifications assessments that help ensure that a buyer s suppliers all meet the minimum supplier standards Some buyers may not even consider purchasing from a supplier unless it gets cetified Single vs Multiple suppliers 0 Single 0 Quantity discount opprotunities 0 Lowest cost total 0 Intellectual propert advanatges 0 Quality control 0 Relationship management is easier 0 Collaboration easier 0 Multiple 0 Competition can breed innovation Risk is spread out among multiple suppliers Capacity flexibility Location advanategs 000 Also be sure to read all introductory sections Stuff Car etc 1 How do American suppliers feel about Japanese and American car manufacturers a Building great relationships with US 2 What is kieretsu a Close knit networks of vendors that continuously learn improve and prosper along with their parent companies 3 What did American companies do to copy the Japanese partnering model Despite the efforts of American car manufacturers why did cost resurface as the key criterion a As a part of the quality movement of the 1980 s these companies adopted the Japanese partnering model They slashed the number of suppliers they did business with awarded the survivors with longterm contracts and encouraged top tier vendors to manage the lower tiers They also got top tier suppliers to produce subsystems instead of components to take responsibility for costs and deliver just in time Instructor Eddie lDavila 10 11 SCM 300 Module 02 Study Guide amp Problem Set How long does it take American and Japanese automakers to design a new car Why are the Japanese faster a American 23 years Japanese 1218 months They understand how their suppliers word Second they turn supplier rivalry into opportunity Third they supervise their vendors Fourth they develop their supplier s technical capabilities Fifth they share information intensively but selectively Sixth they conduct joint improvement activities Japanese cars are seen as durable reliable and high in quality Do they struggle in decreasing manufacturing costs No their parent suppliers believe that Toyota will help them reach target And because of Toyotas tough love they believe they will become more competitive and therfor more profitable What are the general steps outlined in the supplierpartnering hierarchy How should companies go about fulfilling each step 0 They understand how their suppliers word Second they turn supplier rivalry into opportunity Third they supervise their vendors Fourth they develop their supplier s technical capabilities Fifth they share information intensively but selectively Sixth they conduct joint improvement activities They must do each step How did the relationship between Honda and Atlantic Tool and Die develop 0 They sent one of their engineers to work at that firm for 12 months That engineer studied their company tooke notes and sought to understand the fundamentals of that company After six months he asked to see the company s books This proved successful when they eventually went into business together How has Johnson Controls benefited from its relationship with Toyota a It began wanting to expand but toyta said no Toyota helped them figure out a a way to supply seats in their existing space Because they trusted Toyota Toyota trusted them 6 years later Toyota asked them to venture in with Toyotas buiggest supplier Then trim masters was created and because it owned most of them market Johnson benefited form it Toyota turned a need of competition into an opportunity How does Honda use report cards a Monitor its core suppliers some which may be even second or third tier vendors They send their vendors a report card every month Despite the low cost wage opportunities presented by Chinese and Indian suppliers Toyota and Honda have not switched suppliers Why a Neither company sources very much from those countries primarily because suppliers there offer them only wage savings That isn t enough Toyota and Honda believe that suppliers innovation capabilities are more important than their wage costs Why does Toyota divide components into two categories a Those that vendors can design themselves and those that must be developed by at Toyota The first category includes floor consoles sunroofs small components Second category are products that involve the sheet of metal on the car SCM 300 Instructor Eddie lDavila SCM 300 Module 02 Study Guide amp Problem Set 12 Explain the benefits of Honda s Best Practices program to both Honda Suppliers and Honda Instructor Eddie iDavila SCM 300 Module 02 Study Guide amp Problem Set 0 Increased productivity by 50 percent improved quality by 30 and reduced costs by 7 percent PART 1 Introduction to Inventory Slides 0216 53 Lead time Lot size SKU Shrinkage pilferage security lost items damaged obsolesence Inventory and types of inventory Relationship between risk and inventory Purchasing considerations Costs associated with inventory Inventory Classifications longterm seasonal safety stock market pipeline perishable anticipation PART 1 Basic Forecasting Models Slides 3539 Qualitative and Quantitative forecasting Simple moving average Weighted moving average PART 2 Total Cost of Inventory and E00 Slides 1834 High vs Low inventory Benefits downsides tradeoffs Cycle stock inventory used to accommodate normal demand or inventory that varies directly with lot size 0 Costs of inventory See slide 24 Be able to discuss explain and use the Total Cost Formula Formulas calculations graphs etc The team exercise and problems are good indications of what the exam might contain Total cost formula Know all parts of the formula Time between orders EOQ Fully understand this concept calculations and all associated the graphs 0 What does it mean if AHC gt AOC AHC lt AOC o How do you know if you are above or below the E00 PART 3 Procurement Basics Slides 4145 52 Purchasing process Make or Buy decision Centralized and Decentralized purchasing What are some of the key issues to consider in choosing a supplier Value of supplier evaluation Value of supplier certification For buyers and suppliers Why is relationship management important between buyers and suppliers Vertical integration Forward and backward integration Unders tndinq Module 02 These questions are intended to help you see if you understand how this module s topics all tie together 1 Why is inventory valuable for a company like Apple Why is inventory a burden for them 2 Modern SCM does not always favor purchasing the lowest cost items Why Besides cost what else needs to be considered when choosing suppliers Making purchases 3 How many rolls of toilet paper do you buy at once Why What brand Why How do these questions relate to this module 4 Why is a very academic tool like the E00 model still useful in making real life decisions 5 Consider how shrinkage and obsolescence data must be used in conjunction with demand forecasts Instructor Eddie lDavila SCM 300 Module 02 Study Guide amp Problem Set Problem 1 Annual Demand D 8000 Ave Weekly Demand 15385 D52 Ave Daily Demand d 2192 D365 Unit Cost C 1600 Ordering Cost S 4000 Holding Cost of C 2500 Holding Cost H 400 C 025 Annual Cost of Item DC Q DQ QD 52 DQ S Q2 Q2 H AOC AHC TC Time otglrsisziie OrdersYr 3332quot Order Cost 7223 cagxrg Total Cost weeks 100 800 065 50 20000 13140000 200 400 13 100 40000 13000000 300 267 195 150 60000 400 200 26 200 80000 500 160 325 250 100000 600 133 39 300 120000 700 114 455 350 140000 12985714 800 100 52 400 160000 13000000 Instructor Eddie lDavila GRAPH for Problem 1 SCM 300 Module 02 Study Guide amp Problem Set 1800 1600 1400 1200 1000 800 600 400 200 100 200 300 400 500 600 700 800 900 SCA SOO Instructor Eddiie Davila SCM 300 Module 02 Study Guide amp Problem Set PROBLEM 2 Givens Annual Demand 15000 Units Holding Cost 030 or 30 of unit cost per unit per year Unit Cost 1000 Cost to Place an Order 12500 a Find EOQ b TC if QEOQ c TBO if QEOQ a Find EOQ EOQ 23D 2 125 15000 H 300 1118034 b TC if QEOQ TC DC Q2 H DQ S TC Item Cost AHC AOC TC 15000 10 11182 3 150001118 125 TC 150000 1677 1677 TC 153354 COST Annual Holding Cost Total Cost I E Annual Ordering Cost 1 r 1118 111803 QUANTITY Q NOTE When Q is greater than EOQ AHC gt AOC You are holding too much When Q is less than EOQ AHC lt AOC You need to hold more inventorv Instructor Eddie lDavila SCM 300 Module 02 Study Guide amp Problem Set c TBO if QEOQ TBO QD 52 Weeks 111815000 52 Weeks TBO 387 3 weeks and 9 days Instructor Eddie Davila SCM 300 Module 02 Study Guide amp Problem Set PROBLEM 3 A certain store sells Sun Devil Baseball Caps Style 101 They sell on average 90 of those caps per week during their 52 week fiscal year The Unit cost for a cap is 1170 All ordering costs transportation tracking processing stocking etc amounts to 54 per order Annual holding costs are 27 of the unit cost D4680 Q1500 C 7 H3159 854 A Currently the lotsize this store uses is 1500 What is their AHC What is their AOC What is their TC Without calculating EOQ is their present lotsize smaller or larger than the E00 AHC 15002 3159 236925 AOC 46801500 54 16848 TC add all together 5729373 A Which order size will provide the lowest Total annual inventory cost 400 B Using EOQ what would the avg time between orders be 4004680 52 444 C How much do they stand to save annually in Total annual inventory costs if they use EOQ versus the present lotsize of 1500 56862 631 8 6318 560916 GOOD PRACTICE PROBLEM FOR THE EXAM PROBLEM 4 An electronics firm has annual demand of 1440 units holding costs are 1250 of the cost of the item per unit per year and ordering cost are 50 Each unit costs 80 to produce Their present lot size is 650 units A How many orders will they place if they use the present lot Sig 221 or 3 B What is the average inventory if they use the present lot Sig 325 C What is the Annual Holding Cost if they use the present lot Sig 6502 10 D What is the Annual Ordering Cost if they use the present lot Sig 1440650 50 E What is the Total Annual Inventory Cost include DC if they use the present lot size 72000 F What is the Time Between Orders in weeks if they use the present lot Sig G Which lot size will give them the lowest annual inventory cost H How many orders will they place if they use the E00 I What is the average inventory if they use the E00 Instructor Eddie lDavila SCM 300 Module 02 Study Guide amp Problem Set What is the Annual Holding Cost if they use E0 What is the Annual Ordering Cost if they use E0 What is the Total Annual Inventory Cost include DC if they use EOQ What is the Time Between Orders in weeks if they the E00 How much do they stand to save if they use their EOQ versus their present lot size SCM 300 Instructor Eddie lDavila SCM 300 Module 02 Study Guide amp Problem Set Use the following Data Set to complete the problems that follow Try using both a calculator and a spreadsheet to solve these problems Period Sales Volume 25502 24946 2591 1 26245 26454 26269 26452 26804 25396 26256 31 365 28226 gjgcoooxloucnhcoN L What are the 4 period moving average forecasts for periods 5 through 12 What are the 3 period moving average forecasts for periods 5 through 12 What would be the forecast for periods 5 through 12 using a 4 period weighted moving average The weights for each period are 01 02 03 and 04 from the oldest period to the most recent period respectively What would be the forecast for periods 5 through 12 using a 3 period weighted moving average The weights for each period are 01 03 and 06 from the oldest period to the most recent period respectively Use the following Data Set to complete the problems that follow Try using both a calculator and a spreadsheet to solve these problems Period Sales Volume 1 37792 39562 41 330 42141 42455 42032 DUIPOOR Instructor Eddie lDavila L SCM 300 Module 02 Study Guide amp Problem Set 7 41538 8 41605 9 41727 10 42899 11 42677 12 43459 9 What are the 4 period moving average forecasts for periods 5 through 12 10 What are the 3 period moving average forecasts for periods 5 through 12 11 What would be the forecast for periods 5 through 12 using a 4 period weighted moving average The weights for each period are 01 02 03 and 04 from the oldest period to the most recent period respectively 12 What would be the forecast for periods 5 through 12 using a 3 period weighted moving average The weights for each period are 01 03 and 06 from the oldest period to the most recent period respectively Problem Set K This problem will be done during lecture This problem will be done during lecture 3 Part A AHC 236925 AOC 16848 TC 5729373 Part B EOQ 400 Part C TBO 444 weeks Part D AHCAOC 63180 TC 5601960 Savings 127413 4 A 2215 orders E 11856077 B 325 units F 2347 Wks C 3250 G 120 units D 11077 H 12 orders 60 units Problems 5 through 8 ForecaSt Problem 4 Problem 5 Problem 6 Problem 7 for Period 5 2565100 2570067 2581070 2601490 6 2588900 2620333 2613190 2633700 7 2621975 2632267 2628390 2632210 8 2635500 2639167 2637680 2639730 9 2649475 2650833 2655640 2664490 10 2623025 2621733 2611690 2592400 11 2622700 2615200 2612720 2605280 12 2745525 2767233 2818240 2923540 J 600 K 600 L 116400 M 433 Weeks N 216077 SCM 300 Instructor Eddie lDavila Problems 9 through 12 Forecast for Problem 8 Problem 9 Problem 10 Problem 11 Pe od 5 4020625 4101100 4094700 4163980 6 4137200 4197533 4184650 4224830 7 4198950 4220933 4211050 4216980 8 4204150 4200833 4192990 4177790 9 4190750 4172500 4175530 4162760 10 4172550 4162333 4168310 4167150 11 4194225 4207700 4215250 4241800 12 4222700 4243433 4244640 4264860 SCM 300 Module 02 Study Guide amp Problem Set SCM 300 Instructor Eddlie lDavila
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