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OPTM 3000 Exam 1 Study Guide

by: Jessica Notetaker

OPTM 3000 Exam 1 Study Guide 3000

Marketplace > University of Colorado Colorado Springs > OPTM > 3000 > OPTM 3000 Exam 1 Study Guide
Jessica Notetaker
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About this Document

This study guide contains the main concepts and key words discussed so far in class.
Fundamentals of Operations Management
Joshua Thomas
Study Guide
OPTM3000, exam
50 ?




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This 8 page Study Guide was uploaded by Jessica Notetaker on Saturday September 24, 2016. The Study Guide belongs to 3000 at University of Colorado Colorado Springs taught by Joshua Thomas in Fall 2016. Since its upload, it has received 8 views. For similar materials see Fundamentals of Operations Management in OPTM at University of Colorado Colorado Springs.


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Date Created: 09/24/16
Study Guide Exam 1- OPTM 3000 Chapter 1  Operation Supply Chain management : Control, plan the use of resources needed to produce the company’s products and services o 5 different activity types  Planning, Sourcing, Making, Delivering, Returning o 4 types of organization  Pure Goods  Core Goods  Core Services  Pure Services o Effectiveness: Doing the right things o Efficiency: Doing things right Inventory Turnover= COGS/Average aggregate inventory value Average aggregate inventory value= value production materials on hand +work in process+ finished goods  Common measure of efficiency Weeks of Supply= (average aggregate inventory value/COGS)x52weeks  Common measure of efficiency Value= Quality/ Price Productivity= outputs/ inputs % Change= this year productivity- last year productive/ last year productivity o Partial measure: output/labor  output/capital  output/ materials  output/energy o Multifactor measure:  output/ (labor+capital+energy)  output/ (labor+capital+materials) o Total Measure:  outputs/inputs  goods and services produced/ all resources used  Efficiency Ratios o Labor Productivity: Net income/ employee; Revenue per employee o Asset Productivity : Receivables turnover ratio; inventory turnover; asset turnover  Activity-system maps: show how a company’s strategy is delivered through a set of tailored activities. Chapter 13  Strategic Sourcing- management and development of relationships with the supplier to acquire goods and services in a way that meets the immediate needs of the business o Sourcing- Implies a more complex process for products that are important strategically.  Specificity- how common an item is, then number of substitutes available  Request for Proposal (RFP)- reverse auction, vendors bid for the job  Vendor managed inventory- supplier manages inventory with some constraints  Forward Buying- retailers respond to price cuts by stocking up  Bullwhip Effect- variability magnification as we move from customer to producer in the supply chain o Indicates lack of synchronization  Continuous replenishment- suppliers forecast demand and compare it with the current levels of inventory.  Product (demand) Characteristics o Functional Products- staples people can get from a wide range of retailers  Stable and predictable demand, long life-cycles, large amount of competition leading to lower margins  Criteria  Life cycle > 2 yr  Contribution margin 5-20%  10-20% variation  Average forecast error of 10% at time of production  Lead time for make to order products 6 months-yr o Innovative Products  Life cycle of a few months  Forced to introduce a steady stream of innovations  Unpredictable demand  Supply Chain Uncertainty Framework: o Efficient supply chain: highest level of cost efficiency, utilize strategies aimed at creating high cost efficiency o Risk-hedging supply: pools and shares resources in a supply chain so risk of supply disruption can be shared, stable demand, high certainty on supply side o Responsive supply chain: responsive and flexible to changing and diverse needs of customers, very stable supply process, but needs to serve changing/ diverse customer needs o Agile Supply Chain: Responsive and Flexible to customer’s needs while hedging risk , supply chain for innovative products with an evolving supply process, high level of both supply and demand uncertainty.  Stable Supply Process- manufacturing process and underlying technology are mature and supply base is well established  Evolving Supply Process- tech and process are in early development and rapidly changing o Supply may be limited in both size and experience  Reasons for outsourcing o Finically Driven Reasons o Improvement Driven Reasons o Organizational Driven Reasons  6 steps of process for Green Sourcing o Access the opportunity o Engage sourcing agents o Access the supply base o Institutionalize the sourcing strategy o Implement sourcing strategy o Develop the sourcing strategy  Total Cost of Ownership: (TCO) estimate of the cost of an item that includes all the related costs to procurement and use of an item (includes any related costs in disposing of the item after it is no longer useful) o Acquisition costs o Ownership costs o Post-ownership costs Chapter 14  Logistics: obtaining, producing, and distributing products and materials to the correct place and with the right amount. (International Logistic is simply the process on a global scale)  Transportation modes (usually use multimodal solutions or more than one) o Highway (trucks)- involved in majority of product transportation, can move a great variety of products o Water (ships)- Low operating costs, can move large amounts of products but slow. o Air- expensive but fast, not usually used for bulk items o Rail- low cost, can be slow (popular choice in Europe where rail infrastructure is highly developed) o Pipelines- limited to liquids, gases, and solids that could move through it. High initial cost but cost per mile is cheap. o Hand Delivery- last step, slow and costly because of labor  Warehouse Design: o Cross-docking- incoming shipments are made into smaller shipments for local delivery  Used by retailers to take in large shipments then separate to the different stores, keeps warehouse inventory small o Hub-and-spoke systems “Hub”- (mix of consolidation and cross- docking) sorts goods to consolidation areas, each area is designated for shipment to a specific location. (sole purpose of the warehouse is sorting goods).  Types of locations o Proximity to customers: good when businesses need products frequently, helps insure product meets customer’s needs o Business Climate: ex. Similar-sized businesses, same industry companies, positive government intervention, or presence of other foreign companies for international locations o Total Costs: want a site with the lowest total cost (reginal costs, inbound/outbound distribution cost, land, construction, labor, taxes, etc. o Infrastructure: Adequate forms of transportation, energy, and telecommunications. An incentive is that the local gov’t willing to invest in improving the infrastructure o Quality Labor: education, labor skills, willingness and ability to learn must match the company’s needs o Suppliers: high quality and competitive suppliers o Other Facilities: location of plants and other distribution centers o Free Trade Zones (Free trade zone): usually a closed facility (supervised by customs department) which foreign goods can be brought without being subject to normal customs. o Political Risk: geopolitical scenes can be fast changing which brings risk o Government Barriers: many legislation is removing barriers but there is still nonlegislative and cultural barriers. o Trading Blocs: the Central American Free Trade Agreement is a trading bloc. It provides new market opportunities or lower total costs within the trading block. (A group of countries that agree on a special agreement governing the trading of goods). o Environmental Regulation: can increase cost o Host Community: how community will react to the plant being placed there o Competitive Advantage: is where strategy is set, products and process technology is created, and a critical mass of production takes place  Plant Location Methods o Factor-Rating Systems: It is a point rating system. It rates each location’s major factors on a number scale (point value) and then adds up the points with the highest being the best option. o Transportation Method of Linear Programming: Used to solve problems like how to transport products from several sources to several destinations  Purpose is to minimize the cost or maximize profits of shipping x units to y destinations. o Centroid Method: Used for locating single facilities taking the existing facilities, distances between them, and volumes of goods to be shipped into consideration. C x ∑d Vix i  i C x ∑d Vix i  i  C x= X coordinate of the centroid  C y= Y coordinate of the centroid  dix= X coordinate of the ith location  d  = Y coordinate of the ith location iy  V i Volume of goods moved to or from the ith location (the x coordinate of location 1 x Volume of location 1)+(the x coordinate of location 2 x  Volume of location 1)+…./ (Volume of location 1+ Volume of location 2+…..) = X  coordinate of the centroid Chapter 12  Lean Production: goal is to reduce waste as much as possible (if step doesn’t have value  remove it), set of activities designed to achieve production using minimal inventories of raw  materials, work­in­progress, and finished goods.  JIT works best with repeatable and standardized operations  Targets excess inventory, or any extra steps usually  Cost of eliminating waste can be customer service when unlikely events occur  Concept came from JIT (just-in-time) production  Customer Value: what a customers will pay for  Value-adding activities make product/service into something customers want  Waste: Anything not adding value to customer  7 major types: o Waste from production o Waste of waiting time o Transportation waste o Inventory waste o Processing waste o Waste of motion o Waste from product defects  Service has a lot more uncertainty than manufacturing which makes waste elimination harder. Types of uncertainty:  Uncertainty in task times: how long it takes to complete the service  Uncertainty in Demand: cannot build up inventory like in manufacturing, production and consumption are simultaneous.  Customers’ Production roles: the quality of service can vary depending onf providers performance  Pull System: when item is sold the market pulls a replacement from last position in the system. This then adds an order to the factory production line, continuing through the production line until it reaches the final process.  Lean Supply Chains: Improves responsiveness to customers  Value Stream: activities (value and non-value adding) that are needed to design, order, and provide a product/service from beginning to end (from concept to launch, ordering to delivering, materials into products)  Lean Suppliers: able to respond to changes, usually low prices, on time and has a culture of continuous improvement  Lean Procurement: the key is automation.  Suppliers and customers’ can see into each other’s operations  Value Stream Mapping (VSM): used in developing lean processes through a flowcharting tool o Parts are grouped into families based off similarity, and processes used to make the parts are put into specialized work cells   E-procurement= automatic transaction, sourcing, bidding, and auctions on the web (removes human interaction and mixes with the financial reporting of the firm)  Lean Manufacturing: produces what, when, and how much of what the customer wants with minimal resources.  Lean Warehousing: eliminate waste in product storage processes  Picking inventory, packing for shipment, receiving material, etc.  Lean Logistics: lean concept applied to the movement of materials.  Optimizing mode of transportation, backhaul minimization, etc.  Lean Customers: customers that understand their needs and specify requirements.  Value speed and flexibility  Lean Supply Chain Design Principles: lean layouts and Lean Production Schedules are internal, Lean supply chains apply to entire supply chain. o Lean Layouts  Group Tech, Quality at the source, JIT production  Quality at the source: doing it right the first time, empowers employees to do their own maintenance until problem is fixed  JIT Production: Produce what’s needed when needed (can be bad in case of emergency). Usually repetitive manufacturing o Exposes problems when there is low inventory  Lean Concepts o Try to balance workflow with minimum of work-in-process inventory. o Pull system o Preventive Maintenance: ensure downtime or malfunctioning equipment doesn’t interrupt flows  Consists of periodic inspections/repairs o Group Technology: philosophy where parts are grouped into families based on similarity and processes required to make the parts organized by manufacturing cell  Benefits: eliminate movement and queue time for operations, reduce inventory, reduce number of required employees  Cons: Workers must be flexible to operate multiple machines  Lean Production Schedules: a stable schedule needed for Lean Production consists of level schedule, freeze window, and underutilization of capacity. o Level Schedule: pulling material into final assembly in a uniform patterns that allow different elements of production to respond to the pull signal o Freeze Window: time which schedule is fixed and changes aren’t possible  Backflush: remove inventory used in making the unit from listing when producing the unit. (if you are making 100 cars you would take out 400 tires) o Uniform Plant Loading: smoothing production flow to diminish the reaction waves that result from schedule variations.  Kanban Production Control System: A type of production system that regulates material (JIT) flow using a signaling device o Uses cards or containers (paperless control system) which make up the Kanban Pull System o Signal need for production, has Production Kanban and Withdrawal Kanban o Kanban Squares: marks on the floor to identify where material should be stored. If sot is empty then they should produce, if full they don’t need parts o Container System: using the container itself to signal. Empty container signals it needs filled o Colored Golf Balls: Has different variations. Would role colored golf ball down pipe to tell operator what part to make next. o Kaizen: lean philosophy that focuses on continuous improvement. K= (Expected Demand During Lead Time + Safety Stock)/ Size of the container = D*L(1+S)/C ←Other format to write it  K= number of Kanban card sets  D= average number of units demanded per period  L= lead time to replenish an order  S=Safety stock expressed as % of demand during lead time  C= Container size o D and L must be in the same time units! o Lead time: function of processing time, waiting time, time required to transport  Lean Supply Chains o Specialized Plants:  small specialized plants  make them easier to manage than large operations  designed for one purpose (allows them to operate more economically)  Synchronized with other plants o Collaboration with Suppliers:  Being confident that a supplier/vendor will meet their delivery commitment will allow you to reduce buffer inventories. Lean supply chain requires frequent deliveries. o Building a Lean Supply Chain:  In a nutshell everyone has to be on the same page with the same goals


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