OpMan Final (13,14,15)
1. strategic importance of inventory are?
A: necessary for business operations and contributes directly to customer satisfaction
2. What is the objective of inventory management?
A: to achieve a desired level of customer service while keeping inventory costs reasonable
3. How do you reduce risk of stock outs?
A: by holding a safety stock of components or products.
4. 2-bin system is?
A: Two containers of inventory; reorder when the first is empty.
5. ABC analysis is?
A: classifying inventory according to some measure of importance, and allocating control efforts accordingly. 6. Inventories are held because?
A: (1) to take advantage of price discounts, (2) to take advantage of economic lot sizes, (3) to provide a certain level of customer service, and (4) because production requires some in-process inventory 7. What does effective inventory management require?
A: requires (1) cost information, information on demand and lead time (amounts and variabilities), an accounting system, and a priority system “ABC”.
Simple EOQ question: D=1215 bags per year, S=$10, H=$75
DS Q 18
= = =
b. Q/2 = 18/2 = 9 bags
c. D/Q = 1215 bags/ 18 bags/orgers = 67.5 orders d. TC= Q/2*H + D/Q*S
e. 18/2*75 + 1215/18*10=675+675= 1350
f. Assuming that holding cost per bag increases by $9/bag/year 2(1,215)(10)17 bags
g. Q = =
17 TC = + = + =
h.(10) 714 714.71 $1,428.71
i. Increase by (1428.71-1350)= $78.71
D = 40/day x 260 days/yr. = 10,400 packages
S = $60 H = $30
2DS Q0 = = = =
203.96 204 boxes
TC = +
H We also discuss several other topics like chem 105 ole miss
(60) 3,060 3,058.82 $6,118.82 = + = + =
200 TC200 = +
TC200 = 3,000 + 3,120 = $6,120
6,120 – 6,118.82 (only $1.18 higher than with EOQ, so 200 is acceptable.)
• Dependent Demand: Not market-driven! Components of finished products, like how many tires will you need if you’re manufacturing cars. (demand but not for the finished products).
ie. The parts of a MacBook or a computer
• Independent demand: Market-driven demand! Products ready to be sold or used (finished products). • Inventory T.O. = annual COGS/Average Inventory investment
Annual carrying cost (holding)= Q/2 *H. Where Q=Order quant in units, H=holding (carrying) cost per unit per year. [important]. If you want to learn more check out dale hoffman bellevue college
Note: carry cost will yield a linear function ( a straight line graph that starts at the origin and positively goes up to the right). Also carry costs are linearly related to order size (Q).
Annual Ordering cost (or set-up cost) = D/Q *S. Where, D=Demand, usually in units per year, S=Ordering cost per order.
Note: order cost are inversely & non-linearly related to order size. [important].
Total Cost (TC)= Annual carry cost + Annual order cost= Q/2 *H + D/Q *S
Note: the curve for TC is U-shaped.
EOQ= �� = √2����
For orders with a discount due to buying in bulk.
The same formula as TC but at the end you add purchasing cost (P*D)
P=Price per unit
Thus, TC= Ordering cost + carry cost + Purchasing cost (PD). Don't forget about the age old question of climate data cannot predict the weather.
Toyota Approach. (Toyota Production System [TPS])
• Muda: minimize waste and inefficiency (Publix checkouts a couple of years ago
• Pull System: Produce only what is needed, ON DEMAND
• Kanban: manual system to control flow of parts/materials in response to signals of need, few parts/materials but a steady flow
• Heijunka: level workload, steady workflow of average volume and demand, production volume variation leads to waste.
• Kaizen: continuous improvement, there is always room for improvement.
• Jidoka: quality at source, stop work when bad part is detected, also called autonomation. • Team concept: use small teams of workers for process improvement
Unnecessary transporting We also discuss several other topics like uf telecommunications major
Processing waste (wasteful processing steps)
Inefficient work methods
• Ultimate goal: a BALANCED system
• Supporting goals: Eliminate disruptions; caused by poor quality, equipment breakdown, Δ in schedule, late deliveries, eliminate disruptions to reduce uncertainty in system. Make the system flexible; maintain product mix (even daily) while maintaining balance and throughput speed, reduce setup and lead times. Eliminate waste (especially inventory); waste represents unproductive resources, eliminating waste frees up resources, inventory is idle resource
• WASTE IS THE ENEMY
• Improvement should be done gradually and continuously
• Everyone should be involved
• Kaizen is a low cost strategy
• It can be applied anywhere
• Supported by a visual system
• It focuses attention to where value is created
• It is process oriented (flowsss)
• Improvement should come from new thinking and new work style
• Essence of organizational learning is to learn while doing We also discuss several other topics like cell structure and function temple university
• Balanced system: Takt time: cycle time needed for production to match demand
• Net available time = (total shift time – nonproductive time) * number of shifts
• Net available time/ demand = Takt time
• Poka-Yoke: or fail safe methods: foolproof to reduce or eliminate potential errors during a process
• Inventory storage: minimize inventory (remember it’s one of the wastes!!!!), deliver directly to where parts/ products are used.
5 S’s for lean operations are?
• Self-discipline or Sustain (understand need for uncluttered workplace)
5 W’s 2 H’s for process improvement (REMEMBER THESE).
• What? Subject
• Why? Purpose
• Where? Location
• When? Sequence
• Who? People
• How? Method
• How much? Cost
JIT stands for?
A: a highly coordinated system in which raw materials, components, products or services are made available just as they are needed
NOTE: Lean is both a philosophy and a methodology that focuses on eliminating waste What is a lean operation?
A: a flexible system that uses minimal resources to produce high quality products or services Ultimate goal of lean?
A: create a balanced system where there is a rapid and smooth flow of products and services synchronized to meet demand Don't forget about the age old question of ecn 212 asu final exam
3 supporting goals of lean?
A: 1. eliminate disruptions
2. make system flexible
3. eliminate waste
1. JIT is a philosophy of?
A: Waste reduction
2. This action tends to reduce variability
A: Customer demands are made clear.
3. An effective JIT effort should result in increased
4. Goals of JIT partnerships include
A: elimination of in-transit inventor
5. Characteristics of just-in-time suppliers do NOT include
A: short-term contract agreements
6. A key to just-in-time production is
A: the elimination of all inventories.
7. The prime advantage of a just-in-time inventory system lies in the?
A: exposure of problems in the production/distribution system.
8. Which of the following is a JIT layout tactic?
A: Sequential operations are adjacent to each other.
9. Which of the following is NOT a JIT inventory tactic?
A: consistently receive and store deliveries at the same point in the warehouse
10. Which of the following is a JIT scheduling tactic?
A: Level Schedules
11. JIT has an internal focus and Lean Production begins with an external focus on? A: customers. (NOT logistics, they may be external, but not the focus)
12. JIT, Lean Production, and the Toyota Production System (TPS) all emphasize continuous improvement, but what makes the TPS unique is its emphasis on
A: learning and employee empowerment.
13. The 5S checklist item that calls for the removal of variation from the process via consistent training, tooling, and procedures is
14. Which is NOT an underlying principle of TPS?
A: Inventory shall be reduced to zero between processes and maintained at this level unless authorized by management
15. What is an advantage of holding inventory?
A: Greater Availability
Strategies in Supply Chain:
Responsive/Agile: ability of supply chain to respond quickly to changes in product requirements or volume of demand, adapt to disruptions
Lean: create an efficient, low-cost supply chain by eliminating non-value-added activities
Near-sourcing: “buy local” shortens supply chains; reduces transportation time and cost, inventory, risk of disruptions; increases responsiveness
Components of SCM?
A: SCM is the planning, implementation and controlling supply chain ops, key area of OM. Picture of a typical SC.
Distrib Center (DC)
• Procurement (The purchasing dept of an org. responsible for parts, materials, supplies, and services needed to produce a PorS)
• Supply Mngmt
• Demand Mngmt
• Supply Chain is in reality a complex “supply network”
• Determine appropriate level of outsourcing. (Remember: outsourcing is simply someone else doing the work, not necessarily in another country like China. Example: if the US govt needs a fighter jet, they’ll contact Northrop Grumman or Lockheed Martin).
• Managing procurement. (think “purchasing” and strategic partnerships)
• Managing supplies. (selecting them and keep good relations with suppliers. Think: if you buy garbage supplies, your product is going to be garbage)
• Managing customer relations
• Flow management. (Think: finding problems and fixing them quick.)
• Flow of goods/services, cash and information
• Quickly identify problems and respond.
3 Key questions in risk management are?
A: 1. What can go wrong? 2. How likely will it happen? 3. And when it does, what is the consequence? Key areas of SCM are?
Procurement. “purchasing” (60% of finished goods are PURCHASED. Criteria; cost, quality, and timely delivery.
E-business (in SCM).
Logistics: Refers to the movements of materials, services, cash, and information in a SC. Order Fulfillment:
Engineer to Order (ETO): products are designed and built according to customer specifications. Frequently used for large-scale construction projects, custom homebuilding, home remodeling, and for products made in job shops
Make to Order (MTO): a standard product design is used, but production of the final product is linked to the final customer’s specifications. Best example; aircraft manufacturers such as Boeing. Fulfillment time is generally less than with ETO fulfillment, but still fairly long.
Assemble to Order (ATO): products are assembled to customer specifications from a stock of standard and modular components. When you buy a Dell computer you pick and choose your specs. Fulfillment is fairly short.
Made to Stock (MTO): production is based on a forecast, and products are sold to the customer from finished goods stock. Used in department stores and supermarkets. FASTEST fulfillment (immediate!)
Bullwhip effect: Inventory oscillations become progressively larger looking backward through the supply chain. the rippling effect of demand variations begin at the customer end of the chain and become increasingly large as they radiate backward through the chain. (IMPORTANT)
VMI: vendor managed inventory. Essentially how Walmart operates their products
Which of the following isn’t a criteria of procurement?
C) Timely delivery
E) All of the above are criteria
What is procurement?
Logistics are referred to as the__?
A) movement of materials, services, cash and information in a supply chain B) movement of materials, services, and information in a supply chain C) movement of materials, services, cash and information between competitors D) movement of materials, cash and information between the company and customers E) movement of services, and information in a supply chain
Which of the following is/are standard for ethical behavior in purchasing?
A) Promote positive supplier and customer relationships
B) Avoid improper reciprocal agreements
C) Protect confidential and proprietary information
D) Champion social responsibility and sustainability practices
E) All of the above
What percentage of finished goods that you buy are purchased?
E) Not listed
RFID can aid a business in which of the following?
A) increase supply chain visibility
B) improve inventory management
C) improve quality control
D) enhance relationship with suppliers or customers
E) all of the above
Which is a key element of managing returns?
B) Event management
D) Both A & C
What is usually not a duty associated with purchasing?
A: Managing Inventories.
What option(s) are necessary in creating an effective SC?
B) Effective communication
C) Information velocity
D) None of the above
E) All of the above are necessary
Which of the following is not part of order fulfillment?
Tracking chips that allow items to be tracked in real time. Abbreviated?
Goal of SCM is to?
A: To match demand to supply as effectively as possible
Correct order of purchasing cycle?
A: Requisition????Supplier selection????order with vendor???? monitor order status???? receiving???? accounts payable.
Centralized purchasing pros?
A: Scale advantages, lower prices with higher vol., better service and closer attention from suppliers. Decentralized purch pros?
A: Awareness of differing “local” needs and being better able to respond to those needs. QUICKER response than centralized.
What best describes disintermediation?
A: “removing the middle man”???? reduces costs and increases options. Technology basically made this happen. Advantages of Disintermediation?
A: Transaction costs are reduced, SC status tracking online, Virtual companies are possible, reducing costs, and small companies can compete.
Which of the followings is NOT one of the challenges of supply chain management? A) Barriers to integration of separate organization
B) Getting CEOs, board of directors, managers, and employees on the same page C) Dealing with trade-offs
D) Other competitors
E) Variability and uncertainty
Which one below is not a performance measure?
Which of the following is not a managing return:
B) Recalled products
C) Unsold products returned from retailers
D) Non-recycle items
E) Defective products
What describes the screening of returned goods to prevent incorrect acceptance of goods? A: GATEKEEPING
Radio Frequency Identification can do all the following EXCEPT:?
A) reduce theft of inventory
B) improve inventory management
C) eliminate the need for checkout personnel at registers
D) reduce manual errors
E) provides more information than a barcode