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SCM 301 Exam 2 Study Guide

by: Lisa Thein

SCM 301 Exam 2 Study Guide SCM 301

Marketplace > Pennsylvania State University > Economcs > SCM 301 > SCM 301 Exam 2 Study Guide
Lisa Thein
Penn State
GPA 3.91

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About this Document

These notes cover what is on exam 2
Supply Chain Management
Felisa Preciado
Study Guide
Supply Chain, SCM
50 ?




Popular in Supply Chain Management

Popular in Economcs

This 5 page Study Guide was uploaded by Lisa Thein on Sunday March 20, 2016. The Study Guide belongs to SCM 301 at Pennsylvania State University taught by Felisa Preciado in Winter 2016. Since its upload, it has received 208 views. For similar materials see Supply Chain Management in Economcs at Pennsylvania State University.


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Date Created: 03/20/16
SCM 301 Exam 2 Sales and Operations Planning  Aggregate planning process that determines the resource capacity a firm will need to meet its demand over an intermediate time horizon (6-12 months) o Aggregate because plans are developed for product lines/families rather than individual products  Capacity is limited by space and time  2 objectives of S&OP o To establish a company-wide game plan for allocating resources o To develop an economic strategy for meeting demand  Strategies for adjusting capacity o Seasonal demand patterns can be met by  Producing at a constant rate and using inventory to absorb fluctuations in demand (level production)  Hiring and firing works to match demand (chase demand)  Maintaining resources for high-demand levels  Increasing/decreasing working hours (overtime/undertime)  Subcontracting work to other firms  Using part-time workers  Providing the service or product at a later time period (backordering)  Level production o Sets production at a fixed rate (usually to meet demand) and uses inventory to absorb variations in demand  Cost of holding inventory and obsolete products  Chase demand o Matches the production plan to the demand pattern and absorbs variations in demand by hiring and firing workers  Cost of hiring and firing workers  Peak demand o Ensures high levels of customer service, but can be costly in terms of investing in extra workers and machines that remain idle during low-demand periods  Overtime/undertime o When demand fluctuations are not extreme  Subcontracting o Feasible alternative if a supplier can reliably meet quality and time requirements o Disadvantages: reduced profits, loss of control over production, long lead times, potential of subcontractor to become future competitor  Part-time workers o Feasible for unskilled jobs or areas with large temporary pools  Backlogs, backordering, and lost sales o Backlog – for customized products and services o Backorder – for customers willing to wait for a temporarily out of stock make-to-stock item  Strategies for managing demand o Shifting demand into other time periods with incentives, sales promotions, and advertising campaigns o Offering products or services with countercyclical demand patterns o Partnering with suppliers to reduce information distortion along the supply chain  Pure strategies o Level production and chase demand  General linear programming model o To evaluate the optimal balance between level and chase  Mixed Strategies o Varying 2 or more capacity factors to determine a feasible production plan  Aggregate Planning for Services o Most services cannot be inventoried  Airline seats or hotel rooms can’t be stored for later or if something can be stored its for very short time periods o Demand for services is hard to predict  Demand is often erratic and customer service levels must be met o Capacity is also difficult to predict  Units of capacity vary and so does the service level for each task o Service capacity must be provided at the appropriate place and time o Labor is usually the most constraining resources for services  Labor is very flexible and workers can be cross trained  Revenue Management (Yield Management) o Seeks to maximize profit or yield from time-sensitive products and services  For industries with inflexible and expensive capacity, perishable products or services, segmented markets, advanced sales, and uncertain demand o Overbooking o Fare classes o Single order quantities Inventory Management  Average cost of inventory in the US is 30-35% of its value  The closer the decoupling point to consumer the faster they can be served  Single period model – used for one-time purchases of an item  Fixed-order quantity model – when we want to maintain an item “in-stock” and when we resupply the item, a certain number of units must be ordered each time o A constant order is placed at a variable time level o Inventory remaining must be continually monitored o Has a smaller average inventory o Allows individual review frequencies o Possible quantity discounts o Requires more time and money to maintain/manage  Fixed-time period model – used when the item should be in-stock and ready to use. Ordered at certain time intervals o Orders are placed at a constant time interval o Variable order sizes o Convenient to administer o Orders may be combined o You don’t have to monitor your inventory as much  Purposes of Inventory o To maintain independence of operations  A supply of materials at a work center allows that center flexibility in operations o To meet variations in product demand  If the demand is known precisely it may be possible to produce the product to exactly meet the demand (usually demand is not known and they use safety stock as a buffer) o To allow flexibility in production scheduling  A stock of inventory relieves pressure on the production system to get the goods out o To provide a safeguard for variation in raw material delivery time  When material is ordered from a vendor, delays can occur for a variety of reasons: a normal variation in shipping time, a shortage of material at the vender’s plant causing backlogs, an unexpected strike at the vendor’s plant or at one of the shipping companies, a lost order, or a shipment of incorrect or defective material o To take advantage of economic purchase order size  The larger each order is, the fewer that have to be placed so less order costs, also shipping costs favor larger orders o Many other domain-specific reasons  Ex: Buying inventory in anticipation of price changes  Inventory Costs o Holding (carrying) costs  Cost of storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, opportunity cost of capital o Setup (production change) costs  To make each different product involves obtaining the necessary materials, arranging specific equipment setups, filling out the required papers, appropriately charging time and materials, and moving out the previous stock material o Ordering costs  The managerial and clerical costs to prepare the purchase or production order o Shortage costs o Establishing the correct quantity to order from vendors or size of the lots submitted to the firm’s productive facilities involves finding the minimum total cost resulting from the combined effects of these costs  Independent demand – the demands for various items are unrelated to each other  Dependent demand – the need for any one item is a direct result of the need to some other item, usually an item of which it is a part  Fixed Order Quantity Assumptions o Demand for the product is constant and uniform throughout the period o Lead time is constant o Price per unit produced is constant o Inventory holding cost is based on average inventory o Ordering or setup costs are constant o All demands for the product will be satisfied (no backorders)  Safety stock o Amount of inventory carried in addition to the expected demand Total Cost Equation  TC = total annual cost  D = demand  C = cost per unit  Q quantity to be ordered  S = cost of placing an order  H = annual holding/storage cost  R = reorder point  L = lead time


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