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Date Created: 12/20/15
Questions and Hints Q1) Difference between a RFP and a RFQ? Ans: RFP- Request for proposal--the client dosen’t the contract amount but only knows the specification. RFP is floated when the work is new RFQ—Request For Quotation—The client estimates the value of the contract and specification. RFQ is floated when the work is repetitive. Q 2) Auction? Difference between a Dutch and English Auction? Ans: English Auction is an ascending whereas Dutch is descending . Q 3) What is a tender? How many types of tender are there? Ans- open, limited , single , risk and cost Risk and Cost—When the original contractor fails to do the work awarded to him then the work is done by another contractor, the payment to whom is made at the present market rates and it is deducted from the original contractor. Q 4) What is value stream mapping and how will you determine the value added and non value added activites? Ans :It is a lean manufacturing technique which is used to improve the lead time.By VSM we draw the AS-IN process and then figure out the TO-BE process .The goal is to map all the value added activities of the system and remove the non-value added ones. Q 5) What is RFID? How does it work? Tell me its uses. How it can be used in a supply chain? Ans: Radio Frequency Identification is a technology which is used to transmit data via electromagnetic waves. Two devices are there(Tag—integrated circuit,, Reader-Antena) Uses—Tracking, Library, Inventory etc Q6) What is TPM? Ans) Total productive maintenance . Focus on: Zero Product Defects, Zero Equipment unplanned failures and Zero Accidents Q 6) Difference between cycle and takt time? Ans) Cycle time: Time it takes from the start of one piece until the beginning of the next piece. Example: A process is defined as follows: 1) Melting-4 min 2) Stamping—6 min 3) Welding----8 min 4) Finishing---4 min Hence the cycle time will be the time of the bottleneck i.e. 8 Min Takt time: Takt time is the pace required to satisfy customer demand. For example, on a single 8- hour shift you have 480 minutes of available work. Subtract the time for any paid breaks and/or meetings (start of shift, quality, etc.) For this example we'll take two 10-minute breaks and one 10- minute meeting at the beginning of the shift. This leaves 480 (total shift time in minutes) - 30 (time for two breaks and one meeting) for a total of 450 available minutes per shift. If the customer places an order for 900 units, and the parts are scheduled to be produced on a single shift, then the takt time is 1 minute. 450 available minutes / 900 units = .5 minutes (30 seconds) per unit. An effort should be made to produce according to the takt time. Q7 ) What is delayed differentiation? Give me its example. Ans ) Postponement at a later stage in the chain . Example Asian paints. Prepares few base colours and then mixes them as per the demand of the customer. This Q8) Difference between a supply chain and a demand chain? Ans) Supply chain consists of both upstream(Supplier till the factory) and downstream partners whereas the demand chain focuses on the downstream i.e. from the factory till the customer. Q9) What is MRP? Ans) Material Requirement Planning. The basic function of MRP system includes inventory control, bill of material processing and elementary scheduling. MRP helps organizations to maintain low inventory levels. It is used to plan manufacturing, purchasing and delivering activities. Q10) What are MRO items? Ans) Maintenance , repair and operating supplies items. MRO items are used in production and plant maintenance and can be items such as maintenance supplies, spare parts, and consumables used in the production process. Q 9 ) What is a Kanban ? How many types of kanban are there? Q 10)What is lead time ? What is the effect of long lead times? How can it be reduced? Q11) What is 1 PL,2 PL,3PL,4PL? Ans) 1 PL- First party logistics—Here everything including warehouse, transportation logistics etc is controlled by one party only and nothing is outsourced 2 Pl— Company which is controlling only transportation for the client 3 Pl- Company which is acting as a one stop shop for the client as everything including the logistics and warehousing which is not the competitive advantage for the client is outsourced 4PL—The company which dosen’t have any asset but Q 12) Draw a 4 stage supply chain? Ans; Manufacturer----Wholesaler-----Distributor---------Retailer Q 13)What is a Bullwhip effect? How to counter it ? Give examples? Ans: Due to oscillating demand caused due to longer lead time, forecasting errors, discounts there is an unnecessary safety stock which is kept at each level on upstream supply chain. So eventually the manufacturer has a high reserved capacity which is not required. It can be overcomed by sharing point of sales data, EDI etc. Example EDLP—Every Day Low Pricing( Techique used by Walmart to counter Bullwhip effect.) Q14) What is vendor managed inventory? Ans) Inventory managed by the manufacturer at the retailer’s end.Ex P&G manages its inventory at Walmart. Q 15) Difference between made to order and make to stock ? Made to order – laptop ( Dell)( As demand is uncertain) Make to stock—FMCG products( As demand is not uncertain) Q 16) What are Class A , B and C items? A items—20% of items constitute of 80%of the total cost B items—30% contribute to 15 % of the cost C items—50% contribute to 5% of the total cost Q 17) Buy back contract? Ans ) Manufacturer agrees to buy back the unsold products from the retailer. Q18) Revenue Sharing Contract? Ans) Retailer agrees to give back a percentage of sales to the manufacturer in return for a less cost prize. Q1) What is 5 S? Ans) 1) Sort—(Distinguish the needed items from the not so important ones ) 2) Set In Order 3) Shine 4) Standardize 5) Sustain Q2) What are the lean manufacturing building blocks? Ans) Quick Changeover/Setup Reduction, Pull System/Kanban, Workplace-5 S systems,Value Stream Analysis, Total Productive Mainetnance(TPM),CellularManufacturing Supporting Tools are---One piece flow, takt time,visual controls , team building , balanced flow,Quality at source,Employee employment,Stablized operations, Continuous improvement (Kaizen),equipment replacement, standardized operations. Q3) What is a supply chain? Ans) Supply chain involves everybody, from the customer all the way to the last supplier. Key flows in the supply chain are- information, product, and cash. It is through these flows that a supply chain fills a customer order. The management of these flows is key to the success or failure of a firm. Q4) What is supply chain management? Ans) Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability. Q5) What can be strategic supply chain decisions? Ans) Locations and capacities of facilities,Products to be made or stored at various locations,Modes of transportation,Information systems, Information, Sourcing , Pricing Note: Always keep in mind that we are looking for a best supply chain which equally balances efficiency and responsiveness. These are the key words : Responsiveness--------By having decentralized warehouses Efficiency---------- By having centralized warehouses Q6) What is a phantom stockout? Ans) If a stock is present in the warehouse ,the ERP system is also showing it in the records but you are not able to locate it physically then it is known as a phantom stock out. Example--- In case of book stores this phenomenon is quite prevalent where the people take the books and keep them anywhere they desire. Q7) What are some of the sourcing metrics? Ans) Days payable outstanding,Average purchase price,Range of purchase price,Average purchase quantity,Fraction on-time deliveries,Supply quality,Supply lead time,Technical Knowledge of Supplier,Life cycle cost etc. This below is a difference between different supply chains taken from net which will give you an idea. DON’T MUG Just understand the logic behind this Q) What is flexible and agile manufacturing? Ans) Flexible Manufacturing – Combines general purpose equipment and skilled and adaptable workforce – Wide and changing range of customizable products – Flexibility of products, mixes, volumes and delivery schedules Agile Manufacturing – Modular Manufacturing (CIM, cellular setup, flexible workforce, horizontal outsourcing, short-term, flexible contracts) Operations Part 3 Distribution Strategies:- 1) Direct shipping 2) Using intermediate storage points Advantages of Direct shipping: 1) Reduced lead time 2) Retailer avoids expenses of operating a distribution centre Disadvantages 1) Risk Pooling not there 2) Transportation cost increase In grocery Industries lead time is critical because of perishable goods Intermediate storage points 1) Traditional warehousing strategy 2) Cross Docking---------- This is important----Warehouses and distribution centers act as transfer points for inventory and no inventory is held at these points ( Popularized by Walmart) Goods coming directly from the manufacturer are transferred directly to the retailer. Goods spend hardly 12 hours. Problem with this strategy is that it requires a significant start up investment and advanced information system, forecasts are critical, effective only for large distribution firms. Q) Name the wastes in a manufacturing process? Ans ) The wastes are :- Overproduction, Inventory ,Waiting, Motion,Transportation,Motion, Rework, Overprocessing. Transportation Waste:- Excess or unnecessary material handling between factories, between work centers,between machines and/or within production areas. • Transportation is a cost factor • Increase lead time • Does not add any value to the product and to the business • It should be minimized or eliminated Causes of the Transportation Waste Poor plant layout • Poor understanding of the process flow for production • Large batch sizes, long lead times, and large storage areas • Poor planning • Inclination of the supervisor to keep the workers busy Counter Measures Transport waste can be eliminated through removing its sources • Process mapping • Workplace redesign • Pull system • VSM • Kanban • Line balancing • Kaizen (Teamwork: cross departmental teams) Inventory Waste Represents the material between operations: Raw materials, Work in process, Finished goods, Consumable supplies, Purchased components • The most frequent type of waste • One of the most expensive wastes Causes of Inventory Waste Compensating for inefficiencies and unexpected problems • Product complexity • Long set up time • Unleveled scheduling • Poor market forecast • Unbalanced workload • Unreliable shipments by suppliers • Misunderstood communications • Lack of ordering procedures • Reward systems • Large lot production or processes with long cycle/lead Times Counter Measures for Inventory Waste Kanban • PokaYoke • One-Piece-Flow • Jodoka • Kaizen • Redesign production flow • Order-based scheduling Overproduction Waste Making more than is required by the next process • Making earlier than is required by the next process • Making faster than is required by the next process • It is visible as storage of material To produce more than is sold or produce it before it is needed. • Overproduction drives high inventory levels and associated costs, long throughput times, and delays in identifying problems. • Overproduction has a negative impact on the smooth flow of materials, thus on productivity, flexibility, quality and cost. • Overproduction leads to all other forms of waste Causes for over production waste Forecasting • Long process setup • Just-in-case logic (for breakdowns) • Misuse of automation • Unleveled scheduling • Unbalanced work load • Redundant inspections Counter Measures Order-based scheduling/Pull scheduling • Load balancing • Poka Yoke • TPM • Kaizen Wait Time Waste Any non-value added time duration for which anyresource is forced to stop doing its function due to: waiting for materials, instructions, team leader , equipment, downtime etc. • Waiting for the next process step is typical for batch and queue production • Waiting is a major cause of bottlenecks, high inventory levels of raw material, parts, sub-assembly and finished goods • Not adding value at all to the business. Causes Of Wait Time Waste • Centralized inspection • Unbalanced work load • Long runs • Long shop-floor distances • Unplanned maintenance • Long process set-up times • Misuses of automation • Upstream quality problems • Unleveled scheduling • Lack of Communication Counter Measures • Redesign production flow • Shorten production cycles • Downstream pull Kanban • Teamwork • Takt time production • Jodoka • TPM Over Processing Waste • Doing more processing to the parts than the customer really requires: Paperwork, over tight tolerance • Over processing waste can be minimized byasking why a specific processing step is needed and why a specific product is produced • All unnecessary processing steps should be Eliminated Causes Of Over processing Waste • Product changes without process changes • Just-in-case logic • True customer requirements undefined • Over processing to accommodate expected downtime • Lack of communication • Redundant approvals • Excess capacity • Extra copies/excessive information Counter Measures • Appropriate Technology • Appropriate Automation Levels • Flexible Options • TPM • Process Audit • Eliminate unnecessary processing steps • Teamwork Movement( Motion) Waste • Any movement that does not add value • Examples: looking for tools, walking manysteps to get parts or place parts into finished goods, more movements than necessary to perform an operation Causes of Motion Waste • Poor people/machine effectiveness • Inconsistent work methods • Failure to take ergonomic issues into consideration • Poor facility or cell layout • Poor workplace organization, housekeeping and design • Unsafe work area • Extra "busy" movements while waiting Counter Measures • 5S • Process Mapping • Point of use storage • One piece flow • Ergonomics • Workplace Redesign • Shorten distances and processes Scrap or Rework Waste • Defects result in rework, adaptations, and scrap • Defects drive extra costs to be associated with material, production and capacity losses, rescheduling, quality control etc. • Defects are the primary metrics in Six Sigma strategies. Causes of Rework Waste • Little or no process control • Poor quality standards or inconsistent quality standards • Lack of or little planned equipment preventive maintenance • Inadequate education/training/work instructions • Product design (Process cannot produce to quality) • Customer needs not understood Counter Measures • Gemba Kaizen • Poka Yoke • Jidoka • TPM • Product Engineering • Process Engineering • Technology management • Quality management • Teamwork Unutilized Talent The lack of involvement and participation ofthe employees in improving operations; quality and safety Causes of People Waste • Old guard thinking, politics, the business culture • Poor hiring practices • Low or no investment in training • Low pay, high turnover strategy • Management thinking it has to “drive” everything instead of involving those whoknow the process the best Q) What is an Assembly Line? Ans: The first movable assembly line was created by Ford to manufacture the Ford Model T Ford installed a capstan and a thick cable to move the cars between assembly stations. Form a major part of manufacturing systems • Popular • Offer tremendous advantage in terms of higherproductivity • A system of assembly line consists of Tasks to be performed The work stations at which these tasks are performed and conveyor that moves the product. • Task: A necessary step to be performed • Workstations: The specific manufacturing or assembly stations defined to perform specific tasks. ** The number of workstations needed must be as small as possible** Q) What is Six-Sigma? Six Sigma is a business management strategy originally developed by Motorola. Six Sigma seeks to improve the qualityof process outputs by identifying and removing the causes of defects (errors) and minimizingvariability in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization. A six-sigma process is one in which 99.99966% of the productsmanufactured are statistically expected to be free of defects (3.4 defects per million). Q) What is Kaizen? Ans) Kaizen (Japanese for "improvement" or "change for the better") refers to philosophy or practices that focus upon continuous improvement of processes in manufacturing, engineering, supporting business processes, and management. When used in the business sense and applied to the workplace, kaizen refers to activities that continually improve all functions, and involves all employees from the CEO to the assembly line workers. The cycle of kaizen activity can be defined as: Standardize an operation Measure the standardized operation (find cycle time and amount of in-process inventory) Gauge measurements against requirements Innovate to meet requirements and increase productivity Standardize the new, improved operations “This is also called Plan DoCheck Act cycle” The five main elements of kaizen Teamwork Personal discipline Improved morale Quality circles Suggestions for improvement Q) What is Business Process Reengineering? Business process reengineering is one approach for redesigning the way work is done to better support the organization's mission and reduce costs. Reengineering starts with a high-level assessment of the organization's mission, strategic goals, and customer needs. Basic questions are asked, such as "Does our mission need to be redefined? Are our strategic goals aligned with our mission? Who are our customers?" An organization may find that it is operating on questionable assumptions, particularly in terms of the wants and needs of its customers. Only after the organization rethinks what it should be doing, does it go on to decidehow best to do it Q) Business Process Improvement ? Business Process Improvement works by:- Defining the organization's strategic goals and purposes(Who are we, what do we do, and why do we do it?) Determining the organization's customers (or stakeholders)(Who do we serve?) Aligning the business processes to realize the organization's goals (How do we do it better?) Q) Key Performance Indicator? A Performance Indicator or Key Perf[rmance Indicator (KPI) is an industry jargon term for a type of Measure of Performance. KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged. Categorization of indicators Quantitative indicators which can be presented as a number. Practical indicators that interface with existing company processes. Directional indicators specifying whether an organization is getting better or not. Actionable indicators are sufficiently in an organization's control to effect change. Financial indicatorsused in performance measurement and when looking at an operating index Very Important:-- The key performance indicators in a supply chain can be:- sales forecasts inventory procurement and suppliers warehousing transportation reverse logistics Economic Order Quantity Model: Economic order quantity is the level of inventory that minimizes the total inventory holding costs and ordering costs. EOQ only applies where the demand for a product is constant over the year and that each new order is delivered in full when the inventory reaches zero. Assumptions 1. The ordering cost is constant. 2. The rate of demand is constant 3. The lead time is fixed 4. The purchase price of the item is constant i.e no discount is available 5. The replenishment is made instantaneously, the whole batch is delivered at once. Lot Size -- A lot size or batch size is the quantity that a stage of a supply chain either produces or purchases at a time. For example a computer seller sales 4 computers a day and the manager orders80 from the manufacturer each time he places an order. The lot or batch size in this case is 80 computers. Also it will take 20 days before the store sells the entire lot and orders a replenishment lot. Lot size = Q Cycle inventory= Q/2 (Average inventory in the supply chain) Average flow time= cycle inventory/demand= Q/2D It is desired to have a low cycle inventory as this reduces the firms’ working capital requirement. For example Toyota keeps a cycle inventory of few hrs of production between factory and most suppliers. Cycle inventory is used to take advantage of the economies of scale and reduce cost within the supply chain. Variables Q = order quantity Q * = optimal order quantity D = annual demand quantity of the product P = purchase cost per unit S = fixed cost per order (not per unit, in addition to unit cost) H = annual holding cost per unit (also known as carrying cost or storage cost) (warehouse space, refrigeration, insurance, etc. usually not related to the unit cost) The Total Cost function The single-item EOQ formula finds the minimum point of the following cost function: Total Cost = purchase cost + ordering cost + holding cost - Purchase cost: This is the variable cost of goods: purchase unit price × annual demand quantity. This is P×D - Ordering cost: This is the cost of placing orders: each order has a fixed cost S, and we need to order D/Q times per year. This is S × D/Q - Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2, so this cost is H × Q/2 . To determine the minimum point of the total cost curve, set the ordering cost equal to the holding cost: Solving for Q gives Q* (the optimal order quantity): Therefore: . Note that interestingly, Q* is independent of P; it is a function of only S, D, H. Important : Inventory holding cost is defined as the sum of= Cost of capital+ Obsolescence ( spoilage ) cost+ Handling Cost+ Occupancy Cost +Miscellaneous cost( like theft security , damage etc) Ordering Cost = Buyer time (incremental time for buyer placing an extra order) +Transportation cost+Receiving Cost Effect of Lot Size: 1) With increase in lot size the Material cost is constant, ordering cost first decreases then remains constant, Holding cost continuously increases. Effect of Trade Promotions Key Goals of Manufacturers 1) Induce retailers to use price discounts,displays oradvertising to spur sales 2) Shift inventory from the manufacturer to the retailer and the customer 3) Defend a brand against the competition Key Goals of a Retailer 1) Pass through some or all the promotion to customers to spur sales 2) Pass through very little to customers but purchase in greater quantity during the promotion period to exploit the temporary reduction in price. This may lead to Bull Whip effect as this leads to a forward buy. Factors affecting the distribution network design 1) Customer needs are meet 2) Cost of meeting the customer needs 3) Response time 4) Product variety 5) Product availaibility 6) Customer experience 7) Time to market 8) Order visibility 9) Returnability Note: 1) If the no of warehouses are increased then the response time will reduce, inventory costs will increase, outbound (warehouse to retailer) transportation costs will decrease but inbound (manufacturer to warehouse) will increase as it will have to serve many warehouses.
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