56. Inventory Management & Production Systems

Question 1

List some of the benefits and limitations of outsourcing

Answer 1

Benefits:
•Internal resources are freed up to focus on the core business.
•Better process quality and efficiency if the third-party vendor has comparatively more expertise.
•Risk reduction if much of the risk can be shifted to the vendor based on the contract.
•Internationally, potentially significant cost reductions and tax breaks.

Limitations:
•New risks because organizations must trust a process they no longer control.
•Sensitive information may need to be trusted with the vendor

Question 2

Briefly describe enterprise resource planning (ERP) systems

Answer 2

• ERP systems are evolving to manage core business processes (like finance, HR, supply chain, and others) needed to effectively run a supply management solution for the organization.
• The goal of an ERP system is to integrate the core processes into a single system solution to provide the organization with intelligence, visibility, analytics, and efficiency needed to run the business well.
• ERP systems require significant investments in design, implementation, and maintenance to successfully support an organization

Question 3

Briefly describe some of the major components of the material requirements planning (MRP) model.

Answer 3

• The MRP model focuses on launching a master production schedule into a series of detailed daily schedules.
• Raw material and work-in-process inventory levels are based on the scheduling of purchases and release events in order to have components arrive as needed in the production process.
• MRP systems help manage complex organizations and production processes to reduce inventory and workflow interruptions.
• An MRP system is described as a “push” system.

Question 4

Briefly describe some of the major components of just-in-time (JIT) systems.

Answer 4

• JIT systems have similar management objectives as MRP systems.
• JIT involves ordering and receiving inventory for production and customer sales only as it is needed to produce goods, not before.
• There is a very low tolerance for errors in JIT systems.
• The initial objective of JIT systems is to reduce all inventory in the organization to extremely low or zero levels.
• The true objective of JIT systems is to improve quality, reduce speed, and increase throughput.

Question 5

Briefly describe the concept of “Lean Manufacturing.”

Answer 5

• Lean manufacturing changes management’s focus from optimizing separate technologies, processes, and assets to optimizing the flow of products and services to a horizontal view through the entire organization.
• Lean manufacturing is not only focused on eliminating excess inventory and production scrap and spoilage, but it is also focused on reducing time spent waiting in the production process, eliminating unnecessary movement of inventory and people, and reducing processing that isn’t desired by the customer.