BADM 3601 Test 2 Flashcards
Main challenge for businesses today?
satisfy customers through exceptional perforce of their processes and products
Costs of quality four major categories
prevention, appraisal, internal failure, external failure (ethics)
Defect
any instance when a process fails to satisfy its customer
rework or rectification, scrap, or waste
Prevention costs
costs associated with preventing defects before they happen
-redesigning process, redesigning service or product
-firms must invest additional time, effort, and money
Appraisal costs
costs incurred when the firm assesses the performance level of its processes
-increase costs of prevention and performance, decrease appraisal cost
Internal failure costs
costs resulting from defects that are discovered during the production of a service/product
External failure costs
costs that arise when a defects that are discovered during the production of a service/product
repairs/servicing, complaints, returns, warranty service/litigation costs
Ethical failure costs
societal and monetary costs associated with deceptively passing defective services or products to internal or external customers such that it jeopardizes the well-being of stockholders, customers, employers
Sampling plan
specifies sample size, time between successive samples, and decision rules that determine when action should be taken
Sampling distributions
sample mean, range, and standard deviation
Common causes of variation
purely random, unidentifiable sources of variation that are unavoidable with the current process
Assignable causes of variation
any variation causing factors that can be identified and eliminated
Control Charts
time-ordered diagram that is used to determine whether observed variations are abnormal
R-chart, X-bar chart, P-chart, C-chart
Type I and II Error
I: sample result falls outside control limits
II: process is out of statistical control
Process capability
ability of the process to meet design specifications for a service or product
index that measures the potential for a process to generate defective outputs relative to either upper or lower specifications
Nominal value
target for design specifications
Tolerence
allowance above or below nominal value
Process capability ratio
tolerance width divided by 6 standard deviations
Inventory management
planning and controlling of inventories to meet the competitive priorities of an organization
Lot sizing
determination of how frequently and in what quantity to order inventory
lot size
quantity of an inventory item that management either buys from a supplier or manufactures using internal processes
Inventory
stock of material used to satisfy customer demand or to support the production of services or goods
Inventory holding cost
sum of the cost of capital and the variable cost of keeping items on hand, such as storage and handling costs, taxes, insurance, and shrinkage
Pressures for small inventories
cost of capital, storage/handling cost, taxes, insurance, and shrinkage
Pressures for large inventories
customer service, ordering cost, setup cost, labor and equipment utilization, transportation cost, payments to suppliers
Ordering cost
cost of preparing a purchase order for a supplier or a production order for manufacturing
Setup cost
cost involved in changing over a machine or workspace to produce a different item
Quantity discount
drop in price per unit when an order is sufficiently large
Types of inventories
accounting inventories and operational inventories
Accounting inventories
raw materials: inventories needed for the production of service or goods
work-in-progress (WIP): items, such as components or assemblies, needed to produce a final product in manufacturing or service operations
finished goods: items in manufacturing plants, warehouses, and retail outlets that are sold to firms’ customers
Independent demand items
items for which demand is influenced by market conditions and is not related to the inventory decisions for any other item held in stock or produced
Dependent demand items
items whose required quantity varies w/ the production plans for other items held in the firm’s inventory
Four forms of inventory
cycle inventory: portion of total inventory that varies directly with lot size
safety stock: surplus inventory that a company holds to protect against uncertainties in demand, lead time, and supply changes
anticipation: inventory used to absorb uneven rates of demand or supply
pipeline: inventory that is created when an order for an item is issued but not yet recieved
Inventory reduction tactics
primary lever: must be activated if inventory is to be reduced
secondary lever: reduces penalty cost of applying the primary lever and the need for inventory in the first place
Cycle inventory reduction tactics
primary lever: simply reduce the lot size of items moving in the supply chain
secondary lever: 1. streamline methods for placing orders and making setups to reduce ordering and setup costs and allow Q to be reduced
2.increase repeatability to eliminate the need for changeover
Safety stock inventory reduction tactics
primary lever: place orders closer to the time when they must be received
secondary levers: 1. improve demand forecasts so that fewer surprises come from customers 2. cut lead times of purchased or produced items to reduce demand uncertainty 3. reduce supply uncertainties 4. rely more on equipment and labor buffers, such as capacity cushions and cross-trained workers
Pipeline inventory reduction tactics
primary lever: reduce lead time
secondary lever: 1. find more responsive suppliers and select new carriers for shipments between stocking locations or improve materials handling within the plant 2. change Q in those cases where the lead time depends on the lot size
Anticipation inventory reduction tactics
primary lever: simply to match demand rate with production rate
secondary lever: 1. add new products with different demand cycles so that a peak in the demand for one product compensates for the seasonal low for another 2. provide off-season promotional campaigns 3. offer seasonal pricing plans
Economic Order Quantity (EOQ)
lot size that minimizes total annual cycle-inventory holding and ordering costs
Time between orders (TBO)
average elapsed time between receiving (or placing) replenishment orders of Q units for a particular lot size
Continuous Review System
aka reorder point system (ROP): system designed to track the remaining inventory of a SKU each time a withdrawal is made to determine whether it is time to reorder
Inventory position
measurement of a SKU’s ability to satisfy future demand
Scheduled receipts
orders that have been placed but have not yet been received
Reorder point
predetermined minimum level that an inventory position must reach before a fixed quantity Q of the SKU is ordered
Visual system
system that allows employees to place orders when inventory visibly reaches a certain marker
Two-bin system
visual system version of the Q system in which a SKU’s inventory is stored at two different locations
Periodic review system
system in which an item’s inventory position is reviewed periodically rather than continuously
Perpetual inventory system
system of inventory control in which the inventory records are always current
Single-bin system
system of inventory control in which a maximum level is marked on the storage shelf or bin, and the inventory is brought up to the mark periodically
Optional replenishment system
system used to review the inventory portion at fixed time intervals and, if the position has dropped to or below a predetermined level, to place a variable-sized order to cover expected needs
External competitive pressures of supply chain
dynamic sales volumes, customer service/quality expectations, service/product proliferation, and emerging markets
Supply chain design
designing a firm’s supply chain to meet the competitive priorities of the firm’s operations strategy
Four categories of supply chain design
strategic options, logistical network options, integration options, sustainability options
Three ways of measuring inventory
average aggregate inventory value, weeks of supply, and inventory turnover
Average aggregate inventory value
total average value of all items held in inventory for a firm
Weeks of supply
an inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost
Inventory turnover
An inventory measure obtained by dividing annual sales at cost by the average aggregate inventory value maintained during the year
Efficient supply chain common design
make-to-stock (based on sales forecast)
Responsive supply chain common design
assemble-to-order (product built using existing components), make-to-order (initiated by customer), design-to-order (built entirely by customer)
Competitive advantages of mass customization
managing customer relationships, eliminating finished goods inventory, increasing perceived value of services or products
Supply chain design for mass customization
assemble-to-order, modular design, postponement
Channel assembly
process of using members of the distribution channel as if they were assembly stations in the factory
Outsourcing
paying suppliers and distributors to perform processes and provide needed services and materials
offshoring
supply chain strategy that involves moving processes to another country
Next-shoring
supply chain strategy that involves locating processes in close proximity to customer demand or product R&D
Backward integration
a firm’s movement upstream toward the sources of raw materials, parts, and services through acquisitions
Forward integration
acquiring more channels of distribution, such as distribution centers, and retail stores, or even business customers
make-or-buy decisions
a managerial choice between whether to outsource a process or do it in-house
Supply chain integration
effective coordination of supply chain processes through seamless flow of information up and down the supply chain
External causes of supply chain disruptions
environmental disruptions, supply chain complexity, loss of major accounts, loss of supply, customer-induced volume changes, service and product mix changes, late deliveries undefiled shipments
Internal causes of supply chain disruptions
internally generated shortages, quality failures, poor supply chain visibility, engineering changes, order batching, new service/product introductions, service/product promotions, information errors
Bullwhip effect
phenomenon in supply chains whereby ordering patterns experience increasing variance as you proceed upstream in the chain
SCOR model
framework that focuses on a basic supply chain of plan, source, make, deliver, and return processes, repeated again and again along the supply chain
Supply chain risk management
practice of managing the risk of any factor or event that can materially disrupt a supply chain, whether within a single firm or across multiple firms
Hedging
supply chain risk-management strategy used in limiting or offsetting the probability of loss from fluctuations in the prices of commodities or currencies
Futures contract
a contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a predetermined price in the future
Typical security activities of supply chain
access control, physical security, shipping/receiving, transportation service provider, ISO 28000
ISO 28000:2007
set of requirements for a supply chain security management system that includes aspects of financing, manufacturing, information systems, and the facilities for packing, storing, and transferring goods between modes of transportation and locations
Two key technologies to supply chain
cloud computing: practice of using a network of remote servers hosted on the internet to store, manage, and process data
blockchain: digital record of transactions in which individual records, called blocks, are linked together in a single list, called a chain
Benefits of blockchains
decentralization, transparency, immutability
Radio frequency identification (RFID)
method for identifying items through the use of radio signals from a tag attached to an item
Smart contracts
codified agreements that self-execute when the conditions are met
New service or product development process
design, analysis, development, and full launch
Supplier relationship process
sourcing, design collaboration, negotiation, buying, and information exchange
Forecast
prediction of future events used for planning purposes
Three forecasting methods
judgement. casual. and time-series methods
Time series
repeated observations of demand for a service or product in their order of occurrence
- horizontal: fluctuation of data around a constant mean
- trend: systematic increase or decrease in the mean of the series over time
- seasonal: repeatable pattern of increases or decreases in demand, depending on the time of day, week, month, or season
- cyclical: less predictable gradual increases or decreases in demand over longer periods of time
- random: unforecastable variation in demand
Demand management
process of changing demand patterns using one or more demand options
Complementary products
services or products that have similar resource requirements but different demand cycles
Revenue management
varying price at the right time for different customer segments to maximize revenues yielded by existing supply capacity
backlog
an accumulation of customer orders that a manufacturer has promised for delivery at some future date
backorder
customer order that cannot be filled when promised or demanded but is filled later
stockout
an order that cannot be satisfied, resulting in a loss of the sale
Aggregation
act of clustering several similar services or products so that forecasts and plans can be made for whole families
Judgement methods and quantitative methods of forecasting techniques
judgement methods: translates the opinions of managers, expert opinions, consumer surveys, and salesforce estimates into quantitative estimates
casual methods: uses historical data on independent variables, such as promotional campaigns, economic conditions, and competitors’ actions, to predict demand
1.time-series analysis: statistical approach that relies heavily on historical demand data to project the future size of demand and recognizes trends and seasonal patterns
- trend projection with regression: forecasting model that is a hybrid between a time-series technique and the causal method
forecast error
difference found by subtracting the forecast from actual demand for a given period
Salesforce estimates
forecasts that are compiled from estimates of future demand made periodically by members of a company’s salesforce
Executive opinion and technological forecasting
executive opinion: forecasting method in which the opinions, experience, and technical knowledge of one or more managers and summarized to arrive at a single forecast
technological forecasting: application of executive opinion to keep abreast of the latest advances in technology
Delphi method
process of gaining consensus from a group of experts while maintaining their anonymity
combination forecast
produced by averaging independent forecasts based on different methods
Project
interrelated set of activities with a definite starting and ending point, which results in a unique outcome for a specific allocation of resources
Project management
systemized, phased approach to defining, organizing, planning, monitoring, and controlling projects
Program
interdependent set of projects that have a common strategic purpose
Work breakdown structure (WBS)
statement of all work that has to be completed
path and critical path
path: sequence of activities between a project’s start and finish
critical path: sequence of activities between a project’s start and finish that takes the longest time to complete
Activity slack
the maximum length of time that an activity can de delayed without delaying the entire project
Scrum
an agile project management framework that focuses on allowing teams to respond rapidly, efficiently, and effectively to change
Closeouts
activity that includes writing final reports, completing remaining deliverables, and compiling the teams recs for improving the project process
Linera programming
technique that is useful for allocating scare resources among competing demands
Operations planning and scheduling
process of balancing supply with demand, from the aggregate level down to the short-term scheduling level
Chase strategy
involves hiring and laying off employees
Level strategy
strategy that keeps the workforce constant, but varies its utilization via overtime, undertake, and vacation planning to match the demand forecast
Mixed strategy
strategy that considers the full range of supply options
Rotating schedule
schedule that rotates employees through a series of workdays or hours
Fixed schedule
schedule that calls for each employee to work the same days and hours each week
Earliest Due Date (EDD)
priority sequencing rule that specifies that the job or customer with the earliest due date is the next job to be processed
Sequencing
determining the order in which jobs or customers are processed in the waiting line at a workstation
Priority sequencing rule
rule that specifies the job or customer processing sequence when several jobs are waiting in line at a workstation
Expediting
process of completing a job or finishing with a customer sooner than would otherwise be done
Advanced planning and scheduling systems
computer software systems that seek to optimize resources across the supply chain and align daily operations with strategic goals
