Chapters 12, 13, 14, 16 Flashcards
Raw materials
Purchased items or extracted materials transformed into components or products.
Components
Parts or subassemblies used in the final product.
Work-in-process (WIP)
Items in process throughout the plant.
Finished goods
Products sold to customers.
Distribution inventory Finished goods in the distribution system.
Anticipation inventory
Inventory built in anticipation of future demand.
Fluctuation inventory
Provides a cushion against unexpected demand. Lot-size inventory A result of the quantity ordered or produced.
Transportation inventory
Inventory in movement between locations.
Speculative inventory
Used to protect against some future event.
Maintenance, repair, and operating (MRO) inventory
Items used in support of manufacturing and maintenance.
Percentage of orders shipped on schedule
A customer service measure appropriate for use when orders have similar value.
Percentage of line items shipped on schedule
A customer service measure appropriate when customer orders vary in number of line items ordered.
Percentage of dollar volume shipped on schedule
A customer service measure appropriate when customer orders vary in value.
Setup cost
Costs such as scrap costs, calibration costs, and downtime costs associated with preparing the equipment for the next product being produced.
Inventory turnover A measure of inventory policy effectiveness.
Weeks of supply
A measure of inventory policy effectiveness.
Item cost
Includes price paid for the item plus other direct costs associated with the purchase.
Holding costs
Include the variable expenses incurred by the plant related to the volume of inventory held.
Capital costs
The higher of either the cost of the capital or the opportunity cost for the company.
Storage costs Include the variable expenses for space, workers, and equipment related to the volume of inventory held.
Risk costs
Include obsolescence, damage or deterioration, theft, insurance, and taxes associated with the volume of inventory held.
Ordering costs
The fixed costs associated with either placing an order with a supplier or setup costs incurred for in-house production.
Shortage costs
Incurred when demand exceeds supply.
Back-order
Delaying delivery to the customer until the item becomes available.
Lost sale
Occurs when the customer is not willing to wait for delivery.
Continuous review system
Updates inventory balances after each inventory transaction.
Periodic review system
Requires regular periodic reviews of the on-hand quantity to determine the size of the replenishment order.
Two-bin system
One bin with enough stock to satisfy demand during replenishment time is kept in the storeroom; the other bin is placed on the
manufacturing floor.
Lead time
Time from order placement to order receipt.
Periodic counting
A physical inventory is taken periodically, usually annually.
Cycle counting
Prespecified items are counted daily
Strategic business plan
A statement of long-range strategy and revenue, cost, and profit objectives.
Sales and operations planning
The process that brings together all the functional business plans (marketing, operations, engineering, and finance) into one integrated plan.
Marketing plan
Identifies the markets to be served, desired levels of customer service, product competitive advantage, profit margins, and the market share needed to achieve the objectives of the strategic business plan.
Aggregate plan
Includes the budgeted levels of finished products, inventory, backlogs, workforce size, and aggregate production rate needed to support the marketing plan.
Financial plan
Identifies the sources and uses of funds; projects cash flows, profits, return on investment; and provides budgets in support of the strategic business plan.
Engineering plan
Identifies new products or modifications to existing products that are needed to support the marketing plan.
Master production schedule
The anticipated production schedule for the company expressed in specific configurations, quantities, and dates.
Demand-based options
A group of options that respond to demand fluctuations through the use of inventory or back orders, or by shifting the demand
pattern.
Capacity-based options
A group of options that allow the firm to change its current operating capacity.
Finished goods inventory
Products available for shipment to the customer.
Back orders
Unfilled customer orders.
Shifting demand
A marketing strategy that attempts to shift demand from peak periods to nonpeak periods to smooth out the demand pattern.
Overtime
Work beyond normal established operation hours that usually requires a premium be paid to the workers.
Undertime
A condition occurring when there are more people on the payroll than are needed to produce the planned output.
Subcontracting
Sending production work outside to another manufacturer or service provider.
Hiring and firing
Long-term option for increasing or decreasing capacity.
Point of departure
The percentage of normal capacity the company is currently using.
Magnitude of the change
The relative size of the change needed.
Duration of the change
The expected length of time the different capacity level is needed.
Level aggregate plan
A planning approach that produces the same quantity each time period. Inventory and back orders are used to absorb demand fluctuations. A level aggregate plan maintains a constant workforce and produces the same amount of product in each time period of the plan.
Chase aggregate plan
produces exactly what is needed to satisfy demand during each period. The production rate changes in response to demand fluctuations. Whereas the level aggregate plan sets capacity to accommodate average demand, the chase aggregate plan sets labor and equipment capacity to satisfy demand each period.
Hybrid aggregate plan
A planning approach that uses a combination of level and chase approaches while developing the aggregate plan.
Enterprise resource planning (ERP)
Large, sophisticated software systems used for identifying and planning the enterprise-wide resources needed to coordinate all activities involved in producing and delivering products.
SCM software
Designed to improve decision making in the supply chain.
Closed-loop MRP
An MRP system that includes production planning, master production scheduling, and capacity requirements planning.
Manufacturing resource planning (MRP II)
A method for the effective planning and integration of all internal resources.
Material requirements planning (MRP)
A system that uses the MPS, inventory record data, and BOM to calculate material requirements.
Backward scheduling
Starts with the due date for an order and works backward to determine the start date for each activity.
Capacity requirements planning (CRP)
Determines the labor and machine resources needed to fill the open and planned orders generated by the MRP. CRP enables a company to evaluate both the feasibility of the MRP system and how well the company is using its critical work centers.
Precedence relationships
Establishes the sequencing of activities to ensure that all necessary activities are completed before a subsequent activity is begun.
Bill of material (BOM)
Lists all the subassemblies, component parts, and raw materials that go into an end item and shows the usage quantity of each required.
Independent demand
The demand for an item is unrelated to the demand for other items.
Dependent demand
The demand for component parts is based on the number of end items being produced.
Time-phased
Expressing future demand, supply, and inventories by time period.
Open shop orders
Released manufacturing orders.
Project
Endeavor with a specific objective, multiple activities, and defined precedence relationships, to be completed in a specified time period.
Concept
Identify the need for the project.
Feasibility analysis or study Evaluate costs, benefits, and risks.
Planning
Decide who does what, how long it should take, and what you need to do it.
Execution
Do the project.
Termination
End the project.
Program evaluation and review technique (PERT)
Network planning technique used to determine a project’s planned completion date and identify the
project’s critical path.
Critical path method (CPM) Network
planning technique, with deterministic times, used to determine a project’s planned completion date and identify the project’s critical path.
Project activities
Specific tasks that must be completed and that require resources.
