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CPIM > CPIM > Flashcards

CPIM Flashcards

1
Q

Supply Chain

A

Network of suppliers delivering products from raw materials to end customers through a transactional flow of information, goods, and money

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2
Q

Supply Chain Management

A

Design, planning, execution, control, and monitoring of supply chain activities to create net value, build competitive infrastructure, leverage logistics, synchronize supply with demand, and measure performance globally

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3
Q

Upstream

A

toward RAW MATERIAL end of chain

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4
Q

Downstream

A

toward END CUSTOMER

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5
Q

Reverse Logistics

A

supply chain for returns

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6
Q

External Influences on Supply Chains

A
  • Customers
  • Government
  • Economy
  • Social environment
  • Competitors
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7
Q

Manufacturing, Planning, & Control (MPC)

A

Closed loop system that includes:
- S&OP (production planning)
- Master production scheduling
- Materials requirements planning (MRP)
- Capacity requirements planning

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8
Q

Strategic & Business Planning

A

long range (2-3 years), mission/vision/values

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9
Q

S&OP

A

medium range (<2 years)
product family aggregate demand is a key input, capacity checks involve resource planning, output is a production plan

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10
Q

Material Requirements Planning (MRP)

A

short range (days/weeks/months) involves demand calculation in the master production schedule, uses quantities in BOMS to calculate raw materials/components/timelines to purchase or release

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11
Q

Priority Planning

A

S&OP, master scheduling, MRP

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12
Q

Resource Planning

A

Supply side activity, start of capacity planning
- @ strategic level: long range (capex)
- @ business plan/S&OP level: a capacity check for time horizon of production plan

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13
Q

Rough Cut Capacity Planning (RCCP)

A

2nd level of capacity planning done at master scheduling Checks:
- equipment
- space
- staffing
- raw materials
results in a master production schedule for each product with due dates and quantities

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14
Q

Purchasing & Production Activity Control (PAC)

A

Where planning ends because the MRP results in purchasing raw materials. In-house produced materials inputs to PAC which regulates flow of work through production processes.

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15
Q

4 Major sections of Supply Chain Operations Reference (SCOR) model

A

Performance
Processes
Practices
People

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16
Q

3 Characteristics of Well-Crafted Business Strategy

A
  • Environmental fit (responds to changes)
  • Sustainable competitive advantage (not easily imitated by rivals)
  • Measurable results
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17
Q

Key Success Factors

A
  • Product attributes
  • Organizational strengths/accomplishments
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18
Q

Strategy

A

Specifies how to:
- satisfy customers
- grow business
-compete
- management
- financial objectives

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19
Q

2 Major Activities of Strategy Formation

A
  • Strategic Planning
  • Business Planning
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20
Q

Strategic Plan

A

Time frame is > 1year, how to support the mission, goals, and objectives of an organization.

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21
Q

Business Plan

A

long-range strategy and revenue, cost, and profit objectives accompanied by budgets, a projected balance sheet, and a cash flow statement. Translated into plans through the S&OP process.

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22
Q

Corporate Strategy

A

Plan to improve competitiveness of organization as a whole

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23
Q

Business Strategies

A

Plan to improve competitiveness of individual lines of business

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24
Q

Functional Area Strategies

A

Plan to implement and support corporate strategy at a functional level

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25
Q

Operations Strategies

A

Plan how the function will perform its work in a manner consistent with direction/priorities of other strategy levels. Addresses decisions about capacity, supply network, process technology, organizational improvement

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26
Q

Mission

A

The overall goal(s) for an organization set within the parameters of the business scope

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27
Q

Vision

A

Future focused - what org will achieve and a supporting philosophy

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28
Q

Environmental Scanning

A

A process used to analyze an organization’s strengths, weaknesses, opportunities, and threats. Emphasizes opportunities and threats because the tool is external.

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29
Q

Benchmarking

A

Tool used to learn lessons from other companies (successes to emulate, failures to avoid) and benchmark organizations who won awards (seek out their processes). Can be expensive/time consuming and should be part of a larger plan.

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30
Q

Competitive Analysis

A

Analysis of competitor’s strategies, capabilities, prices, and costs.

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31
Q

PESTEL Analysis

A

Political
Economic
Sociocultural
Technological
Environmental
Legal

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32
Q

5 Forces Framework

A

method for analyzing competitive pressures in the market and assessing importance of each pressure ex: suppliers, substitutes, buyers, new entrants

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33
Q

Industry attractiveness is highest when:

A
  • weak/moderate seller rivalry
  • high barriers to entry
  • low competition from substitutes
    -weak supplier leverage
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34
Q

Resource

A

Anything that adds value. This includes tangible and intangible assets. Capabilities use resources to create value.

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35
Q

VRIN Test

A

Tests for sustainable competitive advantage:
- Valuable
- Rare
- Inimitable: difficult to copy
- Non-substitutable: cannot be countered by entirely different type of resources

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36
Q

SWOT Analysis

A

Tests for ability to implement a strategy and defend against competition:
- Strengths (internal)
- Weaknesses (internal)
- Opportunities (external)
- Threats (external)

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37
Q

Core Process

A

Unique capability that is central to a company’s competitive strategy

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38
Q

Core Competency

A

Skills/knowledge that provides value in a way that is difficult for competitors to emulate and provides growth

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39
Q

Value Chain

A

Functions that add value to the goods or services that the organization sells

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40
Q

Primary Activities

A

Create value:
- Purchasing
- Operations
- Logistics
- Sales/marketing

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41
Q

Secondary Activities

A

Enable primary activities:
- IT
-HR
- Accounting

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42
Q

Product Life Cycle

A

1) stages a new product goes through from beginning to end (introduction, growth, maturity, decline)
2) the time from initial R&D to time when sales and support are withdrawn
3) the period of time when a product can be products & marketed profitably

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43
Q

Functional Product

A

mature products with a low profit margin and predictable demand

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44
Q

Solo Product Roll (Rollover) vs. Dual Product Roll

A

Solo: inventories of existing product are used up before new product introduction
Dual: both old and new product version are available for a period of time

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45
Q

ETO is best for what phase(s) of product life cycle?

A

Introduction

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46
Q

MTO is best for what phase(s) of product life cycle?

A

Introduction, Growth, Maturity, Decline

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47
Q

ATO is best for what phase(s) of product life cycle?

A

Growth, Maturity, Decline

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48
Q

MTS is best for what phase(s) of product life cycle?

A

Introduction, Growth, Maturity

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49
Q

Strategic Scope

A

range of activities performed internally, product and service offerings, geographic market presence, and business mix

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50
Q

Market Penetration

A

pursuing larger market share in the existing market with the same product

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51
Q

Product Development

A

growing within an existing market by introducing new products

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52
Q

Market Development

A

selling existing products in a new market

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53
Q

Diversification Strategy

A

expanding the scope of a product line to exploit new markets and spread risk over several product lines, often pursued when original markets are saturated or declining

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54
Q

Related vs. Unrelated Diversification

A

Related: focuses on industries with similar value-chain activities aka “strategic fit” enabling economies of scale
Unrelated: corporate investment in organizations with different value chain activities/resources

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55
Q

3 Tests of Potential Diversification

A

1) Industry attractiveness
2) Cost of entry (will profit outweigh investment - barriers are often high in attractive industries)
3) Better-off test (are returns greater together than two companies apart)

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56
Q

Profit Sanctuary

A

expansion into a foreign market with a strong protected position that supports competitive activities in the organization’s other markets

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57
Q

Multinational Strategy

A

designed to out-compete rivals that focus on cross-business and cross-country coordination, enabling economies of scale and improved position by reducing costs, cross country-subsidization, etc.

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58
Q

Transnational Strategy

A

aims to achieve both standardization and local responsiveness

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59
Q

Multi-domestic Strategy

A

each country market is self contained, customers have unique product expectations that are addressed by local production capabilities

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60
Q

Horizontal Integration

A

a firm that produces or sells similar products in various geographical locations

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61
Q

Vertical Integration

A

functions that were previously performed by suppliers are done internally

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62
Q

Merger vs. Acquisition

A

In a merger a new entity is formed, in an acquisition one entity absorbs another

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63
Q

Backward Integration

A

focuses on activities closer to the origin of the value chain (raw material suppliers)

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64
Q

Forward Integration

A

focuses on activities closer to the end customer

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65
Q

Outsourcing

A

having suppliers provide goods/services that were previously produced internally aka replacement of internal capacity and production by that of a supplier

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66
Q

Subcontracting

A

sending production work outside to another manufacturer

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67
Q

2 Ways to Approach Customer Market Research

A

1) Inquiry (focus groups, surveys)
2) Observation (of customer use of product in relevant conditions)

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68
Q

Market Segmentation

A

a marketing strategy in which the total market is desegregated into segments that share some measurable characteristic (demographics, psychographics, lifestyle, geography, etc.)

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69
Q

Customer Segregation

A

the practice of dividing a customer base into groups who are similar in ways relevant to marketing (demographics, attitude, psychological profiles)

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70
Q

Pareto Principle

A

80% of profit comes from 20% of customer base (maintaining customer loyalty is cheaper than acquiring new customers)

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71
Q

Performance Objectives

A

enable the firm to monitor if strategy is being accomplished, measurement should be aligned with strategy

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72
Q

SMART

A

Specific
Measurable
Attainable
Relevant
Time-bound

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73
Q

Time-based Competition (TBC)

A

competition strategy on speed of delivery including:
1) deals only with lead times important to customer
2) lead-time reductions must decrease both mean and variance from the mean
3) lead-time reductions must be achieved through system or process analysis

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74
Q

Two Dimensions of Flexibility

A

Volume/Mix: range of products/services, varieties, levels of output, delivery dates
&
Product-mix: ability to change over quickly to other products produced in a facility as required by demand shifts in mix

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75
Q

Order Qualifiers

A

competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace (lead times, price, customer expectations)

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76
Q

Order Winners

A

Competitive characteristics that cause a firm’s customers to choose their goods/services over competitors. These can be considered competitive advantages (price, quality, delivery speed, reliability, design)
* over time winners tend to become qualifiers and new winners need to be devised

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77
Q

Product Profiling

A

a graphical device that ascertains the level of fit between a manufacturing process and the order-winning criteria of it’s products

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78
Q

Qualifiers & Winners at Introduction Phase

A

Qualifiers: quality, flexibility to win loyalty and met customer specs
Winners: related to design/brand image
Customers are innovators.

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79
Q

Qualifiers & Winners at Growth Phase

A

Qualifiers: cost, flexibility
Winners: related to dependability of supply
Customers are early adopters.

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80
Q

Qualifiers & Winners at Maturity Phase

A

Qualifiers: quality, flexibility
Winners: cost, dependability, after-market service
Customers are majority of product market.

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81
Q

Qualifiers & Winners at Decline Phase

A

Qualifiers: dependability
Winners: usually cost, unless loyal customers pay premium for OG version
Customers are those seeking replacements or late adopters.

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82
Q

Low-cost Provider Strategy

A

offer value based on lower or lowest price compared to competitors. This can look like pursuing largest market share and profit through volume or offering a lower price relative to market with smaller market share but higher profit-margin than lowest priced competitor.

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83
Q

Differentiation Strategy

A

creates distinctive benefits/features that competitors do not, enabling organization to charge a premium and creating a brand identity

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84
Q

Focused Low-Cost Strategy

A

focus on customers who want specialty product but strategy hones in on cost-conscious buyers

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85
Q

Focused Differentiation Strategy

A

focus on customers who want specialty product but hones in on sub-segment of buyers interested in benefits besides low cost

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86
Q

Best-Cost Provider Strategy

A

value strategy aimed at providing desirable features at a cost consumers view as attractive aka “relatively” low-cost

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87
Q

Social Responsibility

A

commitment by top management to behave ethically and to contribute to community development (may also entail improving the workforce’s quality of life

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88
Q

4 Driving Forces for Sustainable Operations

A
  • Organizational ethics & values
  • Regulations
  • Community relations
  • Economic value
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89
Q

Focus Areas of Sustainable Performance

A
  • Ethics
  • Governance
  • Transparency
  • Business relationships
  • Financial return
  • Community involvement
  • Value of products/services
  • Employment practices
  • Protection of environment
90
Q

Triple Bottom Line (TBL)

A

measures economic, social, and environmental impacts of organization’s activities with the intent of creating value for both shareholders & society (people, planet, profit)

91
Q

3 Categories of Sustainable Issues

A

1) General sustainability issues: important to society as a whole but not directly influenced by org
2) Value chain issues: directly affected by org actions
3) Issues w/ strategic effects: affects how an org succeeds or competes

92
Q

Stages of Corporate Responsibility

A

defensive > compliance > managerial > strategic > civil

93
Q

Life Cycle Costing

A

in evaluation of alternatives, consideration of all costs including acquisition, operation, and disposition that will be incurred over the entire time of product ownership

94
Q

Life Cycle Assessment (LCA)

A

understanding human and environmental impacts during the life of a product/process/service including energy, material, environmental inputs/outputs. LCA includes raw material extraction through materials processing, manufacture, distribution, use, repair, maintenance, & disposal

95
Q

Inside-out Linkage

A

the influences of an organization’s value chain activities on society (ex: infrastructure, HR management, technology development, procurement, logistics, operations)

96
Q

Outside-in Linkage

A

the influences of society on an organization’s value chain activities (ex: inputs to business—human resources, transportation, rules and incentives—policies that protect IP and prevent corruption,
Local demand standards—product quality and safety, consumer rights, Availability of supporting industries—service providers, machine producers, etc.)

97
Q

Green (aka Sustainable) Manufacturing

A

a method of producing a good or service that minimizes external cost and pollution. It includes design for reuse, design for disassembly, and design for remanufacture.

98
Q

design for the environment (DFE)

A

considering health, safety, and environmental aspects of a product during the design and development phase of product development. “cradle to cradle”

99
Q

Global Reporting Initiative (GRI) Reporting Framework

A

sets out the principles and performance indicators organizations can use to measure and report their human rights, labor, environment, and anticorruption practices and outcomes

100
Q

Aggregate Forecast

A

In terms of units, dollars, or both. Estimate of sales, often time-phased, for a group of products or product families. Used for S&OP.

101
Q

Product Group Forecast

A

For strategic and business planning, in terms of total volume and sales and horizon can be 3+ years. For S&OP in terms of product family, volume, and sales and horizon can be 15-24mo. For master production scheduling in terms of finished products or components (units).

102
Q

Subplans of an Aggregate Supply Plan

A
  • production plan
  • inventory plan
  • resource plan
  • distribution plan
103
Q

3 areas of conflict between manufacturer/supplier and consumer desires

A
  • customer service levels
  • costs of production
  • investment in inventory
104
Q

Production Strategies

A
  • Level (stable volume, uses inventory for fluctuations)
  • Chase (flexes capacity to meet demand)
  • Outsourced/subcontracted (part or all of production above a minimum level)
  • Hybrid (mix of above)
105
Q

Production Planning

A

Process to develop plans based on the overall level of manufacturing output (production plan) and activities to satisfy the current planned levels of sales (sales plan/forecasts) while meeting business objectives of profitability, productivity, lead times, etc. as expressed in the business plan. Output of S&OP. Sets overall levels over a horizon of 15-18mo in weekly or monthly time buckets.

106
Q

Backlog Formula

A

Ending Backlog = Beginning Backlog + Demand - Supply

107
Q

Level Production Strategy

A

In traditional management, a schedule that spreads material & labor requirements evenly over time. In just in time, a level schedule has each day’s customer demand scheduled to be built on the day it will be shipped. This strategy uses inventory to absorb variations in demand (including safety stock) and is good for highly seasonal demand.

108
Q

Chase Production Strategy

A

A production planning that maintains a stable inventory level while varying production to meet demand. May be combined with level production schedule methods. Used in lean production.

109
Q

Sub-contracting vs. Outsourcing

A

Sub-contracting is temporary while outsourcing is meant to be permanent

110
Q

Formula for Total Production in MTS Production Plan

A

Total Production = Total Forecast + Backorders + Ending Inventory - Opening Inventory

111
Q

Average Inventory

A

Half the average lot size + safety stock. Can be calculated as an average of several instances over time (ex: average of 12mo ending inventories). =(Prior period ending inventor + current period ending inventory)/2

112
Q

Resource Planning

A

Capacity planning conducted at business plan level. Process of establishing, measuring, and adjusting limits of long range capacity based on production plan and/or higher level plans like the business plan.

113
Q

Master Scheduling

A

Creation of a schedule to ensure consistency with the production plan. S&OP and demand management drive master scheduling. The MPS is the primary input for material requirements plan. The sum of MPS for items within the product family must equal the production plan for that family.

114
Q

Master Schedule

A

Includes dates, forecast, customer orders, projected available balance, available-to-promise, and the master production schedule.

115
Q

Master Production Schedule (MPS)

A

A line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule and it becomes a set of planning numbers to drive material requirements planning.

116
Q

Two-Level Master Schedule

A

an approach in which a planning BOM is used to master schedule an end product or family, along with selected key features

117
Q

Product load profile

A

A list of required capacity and key resources needed to manufacture one unit of a selected item/family. Can be used for RCCP to calculate approximate capacity requirements of the MPS.

118
Q

Product Structure

A

Sequence of operations that components follow during manufacture into a product. Shows Raw material > fabricated components > subassemblies > assemblies

119
Q

Option overplanning

A

scheduling extra quantities of a master schedule option to protect against unanticipated demand, used on second level of a two-level master scheduling approach

120
Q

Common Parts BOM

A

groups common components for a product or family into one BOM, structured to a pseudoparent item number

121
Q

Modular BOM

A

a type of BOM arranged in product modules or options, often used where the product has many optional features (ATO)

122
Q

Projected Available Balance (PAB)

A

the forecasted inventory on hand. the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders

123
Q

MPS Quantity

A

the output of actual production (not when production begins). zero when the organization has positive inventory above the safety stock.

124
Q

Available-to-Promise (ATP)

A

the uncommitted portion of a company’s inventory and planned production. In the first period it is on-hand inventory minus customer orders that are due or overdue

125
Q

Pegging

A

the ability to identify sources of gross requirements or allocations, can be thought of as active where-used information

126
Q

5 levels of capacity planning within Manufacturing Planning & Control

A
  • resource planning
  • rough-cut capacity planning (RCCP)
  • capacity requirements planning (CRP)
  • scheduling
  • capacity control
127
Q

Capacity planning using overall factors (CPOF)

A

RCCP technique where the master schedule items and quantities are multiplied by the total time required to build each item to provide the total number of hours to produce the schedule

128
Q

Bill of Labor RCCP approach

A

uses a listing of labor requirements for an item, routing data, BOM, and master production schedule and requires dat on labor hours or machine hours per operation. the total standard hours per unit are used in capacity requirements for a given product mix being run (this method detects shifts in product mix)

129
Q

Resource Profile RCCP approach

A

similar to bill of labor approach but also includes production lead times for end units and components

130
Q

Stability of the MPS relates to these 3 things

A
  • frequency of changes in timing and quantity
  • discipline of org at following processes after forecasting to delivery
  • organizational goals in customer service commitments
131
Q

Cumulative Lead Time

A

The longest planned length of time to accomplish an activity. It is found by reviewing the lead time for each BOM path below the item and adding those that make up the greatest lead time.

132
Q

System Nervousness

A

A production environment inefficiencies due to too many last-minute changes.

133
Q

Demand Time Fence (DTF)

A

Frozen zone where all capacity and materials are committed to specific orders. Inside this time fence, only customer orders are considered. Beyond this fence, total demand is a combination of actual orders and forecasts. May correspond to a future point inside which changes to the MPS must be approved by higher than master scheduler.

134
Q

Planning Time Fence (PTF)

A

Inside this fence changes to the schedule may adversely affect component schedules, capacity plans, customer deliveries, and cost. Outside this fence customer orders can be booked and changes to the MPS can be made within the constraints of the production plan. Usually this is the same as the longest cumulative lead time of the product.

135
Q

Order Entry

A

Accepting & translating what a customer wants into terms used by the manufacturer or distributer. Should be based on ATP line in master schedule.

136
Q

Order Promising

A

Making a delivery commitment (ie answering the question “when can you ship?”). For MTO products involves check of committed material and availability of capacity.

137
Q

Available Inventory aka Beginning Available Balance

A

On-hand inventory minus allocations, reservations, backorders, quantities held for quality problems.

138
Q

On-Hand Balance

A

Quantity shown in inventory records as being physically in stock.

139
Q

Discrete Available To Promise (ATP)

A

For period 1, ATP is the sum of beginning inventory + MPS quantity - backlog. For all other periods if a quantity has been scheduled, then ATP is this quantity - customer commitments.

140
Q

Cumulative Available to Promise (ATP) w/ Look-Ahead

A

(ATP from previous period + MPS of the period) - (period backlog - differences between backlogs and MPSs of all future periods until production exceeds backlogs)

141
Q

Capacity Utilization

A

goods produced, or customers served divided by total output capacity

142
Q

Internal vs. External Setup Time

A

Internal: while machine is not running
External: while machine is running, not included in overall setup time

143
Q

Operation Setback Chart

A

displays the BOM and lead time for each part via a horizontal axis with lead time from raw material purchase to assembly of final product.

144
Q

Flow Rate

A

Running rate. Inverse of cycle time. Ex: a flow rate of 360 units per 8hr shift means the cycle time is .75 units per minute.

145
Q

Production Rate

A

expressed as units, cases or other measure per period of time

146
Q

In service throughput, value-added time vs. non-value-added

A

Value-added: time during service is actually provided that should not be minimized because customers will desire this time to be spent.
Non-value added: queue, setup, wait, move times that should be minimized where feasible

147
Q

Production Activity Control (PAC)

A

routing and dispatching work to be done at the production facility and performing supplier control. Components include scheduling/planning, implementation, and capacity control.

148
Q

Continuous Process Control

A

use of sensors to monitor a process and make automatic changes in operations through appropriate feedback loops.

149
Q

Priority Control

A

The process of communicating start and completion dates to manufacturing departments in order to execute a plan via dispatch list.

150
Q

Operations Sequencing

A

Short-term planning of actual jobs to be run in each work center based on capacity and priorities resulting in a set of projected completion times and queue levels for facilities.

151
Q

Order Slack

A

Setup time + run time for remaining operations - duration of time until part is due. Used to prioritize orders with the least slack.

152
Q

Back Scheduling

A

starts from the due date and works backward to find the latest time an operation could start. this approach minimizes WIP levels but leaves little room for error. Often used in MTS environments to keep inventory costs low.

153
Q

Forward Scheduling

A

starts from the earliest date the material can be ordered and adds lead time to find the earliest time an operation could be finished. Often used to ensure level loading can schedule necessary capacity early

154
Q

Central Point Scheduling

A

employs both forward and backward scheduling, starting from the scheduled start date of a particular operation. Used to handle a critical operation with dates needing to be set first - the critical operation (ex: capacity constrained work center) determines the rest of the lead time

155
Q

Infinite Loading

A

assumes work centers that need to b used for an order are available and that other orders are not competing for time on that work center. assumes work centers have a high degree of flexibility in capacity (ex: regular OT)

156
Q

Finite Loading

A

can be used w/ forward or backward scheduling to prevent overloads. when time is booked in a work center, the time slot is not available for other work centers. loads cannot exceed capacity and schedule has to be smoothed which results in a realistic schedule.

157
Q

Overlapped Schedule

A

Overlaps successive operations. Sending part of a lot to the next operation so it can start processing while the remainder of the lot is being finished at the first operation.

158
Q

Lot Splitting

A

Splits a lot into smaller portions and runs each portion on duplicate equipment and tooling therefore reducing operational lead time.

159
Q

Lot Size Reduction

A

control tool for scheduling and leveling production as well as used in MRP theory of constraints where the goal is to have the lot size be as small as possible without losing benefits of maintaining a reasonable ratio.

160
Q

Standard Time

A

The length of time required to 1) set up a machine or operation and 2) run one batch through that operation. It assumes an average worker who follows methods and allows time for personal rest. Can be expressed as machine or labor hours.

161
Q

Machine Loading vs. Capacity Requirements Planning

A

Machine loading does not use planned orders from MRP but operates solely on released orders and therefore may have limited value due to limited visibility of resources

162
Q

Routing

A

Information detailing the manufacture of an item including operations, sequence, work center, standard setup and run times.

163
Q

Rated Capacity

A

the expected output of a resource or system: hours available x efficiency x utilization

164
Q

Available Time vs. Availability

A

Available time is the number of hours a work center or equipment can be used based on management decisions (shifts, OT, holidays, shutdowns, etc.). Availability is the percentage of time that a worker or machine is capable of working. The rated capacity formula uses available time instead of availability because utilization already factors in downtime.

165
Q

Utilization

A

a % of how intensively a resource is being used - compares actual time to available time

166
Q

Efficiency

A

percent of how closely the actual worked hours compare to a predetermined standard for hours worker per output level

167
Q

Decoupling Inventory

A

An amount of inventory maintained between entities in a manufacturing or distribution network to create independence between processes or entities with the objective of disconnecting rate of use from rate of supply

168
Q

Anticipation Inventory

A

Additional inventory above basic levels to cover projected trends of increasing sales, promotions, seasonal fluctuations, shutdowns, etc.

169
Q

Lot-Size Inventory

A

Inventory that results whenever quantity price discounts, shipping, setup, or other costs make it more economical to purchase or produce in larger lots than are immediately needed

170
Q

Hedge Inventory

A

Inventory buildup to buffer against some event that may not happen ex: speculating related to labor strikes, price increases, other events

171
Q

ABC Inventory Classification

A

A: highest degree of control and cost
B: moderate control and safety stock
C: least controlled, low carrying cost

172
Q

Item Cost

A

Transportation, customs, insurance of getting items to where they need to be. In-house item costs include materials, labor, factory overhead

173
Q

Carrying Cost aka Holding Cost

A

Cost of holding inventory. Percent of dollar value of inventory per unit of time (usually 1yr). Depends on capital invested and costs of maintaining inventory such as taxes, insurance, obsolescence, spoilage, space. Typically 10-35%

174
Q

Capital Costs

A

Cost of money invested in inventory. Reflects the opportunity costs of carrying inventory. Can be direct cost of a loan or money invested in inventory that is tied up.

175
Q

Risk Costs

A

Cost of ongoing loss of inventory value over time (shrinkage, perishable, theft, obsolescence, damage).

176
Q

Ordering Cost

A

the costs that increase as the number of purchase orders and factory orders per period placed increases such as clerical work of preparing, releasing, monitoring, and receiving orders, handling of goods, inspections, setup costs

177
Q

Joint Replenishment

A

Coordinating the lot sizing and order release decision for related items and treating them as a family to lower costs

178
Q

Stockout Costs

A

includes lost sales, backorder costs, expediting, additional manufacturing and purchasing costs

179
Q

Risk Pooling

A

Strategy for managing inventory in multiple locations where products with common components can be pooled together to buffer variability in demand

180
Q

Managerial Accounting

A

used for internal users to plan, make investment decisions, and assess KPIs. Uses break-even analysis, cost-volume-profit analysis, and make-buy analysis to provide info for day-to-day decision making.

181
Q

Cost Accounting

A

concerned with recording and reporting operating costs, includes costs by departments, activities, and products.

182
Q

Balance Sheet

A

shows assets, liabilities, and owner’s share of a company

183
Q

Income Statement aka Statement of Profit & Loss

A

shows sources of revenue and various expenses incurred throughout a period to result in net income

184
Q

Cost of Goods Sold (COGS)

A

the amount of direct materials, direct labor, and overhead associated with products sold during a given period

185
Q

Direct Labor

A

labor specifically applied to the good being manufactured or used in the performance of a service

186
Q

Direct Material

A

material that becomes part of a final product in measurable quantities

187
Q

Overhead

A

cost of operating a business that cannot be directly related to the individual goods or services produced such as light, heat, supervision, maintenance

188
Q

Fixed Overhead

A

All manufacturing costs other than direct labor and direct materials that continue even if products are not produced

189
Q

Gross Margin

A

the difference between total revenue and COGS

190
Q

Profit Margin

A

difference between sales and COGS, sometimes expressed as a % of sales

191
Q

Cash Flow

A

net flow of money into or out of a project. Also the sum of all cash receipts, expenses, and investments

192
Q

Unit Cost

A

labor, material, and overhead cost for one unit of production

193
Q

Value Added

A

in accounting - the addition of direct labor, direct material, and allocated overhead assigned at an operation. In manufacturing - the increase of customer utility

194
Q

Velocity

A

the rate of change of an item over time, also a term indicating the relative speed of all transactions within a supply chain community. Higher velocity indicates higher asset turnover and faster order-to-delivery response

195
Q

Inventory Accounting

A

Can be accounted using a perpetual system (updated in real time) or periodic system (measured at fixed intervals)

196
Q

4 Methods of GAAP (Generally Accepted Accounting Principles) Inventory Accounting

A
  • FIFO
  • LIFO
  • Average Cost
  • Specific Identification
197
Q

First In, First Out (FIFO)

A

accounting assumption oldest inventory is the first to be used (does not require physical movement to match) - when prices rise, recorded COGS will be less than current COGS because replacement inventory is at a higher cost

198
Q

Last In, First Out (LIFO)

A

accounting assumption that the most recently received unit is the first to be sold (for costing, physical inventory may not match) - COGS will be the actual current cost of goods sold but the valuation of unsold inventory will be overvalued when prices are falling or undervalued when prices are rising - since it lowers the value of inventory when prices rise this is appealing for ax purposes but generally not accepted under IFRS

199
Q

Average Cost aka Weighted Average Cost

A

average of all costs paid for or internally invested for COGS and balance sheet inventory valuation - value falls between FIFO and LIFO, often used for bulk items

200
Q

Specific Identification

A

keeps track of the specific purchase cost of each item through coding or serial numbers - used for very expensive items w/ low inventory (yachts)

201
Q

Standard Costs

A

the target costs of an operation, process, or product including direct material, direct labor, & overhead

202
Q

Standard Cost Accounting System

A

uses cost units for estimating cost of an order or product

203
Q

Actual Cost System

A

collects costs historically as they are applied to production and allocates indirect costs to products based on specifics costs and achieved voume

204
Q

Job Costing

A

Assigning costs to specific jobs - can be used with either actual or standard costs

205
Q

Transfer Pricing

A

pricing of goods/services transferred from one segment of a business to another

206
Q

3 Classes of Manufacturing Costs

A
  • Materials (direct or indirect)
  • Labor (direct or indirect)
  • Overhead
207
Q

Non-manufacturing Costs

A
  • Marketing/Sales
  • Administration
208
Q

Throughput Costing

A
  • includes only direct materials as product costs
  • all other costs are period costs
209
Q

Variable Costing

A
  • considers variable manufacturing costs as product costs
  • regards all other costs including factory overhead as period costs
  • used in make or buy decisions, not for financial reporting
210
Q

Full Absorption Costing

A
  • includes materials, labor, and manufacturing overhead as product costs
  • handles all other non-manufacturing costs as period costs
211
Q

Life Cycle Costing

A

Includes all production related costs + upstream & downstream costs as product costs

212
Q

Job-Order Costing

A

used when products are made in batches or as ordered. Direct costs are assigned to the job and indirect costs are assigned to a set overhead rate (annual overhead/annual capacity in units)

213
Q

Process Costing

A

all costs are collected by time period and averaged over all units produced in the period - can be used with actual or standard costs

214
Q

Operation Costing

A

used in batch manufacturing environments when the products have both common and distinguished characteristics (ex: suits). Products are costed by production runs based on variations.

215
Q

Activity-Based Costing

A

accumulates costs based on activities and then uses cost drivers to allocate these costs to products or bases such as customers/markets/projects. It allocates overhead costs on a more realistic basis than direct labor or machine hours.

216
Q

Cost Object Driver

A

a measure of demand placed on one cost object by other cost objects - there is no one-size-fits-all costing approach

217
Q

Activity-Based Management

A

use of activity-based costing info about cost pools and drivers, activity analysis, and business processes to identify business strategies, improve product design, manufacturing, distribution, and remove waste

218
Q

Cost Control

A

monitoring operations against budgets and taking action to minimize costs

219
Q

Cost Variance

A

actual costs vs. budgeted or standard costs

220
Q

The 7 Wastes

A
  • Overproduction
  • Waiting
  • Transportation
  • Stocks
  • Motion
  • Defects
  • Processing
  • People Skills

CPIM (1 decks)

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