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
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
3
Q
Upstream
A
toward RAW MATERIAL end of chain
4
Q
Downstream
A
toward END CUSTOMER
5
Q
Reverse Logistics
A
supply chain for returns
6
Q
External Influences on Supply Chains
A
- Customers
- Government
- Economy
- Social environment
- Competitors
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
8
Q
Strategic & Business Planning
A
long range (2-3 years), mission/vision/values
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
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
11
Q
Priority Planning
A
S&OP, master scheduling, MRP
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
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
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.
15
Q
4 Major sections of Supply Chain Operations Reference (SCOR) model
A
Performance
Processes
Practices
People
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
17
Q
Key Success Factors
A
- Product attributes
- Organizational strengths/accomplishments
18
Q
Strategy
A
Specifies how to:
- satisfy customers
- grow business
-compete
- management
- financial objectives
19
Q
2 Major Activities of Strategy Formation
A
- Strategic Planning
- Business Planning
20
Q
Strategic Plan
A
Time frame is > 1year, how to support the mission, goals, and objectives of an organization.
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.
22
Q
Corporate Strategy
A
Plan to improve competitiveness of organization as a whole
23
Q
Business Strategies
A
Plan to improve competitiveness of individual lines of business
24
Q
Functional Area Strategies
A
Plan to implement and support corporate strategy at a functional level
25
Operations Strategies
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
26
Mission
The overall goal(s) for an organization set within the parameters of the business scope
27
Vision
Future focused - what org will achieve and a supporting philosophy
28
Environmental Scanning
A process used to analyze an organization's strengths, weaknesses, opportunities, and threats. Emphasizes opportunities and threats because the tool is external.
29
Benchmarking
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.
30
Competitive Analysis
Analysis of competitor's strategies, capabilities, prices, and costs.
31
PESTEL Analysis
Political
Economic
Sociocultural
Technological
Environmental
Legal
32
5 Forces Framework
method for analyzing competitive pressures in the market and assessing importance of each pressure ex: suppliers, substitutes, buyers, new entrants
33
Industry attractiveness is highest when:
- weak/moderate seller rivalry
- high barriers to entry
- low competition from substitutes
-weak supplier leverage
34
Resource
Anything that adds value. This includes tangible and intangible assets. Capabilities use resources to create value.
35
VRIN Test
Tests for sustainable competitive advantage:
- Valuable
- Rare
- Inimitable: difficult to copy
- Non-substitutable: cannot be countered by entirely different type of resources
36
SWOT Analysis
Tests for ability to implement a strategy and defend against competition:
- Strengths (internal)
- Weaknesses (internal)
- Opportunities (external)
- Threats (external)
37
Core Process
Unique capability that is central to a company's competitive strategy
38
Core Competency
Skills/knowledge that provides value in a way that is difficult for competitors to emulate and provides growth
39
Value Chain
Functions that add value to the goods or services that the organization sells
40
Primary Activities
Create value:
- Purchasing
- Operations
- Logistics
- Sales/marketing
41
Secondary Activities
Enable primary activities:
- IT
-HR
- Accounting
42
Product Life Cycle
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
43
Functional Product
mature products with a low profit margin and predictable demand
44
Solo Product Roll (Rollover) vs. Dual Product Roll
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
45
ETO is best for what phase(s) of product life cycle?
Introduction
46
MTO is best for what phase(s) of product life cycle?
Introduction, Growth, Maturity, Decline
47
ATO is best for what phase(s) of product life cycle?
Growth, Maturity, Decline
48
MTS is best for what phase(s) of product life cycle?
Introduction, Growth, Maturity
49
Strategic Scope
range of activities performed internally, product and service offerings, geographic market presence, and business mix
50
Market Penetration
pursuing larger market share in the existing market with the same product
51
Product Development
growing within an existing market by introducing new products
52
Market Development
selling existing products in a new market
53
Diversification Strategy
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
54
Related vs. Unrelated Diversification
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
55
3 Tests of Potential Diversification
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)
56
Profit Sanctuary
expansion into a foreign market with a strong protected position that supports competitive activities in the organization's other markets
57
Multinational Strategy
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.
58
Transnational Strategy
aims to achieve both standardization and local responsiveness
59
Multi-domestic Strategy
each country market is self contained, customers have unique product expectations that are addressed by local production capabilities
60
Horizontal Integration
a firm that produces or sells similar products in various geographical locations
61
Vertical Integration
functions that were previously performed by suppliers are done internally
62
Merger vs. Acquisition
In a merger a new entity is formed, in an acquisition one entity absorbs another
63
Backward Integration
focuses on activities closer to the origin of the value chain (raw material suppliers)
64
Forward Integration
focuses on activities closer to the end customer
65
Outsourcing
having suppliers provide goods/services that were previously produced internally aka replacement of internal capacity and production by that of a supplier
66
Subcontracting
sending production work outside to another manufacturer
67
2 Ways to Approach Customer Market Research
1) Inquiry (focus groups, surveys)
2) Observation (of customer use of product in relevant conditions)
68
Market Segmentation
a marketing strategy in which the total market is desegregated into segments that share some measurable characteristic (demographics, psychographics, lifestyle, geography, etc.)
69
Customer Segregation
the practice of dividing a customer base into groups who are similar in ways relevant to marketing (demographics, attitude, psychological profiles)
70
Pareto Principle
80% of profit comes from 20% of customer base (maintaining customer loyalty is cheaper than acquiring new customers)
71
Performance Objectives
enable the firm to monitor if strategy is being accomplished, measurement should be aligned with strategy
72
SMART
Specific
Measurable
Attainable
Relevant
Time-bound
73
Time-based Competition (TBC)
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
74
Two Dimensions of Flexibility
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
75
Order Qualifiers
competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace (lead times, price, customer expectations)
76
Order Winners
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
77
Product Profiling
a graphical device that ascertains the level of fit between a manufacturing process and the order-winning criteria of it's products
78
Qualifiers & Winners at Introduction Phase
Qualifiers: quality, flexibility to win loyalty and met customer specs
Winners: related to design/brand image
Customers are innovators.
79
Qualifiers & Winners at Growth Phase
Qualifiers: cost, flexibility
Winners: related to dependability of supply
Customers are early adopters.
80
Qualifiers & Winners at Maturity Phase
Qualifiers: quality, flexibility
Winners: cost, dependability, after-market service
Customers are majority of product market.
81
Qualifiers & Winners at Decline Phase
Qualifiers: dependability
Winners: usually cost, unless loyal customers pay premium for OG version
Customers are those seeking replacements or late adopters.
82
Low-cost Provider Strategy
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.
83
Differentiation Strategy
creates distinctive benefits/features that competitors do not, enabling organization to charge a premium and creating a brand identity
84
Focused Low-Cost Strategy
focus on customers who want specialty product but strategy hones in on cost-conscious buyers
85
Focused Differentiation Strategy
focus on customers who want specialty product but hones in on sub-segment of buyers interested in benefits besides low cost
86
Best-Cost Provider Strategy
value strategy aimed at providing desirable features at a cost consumers view as attractive aka "relatively" low-cost
87
Social Responsibility
commitment by top management to behave ethically and to contribute to community development (may also entail improving the workforce's quality of life
88
4 Driving Forces for Sustainable Operations
- Organizational ethics & values
- Regulations
- Community relations
- Economic value
89
Focus Areas of Sustainable Performance
- Ethics
- Governance
- Transparency
- Business relationships
- Financial return
- Community involvement
- Value of products/services
- Employment practices
- Protection of environment
90
Triple Bottom Line (TBL)
measures economic, social, and environmental impacts of organization's activities with the intent of creating value for both shareholders & society (people, planet, profit)
91
3 Categories of Sustainable Issues
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
Stages of Corporate Responsibility
defensive > compliance > managerial > strategic > civil
93
Life Cycle Costing
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
Life Cycle Assessment (LCA)
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
Inside-out Linkage
the influences of an organization’s value chain activities on society (ex: infrastructure, HR management, technology development, procurement, logistics, operations)
96
Outside-in Linkage
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
Green (aka Sustainable) Manufacturing
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
design for the environment (DFE)
considering health, safety, and environmental aspects of a product during the design and development phase of product development. "cradle to cradle"
99
Global Reporting Initiative (GRI) Reporting Framework
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
Aggregate Forecast
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
Product Group Forecast
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
Subplans of an Aggregate Supply Plan
- production plan
- inventory plan
- resource plan
- distribution plan
103
3 areas of conflict between manufacturer/supplier and consumer desires
- customer service levels
- costs of production
- investment in inventory
104
Production Strategies
- 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
Production Planning
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
Backlog Formula
Ending Backlog = Beginning Backlog + Demand - Supply
107
Level Production Strategy
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
Chase Production Strategy
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
Sub-contracting vs. Outsourcing
Sub-contracting is temporary while outsourcing is meant to be permanent
110
Formula for Total Production in MTS Production Plan
Total Production = Total Forecast + Backorders + Ending Inventory - Opening Inventory
111
Average Inventory
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
Resource Planning
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
Master Scheduling
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
Master Schedule
Includes dates, forecast, customer orders, projected available balance, available-to-promise, and the master production schedule.
115
Master *Production* Schedule (MPS)
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
Two-Level Master Schedule
an approach in which a planning BOM is used to master schedule an end product or family, along with selected key features
117
Product load profile
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
Product Structure
Sequence of operations that components follow during manufacture into a product. Shows Raw material > fabricated components > subassemblies > assemblies
119
Option overplanning
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
Common Parts BOM
groups common components for a product or family into one BOM, structured to a pseudoparent item number
121
Modular BOM
a type of BOM arranged in product modules or options, often used where the product has many optional features (ATO)
122
Projected Available Balance (PAB)
the forecasted inventory on hand. the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders
123
MPS Quantity
the output of actual production (not when production begins). zero when the organization has positive inventory above the safety stock.
124
Available-to-Promise (ATP)
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
Pegging
the ability to identify sources of gross requirements or allocations, can be thought of as active where-used information
126
5 levels of capacity planning within Manufacturing Planning & Control
- resource planning
- rough-cut capacity planning (RCCP)
- capacity requirements planning (CRP)
- scheduling
- capacity control
127
Capacity planning using overall factors (CPOF)
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
Bill of Labor RCCP approach
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
Resource Profile RCCP approach
similar to bill of labor approach but also includes production lead times for end units and components
130
Stability of the MPS relates to these 3 things
- frequency of changes in timing and quantity
- discipline of org at following processes after forecasting to delivery
- organizational goals in customer service commitments
131
Cumulative Lead Time
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
System Nervousness
A production environment inefficiencies due to too many last-minute changes.
133
Demand Time Fence (DTF)
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
Planning Time Fence (PTF)
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
Order Entry
Accepting & translating what a customer wants into terms used by the manufacturer or distributer. Should be based on ATP line in master schedule.
136
Order Promising
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
Available Inventory aka Beginning Available Balance
On-hand inventory minus allocations, reservations, backorders, quantities held for quality problems.
138
On-Hand Balance
Quantity shown in inventory records as being physically in stock.
139
Discrete Available To Promise (ATP)
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
Cumulative Available to Promise (ATP) w/ Look-Ahead
(ATP from previous period + MPS of the period) - (period backlog - differences between backlogs and MPSs of all future periods until production exceeds backlogs)
141
Capacity Utilization
goods produced, or customers served divided by total output capacity
142
Internal vs. External Setup Time
Internal: while machine is not running
External: while machine is running, not included in overall setup time
143
Operation Setback Chart
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
Flow Rate
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
Production Rate
expressed as units, cases or other measure per period of time
146
In service throughput, value-added time vs. non-value-added
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
Production Activity Control (PAC)
routing and dispatching work to be done at the production facility and performing supplier control. Components include scheduling/planning, implementation, and capacity control.
148
Continuous Process Control
use of sensors to monitor a process and make automatic changes in operations through appropriate feedback loops.
149
Priority Control
The process of communicating start and completion dates to manufacturing departments in order to execute a plan via dispatch list.
150
Operations Sequencing
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
Order Slack
Setup time + run time for remaining operations - duration of time until part is due. Used to prioritize orders with the least slack.
152
Back Scheduling
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
Forward Scheduling
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
Central Point Scheduling
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
Infinite Loading
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
Finite Loading
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
Overlapped Schedule
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
Lot Splitting
Splits a lot into smaller portions and runs each portion on duplicate equipment and tooling therefore reducing operational lead time.
159
Lot Size Reduction
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
Standard Time
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
Machine Loading vs. Capacity Requirements Planning
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
Routing
Information detailing the manufacture of an item including operations, sequence, work center, standard setup and run times.
163
Rated Capacity
the expected output of a resource or system: hours available x efficiency x utilization
164
Available Time vs. Availability
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
Utilization
a % of how intensively a resource is being used - compares actual time to available time
166
Efficiency
percent of how closely the actual worked hours compare to a predetermined standard for hours worker per output level
167
Decoupling Inventory
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
Anticipation Inventory
Additional inventory above basic levels to cover projected trends of increasing sales, promotions, seasonal fluctuations, shutdowns, etc.
169
Lot-Size Inventory
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
Hedge Inventory
Inventory buildup to buffer against some event that may not happen ex: speculating related to labor strikes, price increases, other events
171
ABC Inventory Classification
A: highest degree of control and cost
B: moderate control and safety stock
C: least controlled, low carrying cost
172
Item Cost
Transportation, customs, insurance of getting items to where they need to be. In-house item costs include materials, labor, factory overhead
173
Carrying Cost aka Holding Cost
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
Capital Costs
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
Risk Costs
Cost of ongoing loss of inventory value over time (shrinkage, perishable, theft, obsolescence, damage).
176
Ordering Cost
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
Joint Replenishment
Coordinating the lot sizing and order release decision for related items and treating them as a family to lower costs
178
Stockout Costs
includes lost sales, backorder costs, expediting, additional manufacturing and purchasing costs
179
Risk Pooling
Strategy for managing inventory in multiple locations where products with common components can be pooled together to buffer variability in demand
180
Managerial Accounting
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
Cost Accounting
concerned with recording and reporting operating costs, includes costs by departments, activities, and products.
182
Balance Sheet
shows assets, liabilities, and owner's share of a company
183
Income Statement aka Statement of Profit & Loss
shows sources of revenue and various expenses incurred throughout a period to result in net income
184
Cost of Goods Sold (COGS)
the amount of direct materials, direct labor, and overhead associated with products sold during a given period
185
Direct Labor
labor specifically applied to the good being manufactured or used in the performance of a service
186
Direct Material
material that becomes part of a final product in measurable quantities
187
Overhead
cost of operating a business that cannot be directly related to the individual goods or services produced such as light, heat, supervision, maintenance
188
Fixed Overhead
All manufacturing costs other than direct labor and direct materials that continue even if products are not produced
189
Gross Margin
the difference between total revenue and COGS
190
Profit Margin
difference between sales and COGS, sometimes expressed as a % of sales
191
Cash Flow
net flow of money into or out of a project. Also the sum of all cash receipts, expenses, and investments
192
Unit Cost
labor, material, and overhead cost for one unit of production
193
Value Added
in accounting - the addition of direct labor, direct material, and allocated overhead assigned at an operation. In manufacturing - the increase of customer utility
194
Velocity
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
Inventory Accounting
Can be accounted using a perpetual system (updated in real time) or periodic system (measured at fixed intervals)
196
4 Methods of GAAP (Generally Accepted Accounting Principles) Inventory Accounting
- FIFO
- LIFO
- Average Cost
- Specific Identification
197
First In, First Out (FIFO)
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
Last In, First Out (LIFO)
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
Average Cost aka Weighted Average Cost
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
Specific Identification
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
Standard Costs
the target costs of an operation, process, or product including direct material, direct labor, & overhead
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Standard Cost Accounting System
uses cost units for estimating cost of an order or product
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Actual Cost System
collects costs historically as they are applied to production and allocates indirect costs to products based on specifics costs and achieved voume
204
Job Costing
Assigning costs to specific jobs - can be used with either actual or standard costs
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Transfer Pricing
pricing of goods/services transferred from one segment of a business to another
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3 Classes of Manufacturing Costs
- Materials (direct or indirect)
- Labor (direct or indirect)
- Overhead
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Non-manufacturing Costs
- Marketing/Sales
- Administration
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Throughput Costing
- includes only direct materials as product costs
- all other costs are period costs
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Variable Costing
- 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
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Full Absorption Costing
- includes materials, labor, and manufacturing overhead as product costs
- handles all other non-manufacturing costs as period costs
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Life Cycle Costing
Includes all production related costs + upstream & downstream costs as product costs
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Job-Order Costing
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)
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Process Costing
all costs are collected by time period and averaged over all units produced in the period - can be used with actual or standard costs
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Operation Costing
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.
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Activity-Based Costing
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.
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Cost Object Driver
a measure of demand placed on one cost object by other cost objects - there is no one-size-fits-all costing approach
217
Activity-Based Management
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
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Cost Control
monitoring operations against budgets and taking action to minimize costs
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Cost Variance
actual costs vs. budgeted or standard costs
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The 7 Wastes
- Overproduction
- Waiting
- Transportation
- Stocks
- Motion
- Defects
- Processing
- People Skills
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TQM (Total Quality Management)
a management approach to long-term success through customer satisfaction.
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5 Principle Approaches to Quality
1) Transcendent
2) Product-based
3) User-based
4) Manufacturing-based
5) Value-based
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2 Major Components of Quality
1) Quality of conformance: absence of defects
2) Quality of design: degree of customer satisfaction
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Transcendent Quality
Ideal and a condition of excellence, subjective
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Product-based Quality
based on product attributes and how they fit target customer segment
226
User-based Quality
Fitness for use:
- reliability
- durability
- maintainability
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Manufacturing-based Quality
Conformance to requirements
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Value-based Quality
Degree of excellence at acceptable price
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Basic 7 (B7) Quality Tools
- diagrams
- check sheet
- flowchart
- histogram
- pareto chart
- control chart
- scatter diagram
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Seven New (N7) Tools
- affinity tree
- matrix diagram
- relationship diagram
- activity network diagram
- process decision program chart
- matrix data analysis chart
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Inventory Shrinkage
Reductions of inventory items by scrap, theft, deterioration, evaporation, etc.
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Obsolescence
out of date, value diminished, depreciated, loss of worth
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Cut-Off Control
a procedure for synchronizing cycle counting and transaction processing
234
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Push System
Production of items at times based on a planned schedule, issuing of material according to a schedule
236
Independent Demand
Demand for an item unrelated to demand for other items, ex: FG, service parts
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