EXAM 2 Flashcards
A balance sheet item that shows the amount a company paid for the inventory it has on hand at a particular point in time
Merchandise inventory
The ratio of earnings (profit) to sales (revenue) for a given time period
Profit margin
Decreasing the money spent on purchasing functions increases profit FASTER than increasing revenue as a result of marketing and sales. Every $1 saved in purchasing, lowers COGS by $1 and directly contributes $1 to bottom line profits.
Profit Leverage Effect
%COGS =
= COGS / Sales Revenue
Pretax Profit Margin =
=Pretax Profit / Sales Revenue
Profit Leverage Effect: Sales must increase by ___FORMULA___ to have the same effect
[COGS Savings] / [Pretax Profit Margin]
MAVERICK SPENDING DEFINITION
BUYING RAW MATERIALS AT RETAIL
CALCULATE DIRECT LABOR COST PER UNIT
6 STEPS OF Strategic Sourcing Process
5 Qualitative sourcing criteria from Bauer SCM Recruiting Companies: SSQDC
- Safety: Internal and External
- Sustainability: Green and Ethics
- Quality: Consistency, Conformance, Service
- Delivery: Reliability, Speed, Capacity
- Cost: Total Cost of Ownership
RFQ STANDS FOR
-Request for Quotation
Price of the good or service is tied to the cost of some other key input(s) or other economic factors
Cost-based contract
Terms and conditions for a purchased service that indicate, among other things, what services will be performed and how the service provider will be evaluated
Statement of work (or scope of work) –
(EFT) STANDS FOR
§Electric Funds Transfer
(SRM) STANDS FOR
Supplier Relationship Management
(RFI) STANDS FOR
request for information
2 Processes Designs
- §Product-based layout (continuous flow & production lines)
- §Functional layout (job shop & batch manufacturing)
§A type of layout where resources are arranged sequentially, according to the steps required to make a product
§Used for products with identical or highly similar designs
§Think about the process used to make sandwiches at Quiznos or Subway
§Product-based layout (continuous flow & production lines) CHARACTERISTICS
§A type of layout where resources are physically grouped by function
§Used for products with high degrees of customization or expertise required
§Think about the process you must go through to sign up for and pay for classes
§Functional layout (job shop & batch manufacturing) CHARACTERISTICS
5 Process Types
§Continuous Flow Processes
§Production Line
§Batch Manufacturing
§Job Shop
§Fixed Position Layout
§Continuous Flow Processes DEFINTION
A process that produces highly standardized products using a tightly-linked, paced sequence of steps.
§Example products: oil, gas, oils, beverages, fluids, yarn and fabric
A process used to produce a narrow range of standard items with identical or highly similar designs.
§Examples: high-volume standardized products such as automobiles, candy bars, paper, pens
§Production Line DEFINITION
A process used to make a wide variety of highly customized products in quantities as small as one
§Job Shops DEFINITION
§Batch Process DEFINITION
A process where items are moved through the different manufacturing steps in groups or batches.
§Examples: mass-market consumer products such as hand tools, computers, clothing, shoes, books, packaged food items, office furniture, etc.
Job Shop & Batch Processes
-Functional Layout- CHART
A type of manufacturing process in which the position of the product is fixed.
§Examples: shipbuilding, construction projects, and traditional home building.
Fixed-Position Layout
A group of processes that seeks to combine the characteristics, and hence advantages, of more than one of the classic processes.
§Machining centers – machines or series of machines that complete several manufacturing steps
§Group technology/Cellular Layout – Dedicating equipment and people to producing all the products within a product family
§Hybrid Manufacturing Process DEFINITION
A set of products that require similar processing
Product Family
4 LEVELS OF Product Customization
§Make-to-stock (MTS)
§Assemble-to-order (ATO)
§Make-to-order (MTO)
§Engineer-to-order (ETO)
Products that require no customization.
§Make-to-stock (MTS) –
Products that are customized only at the very end of the manufacturing process.
§Assemble-to-order (ATO) –
Products that use standard components but the final configuration of those components is customer-specific. Customized from a Standard “Menu” of options.
§Make-to-order (MTO) –
Products are designed and produced from the start to meet unusual customer needs or requirements. Completely Customized.
§Engineer-to-order (ETO) –
§Three dimensions on which services can differ and compete
§The nature of the Service Package
§The degree of customization
§The level of customer contact
5 Project Phases
§Concept Phase
§Project Definition Phase
§Planning Phase
§Performance Phase
§Postcompletion Phase
A sequence of tasks for which there is no extra time available.
§Critical Path:
Extra time that is available for task completion. Tasks with available slack may be delayed without delaying the entire project.
§Slack:
Efforts to shorten the duration of a project or to make up delays that have occurred.
§Crashing:
§A network-based technique in which there is a single time estimate for each activity.
CPM: Critical Path Method
CPM STANDS FOR
Critical Path Method
5 distinct forms of customer-introduced variability (Professor Frei)
- Arrival variability
- Request variability
- Capability variability
- Effort variability
- Subjective preference
Customers arrive when they desire service. In some cases, this can be controlled (e.g., a hotel reservation system). In other cases, it cannot (e.g., emergency medical services).
Arrival variability.
Customers demand and expect different services outcomes, even from the same service provider. One customer might want a restaurant to make a menu substitution, while another might want the restaurant to serve her after closing time.
Request variability.
Some customers are capable of performing many service tasks themselves, while others require substantial hand-holding.
Capability variability.
Even if they are capable of performing certain tasks, customers can differ from one another in willingness to apply to these tasks. For example, some customers at a grocery checkout will bag their own groceries; others will wait for the cashier or someone else to do it.
Effort variability.
Different customers can perceive the same service outcome differently. What one customer might interpret as a “quick and efficient” answer to a question might strike another customer as a “cold, unsympathetic” response.
Subjective preference.
a type of manufacturing process that completes several manufacturing steps without removing an item from the process
A machining center
a type of manufacturing process that seeks to achieve the efficiencies of a line process in a batch environment by dedicating equipment and personnel to the manufacture of products with similar manufacturing characteristics
Group technology/Cellular Layout
__________ is the actual time between completions of successive units on a production line.
cycle time
__________ is a technique that works by assigning tasks to a series of linked workstations in a manner that minimizes the number of workstations and minimizes the total amount of idle time at all stations for a given output level.
line balancing
The first of five phases of a project where project planners develop a broad definition of what the project is and what its scope will be.
§Concept Phase
The second of five phases of a project where project planners identify how to accomplish the work, how to organize for the project, the key personnel and resources required to support the project, tentative schedules, and tentative budget requirements. Budget estimates become more accurate.
§Project Definition Phase
The third of five phases of a project where project planners prepare detailed plans that identify activities, time and budgets targets, and the resources needed to complete each task, while also putting into place the organization that will carry out the project.
§Planning Phase
The fourth of five phases of a project where the organization actually starts to execute the plan.
§Performance Phase
The fifth of five phases of a project where the project manager or team confirms the final outcome, conducts a postimplementation meeting to critique the project and personnel, and reassigns project personnel.
§Postcompletion Phase
__________ is a network-based technique in which there are multiple time estimates for each activity.
The program evaluation and review technique (PERT)
GANTT CHART DEFINITION
A graphical tool used to show expected start and end times for project activities and to track actual progress against these time targets
a graphical tool that shows the logical linkages between activities in a project
A network diagram
(PERT) stands for
The program evaluation and review technique
Kraljic’s Portfolio Analysis
PLANNING AND CONTROL FLOWCHART
A detailed planning process that tracks production output and matches this output to actual customer orders.
§Master Scheduling –
5 Master Schedule Record Phases
§Forecasted demand: Estimate of future demand during the planning period
§Booked orders: Confirmed customer orders for shipment
§Projected inventory levels: Calculation of future inventory levels
§Production quantities: Master Production Schedule (MPS): Planned quantity of products to be produced
§Units still available to meet customer needs (Available to Promise) after filling Booked orders
The amount of product that will be finished and available for sale at the beginning of each week.
§Master Production Schedule (MPS) –
MPS STANDS FOR
Master Production Schedule
Projected Ending Inventory FORMULA
The amount of time the master schedule record or MRP record extends into the future.
§Planning Horizon –
A field in the master schedule record that indicates the number of units that are available for sale each week, given those that have already been promised to customers.
§Available to Promise –
Available to Promise
Calculation FORMULA
A planning process that translates the master production schedule (Independent Demand Items) into planned orders for the actual parts and components needed (Dependent Demand Items) to produce the master schedule.
§Material Requirements Planning (MRP) –
Typically for Finished Goods – products made up of purchased or produced components and materials.
§Independent Demand:
Typically for Raw Materials and Work-In-Progress –
§Dependent Demand:
The “recipe” for an Independent Demand Item – a list of all the Dependent Demand Items used to create the Finished Product.
§Bill Of Materials:
Graphical or “outline” representation off all the components involved in building the Independent Demand Item
§Product Tree Structure:
The time from when a
component is ordered (or produced) until it
arrives and is ready to use.
§Planning Lead Time:
MRP calculates when
Dependent Demand items must be ordered
and when sub-assembly components must
be produced in order to complete the
Independent Demand item on schedule.
§Backward Scheduling:
Simplified MRP Calculation
Simplified MRP Example Calculation RAW MATERIALS
§PP =
Planned Production Orders
§FC =
Forecast for Finished Goods Requirements
§FG =
Finished Goods Currently On-Hand
§RP =
Released Production
§POnew =
New Purchase Orders for Raw Materials that will be needed
§RMavailable =
Raw Materials that are not currently dedicated to Released Production Orders
§SR =
Scheduled Receipts
uses the master production schedule to monitor key resource requirements
Rough-cut capacity planning
__________ is the process of working backward from the master production schedule for a level 0 item to determine the quantity and timing of orders for the various subassemblies and components.
Exploding the BOM
is a term used to refer to the observation that any change, even a small one, in the requirements for items at the top of the bill of material can have drastic effects on items further down the bill of material
MRP nervousness
__________ is a time-phased planning approach similar to MRP that uses planned orders at the point of demand (customer, warehouse, etc.) to determine forecasted demand at the source level (often a plant).
Distribution requirements planning (DRP)
3 BUSINESS PROCESSES
§Primary process
§Support process
§Development process
A process that addresses the main value-added activities of an organization: Creating value for external customers
§Primary process –
A process that performs necessary, albeit not value-added activities: Creating value for internal customers.
§Support process –
§Usually involves both tasks and options. There may be several possible paths to get from the start to the finish.
FLOWCHART
§The various functions/people/specialties each have a horizontal “swimlane” within which all of their responsibilities are listed.
SWIMLINE PROCESS MAP
§Used to decrease process delays and waste and to make sure the process can meet the customer requirements.
VALUE STREAM PROCESS MAP
changing the responsibilities of individual functions/people: Allowing overworked functions/people to transfer some of their responsibility to underutilized functions/people.
LINE BALANCING PROCESS MAP
Productivity =
Outputs / Inputs
§Efficiency =
100% (Actual Outputs / Standard Outputs)
The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance.
§Benchmarking –
3 BENCHMARKS
§Competitive Benchmarking
§Process Benchmarking
§Internal Benchmarking
The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance.
§Benchmarking –
The comparison of an organization’s processes with those of competing organizations – from publically available data.
§Competitive Benchmarking –
The comparison of an organization’s processes with those of noncompetitors that have been identified as having superiority.
§Process Benchmarking –
The comparison of one function within your organization to another function within your organization.
§Internal Benchmarking –
A “perspective” that identifies and removes waste from processes and builds a culture where everyone in the organization is involved in improvement.
§Lean:
An improvement framework that targets problem-solving and consistency using a well-defined set of analytical tools – many of which are based on statistics.
§Six Sigma:
A conscious effort to incorporate both Lean and Six Sigma in the way an organization is managed.
§LeanSigma or Lean Six Sigma:
§The Six Sigma Improvement Methodology (DMAIC)
§Define:
§Measure:
§Analyze:
§Improve:
§Control:
§Lean clearly defines ___
waste in processes – activities that do not create value for the customer.
7 Wastes TYPICALLY recognized by Lean Professionals (TIMWOOD)
§Transportation
§Inventory
§Motion
§Waiting
§Overproduction
§Overprocessing
§Defects
Lean Startups/Entrepreneurism/Software Development – Applying lean to removing waste from the process of starting a business from the ground-up
§Agile:
Using simple visual controls
Visual Management:
Containers, cards, or visual limits that signal when work needs to be done or replenishment needs to be initiated.
§Kanban system –
practice of making small, incremental process improvements over time using Lean principles
§Kaizen:
(DMAIC)
§Define – Measure – Analyze – Improve – Control
intentionally making a small change in your process at the beginning of each day.
§Two Second Lean:
Plan – Do – Check – Act (PDCA)
§Deming Cycle:
(PDCA)
Plan – Do – Check – Act
(PDSA)
§Plan – Do – Study – Adjust
(FOCUS)
§Find – Organize – Clarify – Understand – Select
Quality is how well the characteristics of a product or service align with the needs of a specific customer.
§Value Perspective:
Quality is how closely a product or service was made or performs as measured against a pre-established standard.
§Conformance Perspective:
§Garvin’s Classic “8 Dimensions of Quality”
§Performance
§Features
§Reliability
§Durability
§Conformance
§Aesthetics
§Serviceability
§Perceived Quality
small Prevention Costs avoid large Failure Costs
Juran’s Costs of Quality:
4 Juran’s Costs of Quality:
§External failure costs
§Internal failure costs
§Appraisal costs
§Prevention costs
Costs associated with defects in a product or service that reaches the customer.
§External failure costs –
Costs caused by defects that occur prior to delivery to the customer.
§Internal failure costs –
Costs a company incurs for assessing its quality levels.
§Appraisal costs –
Costs an organization incurs to keep defects from occurring.
§Prevention costs –
The lower the defect rate, the lower the costs.
§Total Cost of Quality Curve
The higher the deviation from the design specifications, the higher the cost. (WATCH ILLUSTRATION)
§Conformance Costs: Taguchi’s Quality Loss Function
7 Total Quality Management (TQM) Core Principles
§Customer focus
§Leadership involvement
§Continuous improvement
§Employee empowerment
§Quality assurance
§Supplier partnerships
§Strategic quality plan
A structured form for collecting and analyzing frequency count data
§Check Sheet
A bar graph that visually displays frequency count data from highest to lowest
§Pareto Chart
§A graphical tool that allows one to explore potential causes for a problem
§Used within a problem-solving team to brainstorm and identify root causes to a problem
§Cause & Effect Diagram (Traditional)
§Also known as a fishbone or Ishikawa diagra
Graph of measured data over time
§Run Chart
Graph of pairs of numerical data to determine potential relationships between two variables
§Used in conjunction with Regression (a statistical calculation)
§Scatter Diagram
Bar graph showing how often each different value in a set of data occurs
§Histogram
Graphs used as a basic form of Statistical Analysis to determine whether changes are caused or random
§Control Charts (Statistical Process Control)
Costs a company incurs for assessing its quality levels.
§Inspection, testing, data analysis
§Appraisal costs –
