Lecture 7

Question 1

Yield management

Answer 1

Strategy aimed at achieving the gihgest possible return. Prices and available supply may vary.

Question 2

Types of Demand management

Answer 2

-Level capacity plan (absorb fluctuations)
-Chase demand plan (change capacity to reflect demand)
-Demand management plan (attempt to change demand)

Question 3

Drum Buffer rope finish

Answer 3

Production speed is determined by the bottleneck which is the “drum”

Make a buffer before the drum part so the drum should never stop

Question 4

Inventory types

Answer 4

-Physical inventory (In > Wait > Out, for products)
-Queue of customers (In > Wait > Out, for people)

Question 5

Types of physical inventory

Answer 5

• Buffer/Safety stock - “just in case”, allows unexpected fluctuations in demand
• Cycle inventory - Maintaining supply when other products are being made using the same transforming resource (batches of bakery buns)
• Decoupling - when product manufacturers set aside extra raw materials or work in progress items for all or some stages in a production line, so that a low-stock situation or breakdown at one stage doesn’t slow or stop operations.
• Anticipation inventory - meeting seasonal demand
• Pipeline inventory - currently in transit and moving

Question 6

How much to order?

Answer 6

Follow Economic order quantity (EOQ)

Question 7

Economic Order Quantity (EOQ) vs Economic Batch Quantity (EBQ)

Answer 7

EOQ - optimal order volume
EBQ - optimal production volume (batch size)

Question 8

Continuous review vs periodic review

Answer 8

Continuous:
+ always the same quantity so the Order Quantity can be set and an “optimum” quantity level
- continuous checking can be very time consuming and costly

Periodic:
+less administration – orders placed at fixed intervals
-different Quantities are ordered and these may not bring benefits of the EOQs

Question 8

Capacity leads demand pros cons

Answer 8

Meaning - there is always sufficient capacity to meet forecast demand.

+Always sufficient capacity to meet demand
+Capacity cushion can absorb extra demand
+Start-up problems with new plants less likely to affect supply

-Low utilization of plants
-Risk of overcapacity if forecast is not realised
-Capital spending on plant early

Question 9

Capacity lags demand pros cons

Answer 9

Timing the introduction of capacity so that demand is always greate than or equal to actual capacity

+Always sufficient demand to keep plants working at full capacity
+Minimal overcapacity when demand drops bellow forecast
+Capital spending on plants is delayed

-Insufficient capacity to meet demand
-No ability to exploit short-term increases in demand
-Start-up problems with new plants cause even worse undersupply

Question 10

Decoupling point meaning

Answer 10

last point in the supply chain where inventory is held.

Question 11

Bullwhip effect

Answer 11

minor inefficient element in supply chain has a bigger effect on its suppliers, then delayed suppliers will have an even worse impact on its suppliers.