operations management final Flashcards
(27 cards)
In critical path method, how do we determine ES, EF, LS and LF?
- ES = max EF of before
- EF = ES + duration
- LS = LF - duration
- LF = min LS of after
What does the critical path method give us?
the minimum possible amount of time to complete a project
Will the greedy method of project crashing always produce an optimal solution?
no
When crashing, what do we do when there is a penalty cost?
continue crashing as long as penalty cost is higher than crashing cost per period
If the crashing cost per period is not given, how do you calculate it?
(crash cost - normal cost) / (normal time - crash time)
What is the main goal of 6 sigma?
reduce the number of defects in manufacturing processes by reducing process variability
What is benchmarking? Describe the 2 types of benchmarking.
- process of selecting the best practices to use as a standard for performance
- external: compares organization’s performance to another organization’s
- internal: compares performance and practices within an organization
What is employee empowerment?
getting employees involved in product and process improvements
How do you calculate DPU (defects per unit)?
number defects / number units
How do you calculate DPO (defects per opportunity)?
defects / (# units x # opportunities)
What is the difference between assignable variation and natural/random variation?
- assignable: can be traced/identified, not pure randomness, wish to eliminate
- natural/random/normal: inherent to the process, a process is in control if it only has natural/random variations
What is the difference between type 1 error and type 2 error?
- type 1 error: when we take corrective action but the process is really in control
- type 2 error: not taking action when the process is actually out of control
What are the 3 ways to measure inventory? How do you calculate each way? In terms of numbers, what is ideal?
- average aggregate inventory value: average of the value of all items held in inventory
- weeks of supply: average aggregate inventory value / COGS per week
- inventory turnover: COGS per year / average aggregate inventory value
- we want high inventory turnover and low weeks of supply
Name 4 reasons why firms hold inventory?
- protect against stock-outs due to uncertain demand
- capacity limitations
- allow for smooth and flexible production operations
- to take advantage of quantity discounts
What are some characteristics of the EOQ model? How do you determine the optimal amount to order?
- demand is constant
- order sizes are always the same
- non-perishable (items can be stored and replenished)
- when average fixed ordering costs per unit of time = average inventory holding costs per unit of time
In EOQ model, what happens when you increase fixed ordering costs?
more expensive = order less frequently (but order in larger quantity, Q* goes up when S goes up)
In EOQ model, what happens if one orders according to the optimal order quantity?
average fixed ordering costs per unit of time = average holding costs per unit of time
What are some characteristics of the Newsvendor model?
- demand is random/unknown
- orders for the product being sold have to be placed before demand is realized
- perishable (single-period items)
With Newsvendor mode, how do you find the optimal order quantity given continuous (fractions/decimals) data?
- compute critical ratio
Cu = P - C (P is sells for, C is cost)
Co = C - S (C is cost, S is salvage value) - find critical ratio in bunch of numbers to get z
- x = u + z * o
With Newsvendor model, how do you find the optimal stocking quantity given discrete (whole numbers) data?
- compute critical ratio
Cu = P - C (P is sells for, C is cost)
Co = C - S (C is cost, S is salvage value) - on graph, draw line at critical ratio and the optimal stocking quantity is where the first bar touches line
What is the formula for marginal analysis/expected marginal profit?
-co * P (D <= x) + cu * P (D > x)
In the supply chain, name upstream vs. downstream players.
supplier > manufacturer > distributor > retailer > customer
goes from upstream to downstream
What is the difference between push system and pull system?
PUSH SYSTEM
- initiated by upstream
- decisions are made in advance
- exposed to inaccurate forecasts which leads to stockouts/wastage
PULL SYSTEM
- initiated by downstream
- decisions are driven by customer demand
- lead to stockouts when production cannot respond to demand quickly
What is the bullwhip effect? What are its causes? What are some ways to mitigate it?
BULLWHIP EFFECT
- demand variability becomes larger as one moves up in the supply chain
CAUSES
- poor forecasting and inventory management
- long lead times
- order batching
- price fluctuations
- shortage gaming (retailers purposefully over-order or place duplicate orders)
WAYS TO MITIGATE
- use POS data (data from real-time, data at the point of sale)
- reduce lead times
- reduce fixed cost
- base inventory allocation on past sales
- share demand information to all of the supply chain
