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OTM > OTM REVIEW > Flashcards

OTM REVIEW Flashcards

1
Q

What is the key OTM motivation? (4)

A
  • Reduce costs
  • Reduce risk exposure
    -Increase customer satisfaction (high service
    level)
  • Meet sustainable goals
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2
Q

5 elements of the process view

A
  • inputs/outputs
  • resources
  • flow unit
  • network of activities and buffers
  • information structure
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3
Q

4 product attributes

A
  • product cost
  • product variety
  • product quality
  • product time
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4
Q

4 process competencies

A
  • process cost
  • process flexibility
  • process quality
  • process flow time
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5
Q

Product attributes are for ______ and process competencies are for _______

A

Customers, Process managers

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6
Q

What is the customer value proposition?

A

All organizations must provide products and services whose value to customers is much greater than the cost of production and delivery

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7
Q

What are the 2 process architechtures?

A

Job shop and Flow shop

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8
Q

Job Shop

A

Uses flexible resources to produce low volumes of highly customized variety products
- similar resources are located together:
functional layout

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9
Q

Flow Shop

A

Uses specialized resources that perform limited tasks with high precision and speed
- resources arranged in sequence to
produce product: product layout

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10
Q

Process competencies for Job Shop (4)

A
  • high variable cost (often low initial investment)
  • high flexibility
  • high quality (may not be consistent)
  • long flow time
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11
Q

Process competencies for Flow Shop (4)

A
  • low variable costs (often high initial
    investment)
  • low flexibility
  • consistent quality
  • short flow time
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12
Q

What are the process flow measures? (3)

A
  • Flow Time: total time spent by a flow unit
    within process boundaries
  • Flow Rate: the number of flow units that flow
    through a specific point in the
    process per unit of time
  • Inventory: the total number of flow units
    present within process boundaries
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13
Q

Little’s Law

A

I = RT
- Average Inventory (I) = Throughput (R) x
Average Flow Time (T)

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14
Q

What are the competitive advantages of shorter flow times? (5)

A
  • Shorter delivery response times
  • Delaying production closer to the time of sales
  • More responsive to technological
    development and customer preference
  • Moving from extremes of make-to-stock to
    make-to-order
  • Reduced inventory
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15
Q

How to reduce flow time?

A
  • Must shorten the length of every critical path
  • Flow time is the sum of activity and waiting
    time
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16
Q

What are the levers for reducing activity time? (5)

A
  • Restructuring the critical path
  • Reduce non-value adding activities
    (non-value adding do not directly increase the
    value of a flow unit)
  • Work faster
  • Do it right the first time
  • Modify the product sequencing (do the
    quickest thing first)
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17
Q

Throughput

A

The average number of flow units that flow through a stable process per unit time

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18
Q

Capacity

A

The maximum sustainable throughput

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19
Q

Resource pool

A

Collection of interchangeable resources that can perform an identical set of activities

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20
Q

Process Cycle Time

A

Process cycle time = ( 1/ process effective
capacity)

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21
Q

The effective capacity of a process

A

The effective capacity of a process if the effective capacity of its bottleneck (the slowest resource pool of the process

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22
Q

Why keep inventory? (3)

A
  • economies of scale
  • production and capacity smoothing
  • stockout protection
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23
Q

Why avoid keeping inventory? (2)

A
  • physical holding costs
  • opportunity costs
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24
Q

How to find optimal order size?

A

Economic Order Quantity (EOQ): Q = √2SR/H
- Q: order size
- S: fixed ordering cost
- R: annual demand rate
- H: unit holding cost for 1 year

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25
Q

Replenishment leadtime

A

time lag between an order being placed and its arrival

26
Q

Forecasting (4)

A
  • Forecasts are usually inaccurate
  • Forecasts should be accompanied by a
    measure of forecast such as standard
    deviation
  • Long-range forecasts are usually less accurate
    than short-range forecasts
  • Aggregate forecasts are more accurate than
    individual forecasts
27
Q

What is a service level?

A

The probability that there will be no stockout within a time interval, or equivalently, the proportion of time intervals without a stockout
- service level is a strategic decision by a
firm
- the amount of safety inventory depends
on the desired service level and the
demand uncertainty during the lead time

28
Q

Relationship between safety inventory, demand uncertainty, and service level

A
  • the larger the safety inventory, the larger the service level (& vice versa)
  • the larger the demand uncertainty, the lower the service level (& vice versa)
29
Q

3 key factors affecting safety inventory

A
  • required service level
  • the uncertainty in demand
  • the lead time
30
Q

How to reduce safety inventory? (2)

A
  • Reducing lead time
  • Reducing demand uncertainty
    - better forecasting, demand aggregation,
    shortening forecast horizon, provide
    incentive for customers in order in
    advance
31
Q

Postponement

A

the practice of reorganizing a process in order to delay the differentiation of a generic product to specific end-products closer to the time of sale

32
Q

7 sources of waste

A
  • overproduction
  • waiting
  • internal transport
  • over-processing
  • inventory
  • rework
  • unnecessary worker movement
33
Q

Just-In-Time process order

A
  1. achieve a one-unit-at-a-time flow
  2. produce at the rate of customer demand
  3. implement a pull system
34
Q

Cellular layout

A

A product layout where all workstations that perform successive operations on a given family of products are grouped together to form a cell

35
Q

The goal of a supply chain is to…

A

satisfy customer demand in the most economical way

36
Q

4 causes of the bullwhip effect

A
  • demand signal processing
  • order batching
  • price fluctuations
  • rationing and shortage gaming
37
Q

How to mitigate the bullwhip effect? (3)

A
  • operational effectiveness
  • information sharing
  • channel alignment
38
Q

What is the fisher matrix?

A

functional products & physically efficient supply chain = match

innovative products & market responsive supply chain = match

39
Q

Reasons to outsource activities (2)

A
  • achieve economies of scale
  • aggregate demand
40
Q

How can outsourcing add value to the supply chain? (4)

A
  • capacity aggregation
  • transportation aggregation
  • warehouse aggregation
  • a firm gains the most by outsourcing to a third
    party is its needs are small, uncertain, and
    shared by other firms
41
Q

Risks of outsourcing (6)

A
  • the process is broken
  • underestimation of the cost of coordination
  • reduced customer/supplier contact
  • leakage of sensitive data and information
  • loss of supply chain visibility
  • negative reputation damage
42
Q

Outsourcing across the product life cycle (4)

A
  • phase 1: Relationship
  • phase 2: Coordination
  • phase 3: Efficiency
  • phase 4: minimize obsolescence
43
Q

Trade credit

A

when a buyer pays a supplier late, we say that the supplier extends a credit to the buyer

44
Q

Consequences of trade credit for the supplier (2)

A
  • increased need of external funding/capital
  • cash flow forecasting becomes more difficult
45
Q

Consequences of trade credit for the buyer (2)

A
  • reduction in need of external funding/capital
  • increased supply disruption risk (due to
    possible bankruptcy of suppliers)
46
Q

Working capital

A

the money that a firm needs to finance inventory and receivables

47
Q

Cash Conversion Cycle

A

the time it takes to convert a dollar spent on buying raw material into a dollar of revenue received from the customer

48
Q

CCC = DIO + DSO - DPO

A
  • DIO: Days Inventory Outstanding
    (the average time the inventory stays in
    the supply chain)
  • DSO: Days Sales Outstanding
    (the average time a firm waits for
    payment after goods have been sold to a
    customer)
  • DPO: Days Payables Outstanding
    (the average time a supplier is payed
    after the goods have been received)
49
Q

How to reduce the cash conversion cycle? (3)

A
  • reduce accounts receivables (DSO)
    - make customers pay quickly
  • reduce inventories (DIO)
    - optimize your inventories
  • increase accounts payables (DPO)
    - pay your suppliers as late as reasonable
50
Q

Why is risk management important?

A

most firms are leveraged, meaning they take on debt to finance their business but there are risks of using debt

51
Q

What are drivers of supply chain risk? (3)

A
  • lean production
    (vulnerable to small supply chain glitches)
  • globalization
    (fragmented supply chain, higher probability
    of disruption, upstream/down)
  • outsourcing
    (often results in supply chain delays,
    increasing likelihood of disruption)
52
Q

Recurrent demand risks

A

ongoing risks: daily, weekly, monthly, or yearly
(ex: higher than expected demand)

53
Q

Disruptive supply risks

A

occur rarely, but can be very impactful
(ex: nuclear disaster in Japan, COVID)

54
Q

Mitigating recurrent risks (2)

A
  • holding capacity and inventory
  • transporting components quickly
55
Q

Mitigating disruptive risks (3)

A
  • multi-sourcing
  • differentiate risk for different products
  • pricing
56
Q

Mitigating both recurrent and disruptive risks

A

flexibility

57
Q

Heat matrix

A
  • considers impact and likelihood of identified risks, so that managers can give priority to certain risks

(look at lecture 10 for image of matrix)

58
Q

6 responses to risk

A
  1. ignore or accept the risk
  2. reduce the probability of the risk
  3. reduce or limit the consequences
  4. transfer or share the risk
  5. oppose a change
  6. move to another environment
59
Q

DIO =

A

(Inventory / Cost of goods sold) x 365

60
Q

DSO =

A

(Accounts receivable / Annual sales) x 365

61
Q

DPO =

A

(Accounts Payable / Cost of goods sold) x 365

OTM (5 decks)

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