Session 10

Question 1

What is the bullwhip effect?

Answer 1

The amplitude of error increases backwards on the supply chain

Question 2

What are the 6 stages of Bullwhip effect?

Answer 2

1) Customer demand begins moderately high
2) Supply cant meet demand at the early stages = shortages
3) Partners down the supply chain over-order due to the shortages attempting to meet demand and stock shelves
4) Supply catches up with demand, whilst there are cancellations and returns too
5) Production still continues through this due to the misalignment of financial and production planning
6) Demand declines at the last stages of life-cycle = attempts to drain inventory

Question 3

What are the 4 Building Blocks of successful automotive supplier systems?

Answer 3

1)	Long-Term Collaboration
>	Commitment to shared future
>	Fair profit
>	Understand the supplier
2)	Tough, but helpful
>	Parallel sourcing to create pressure
>	Monthly reports to suppliers, feedback
>	Supplier development
>	Intensive information share (also selective)
3)	Improvement is realised in collaboration not isolation
>	Continuous improvement = KAIZEN PDCA cycle
>	Exchange best practice
4)	Trust but verify
>	Supervision of suppliers
>	Evaluation of suppliers

Question 4

What is Push-Scheduling?

Answer 4

= Orders (calculated as net requirements at MRP level) are planned and issued centrally = given to suppliers & to process 1 & to process 2
= Upon completion, the order is moved forward until the next process is issued with the order to start processing it
This means: the LONGEST LEAD TIME Process sees the NEW ORDER FIRST
Also called BACKWARDS scheduling

Question 5

What is the definition of MRP?

Answer 5

Material Requirements Planning is a set of priority planning techniques for planning component items below the product or endproduct level
It uses BOMs (bill of materials), inventory data and master production schedule to calculate future requirements of materials

Question 6

What are the steps to and from MRP?

Answer 6

1) Master Production Scheduling
2) Material Requirements Planning
3) Capacity Requirements Planning
4) Production Activity Control

Question 7

What are the 3 Inputs and 3 Outputs of MRP?

Answer 7

1)	Inputs
>	Master Production Schedule
>	Product Structure File
>	Inventory Master File
2)	Outputs: Planned Order Releases  (goes to rought cut capacity planning which gives MPS above)
>	Work Orders
>	Purchase Orders
>	Rescheduling Notices

Question 8

How do you get from MRP Gross to Net?

Answer 8

Future Demands = Gross Requirements + Allocations (some extra parts added that need to be allocated in this period)
Available Resources = On-Hand Balance + Scheduled Receipts
Projected Inventory Status = Net Requirements

Future Demands - Available Resources = Projected Inventory Status (Net Req)

Question 9

What are the 4 problems with MRP Systems?

Answer 9

MRP Systems…

1) Tend to hold more inventory then necessary
2) Lengthen lead times unnecessarily = BULLWHIP EFFECT is created
3) Designed for batch and queue, NOT flow
4) Distort demand pattern in the supply chain

Question 10

What is the JIT?

Answer 10

Just-in-time is a form of inventory management that requires working closely with suppliers so that raw materials arrive as production is scheduled to begin, but no sooner. The goal is to have the minimum amount of inventory on hand to meet demand.

Question 11

What is KANBAN?

Answer 11

Kanban is a workflow management method for defining, managing and improving processes. It aims to help you visualize the work, maximize efficiency, and improve continuously.

Question 12

What is Pull-Scheduling?

Answer 12

In a pull system process are trigged by a replenishment signal =
Upon withdrawal of material from inventory, the preceding processes are authorised to start processing, and ONLY then

Question 13

What is the take rate in MRP Methods?

Why you have to greedy approach?

Answer 13

=How often a special wish by a customer is chosen
Car has about 200 option codes, they have take rates, which is forecasted by the sales planning
Says out of 500 they will 100 take sunroof, so every option has a take rate like this

All components depend on a combination of options. You don’t know the combination of options.
Very hard to calculate the probability for this term, so only single probabilities are given
Then greedy comes in looks at all the different take rates and improves them all

Question 14

What are the Trade-Offs in Order Decisions?

Answer 14

=Too Much / Too Little Problem
1)	Order TOO MUCH and inventory left over at the end
>	Discounts and costs to get rid of them
2)	Order TOO LITTLE and sales are lost
>	Lost profits

Question 15

What is a Rain Check?

Answer 15

The deferral of acceptance of an offer

Take a rain check: to accept the postponement of an offer

Question 16

What are the 5 elements of the Newsvendor Problem?

Answer 16

1) Create forecast information
2) Gather economic inputs
3) Generate a model to represent demand
4) Choose and objective
5) Compute the optimal order size

Question 17

Newsvendor Variables: What are p, c, v, A/F Ratio, F(Q), mü, sigma, Expected Actual Demand, StdDev of Demand, z, Q, co, cu, Expected Loss and Benefit on Qth unit?

Answer 17

p : Selling Price
c : Production / Procurement Costs
v : Salvage Costs / Price (discounted sells for v=…$)
A/F Ratio : Actual Demand / Forecast
F(Q) = Prob {Demand<=Q} = Cu/(Co+Cu)
𝜇 : Average of A/F Ratio = (All A/F Ratios)/N
𝜎 : Std. Dev of A/F Ratio = Kök(Var(All A/F Ratios))
Exp. Act. Demand : Exp. Avg. A/F Ratios * Forecast
Std. Dev of Demand : Std Dev of A/F Ratios * Forecast
z = (Q-mü)/sigma
Q = mü + z * sigma
co : Overage Cost = Cost - Salvage = c - v
cu : Underage Cost = Price - Cost = p - c
Expected loss on Qth unit = Co * F(Q)
Expected benefit on Qth unit = Cu * (1 - F(Q))