The Process View of the Organization Flashcards
What are process resources?
The people, equipment, and other elements of processes
What is a flow unit?
Anything that flows through a process, starting as an input and later leaving the process as an output
What is inventory?
The number of flow units contained within the process
What is flow time?
The time it takes a flow unit to get through the process
What is flow rate?
The rate at which the process delivers output (measured in flow units/period of time)
What is throughput rate?
Same as flow rate
What is capacity?
Maximum rate with which the process can generate supply
Does higher flow rate translate directly into increased revenue? Why?
Yes, because you can produce a unit faster and thus product more units
Does higher inventory directly relate to longer flow times? Why?
Yes, according to Little’s Law (?)
What is the formula for inventory with regards to cumulative inflow and cumulative outflow?
Inventory = Cumulative Inflow - Cumulative Outflow
What is Little’s Law?
Average Inventory = Average Flow Rate x Average Flow Time
Why is Little’s Law useful?
Can be used to find the third performance measure when the other two are known
Little’s Law always holds
What are days of supply?
An efficiency ratio that measures the average number of days the company holds its inventory before selling it. The ratio measures the number of days funds are tied up in inventory.
What are inventory turns?
= 1/Flow Time
Number of times a company turns over its entire inventory in a period of time
Why is inventory holding cost much higher than just the financial cost?
Inventory might become obsolete
Inventory might perish
Inventory might disappear (theft, shrinkage)
Inventory requires storage space and overhead cost
What is the formula for per-unit inventory cost?
Per-Unit Inventory Costs = Annual Inventory Costs / Annual Inventory Turns
What are the main reasons for holding inventory?
Time a flow unit spends in the process
Seasonal demand
Economies of scale
Separation of steps in a process
Stochastic demand
What is pipeline inventory?
Basic inventory on which the process operates
When does seasonal inventory occur?
When capacity is rigid and demand is variable
What is cycle inventory?
Cycle stock inventory is the portion of an inventory that the seller cycles through to satisfy regular sales orders. It is part of on-hand inventory, which includes all of the items that a seller has in its possession.
What is the main difference between cycle inventory and seasonal inventory?
Seasonal inventory is due to temporary inbalances in supply and demand due to variable demand or supply, while cycle inventory is created due to a cost motivation
What are buffers, and what purpose do they serve?
Inventory between process steps. Can absorb variations in flow rates by acting as a source of supply for a downstream process step
What is stochastic demand?
Refers to the fact that we need to distinguish between the predicted demand and the actually realized demand
What is the product-process matrix?
A graph of volume and process that tells
What is the product-process matrix?
A graph of volume and process that tells us that over its life cycle, a product typically shifts from job shop process to high volume/continuous process
What are the main findings of the product-process matrix?
Similar process types tend to have similar problems
Natural drift of companies towards lower right quadrant lets you predict how processes are likely to evolve.
