The Process View of the Organization

Question 1

What are process resources?

Answer 1

The people, equipment, and other elements of processes

Question 2

What is a flow unit?

Answer 2

Anything that flows through a process, starting as an input and later leaving the process as an output

Question 3

What is inventory?

Answer 3

The number of flow units contained within the process

Question 4

What is flow time?

Answer 4

The time it takes a flow unit to get through the process

Question 5

What is flow rate?

Answer 5

The rate at which the process delivers output (measured in flow units/period of time)

Question 6

What is throughput rate?

Answer 6

Same as flow rate

Question 7

What is capacity?

Answer 7

Maximum rate with which the process can generate supply

Question 8

Does higher flow rate translate directly into increased revenue? Why?

Answer 8

Yes, because you can produce a unit faster and thus product more units

Question 9

Does higher inventory directly relate to longer flow times? Why?

Answer 9

Yes, according to Little’s Law (?)

Question 10

What is the formula for inventory with regards to cumulative inflow and cumulative outflow?

Answer 10

Inventory = Cumulative Inflow - Cumulative Outflow

Question 11

What is Little’s Law?

Answer 11

Average Inventory = Average Flow Rate x Average Flow Time

Question 12

Why is Little’s Law useful?

Answer 12

Can be used to find the third performance measure when the other two are known

Little’s Law always holds

Question 13

What are days of supply?

Answer 13

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.

Question 14

What are inventory turns?

Answer 14

= 1/Flow Time

Number of times a company turns over its entire inventory in a period of time

Question 15

Why is inventory holding cost much higher than just the financial cost?

Answer 15

Inventory might become obsolete

Inventory might perish

Inventory might disappear (theft, shrinkage)

Inventory requires storage space and overhead cost

Question 16

What is the formula for per-unit inventory cost?

Answer 16

Per-Unit Inventory Costs = Annual Inventory Costs / Annual Inventory Turns

Question 17

What are the main reasons for holding inventory?

Answer 17

Time a flow unit spends in the process

Seasonal demand

Economies of scale

Separation of steps in a process

Stochastic demand

Question 18

What is pipeline inventory?

Answer 18

Basic inventory on which the process operates

Question 19

When does seasonal inventory occur?

Answer 19

When capacity is rigid and demand is variable

Question 20

What is cycle inventory?

Answer 20

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.

Question 21

What is the main difference between cycle inventory and seasonal inventory?

Answer 21

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

Question 22

What are buffers, and what purpose do they serve?

Answer 22

Inventory between process steps. Can absorb variations in flow rates by acting as a source of supply for a downstream process step

Question 23

What is stochastic demand?

Answer 23

Refers to the fact that we need to distinguish between the predicted demand and the actually realized demand

Question 24

What is the product-process matrix?

Answer 24

A graph of volume and process that tells

Question 25

What is the product-process matrix?

Answer 25

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

Question 26

What are the main findings of the product-process matrix?

Answer 26

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.