Understanding Operations, Logistics and Supply Chain Management Flashcards

Question

Location and Costs

Answer 1

-Once in place, location-related costs are fixed in place and difficult to reduce -Determining optimal facility location is a good investment

Answer 2

Political risks, government rules, attitudes, incentives Cultural and economic issues Location of markets Labor talent, attitudes, productivity, costs Availability of supplies, communications, energy Exchange rates and currency risks

Answer 3

Attractiveness of region Labor availability and costs Costs and availability of utilities Environmental regulations Government incentives and fiscal policies Proximity to raw materials and customers Land/construction costs

Answer 4

Site size and cost Air, rail, highway, and waterway systems Zoning restrictions Proximity of services/ supplies needed Environmental impact issues

Answer 5

Labour Productivity Exchange rate and Currency risk Cost Political risk, values, and culture Proximity to markets Proximity to suppliers Proximity to competitors (clustering)

Answer 6

1) Develop a list of relevant factors called key success factors 2) Assign a weight to each factor 3) Develop a scale for each factor 4) Score each location for each factor 5) Multiply score by weights for each factor for each location 6) Make a recommendation based on the highest point score

Answer 7

1) Determine fixed and variable costs for each location 2) Plot the cost for each location 3) Select location with lowest total cost for expected production volume

Answer 8

1) Purchasing power of customer-drawing area 2) Service and image compatibility with demographics of the customer-drawing area 3) Competition in the area 4) Quality of the competition 5) Uniqueness of the firm’s and competitors’ locations 6) Physical qualities of facilities and neighbouring businesses 7) Operating policies of the firm 8) Quality of management

Answer 9

The objective of layout strategy is to develop an effective and efficient layout that will meet the firm’s competitive requirements

Answer 10

1) Higher utilization of space, equipment, and people 2) Improved flow of information, materials, or people 3) Improved employee morale and safer working conditions 4) Improved customer/client interaction 5) Flexibility

Answer 11

Office layout Retail layout Warehouse layout Fixed-position layout Process-oriented layout Work-cell layout

Answer 12

Positions workers, their equipment, and spaces/offices to provide for movement of information Three physical and social aspects Proximity Privacy Permission Two major trends Information technology Dynamic needs for space and services

Answer 13

Allocates shelf space and responds to customer behavior Five Helpful Ideas for Supermarket Layout 1) Locate high-draw items around the periphery of the store 2) Use prominent locations for high-impulse and high-margin items 3) Distribute power items to both sides of an aisle and disperse them to increase viewing of other items 4) Use end-aisle locations 5) Convey mission of store through careful positioning of lead-off department

Answer 14

Addresses trade-offs between space and material handling All costs associated with the transaction Incoming transport Storage Finding and moving material Outgoing transport Equipment, people, material,supervision, insurance, depreciation Minimize damage and spoilage

Answer 15

Addresses the layout requirements of large, bulky projects such as ships and buildings Product remains in one place Workers and equipment come to site Complicating factors Limited space at site Different materials  required at different  stages of the project Volume of materials  needed is dynamic

Answer 16

Deals with low-volume, high-variety production (also called job shop or intermittent production) Arrange work centers so as to minimize the costs of material handling Basic cost elements are Number of loads (or people) moving between centers Distance loads (or people) move between centers

Answer 17

Arranges machinery and equipment to focus on production of a single product or group of related products Advantages of Work Cells Reduced work-in-process inventory Less floor space required Reduced raw material and finished goods inventories Reduced direct labor cost Heightened sense of employee participation Increased equipment and machinery utilization Reduced investment in machinery and equipment Requirements of Work Cells Identification of families of products A high level of training, flexibility and empowerment of employees Being self-contained, with its own equipment and resources

Answer 18

Organized around products or families of similar high-volume, low-variety products 1) Volume is adequate for high equipment utilization 2) Product demand is stable enough to justify high investment in specialized equipment 3) Product is standardized or approaching a phase of life cycle that justifies investment 4) Supplies of raw materials and components are adequate and of uniform quality Fabrication line Builds components on a series of machines Machine-paced Require mechanical or engineering changes to balance Assembly line Puts fabricated parts together at a series of workstations. Paced by work tasks Balanced by moving tasks Advantages Low variable cost per unit Low material handling costs Reduced work-in-process inventories Easier training and supervision Rapid throughput Disadvantages High volume is required Work stoppage at any point ties up the whole operation Lack of flexibility in product or production rates

Answer 19

The objective of inventory management is to strike a balance between inventory investment and customer service

Answer 20

One of the most expensive assets of many companies representing as much as 50% of total invested capital Operations managers must balance inventory investment and customer service

Answer 21

To provide a selection of goods for anticipated demand and to separate the firm from fluctuations in demand To separate various parts of the production process To take advantage of quantity discounts

Answer 22

Raw material Work-in-process (WIP) Maintenance/repair/operating (MRO) Finished goods

Answer 23

Input Wait for inspection Wait to be moved Move/Wait in queue time for operator time Setup time Run Output

Answer 24

Divides inventory into three classes based on annual dollar volume Class A - high annual dollar volume Class B - medium annual dollar volume Class C - low annual dollar volume Other Categories High shortage or holding cost Anticipated engineering changes Delivery problems Quality problems Policies employed may include More emphasis on supplier development for A items Tighter physical inventory control for A items More care in forecasting A items

Answer 25

Independent demand - the demand for item is independent of the demand for any other item in inventory Dependent demand - the demand for item is dependent upon the demand for some other item in the inventory Holding costs - the costs of holding or “carrying” inventory over time Ordering costs - the costs of placing an order and receiving goods Setup costs - cost to prepare a machine or process for manufacturing an order

Answer 26

Basic economic order quantity (EOQ) model Production order quantity model Quantity discount model

Answer 27

Demand is known, constant, and independent Lead time is known and constant Receipt of inventory is instantaneous and complete Quantity discounts are not possible Only variable costs are setup (or ordering) and holding

Answer 28

By minimizing the sum of setup (or ordering) and holding costs, total costs are minimized Optimal order size Q* will minimize total cost A reduction in either cost reduces the total cost Optimal order quantity occurs when holding cost and setup cost are equal

Answer 29

Q= Number of pieces per order Q*= Optimal number of pieces per order (EOQ) D= Annual demand in units for the inventory item S= Setup or ordering cost for each order H= Holding or carrying cost per unit per year Annual setup cost =(D/Q)S Annual holding cost = (Q/2)H Optimal order quantity is found when annual setup cost equals annual holding cost When including actual cost of material P Total annual cost = Setup cost + Holding cost + Product cost TC = (D/Q)S + (Q/2)H + PD

Answer 30

The reorder point (ROP) tells “when” to order Lead time (L) is the time between placing and receiving an order ROP = Demand per day*Lead time for a new order in days. Demand per day = Annual demand in units for the inventory item/Number of working days in a year

Answer 31

- Largest proportion of overall logistics cost for most retailers - Must suit both the materials to be moved and the other components of the system as precisely as possible. - Consider each mode of transport, identify the main characteristics, and decide in what ways the benefits of these features can best be used to move goods along the supply chain.

Answer 32

- State (solid, liquid, gas) - Mass (weight, volume and dimensions) - Urgency (commercial perishability – compare transit times, which operator is likely to meet deadlines) - Cost vs. value (transport cost vs. commodity value) - Market (geographic concentration of a product or market)

Answer 33

An interactive procedure that finds the least costly means of moving products from a series of sources to a series of destinations Can be used to  help resolve  distribution  and location  decisions A special class of linear programming Need to know The origin points and the capacity or supply per period at each The destination points and the demand per period at each The cost of shipping one unit from each origin to each destination

Answer 34

Start in the upper left-hand cell (or northwest corner) of the table and allocate units to shipping routes as follows: Exhaust the supply (factory capacity) of each row before moving down to the next row Exhaust the (warehouse) requirements of each column before moving to the next column Check to ensure that all supplies and demands are met

Answer 35

Identify the cell with the lowest cost Allocate as many units as possible to that cell without exceeding supply or demand; then cross out the row or column (or both) that is exhausted by this assignment Find the cell with the lowest cost from the remaining cells Repeat steps 2 and 3 until all units have been allocated

Answer 36

a route taken by a commodity between the point of its production and the point of its sale and/or consumption

Answer 37

Supplier / manufacturer -> Customer Supplier / manufacturer -> Retailer -> Customer Supplier / manufacturer -> wholesaler ->Retailer -> Customer Supplier / manufacturer -> Agent->wholesaler ->Retailer -> Customer

Answer 38

Manufacturer direct to retailer Manufacturer - own warehouse – retailer Manufacturer - wholesale warehouse – retailer Manufacturer - retailer’s warehouse – outlets Manufacturer - third party – distributor – retailer

Answer 39

Maximise sales opportunities Achieve high levels of product (on shelf) availability Achieve high levels of customer service Minimise costs Smooth integration of commercial and physical aspects of the distribution chain

Answer 40

The objective of supply chain management is to structure the supply chain to maximize its competitive advantage and benefits to the ultimate consumer

Answer 41

The coordination of all supply chain activities, starting with raw materials and ending with a satisfied customer Includes suppliers, manufacturers and/or service providers, distributors, wholesalers, retailers, and final customers

Answer 42

Make-or-buy decisions Choosing between obtaining products and services externally as opposed to producing them internally Outsourcing Transfer traditional internal activities and resources to outside vendors Efficiency in specialisation Focus on core competencies

Answer 43

Many suppliers Few suppliers Vertical integration Joint ventures Virtual companies

Answer 44

Commonly used for commodity products Purchasing is typically based on price Suppliers compete with one another Supplier is responsible for technology, expertise, forecasting, cost, quality, and delivery

Answer 45

Buyer forms longer term relationships with fewer suppliers Create value through economies of scale and learning curve improvements Suppliers more willing to participate in JIT programs and contribute design and technological expertise Cost of changing suppliers is huge Trade secrets and other alliances may be at risk

Answer 46

Developing the ability to produce goods or services previously purchased Integration may be forward, towards the customer, or backward, towards suppliers Can improve cost, quality, delivery, and inventory but requires capital, managerial skills, and demand Risky in industries with rapid technological change

Answer 47

Formal collaboration Enhance skills Secure supply Reduce costs The challenge is to cooperation without diluting brand or conceding competitive advantage

Answer 48

Rely on a variety of supplier relationships to provide services on demand Fluid organizational boundaries that allow the creation of unique enterprises to meet changing market demands Relationships may be short- or long-term Exceptionally lean performance, low capital investment, flexibility, and speed

Answer 49

More reliance on supply chains means more risk Fewer suppliers increase dependence Compounded by globalization and logistical complexity Political and  currency risks

Answer 50

Research and assess possible risks Innovative planning Reduce potential disruptions Prepare responses for negative events Flexible, secure supply chains Diversified supplier base

Answer 51

Supplier evaluation Finding potential suppliers Determine likelihood of their becoming good suppliers Supplier certification Qualification Education Certification Supplier development Integrate the supplier into the system Quality requirements Product specifications Schedules and delivery Procurement policies Training Engineering and production help Information transfer procedures Negotiation A significant element in purchasing Highly valued skills Cost-based price model Supplier opens books Market-based price model Based on published, auction, or indexed prices Competitive bidding Common policy for many purchases Does not generally foster long-term relationships Contracting Share risks, benefits, create incentives Centralised purchasing Leverage volume Develop specialised staff Develop supplier relationships Maintain professional control Devote resources to selection and negotiation Reduce duplication of tasks Promote standardisation

Answer 52

Plan: Demand/Supply planning and Management Source: Identify, select, manage, and assess sources Return: Raw material Make: Manage production execution, testing, and packaging Deliver: Invoice, warehouse, transport and install Return: Finished goods