Unit 4 Flashcards
Enterprise resource planning
Software that integrates and manages core functions fo a business eg financing, HR, Production, inventory control, orders etc.
Eg when someone order a car it submits order, updates stock etc
ERP benefits
- better financial management
- improve customer service
- improve supply chain (faster, streamlined, less errors)
- better analytics
- lower labor costs
- useful over distance
Types of inventory with examples
- Raw materials (eg metal)
- Work in process (car body) (partly finished)
- Finished goods (car)
Why hold raw materials
- stop changing production level risk (eg chip shortage)
- bulk buy discounts (EOS)
- Flexibility in production process (can be rerouted to new stuff)
Why hold work in process
- To complete production
- To make production process more flexible (no need to wait for smth to come)
- save time
Why hold finished goods
- to sell
- to supply when market supply short
Stock control
Management process to make sure stock is arrived, handled and delivered on time in the most cost efficient and high quality way
What does an efficient inventory management system do
Balances customer demand against cost of holding inventory
Recive right quantity & quality and send at right quantity & quality
Support CAD
Minimize wasteage
What stock does firm want to send first
Oldest stock
FIFO method
First in - first out
Inventory management method where first stock in goes out first too
FIFO advantages
- ensures goods dont deteriorate (esp perishables but rusting etc as well)
How to have efficient stock management system
- minimize waste
- support CAD
- Motivated staff
- well trained staff
- good supplier relations
- good storage environment
Benefits of strong relationship with supplier
- Discounts
- Right time deliveries
- better quality supply
- better handling
- priority when shortages
Whats optimum qty of inventory to hold
Total costs lowest
- oppurtunity costs
- wasteage costs
- storeage costs
- lost orders cost
- reputstion cost
- idle costs
JIT
Just in time stock control
Stock arrives just when its needed instead of standing inventory
Minimal stock levels and stock is used just as it arrives
(Eg toyota tires after it has an order rather than have a standing stock)
JIC
Holding a significant standing inventory.
Eg hospital keep loads of medical supplies in case of emergency
JIT advantages
- cost of holding inventory lowered
- less oppurtunity cost as less working capital tied up in stock (labor, machines etc)
- less insurance costs
- less risk of unsold inventory/perishing
JIT disadvantages
-needs good supplier relation to come in time otherwise supply chain distrupted (massive delay risk)
- unforseen circumstances risk (eg rain blocking roads)
- needs skilled workforce to be able to work quick
- needs good forecasts cuz demand spikes can leave u unable to make the potential profit cuz nothing to sell
- no/little spares incase product incorrectly made
Buffer inventory
Stock held for unforseen demand spikes/supply shortages
Not supposed to be used in normal circumstances
Does JIT have buffer
None or VERY little
Benefits of buffer inventory
- can supply demand surge
- can continue manufacturing if supply shortage or delay
Stock control chart
Chart that shows how stock level progress over time
(Slope down then rise when restock)
Used to do buffers
Re-order level
Quantity level at which a new order for restock is sent
Max stock level
Max qty firm is willing or able to hold in stock
Lead time
Time between stock order and delivery reaching
Capacity utilization
Porportion of max capacity being used
Eg 70% means it can make 30% but its not
(Actual output)/(maximum output) x100
Fixed cost capacity utilisation relation
Fixed cost unchanged despite production lvl so capscity utilisation cannot change it
Disadvantages of 100% capscity utilisation
- overworked workers
- machinery can damage
- managers stressed
- no time for training (longterm bad)
Capacity shortage
When required output is more than capacity shortage
Eg need to make 120 but can only make 100
How to overcome capacity shortage
- Outsourcing / subcontract
- Expansion
Outsourcing/subcontract adv
- relatively quick
- less investment
- flexible (can end quickly)
Expansion adv/disadv
ADV
- Permanent fix
- more control over production
- attractive to investors
DISADV
- Expensive setup
- if bad prediction and demand falls again, can cause excess capacity
Outsourcing/subcontract disadv
- less quality control
- more unit cost (marginal cost) because of added transport costs and paying subcontractor
- uncertain delivery time
Excess capacity reasons
- seasonal downturn
- recession
- overinvestment
- industry demand fall
How to deal w excess capacity
- rationalization
- r&d into new products
- stock excess for later (seasonal esp)
- increase flexibility (eg make workers part time etc)
- rent out machinery/land
Whats rationalization
Reducing max capscity by closing factories, selling machinery, layoffs on long term basis
Lean production
Set of techniques of business to Minimize waste and maximise efficiency while maintaining quality
Try to cut all wasteage types
Wasteage types
- Time
- Unnecessary Transport movement
- Unnecessary inventory
- overproduction
- overutilisation of resources (eg lots of thrown away metal)
- underworking staff
- overprocessing (complex machones for simple task)
- defects
Lean production adv
- save cost
- save time
- less environmental dmg
- better consumer experience
- less opp cost
- offer wide range of products (can develop products fast)
- less defects
Lean production disadv
- workers can feel overwork
- workers can feel at firing risk
- overutilisation of machinery
- bad look cutting costs for investors if done wrong
- can be bad for PR if they firing
Kaizen
Philosophy of continuous, incremental improvements in efficiency/productivity in firm
Started in japan
Workers have basically 2 jobs (work and looking of way to improve work)
How is kaizen diff from traditional approach
Traditional approach is periodic increases in productivity/efficiency
Eg after a year buying new equipment set, or new courses for employees
Kaizen is incremental and constant
Kaizen advantages
- Easier to implement (less need to adjust and less chance for resistance)
- motivates (empowering)
- can create USPs (new ideas)
- costs spread over year rather than all at once (less money held up in investments)
- benefits immediately seen rather than needing to wait a year before improvements
Simultaneous engneering
- AKA time based management
- feature of lean production
- performing diff task at the same time rather than one after another
- eg graphic designs teams making packaging while code team is writing code for a game
Simultaneous engeneering/time based management benefits
- faster release (time saved)
- staff commitment improved
- motivation (as all dept working so competition)
- first mover advantage (can charge higher, more mkt share)
Flexibility
Ability for management to quicky make necessary adjustments to its policy
Whats needed for flexibility
LOTS of things but eg
- multi skilled workforce (can do diff jobs)
- flexible machinery (can be swapped around)
- high liquidity (to invest into other things fast)
Etc
Cell Production
- Lean approach
- profuct line split into several self contained small production units
- each cell has team leader and 1 lvl of hierarchy below him of workers
(Eg cars have engine, tyre cells etc)
Performance measured
Cell production benefits
- quality (focused in specialists)
- motivation (competition)
- productivity
Quality
Features of profuct/service that satisfy consumers at a price level
How do business manage quality
- Quality control
- Quality circles
- Quality assurance
- Total Quality management
- Benchmarking
Quality control
Traditional method
- Take a sample to check output
- below quality is sent for rework or scrapped
ISSUES:
- Checked end of production (not preventative)
- need to hire good inspectors (expensive)
- checks may involve damaging product (eg scratch tests) which can make it unfit for sale.
Quality circles
Group of employees that assemble often, to discuss quality problems, causes and solutions
- improves methods of production
- quality improve
- workers feel invluded
BUT can be inexperienced etc
Quality Assurance
System setting predetermined quality standards at all production stages
- more emphasis on PREVENTING poor quality via designing and producing according to standards at all steps
- quality assurance dept ensures all steps of production (transport, raw material etc)
Total Quality management
Similar to Kaizen
- Quality no longer just responsibility of quality control dept
- all workers must be responsible for quality (via empowering)
- worker should treat next worker who handles the product during production as his customer
- if quality bad in one step of production, worker should send it back to the last worker
- encourages staff to get it right FIRST time and minimize defects
Benchmarking
- technique to discover best production methods via comparing to other ls in the industry
Improving via adapting other techniques for quality and & efficiency
Project & project management
A unique activity with a certain beginning and ending and consumeable resources (time, raw material etc)
Project management responsible for delivering project effectively and efficiently
Objectives of any project
3 objectives
1.Timely completing
2. Quality orientation
3. Within budget
Reasons projects fail
- bad budgeting
- bad time goals
- poor management
- inability to measure progress (lack control)
- poor planning (resources needed, how etc)
- conflict between workers
Etc
(Notice how a lot is related to SMART objectives)
Critical path
- the sequence of activities that must be completed for a projects success
