Operations Management - Final Exam Review

Vocabulary flashcards for Operations Management final exam review, covering topics from Chapters 4, 5, 8, and 12.

Measuring Forecast Error

A measure of how much we should rely on our chosen forecasting method.

Perfect Forecast (Et = 0)

If At = Ft, this results.

Over Forecast (Et < 0)

If At < Ft, this results.

Under Forecast (Et > 0)

If At > Ft, this results.

Mean Absolute Deviation (MAD)

Measures the total error in a forecast without regard to sign.

Mean Squared Error (MSE)

Penalizes larger errors in forecasting.

Tracking Signal (TS)

Measures whether your forecasting model is working; indicates quality and bias.

Error (Et)

The difference between actual sales and the forecast (At – Ft).

System Reliability (Series)

The product of component reliabilities in a series configuration.

Parallel Components

Allows system to operate if one or the other component fails.

System Reliability (Parallel)

1 – (1-R1)(1-R2)…(1-Rn)

Raw Materials Inventory

Raw materials, components

WIP Inventory

Work-in-process

Finished Goods Inventory

Finished goods

Distribution Inventory

Distribution inventory

MRO Inventory

Maintenance, repair & operating supplies (MRO)

Anticipation or Seasonal Inventory

Inventory to meet future demand.

Fluctuation Inventory or Safety (or Reserve) Stock

Inventory to buffer demand fluctuations.

Lot-Size or Cycle Stock

Inventory to take advantage of quantity discounts.

Transportation or Pipeline Inventory

Inventory in transit.

Speculative or Hedge Inventory

Inventory to protect against future events like strikes or price increases.

ABC Inventory Classification

Method for determining level of control and frequency of review of inventory items.

Item Cost

Price paid per item plus any other direct costs.

Holding Costs

Capital, storage, and risk costs.

Ordering Costs

Fixed, constant dollar amount per order.

Shortage Costs

Loss of customer goodwill, back-order handling, and lost sales.

Demand is known & constant

When no safety stock is required

Total Cost (TC)

Annual ordering cost + annual holding costs

Quantity Discount Model

Same as the basic EOQ model, except unit price depends upon the quantity ordered.

Safety Stock

If demand or lead time is uncertain, this can be added to improve order-cycle service levels

Order-cycle service level

The probability that demand during lead time will not exceed on-hand inventory

Supply Chain

The network of all activities involved in delivering a finished product/service to the customer

Supply Chain Management

The vital business function that coordinates and manages all the activities of the supply chain.

Advertising Revenue Model

Provides users with information on services & products; provides opportunity for suppliers to advertise

Subscription Revenue Model

Web site charges a subscription fee for access to the site

Transaction Fee Model

Company receives a fee for executing a transaction

Sales Revenue Model

A means of selling goods, information, or service directly to customers

Affiliate Revenue Model

Companies receive a referral fee for directing business to an affiliate

Bullwhip Effect

The inaccurate or distorted demand information created in the supply chain.

Vertical Integration

A measure of how much of the supply chain is owned or operated by the manufacturer.

Backward Integration

Owning or controlling sources of raw material and components.

Forward Integration

Owning or controlling the channels of distribution.

Crossdocking

Eliminates the storage and order-picking functions of a distribution warehouse while still performing the receiving and shipping functions.