Operations Management Exam 2 (Pitt BUSQOM 1070)

Enterprise Resource Planning (ERP)

a computer system that integrates application programs in accounting, sales, manufacturing, and the other functions in a firm

Material Requirements Planning (MRP)

a planning system that schedules the precise quantity of materials needed to make the product

Master Production Schedule (MPS)

A part of the material requirements plan that details how many end items will be produced within specified periods of time

Frozen

No change allowed

Slushly

Limited changes allowed

Liquid

Any changes allowed

Available to Promise

# of units in master schedule - actual customer orders

Bill of Materials (BOM)

document that shows an inclusive listing of all component parts and assemblies making up the final product

Modular Bills

Not final products but components that can be assembled into multiple end items

Planning Bills (pseudo/super bills)

groups subassemblies to reduce the number planned

Phantom Bills

Describe subassemblies that exist only temporarily

Are part of another assembly and never go into inventory

Projected Available Balance

onhand balance - safety stock

Net Requirements

gross - projected available

lot-for-lot (L4L)

an order for the exact amount needed

Least Total Cost (LTC)

carrying and setup costs are mostly equal

Least Unit Cost (LUC)

lot size with lowest unit cost

Stragetic Sourcing

management of supplier relationships to acquire goods/services to achieve the immediate and future needs of the business

Specificity

how common an item is

Request for Proposal (RFP)

a process through which buying organizations invite alternative suppliers to bid on supplying their required components

Vender Managed Inventory

Inventory which is restocked automatically by vendors regardless of a customer's orders

Bullwhip Effect

occurs when distorted product-demand information ripples from one partner to the next throughout the supply chain

Forward Buying

a retailer's stocking up on a product when it is discounted and buying smaller amounts when it is at list price

Continuous Replenishment

supplying orders in a short period of time according to a predetermined schedule

Functional Products

staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations. Longer product life and low lead time

Innovative Products

products such as fashionable clothes and personal computers that typically have a life cycle of just a few months. Unpredictable demand

Stable Products

Evolving Products

Efficient Supply Chain

utilize strategies aimed at creating the highest cost efficiency

Responsive Supply Chain

focus on flexibility and responsive service and are able to react quickly to changing market demand and requirements

Risk-hedging supply chains

utilize strategies aimed at pooling and sharing resources in a supply chain to share risk

Agile Supply Chain

focuses on an organization's ability to respond to changes in demand with respect to volume and variety. Flexible to customer needs

Total Cost of Ownership (TCO)

All of the costs associated with the design, development, testing, implementation, documentation, training and maintenance of a software system.

green sourcing

Making environmentally conscious decisions throughout the purchasing process, beginning with product and process design, and through product disposal

Inventory turnover

cost of goods sold/average inventory

weeks of supply

avg. inventory/cogs X 52

days of supplu

avg. inventory/cogs X 356

Lead Time

the time needed to respond to a customer order

Decoupling Point

Point at which inventory is stored, which allows SC to operate independently

lean manufacturing

the production of goods using less of everything compared to mass production, increases customer service

Production Process

source, make, deliver

make to stock

serve customers from finished goods inventory

assemble to order

preassembled components, subassemblies, and modules are put together in response to a specific customer order

make to order

product is built directly from raw materials and components in response to a specific customer order

engineer to order

Work with the customer to design and then make the product

Little's Law

inventory = throughput rate x flow time

Project

Product in fixed location, equipment is moved

workcenter

similar equipment grouped together

manufacturing cell

produces similar products

assembly line

progressive steps

continuous process

liquids

work cycle time

c = production time per day / output per day

efficiency

total /# of workstations (workcycle time)

breakeven (demand)

fc/$-vc

breakeven (revenue)

fc/1-vc/$

Single Period

one time purchase

fixed order quantity

maintain same stock, resupply when inventory reaches a certain level

fixed time period

order at same intervals of time

independent demand

the demands for various items are unrelated to each other

dependent demand

the need for any one item is a direct result of the need for some other item, usually an item of which it is a part

logistics

the process of coordinating and moving material from one location to another

hub and spoke systems

the sole purpose of the warehouse (the hub) is sorting goods to consolidation areas, where each area is designed for shipment to a specific location

cross docking

large shipments are broken down into small shipments for local delivery in an area and thus minimizes inventory in the warehouse

International logistics

all functions concerned with the movement of materials and finished goods on a global scale

Third-party logistics company

an outside company used to manage all or part of another company’s product delivery operations

Examples: FedEx, UPS, DHL

Highway (truck)

Great flexibility for moving goods to virtually any location not separated by water

Water (ship)

High capacity, relative low operation costs, slow, large areas are not accessible

Air

Fast but very expesnive to operate; small light, expensive items are most appropriate

Rail (trains)

Low-cost alternative; transit times can be long (slow) and may be subject to variability

Pipelines

Highly specialized and limited to liquids and gases; no packaging needed and low cost per mile

Hand Delivery

the last step in many supply chains; slow and costly activity

Proximity to Customers

Location Decision

Helps ensure that customer needs are incorporated into products; fast and frequent delivery (Just-in-time)

Business Climate

Location Decision

Can include presence of similar-sized businesses, in the same industry, and other foreign companies

Total Cost

Location Decision

The objective is to select a site with the lowest total cost (includes labor, transportation, energy, taxes, etc.)

Infrastructure

Location Decision

Adequate road, rail, air, and sea transportation along with energy and telecommunications

Quality of Labor

Location Decision

The educational and skill levels of the labor pool must match the company’s needs

Suppliers

Location Decision

A high-quality and competitive supplier base makes a given location suitable

Other Facilities

Location Decision

The location of other plants or distribution centers of the same company can influence a location decision

Free Trade Zones

Location Decision

A closed facility into which foreign goods can be brought without being subject to customs requirements

Political Risk, Corruption, and other Risks

Location Decision

The fast-changing geopolitical scenes in numerous nations present challenging opportunities

Corruption can be another challenge

Government Barriers

Location Decision

Barriers to enter and locate in many countries are being removed through legislation

Trading Blocs

Location Decision

Agreements that influence location decisions, both within and outside trade bloc countries (USMCA)

Environmental Regulation

Location Decision

The environmental regulations that impact a certain industry in a given location should be included

Host Community

Location Decision

The host community’s interest in having the plant in its midst is a necessary part of the evaluation process

Competitive Advantage

Location Decision

The base location should provide the company with a competitive advantage

Service Facility

Multiple sites close to customers

Location decision closely tied to the market selection

Decision more about maximizing profits than minimizing costs

Factor-Rating System

• Most widely used

• List of factors is developed

• Range of possible points assigned to each factor

• Each site is rated against each factor

• The sums of assigned points for each site are computed

• The site with the most points is selected

Transporation Method

Special linear programming method

Seeks to minimize costs of shipping n units to m destinations or it seeks to maximize profit of shipping n units to m destinations

Specialized equipment

“Special purpose” - may require a higher initial investment (high FC), but can perform more efficiently over the long run (lower VC)

General equipment

“General purpose” - often has a lower initial investment (lowered FC), but lacks the efficiency of a specialized machine (increased VC)

Demand break even point

Fixed Cost (FC) / (Price - Variable Cost) → how many units does it need to break even for demand

Revenue break even point

Fixed Cost / (1 - Variable Cost/Price)