Operations Management Final

annual ordering cost

F(d/q)

annual product cost

d*c

economic order quantity

root of (2df/ch)

reorder point

lead time * d

number of orders per year

d/q

cogs

d*c

average inventory at cost

(q/2)c

inventory turnover

cogs/avg inv at cost

lean system

system that continually searches for and eliminates waste and delays throughout the value chain

overproduction

type of waste where they manufacture an item before it’s needed, creating excessive lead times and inventory

inappropriate processing

type of waste where they use expensive equipment when simpler machines would work

waiting

type of waste where they waste time when product isn’t being moved or processed

transportation

type of waste where excessive movement and material handling of product between processes

motion

type of waste where unnecessary effort related to the ergonomics of bending, stretching, etc, that leads to fatigue

inventory

type of waste where excess inventory hides problems, consumes space, increases lead times, and inhibits communication

defects

type of waste where quality defects result in rework and scrap and add wasteful costs to the system

underutilization of employees

type of waste where failure to learn from/capitalize on employee knowledge/creativity, impeding on long term efforts to eliminate waste

annual holding cost

CH(q/2)

just in time philosophy

philosophy stating to only produce what’s needed, and to make problems visible+act immediately when they occur

push system

type of system that is supplier driven and pushy of products. ex: car manufacturer

pull system

type of system that is customer driven, and pulls products to meet demand. ex: coffee shop making drinks post order

raw material inventory

unprocessed, purchased inputs

work in process inventory

partially processed goods. raw materials have been transformed but not completed

finished goods inventory

completed product ready for shipment or sale