CPIM

For the past six months, a manufacturer has experienced deviations from its forecasts. The monthly forecast deviations for the past six months are as follows: 15, -6, 12, 8, -18, and -4 units. What is the mean absolute deviation for these months?

To calculate the mean absolute deviation, first make each deviation positive and sum these absolute values: 15 + 6 + 12 + 8 + 18 + 4 = 63 units. Next divide by the number of periods (six): 63/6 = 10.5.

Which of these terms refers to activities that provide present benefit without compromising the needs of future generations?

Sustainability refers to activities that provide present benefit without compromising the needs of future generations.

make-or buy decision

The act of deciding whether to produce an item internally or buy it from an outside supplier.

manufacturing philosophy

The set of guiding principles, driving forces, and ingrained attitudes that helps communicate goals, plans, and policies to all employees and that is reinforced through conscious and subconscious behavior within the manufacturing organization.

manufacturing process

The series of operations performed upon material to convert it from the raw material or a semi finished state to a state of further completion.

order qualifiers

Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace.

Shipping manifest

A document that lists the pieces in a shipment.

Advance ship notice (ASN)

An electronic data interchange (EDI) notification of shipment of product.

Duty

A tax levied by a government on the importation, exportation, or use and consumption of goods.

Tariff

An official schedule of taxes and fees imposed by a country on imports or exports.

Waybill

A document containing a list of goods with shipping instructions related to a shipment.

Bill of lading (uniform) (B/L)

A carrier's contract and receipt for goods the carrier agrees to transport from one place to another and to deliver to a designated person. In case of loss, damage, or delay, It is the basis for filing freight claims.

Freight forwarder

The "middle man" between the carrier and the organization shipping the product. Often combines smaller shipments to take advantage of lower bulk costs.

Customs broker

A person who manages the paperwork required for international shipping and tracks and moves the shipments through the proper channels.

reverse logistics

a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

remanufacturing

1) An industrial process in which worn-out products are restored to like-new condition. 2) The manufacturing environment where worn-out products are restored to like-new condition.

green reverse logistics

the responsibility of the supplier to dispose of packaging materials or environmentally sensitive materials such as heavy metals.

Product

This specifies the product characteristics, which may need to be designed for ease of shipping and handling.

Price

Price is the price of the product. Inventory carrying costs are calculated partly based on price, with higher-priced objects falling into the A or B categories of the ABC classification and getting more management attention for security, materials handling, and so on.

Place

This is where the goods will be located for sale, or market geography, the physical distribution channel(s) that will be used to get them there, and the sales channels customers can use to place orders (e.g., online or retail). The scope of distribution could be local, regional, national, or global, which will require more and more sophisticated management. Each entity in the distribution channel(s) used expects to make a profit and so adds to the total cost. The benefit to customers needs to be high enough that they are willing to pay extra for the services.

Promotion

includes advertising and sales force and reseller incentives. Channel partners can therefore be involved in promotion. Also, promotions can result in increased sales volumes in various locations, and physical distribution needs information on promotions to plan for inventory to be in the right locations in the right amounts.

decentralized inventory control

inventory decision making exercised at each stocking location for SKUs at that location

centralized inventory control

inventory decision making for all stock keeping units exercised from one office or department for an entire company

distribution requirements planning (DRP)

The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are "exploded" via MRP logic to become gross requirements of the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies.

time-phased order point (TPOP)

MRP-like time planning logic technique for independent demand items, where gross requirements come from a forecast, not via explosion.

Net Requirements

Gross Requirements−Scheduled Receipts−Prior Projected Available

Net Requirements (with Safety Stock)

Gross Requirements−Scheduled Receipts−(prior Projected Available−Safety Stock)

transportation

the function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization.

traffic

a department or function charged with the responsibility for arranging the most economic classification and method of shipment for both incoming and outgoing materials and products.

terminals

In transportation, locations where carriers load and unload goods to and from vehicles.

Line-haul costs

Basic costs of carrier operation to move a container of freight, including drivers' wages and usage depreciation

Total line-haul costs

vary with the distance shipped and the cost per mile,

pickup and delivery costs

Carrier charges for each shipment pickup and the weight of that shipment. Costs can be reduced if several smaller shipments are consolidated and picked up in one trip.

terminal-handling charges

Carrier charges dependent on the number of times a shipment must be loaded, handled, and unloaded.

Billing and collecting costs

These are the fixed administrative costs related to paying for the services described above. Fewer shipments or fewer pickups and deliveries will reduce these costs (similar to ordering costs).

quantity discount

a price reduction allowance determined by the quantity or value of a purchase.

backhauling

The process of a transportation vehicle returning from the original destination point to the point of origin.

Detention

Carrier charges and fees applied when truck trailers are retained beyond a specified loading or unloading time.

Demurrage

The carrier charges and fees applied when rail freight cars and ships are retained beyond a specified loading or unloading time.

break-bulk

Dividing truckloads, railcars, or containers of homogeneous items into smaller, more appropriate quantities for use

freight consolidation

The grouping of shipments to obtain reduced costs or improved utilization of the transportation function

Intermodal transport

Shipments moved by different types of equipment combining the best features of each mode

Private carrier

a group that provides transportation exclusively within an organization

For-hire (public) carrier

These are carriers that offer transportation services to others.

Common carrier

Transportation available to the public that does not provide special treatment to any one party and is regulated as to the rates charged, the liability assumed, and the service provided

Contract carrier

a carrier that does not serve the general public, but provides transportation for hire for one or a limited number of shippers under a specific contract.

truckload (TL) carriers

carriers that deliver/charge only for full truckload shipments.

warehousing

the activities related to receiving, storing, and shipping materials to and from production or distribution locations.

distribution center (DC)

Typically a finished goods warehouse designed for demand-driven rapid distribution to retailers (retail distribution centers), wholesalers, or direct shipments to customers (order fulfillment centers)

distribution warehouse

A facility where goods are received in large-volume uniform lots, stored briefly, and then broken down into smaller orders of different items required by the customer. Emphasis is on expeditious movement and handling.

materials handling

Movement and storage of goods inside the distribution center. This represents a capital cost and is balanced against the operating costs of the facility.

Unitization

In warehousing, the consolidation of several units into larger units for fewer handlings.

Unit load

A shipping unit made up of a number of items; bulky material arranged or constrained so the mass can be picked up or moved as a single unit

cross-docking

The concept of packing products on incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination

Receiving

the function encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.

Put-away

Put-away involves moving goods to picking or storage areas as directed by the WMS and recording the completion of the move and the storage location.

Storage

Activities performed on goods in storage include physical security, inventory accuracy auditing such as cycle counting, and authorized relocations.

Order picking

selecting or "picking" the required quantity of specific products for movement to a packaging area (usually in response to one or more shipping orders) and documenting that the material was moved from one location to shipping.

Packaging

adding industrial packaging to protect shipments from damage.

Post-manufacturing services

Postponement and other delayed manufacturing strategies may require light manufacturing to assemble-to-order or other delayed differentiation, such as adding the power supply, documentation, and packaging for a given country.

Staging (marshalling)

assembling individual orders, which may include rearranging pallets or other unit loads; generating pallets, cartons, or other unit loads from individual items; checking orders for completeness; rectifying omissions or errors; and recording backorders or other variances in both shipping documents and system records.

Shipping

verifying orders, preparing bills of lading and other documents, and loading outgoing vehicles in the proper sequence as directed by the WMS or TMS. (Vehicles may be traveling to more than one destination and need to be unloaded in the right order.)

Discrete order picking

A method of picking orders in which the items on one order are picked before the next order is picked.

Batch picking

A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the individual orders are constructed.

Wave picking

A method of selecting and sequencing picking lists or items to minimize the waiting time of the delivered material. Shipping orders may be picked in waves combined by common carrier or destination, and manufacturing orders in waves related to work centers.

Zone

The specific warehouse location assigned to an order picker

Zone picking

A method of subdividing a picking list by areas within a storeroom for more efficient and rapid order picking.

picking list

a document that lists the material to be picked for manufacturing or shipping orders.

Fixed-location storage

A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse.

Random-location storage

A storage technique in which parts are placed in any space that is empty when they arrive at the storeroom.

pallet positions

A calculation that determines the space needed for the number of pallets for inventory storage or transportation based on a standard pallet size.

Bar code

A series of alternating bars and spaces printed or stamped on parts, containers, labels, or other media, representing encoded information that can be read by electronic readers

Radio frequency identification (RFID):

A system using electronic tags to store data about items. Accessing or retrieving this data is accomplished through a specific radio frequency and does not require close proximity or line-of-sight access.

bonded warehouse

Buildings or parts of buildings designated by the US Secretary of the Treasury for storing imported merchandise, operated under US Customs supervision.

An organization offers free standard shipping and charges less than cost for faster shipping. How can this service be characterized?

a)Adds place value and time value.

b)Adds a non-value added waste.

c)Adds a transaction channel.

d)Adds capacity-constrained resources.

a. Free or reduced cost shipping adds place value by locating goods where customers want them and time value by making the goods available when they want them. This organization is adding these values at reduced or no extra cost to the consumer presumably to increase market share by making these part of order qualifiers or order winners depending on what the competition offers.

When should a manufacturer sell to a retailer directly even though they currently sell to a wholesaler who then sells to the retailer?

a)When the wholesaler adds more cost than the value they provide.

b)When the manufacturer can do so, it should do so.

c)The manufacturer should not create these issues if it no longer holds title to the product.

d)When the retailer can be shipped to directly at the same cost per truckload.

a. Channel partners expect to make a profit but also provide services. If the value of these services is greater than the cost of the partner, the partner is value added and should be included in the supply chain. If the opposite is true, it would be better to omit this partner

Due to the 40-day lead time for container ship as opposed to a 2-day lead time for air, the much higher carrying cost for the water option for a given material makes air only slightly more expensive. What else might be considered that could further promote use of the air option?

a)Ability to ship more units per load.

b)Ability to base more production on forecasts than actual orders.

c)Ability to increase product quality.

d)Ability to reduce safety stock levels.

d. Drastically reducing lead times also allows organizations to reduce safety stocks because the lead time is shorter and therefore the demand during the lead time is less. Air transport also allows more production to be based on actual orders rather than forecasts and can enhance customer service

Which would reduce materials handling costs?

a)Shipping by full truckload rather than less-than-truckload

b)Manually moving materials near at hand rather than going to get a forklift.

c)Using traditional warehousing rather than cross-docking.

d)Shipping directly to customers rather than using a break-bulk center.

a. Full truckload shipments require less handling than less-than-truckload; cross-docking reduces handling at the distribution centers of smaller orders assembled for delivery to the next level in the distribution system

Use the information on the planned order releases from distribution centers (DCs) A and B in the figure below to complete the abbreviated central supply planning distribution requirements planning grid. What is Central Supply's projected available balance for week 3?

a)-100 units

b)100 units

c)400 units

d)500 units

c. Since the DC information shows planned order releases already, the offsetting from the planned order receipts is not shown for these DCs and the orders can be directly summed as the gross requirements for each week for central supply. After that, calculate the projected available per week. Projected Available = Prior Period Projected Available + Planned Order Receipts - Gross Requirements. Week 1: 500 units + 0 units - 100 units = 400 units. Week 2: 400 units + 0 units - 300 units = 100 units. Week 3: 100 units + 0 units - 200 units = -100 units. Whenever the projected available would go negative, schedule a planned order receipt in that week for the order quantity amount. Therefore add 500 units in the planned order receipt for week 3 and using offsetting of 2 weeks, also add a planned order release for 500 units in week 1. Finally recalculate the week 3 projected available: 100 units + 500 units - 200 units = 400 units

Which choice can conflict with a desire to minimize transportation costs?

a)Reducing in-transit time.

b)Ensuring on-time delivery.

c)Shipping in full truckloads.

d)Using a consolidation center.

a. Reducing in-transit time typically requires using faster modes of transport, which will raise transportation cost

Which tends to increase when shipments are by full truckload rather than less-than-truckload?

a)Pickup and delivery costs

b)Materials handling costs

c)Billing costs

d)Carrying costs

d. While full truckloads (or full car or container loads) reduce pickup and delivery costs, handling costs, and billing costs, it does create lot-size inventory (cycle stock) which increases carrying costs.

What is the key to reducing the organization's overall terminal handling costs for a time period?

a)Maximize the weight of individual shipments.

b)Use the air transportation mode more often.

c)Use a customs broker.

d)Maximize the number of shipments handled by the same carrier.

a. By increasing the weight of individual shipments, creating more TL shipments, there will be fewer shipments during a particular time period and therefore lower terminal handling, pickup and delivery, and billing and collecting costs

An organization is deciding whether it is worth using a third-party break-bulk distribution center (DC) located near a certain market. Using the information in the figure below, which is the lowest total annual cost between direct shipments to customers versus using the DC?

a)$900,000

b)$1,440,000

c)$1,620,000

d)$1,800,000

b. In this case, using the break-bulk DC will allow full truckload shipments that cut the line haul portion of the transportation cost in half. Despite the added carrying cost and pickup and delivery cost, this method still saves the organization $360,000 per year over the direct shipment alternative ($1,800,000 - $1,440,000 = $360,000).

Which is less expensive for long-distance line haul of large, bulky loads and why?

a)Rail is less expensive than road because rail does not need to add as much packaging.

b)Road is less expensive than rail because road does not need to add pickup and delivery cost.

c)Rail is less expensive than road because most of rail's operating cost is a fixed cost.

d)Road is less expensive than rail because most of road's operating cost is a variable cost

c. Most of the operating cost for a railway is fixed; therefore, large volume can be moved at very reasonable prices per carrying capacity

Which factor favors use of the road mode of transport over other modes?

a)Dispersed market

b)Lowest carrying cost

c)Low variable costs

d)High capital cost

a. Road is best suited for moving goods to a dispersed market because they can provide door-to-door service so long as there is a suitable road

Which factor favors air transport?

a)Highly perishable goods

b)Dense goods

c)Normal operating conditions

a. Highly perishable goods with a short shelf life are often shipped by air, for example, fresh seafood. Air is also best for light, non-bulky, valuable goods and for emergency shipments.

Assuming demand is stable and continuous, approximately what percentage of storage space will be occupied by goods in a distribution center at any given time if it uses a fixed-location system?

a)50 percent

b)80 percent

c)90 percent

d)100 percent

a. If demand for items is stable and continuous, then stock level will draw down steadily and the average level will only be 50 percent. Because its space is reserved, other items cannot be stored there

What is the primary reason organizations choose to use a floating-location system for warehouses?

a)To minimize warehouse management system costs.

b)To increase picking speed.

c)To decrease materials handling costs.

d)To maximize cube utilization.

d. Because any item can be assigned to any empty space, a floating location system improves cube utilization. However, using this type of system generally requires using a warehouse management system to direct put away and picking. Either a fixed location system or a floating location system could be designed to minimize materials handling costs or picking speed

Which is a major objective of distribution inventory management?

a)To provide the required level of customer service.

b)To minimize the cost of warehouse space.

c)To always have enough of everything on hand so there are no stockouts.

d)To minimize labor costs.

a. Answer a is a major objective of distribution inventory management; other objectives include minimizing the cost of transportation and handling and interacting with the factory to minimize scheduling problems. Answer b, c, and d are worthy goals, but not major objectives of distribution inventory management

Which is a function of physical distribution?

a)Purchasing

b)Protective packaging

c)Production control

d)Physical supply

b. The activities of physical distribution include transportation, distribution inventory, warehousing, material handling, and protective packaging

Which of the four Ps influences how physical distribution planning and execution addresses product volume, location of demand, and demand fluctuations?

a)Product

b)Price

c)Place

d)Promotion

d. Answer d (promotion) influences product volume, location of demand, and demand fluctuations. Answer a is incorrect because product is associated with such issues as order-winning and order-qualifying characteristics. Answer b is incorrect because price is associated with such issues as inventory costs. Answer c is incorrect because place is associated with such issues as market geography and distribution or sales channels.

Considering the service desired and the relative cost of the items, which would most likely be shipped by road for a fairly long line haul portion of a trip?

a)Regular shipment of cut flowers direct to a florist shop.

b)Regular shipments of iron ore direct to a foundry.

c)Regular shipments of grain direct to a mill.

d)Emergency maintenance parts direct to an auto plant.

a. Answer a would be appropriate to ship by truck because road transportation offers door-to-door service and fast service. Answers b and c would be better shipped by rail due to their high weight and bulk. Answer d would be better shipped by air for a faster response, depending on distance.

Which is the factor that primarily determines by how much total line haul costs will vary?

a)Distance moved

b)Packaging

c)Customer discounts

d)Perishability of goods

a. Answer a is correct because total line haul costs vary with the distance moved. Answers b, c, and d are incorrect, as line haul costs do not depend on them.

demand management

The function of recognizing all demands for goods and services to support the marketplace

marketing strategy

The basic plan the marketing function expects to use to achieve its business and marketing objectives in a particular market.

four P's

A set of marketing tools to direct the business offering to the customer. The four Ps are product, price, place, and promotion.

total cost curve

In cost-volume-profit (breakeven) analysis, the total cost curve is composed of total fixed and variable costs per unit multiplied by the number of units provided. Breakeven quantity occurs where the total cost curve and total sales revenue curve intersect.

break-even point

The level of production or the volume of sales at which operations are neither profitable nor unprofitable.

Break even in units formula

Fixed Cost/(Price per unit-Variable Cost per unit)

customer relationship management (CRM)

A marketing philosophy based on putting the customer first.