Supply Chain Midterm

[Ch.1] What is Operations Management (OM)?

Managing the processes used to design, supply, produce, and deliver valuable goods and services to customers.

[Ch.1] What is a "process"?

A system of activities that transforms inputs into valuable outputs.

[Ch.1] Name 3 contrasts between goods and services.

Goods: tangible, can be inventoried, capital-intensive, long lead time. / Services: intangible, cannot be inventoried, labor-intensive, short lead time.

[Ch.1] What are the 3 external groups operations managers interact with?

Customers, Suppliers, and Stakeholders.

[Ch.1] In a supply chain, what is a "tier" vs. an "echelon"?

Tier = upstream supplier stages. / Echelon = downstream distribution stages.

[Ch.1] In Fisher’s framework, what supply chain type fits a FUNCTIONAL product (predictable demand)?

An Efficient supply chain — minimize cost, high utilization.

[Ch.1] In Fisher’s framework, what supply chain type fits an INNOVATIVE product (unpredictable demand)?

A Responsive supply chain — buffer stock/capacity, fast, flexible.

[Ch.1] What does "mismatch" mean in Fisher’s framework?

Pairing the wrong SC type with the product: functional product + responsive SC, OR innovative product + efficient SC. (Mismatch is about fit, not about good/bad SC.)

[Ch.1] List the 4 internal parts of a process.

Activities, Inputs/Outputs/Flows, Process structure, Management policies.

[Ch.3] What is "Juran’s Law" (the 85/15 rule)?

85% of process problems are systemic (process-caused), only 15% are human error.

[Ch.3] Define Maximum capacity.

The highest possible output rate under ideal, short-term conditions.

[Ch.3] Define Effective capacity.

The achievable output rate under normal, sustained conditions.

[Ch.3] Write the utilization formula.

Utilization = Actual Output ÷ Capacity (max or effective) × 100%

[Ch.3] Can utilization relative to EFFECTIVE capacity exceed 100%?

Yes — it means you’re running harder/faster than the normal sustainable rate, not an error.

[Ch.3] What are 4 drivers of economies of scale?

Fixed-cost spreading, non-proportional equipment costs, purchasing power, the learning curve.

[Ch.3] List the 5 principles of Theory of Constraints (TOC).

1) Every process has a constraint\n2) Every process has variance that consumes capacity\n3) Must manage the process as a system\n4) Performance measures are crucial\n5) Must continuously improve

[Ch.3] What is a "bottleneck"?

The point in a process where demand meets or exceeds available capacity — the constraint.

[Ch.3] Flow time vs. Cycle time — what’s the difference?

Flow time = total time for ONE unit through the WHOLE process. / Cycle time = time to process one unit at a SINGLE station.

[Ch.3] What does Little’s Law relate?

Flow time, Inventory, and Throughput rate — more inventory in the system means a longer flow time.

[Ch.3] Name the 5 process activity types.

Operation, Transportation, Inspection, Delay, Storage.

[Ch.3] What does DMAIC stand for?

Define → Measure → Analyze → Improve → Control.

[Ch.3] What does PDCA stand for?

Plan → Do → Check → Act.

[Ch.5] Who developed the Product-Process Matrix?

Hayes and Wheelwright.

[Ch.5] The Product-Process Matrix plots process structures against what two axes?

Output volume vs. variety (flexibility).

[Ch.5] List the 5 original process structures on the diagonal, low volume/high variety → high volume/low variety.

Project → Job Shop → Batch → Repetitive → Continuous Process.

[Ch.5] What 2 process structures emerged more recently, off the original diagonal?

Cellular manufacturing and Mass customization.

[Ch.5] PROJECT process: inputs, output, example?

Inputs: flexible employees/equipment. Output: unique, one-of-a-kind. Example: custom home, designing a video game.

[Ch.5] JOB SHOP process: inputs, output, example?

Inputs: highly skilled flexible workers, general-purpose equipment, high variety of materials. Output: customized, low volume. Example: auto repair, beauty salon.

[Ch.5] BATCH process: inputs, output, example?

Inputs: moderately flexible employees/equipment, some common materials. Output: moderate volume and variety. Example: bakery, cinema.

[Ch.5] What characteristic is UNIQUE to Batch (not Job Shop)?

Dominant flow patterns + time needed to set up BETWEEN BATCHES (setup time). Job Shop instead has high variety of flow patterns + challenging scheduling.

[Ch.5] REPETITIVE process: inputs, output, example?

Inputs: low-skilled workers doing limited activities, many common materials. Output: standard product w/ some options (e.g. color). Example: appliances, automobiles.

[Ch.5] CONTINUOUS process: inputs, output, example?

Inputs: highly skilled process engineers, highly specialized equipment. Output: high volume commodities, little variety. Runs 24/7 — line stoppages very costly. Example: aluminum cans, gasoline.

[Ch.5] What are the 4 cells of the Service Process Matrix (Schmenner)?

Low labor/low customization = Service Factory (airlines, hotels) / Low labor/high customization = Service Shop (hospitals) / High labor/low customization = Mass Service (retail banks) / High labor/high customization = Professional Service (doctors, lawyers)

[Ch.5] Define the 4 order fulfillment strategies: ETO, MTO, ATO, MTS.

ETO = Engineer to Order (fully custom design) / MTO = Make to Order (similar design, customized in production) / ATO = Assemble to Order (built from standard components) / MTS = Make to Stock (made/held in inventory ahead of orders)

[Ch.5] Name the 4 operations layouts.

Fixed position (product doesn’t move — ships), Functional (groups similar resources — hospital), Product (sequential, matches flow — assembly line), Cellular (small lines for similar-process families).

[Ch.5] Front office vs. back office?

Front office = customer-facing. / Back office = behind the scenes, not seen by customer.

[Ch.5] Write the Takt Time formula.

Takt time = Available production time ÷ Customer demand

[Ch.5] Write the Minimum # of Stations formula. What’s the rounding rule?

Minimum stations = Total task time ÷ Takt time — always ROUND UP.

[Ch.5] Write the Efficiency formula for a balanced line.

Efficiency = Total task time ÷ (Actual # of stations × Takt time)

[Ch.5] Rule: how should Cycle time compare to Takt time?

Cycle time must be ≤ Takt time, or that station becomes a bottleneck.

[Ch.5] CALC: Total task time = 5 min, 4 stations, takt time = 3.5 min/station. Efficiency?

5 ÷ (4 × 3.5) = 5 ÷ 14 = 35.71%

[Ch.5] Name 2 real benefits of Blockchain in operations (per the slides).

Fraud prevention (from being a secure/tamper-proof record) and Improved visibility (transparent, shared transaction/ownership record).

[Ch.5] Name the 4 "capability enabling technology" categories.

Decision Support, Processing, Communications, Integrative.

[Ch.6] Define Product Quality, Design Quality, and Conformance Quality.

Product Quality = fitness for consumption, meeting customer needs. / Design Quality = match between designed features and customer requirements. / Conformance Quality = meeting design specifications.

[Ch.6] Who are the 3 groups that "define quality"?

Customers, Company, Government.

[Ch.6] Name the 4 Cost of Quality (COQ) categories.

Prevention costs, Appraisal costs, Internal failure costs, External failure costs.

[Ch.6] Prevention costs vs. Appraisal costs — what’s the difference?

Prevention = stopping defects before they happen (training, improvement projects). / Appraisal = inspecting/testing to ASSESS quality levels (inspection staff, tools).

[Ch.6] Internal failure costs vs. External failure costs?

Internal = defects found BEFORE delivery (rework, scrap). / External = defects found AFTER delivery (warranty, recalls) — generally the most expensive.

[Ch.6] Match: "Variability is the source of most problems" — which thought leader?

Deming.

[Ch.6] Match: "Cost of quality analysis" + broadened quality definition — which thought leader?

Juran.

[Ch.6] Match: "Quality is free" / zero defects — which thought leader?

Crosby.

[Ch.6] Match: Kaizen, frontline worker insight — which thought leader?

Imai.

[Ch.6] What are the 3 "total" meanings in TQM (Total Quality Management)?

1) Quality determined by customer acceptance/use / 2) Quality management = org-wide activity, not just technical / 3) Requires total commitment from all employees

[Ch.6] What does ISO 9000 require?

Meeting customer requirements, meeting regulatory requirements, enhancing customer satisfaction, continuous improvement.

[Ch.6] Pareto analysis — what is it for?

Separating the "critical few" causes of problems from the "trivial many" — identifying the most frequent/impactful causes.

[Ch.6] Cause-and-effect (fishbone) diagram — what is it for?

Brainstorming tool to examine complex interrelationships and trace a problem back to root causes.

[Ch.6] Check sheet — what is it for?

A simple tool to collect/organize/display data to track frequency and location of problems.

[Ch.6] Process control chart — what is it for?

Monitoring process output over time to detect whether the process is operating within normally expected limits.

[Ch.6] Variable data vs. Attribute data?

Variable = quantifiable/numerical data. / Attribute = qualitative data/conditions.

[Ch.6] What does 6-Sigma quality correspond to (defects per million)?

About 3.4 defects per million units — the higher the sigma level, the far fewer defects.

[Ch.10] What is Supply Management (also called purchasing/procurement)?

The identification, acquisition, and management of inputs and supplier relationships.

[Ch.10] What is Sourcing?

The process used to acquire goods and services from suppliers.

[Ch.10] List the 6 Supply Management goals.

1) Timely availability of resources / 2) Identify/assess/mitigate supply chain risk / 3) Reduce total cost (not just purchase price) / 4) Enhance quality / 5) Access to technology/innovation / 6) Foster sustainability

[Ch.10] Name the 3 phases of Total Cost of Ownership (TCO) and what's in each.

Before: searching/visiting/evaluating/certifying suppliers. / During: purchase price + ordering/transporting/inspecting. / After: inventory, supply risk, downtime, defects, warranties, recalls, lost sales, reputation damage.

[Ch.10] Define Insourcing vs. Outsourcing.

Insourcing = inputs from within the firm. / Outsourcing = inputs from outside the firm.

[Ch.10] Why can outsourcing often be cheaper, even with the supplier's profit margin included?

The supplier produces for MANY clients, not just you — giving them better economies of scale (spread fixed costs, bulk buying, their own learning curve) than you'd get making it just for internal use.

[Ch.10] Why is outsourcing something close to a firm's CORE COMPETENCY especially risky?

You risk losing in-house expertise and exposing intellectual property/specifications — giving away the exact knowledge that makes your company valuable, not just "helping a competitor."

[Ch.10] In the insource/outsource cost comparison, is factory/equipment cost Fixed or Variable? Why?

Fixed — it doesn't change based on how many units you produce (1,000 units or 100,000 units, the factory costs the same to have).

[Ch.10] CALC — Insourcing: Fixed cost $800,000/yr, variable cost $8.50+$5.00/unit, volume 32,000 units. Total cost?

$800,000 + 32,000×($8.50+$5.00) = $800,000 + $432,000 = $1,232,000

[Ch.10] CALC — Outsourcing: Admin $50,000/yr + Inspection $65,000/yr + price $25.00/unit + shipping $1.50/unit, volume 32,000. Total cost?

$115,000 + 32,000×($25.00+$1.50) = $115,000 + $848,000 = $963,000

[Ch.10] FORMULA — Weighted performance score

Overall score = (Cost rating × cost weight) + (Quality rating × quality weight) + (Delivery rating × delivery weight)

[Ch.10] CALC — Insourcing ratings: Cost=3, Quality=5, Delivery=3. Weights: 0.2, 0.5, 0.3. Overall score?

3×0.2 + 5×0.5 + 3×0.3 = 0.6 + 2.5 + 0.9 = 4.0

[Ch.10] CALC — Outsourcing ratings: Cost=5, Quality=4, Delivery=3. Weights: 0.2, 0.5, 0.3. Overall score?

5×0.2 + 4×0.5 + 3×0.3 = 1.0 + 2.0 + 0.9 = 3.9

[Ch.10] Husky Corp lesson: Insourcing scored 4.0, Outsourcing scored 3.9, but outsourcing saved $249,000/yr. What's the takeaway?

A tiny performance score difference (0.1) does not justify a large cost difference — quantitative cost and qualitative score should both inform the decision, but aren't automatically weighted equally.

[Ch.10] What is Supply Category Management, and what is Spend Analysis?

Supply Category Management = identifying/developing strategies for groups of related purchases. / Spend Analysis = shows what is being purchased, at what prices, from which suppliers.

[Ch.10] Supply Base Optimization: what's the risk of TOO MANY suppliers vs. TOO FEW?

Too many = increases complexity, harder to manage. / Too few = increases shortage/price risk, limits innovation, and creates dangerous single-supplier dependency.

[Ch.10] Purchase requisition vs. Purchase specification — who is each one for?

Purchase requisition = internal (user tells supply management what's needed). / Purchase specification = external (supply management tells suppliers the technical requirements).

[Ch.10] List the 4 supplier selection methods.

Competitive Bidding, RFP/RFQ (Request for Proposal/Quotation), Online Reverse Auctions, Negotiation.

[Ch.10] What's the key mechanism difference between Competitive Bidding and an Online Reverse Auction?

Competitive Bidding = suppliers submit one bid (often sealed/blind). Reverse Auction = real-time, suppliers see competing bids and can resubmit lower bids repeatedly, driving price down further.

[Ch.10] Why is it called a "reverse" auction?

Normal auction: many buyers compete, price goes UP. Reverse auction: many SELLERS compete for one buyer, so price goes DOWN as suppliers underbid each other.

[Ch.10] What is the Weighted-Point Model used for?

A supplier selection method that establishes performance categories (e.g. cost, quality, delivery) weighted by importance, so a company can balance multiple factors instead of just picking the lowest price.

[Ch.10] Supplier Scorecard vs. Supplier Certification — what's the timing difference?

Certification = a one-time/periodic checkpoint ("are you qualified to work with us at all"). / Scorecard = ongoing, continuous tracking of performance over time.

[Ch.10] Define Information Sharing and Supplier Relationship Management (SRM).

Information Sharing = buyers/suppliers share timely data on demand, supply, delivery. / SRM = technology-enabled data gathering to manage strategic supplier relationships.

[Ch.3] FORMULA — Maximum Capacity (planning calc)

Max Capacity = shifts/day x days/week x weeks/month x units/shift (using IDEAL/best-case units per shift)

[Ch.3] FORMULA — Effective Capacity (planning calc)

Effective Capacity = shifts/day x days/week x weeks/month x units/shift (using NORMAL/realistic units per shift)

[Ch.3] FORMULA — Little's Law / Throughput (explicit formula)

Throughput (TH) = Volume / Time available

[Ch.3] FORMULA — Staffing / resources needed (4 steps)

1) Available minutes = hours/day x 60 / 2) Units/day/resource = Available minutes / time per unit / 3) Units at X% efficiency = Units/day/resource x efficiency% / 4) Resources needed = Target volume / Units at X% efficiency (round UP)