scm test 2

Bottleneck

The part of a process with the lowest capacity, which restricts overall process flow and reduces efficiency.

Impact of allocating resources to a bottleneck

Increases the bottleneck’s capacity, improving the throughput and efficiency of the entire process.

Critical path

The sequence of activities that determines the minimum project completion time; delays in this path delay the project.

Critical flow time

The total time needed to complete all activities along the critical path without delays.

Identifying a bottleneck

Identify the resource or stage with the lowest capacity relative to demand; this is where work accumulates and slows the process.

Little’s Law

Relation of the number of items in a system to arrival rate and lead time: L=λ×W.

Core principles of lean operations

Reducing waste, continuous improvement, optimizing flow, and respecting people to enhance process efficiency and customer value.

Eight types of waste in lean thinking (DOWNTIME)

Defects, Overproduction, Waiting, Non-utilized talent, Transportation, Inventory, Motion, Extra processing.

5S system

A workplace organization method: Sort, Set in order, Shine, Standardize, and Sustain.

Learning curve

Represents how process time decreases with experience, showing how repetitive work improves efficiency.

Calculating time with learning curve

Tn=T1×n^b, where T1 is time for the first task, n is task number, and b is the learning curve exponent.

Cycle time

The average time to complete one unit, calculated by dividing total time by the number of units completed.

Z-score in cycle time analysis

Shows the number of standard deviations from the mean, estimating the probability of meeting certain cycle times.

Quality

Meeting or exceeding customer expectations through reliability, durability, and consistency in products or services.

Control charts

Tools used to monitor process stability and identify whether a process is in control by tracking variations over time.

Cp in process capability

Measures a process’s ability to meet specification limits, calculated as Cp=(USL−LSL)/(6σ).

Cpk in quality management

A measure of process capability adjusted for centering; a higher Cpk means the process is more capable of meeting specifications.

Control chart limits

Set at three standard deviations above and below the mean to capture natural process variability.

Total Quality Management (TQM)

A continuous effort to improve quality at every stage, involving all employees and focusing on meeting customer needs.

Six Sigma

A data-driven approach to reduce defects and improve quality, aiming for a process mean within six standard deviations of specifications.

In control process

A process is in control if it operates within established control limits without unusual variation.

Importance of forecasting

Enables businesses to anticipate demand, optimizing inventory, staffing, and production to meet customer needs efficiently.

Qualitative vs Quantitative forecasting

Qualitative forecasting relies on expert opinion; quantitative forecasting uses historical data and statistical models.

Moving average in forecasting

Averages a set number of past periods to smooth demand data, useful for stable demand patterns.

Exponential smoothing

Gives more weight to recent data points, adjusting quickly to changes and reducing forecast error.

Sales and Operations Planning (S&OP)

Aligns demand forecasts with production capabilities to balance resources and meet demand efficiently.

Forecast error calculation

The difference between actual and forecasted demand, often calculated as Mean Absolute Deviation (MAD) or Mean Squared Error (MSE).

Buying vs Procurement vs Strategic sourcing

Buying is the act of purchasing; procurement involves the acquisition process; strategic sourcing focuses on maximizing long-term supplier value.

Global sourcing risks and benefits

Benefits include cost savings and access to innovation; risks include longer lead times and quality issues.

Total Cost of Ownership (TCO)

Includes all costs over a product’s lifecycle, such as acquisition, usage, and maintenance.

Make-or-buy decision

The choice between producing goods internally or purchasing them from an external supplier.

Profit Leverage Effect

The impact of cost savings on profit; a dollar saved in purchasing improves profit more than an additional dollar in sales.

Chase strategy in aggregate planning

Matches production rates to demand, minimizing inventory but potentially causing workforce fluctuations.

Level strategy in aggregate planning

Keeps production constant, using inventory to absorb demand fluctuations.

Pros and cons of a chase strategy

Pros: Low inventory costs, responsive to demand changes. Cons: High labor costs, workforce morale issues.

Advantages and disadvantages of a level strategy

Pros: Workforce stability and planning simplicity. Cons: High inventory costs, risk of stockouts in demand surges.

Hybrid strategy in aggregate planning

Combines chase and level strategies, using workforce adjustments and inventory as needed.

Importance of inventory in business

Meets demand, manages supply variability, and ensures production continuity, impacting customer satisfaction.

Calculating Economic Order Quantity (EOQ)

EOQ=√(2DS/H) where D is demand, S is order cost, and H is holding cost per unit.

Reorder Point (ROP) formula

ROP=Lead Time×Average Daily Demand; accounts for demand variability with safety stock.

Calculating safety stock

Safety stock = Z×σLT, where Z is the Z-score for desired service level, and σLT is the standard deviation during lead time.

Z-scores in inventory

Indicate the number of standard deviations needed to achieve a specific service level.

Total inventory cost calculation

Includes order costs, holding costs, and stockout or backorder costs.

Service level in inventory management

The probability that demand will be met without stockouts during lead time.