International Logistics Exam 2

Lean

A mindset + system that eliminates waste. Also, poses a risk because demand required

Toyota Production System (TPS)

The foundation of lean operations which discovered that inventory hides problems.

Changeover Time (SMED)

The time required to switch a process from making one product to another.

SMED (Single-Minute Exchange of Dies)

A method where Toyota reduced a 4-hour die change to 3 minutes.

Lean (The Philosophy)

Creating more value for customers with fewer resources.

Just-in-Time (JIT)

Produce only what is needed, when needed, in the amount needed.

Kanban (The Pull System)

A visual signal that authorizes production or movement of materials.

Purpose of Kanban

Prevent overproduction, maintain low inventory, create a pull system, and synchronize flow.

Kaizen (Continuous Improvement)

A concentrated effort to engage those involved in a process to focus on continuous incremental waste elimination.

Kaizen Blitz (Kaizen Event)

A short, intense, focused improvement event lasting 1-5 days.

Muda (Waste)

Any activity that uses resources but does NOT create value.

The 8 Wastes (D.O.W.N.T.I.M.E.)

Defects, Overproduction, Waiting, Not utilizing talent, Transportation, Inventory, Motion, Excess processing.

Mura (Inconsistency)

Unevenness in workload, processes, or flow.

Poka-yoke (Mistake-proofing)

Designing processes so mistakes cannot occur or are immediately visible.

Examples of Poka-yoke

Outlines on tool boards, color-coded walkways, USB that fits only one way.

Takt Time (The Heartbeat of Production)

The pace of production needed to meet customer demand.

TAKT Formula

TAKT = Available Minutes / Required Units.

Six Sigma

A data-driven, statistical methodology designed to reduce process variation.

Goal of Six Sigma

Zero defects and stable, predictable processes.

Common Cause Variation

Natural, random, unavoidable variation built into the process.

Special Cause Variation

Unexpected, unusual, assignable variation caused by a specific event.

Control Charts

Tools that monitor the mean and variation of a process.

OUT OF CONTROL Process Indicators

A point outside control limits, 2 of 3 points beyond 2σ, 4 of 5 points beyond 1σ, 8 points in a row on one side, any trend or pattern.

Costs of Quality

Quality always costs money, but poor quality costs much more.

Prevention Costs

Training, process design, supplier certification

Appraisal Costs

Inspection, testing, audits

Internal Failure Costs

Scrap, rework, downtime

External Failure Costs

Returns, recalls, warranty claims, lawsuits, lost customers

Key insight on costs

Investing in prevention + appraisal reduces failure costs dramatically.

Ishikawa (Fishbone) Diagrams

Used during PDCA or DMAIC to identify all possible causes of variation.

People (6 Ms)

Consider everyone who touches the process. What are the sources of human error?

Methods (6 Ms)

Look at every aspect of the process. How is it performed?

Machines (6 Ms)

Evaluate the equipment and technology used in the process.

Materials (6 Ms)

Assess ALL of the materials used in the process.

Measurements (6 Ms)

Ask, 'What data do you have to help you better understand process relationships and performance?'

Environment (6 Ms)

Question how environmental conditions influence the process.

Purpose (6 Ms)

Break the problem into components → find root causes → fix permanently.

ISO 9000

ISO checks whether your organization follows a quality system.

ISO 9000 ensures

Documented processes, consistent execution, continuous improvement, fact-based decisions, customer focus, supplier partnerships.

Process Capability - Cp

Cp = (USL - LSL) / 6σ

Interpretation of Cp

Cp ≥ 1.33 → acceptable; Cp ≥ 1.5 → very good; Cp < 1.0 → not capable.

Process Capability - k

k = |T - μ| / ((USL - LSL)/2)

Process Capability - Cpk

Cpk = Cp(1 - k)

Interpretation of Cpk

Cpk ≥ 1.5 → capable; Cpk < 1.0 → not capable.

Product Quality Dimensions

Performance, Features, Reliability, Conformance, Durability, Serviceability, Aesthetics, Perception.

Service Quality Dimensions

Tangibles, Reliability, Responsiveness, Assurance, Empathy.

BCG Global Manufacturing Cost-Competitiveness Index

Measures manufacturing wages, productivity, energy costs, currency exchange rates.

Key insights on cost-competitiveness

U.S. = 100 (baseline); China ≈ 96; Mexico ≈ 84; Germany ≈ 120.

Market Chasers

Go global to grow revenue, not reduce cost.

Reasons companies chase markets

Growth, know-how, risk reduction, prevent cross-subsidization, avoid protectionism, logistics, commitment signaling.

Multicriteria Analyses (Weighted Scorecards)

Tool managers use to choose countries, regions, sites, suppliers, partners.

6-step process for multicriteria analysis

Decide criteria, set weights, define scoring system, evaluate options, calculate weighted scores, after-action + sensitivity analysis.

Resource Chasers

Go global to access better or cheaper inputs.

Low-cost labor

Labor that is inexpensive and often sought by companies.

Raw materials

Basic materials used in the production of goods.

Technology

Tools and systems used to improve production and efficiency.

Specialized skills

Unique abilities required for specific tasks or industries.

Supplier clusters

Geographic concentrations of suppliers that provide similar goods.

Total cost approach

A method that considers all costs associated with sourcing, not just purchase price.

Logistics cost

Expenses related to the transportation and storage of goods.

Lead times

The time taken from placing an order to receiving it.

Tariffs

Taxes imposed on imported goods.

Currency risk

The potential for loss due to fluctuations in currency exchange rates.

Supply Market Landscape

Factors affecting the supply market, including number of suppliers and ease of entry.

Risk

The potential for loss or damage in the supply chain.

Technological Uniqueness

The distinctiveness of technology that can affect market competition.

ABC (Pareto) Inventory Analysis

A method that prioritizes inventory based on value contribution.

EOQ (Economic Order Quantity)

A formula to determine the optimal order quantity that minimizes total inventory costs.

Fill Rates

Measures how well customer orders are fulfilled.

Reorder Point (ROP)

The inventory level at which a new order should be placed.

Service Level Logic

The relationship between service levels and safety stock requirements.

Routine purchases

Low importance and low complexity purchases, such as office supplies.

Leverage purchases

High importance and low complexity purchases that can be optimized through competition.

Bottleneck purchases

Low importance and high complexity purchases with limited suppliers.

Critical purchases

High importance and high complexity purchases that directly impact competitive advantage.

Transactional relationship

A short-term relationship focused on minimizing costs.

Competitive relationship

A relationship focused on optimizing price and performance.

Collaborative relationship

A moderate interdependence relationship aimed at assuring availability.

Strategic alliance

A long-term relationship focused on maximizing value co-creation.

Competitive bidding

A procurement method used when requirements are clear and many suppliers exist.

Negotiation

A procurement method used when requirements are complex and few suppliers exist.

ABC

A = top 70-80% value; B = next 15-25%; C = bottom 5%; Focus effort on A items.

EOQ

Q∗=2DKh; ↑D or ↑K → EOQ ↑; ↑h → EOQ ↓.

Good / Bad / Ugly

Good = service, efficiency; Bad = cost, obsolescence; Ugly = hides problems.

Customer Role

Customers define service level; Service level → safety stock → ROP.

ROP

ROP=dLT+ZσdLT; Higher service level → higher ROP.

Backward Scheduling

Means you start from the due date and work backward to determine when each activity must begin.

Bill of Materials (BOM)

The recipe for the product; lists every component, quantities, and structure.

Inventory Records

The inventory status file MRP depends on; tracks on-hand inventory, scheduled receipts, allocations, lead times, safety stock, and lot sizes.

Lot Size Rules

Determines how much you order or produce; includes Lot-for-Lot (LFL), Fixed Order Quantity (FOQ), and Period Order Quantity (POQ).

Master Production Schedule (MPS)

Tells you what to produce, when to produce it, and how much to produce.

MPS Logic Chain

1. MPS determines when the parent item must be produced. 2. BOM explodes parent demand into component demand. 3. Inventory Records determine net requirements. 4. Lot Size Rules determine how much to order. 5. Backward Scheduling determines when to release orders.

Core Idea of Returns

High-performing firms turn reverse logistics into a competitive advantage and even a profit center.

Returns Are Growing

U.S. consumers return over $100 billion in goods annually.

Reverse Logistics Can Create Value

Examples include GM simplifying dealer returns and Estée Lauder recovering seasonal products.

Requirements for Profitable Returns

1. Give returns handling its own turf; 2. Treat returned goods as goods for sale; 3. Design efficient routes for returned products.

Preventing Returns Helps

Example: P&G switched to a zero-returns policy.

Strategic Payoff of Reverse Logistics

Can improve customer satisfaction, strengthen supply chain relationships, reduce waste, and increase profit.

Inventory Policy

Defines how much inventory to hold, where to hold it, when to reorder, and what service level to target.

Issues with Lean

Lean reduces waste and inventory but creates vulnerabilities such as low buffer and supplier delays.