Final Exam Study Guide for Gscom PDF

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Fi nalEx am St udyGui de ( Ope r a t i o nsMGT)Da v i s Operations Management - is involved with managing the resources to produce and deliver products and services efficiently and effectively. It deals with the design and management of products, processes, and services, and comprises the stages of sourcing, production, distribution and after sales. Manufacturing Vs. Service operations (operations mgt covers both these areas) Manufacturing- physical, durable, tangible, output can be inventoried/counted, longer response time, lower (indirect customer contact). Service Operations - Intangible service, service can no longer be sold, higher customer contact, shorter response time, output cannot be inventoried/counted. Operations triangle -how to use limited resources with scarcity- cost time and quality a .Supply Chain Management is a collaborative philosophy & a set of methods & tools to integrate & coordinate local logistics processes & their links with the production processes from the perspective of the entire value chain & its total performance b .is a cross-department & cross-enterprise integration & coordination of material, information and financial flows to transform and use the supply chain resources in the most rational way along the entire value chain, from raw material suppliers to customers. c. Integrated production & logistics( warehouse- optimization of warehouse driven material & informational flows) 2. Production/assembling (optimization of production in assembly line) - Input → transformation→Output ----→ material flow/energy flow - ←----- info flow/ financial flow - Sourcing → Production → distribution → IT Strategic collaboration SCOM – Risk pooling/contracting/ organization Process integration SCOM- demand forecasting/ inventory management JIT-JIS Execution Coordination SCOM- Vendor- managed inventory/ supply chain event management Strategic issues include, for example, determination of the size and location of manufacturing plants or distribution centers, decisions on the structure of service networks, factory planning, and designing the SC. Tactical issues are decisions of production or transportation planning & inventory planning. Operative issues involves production scheduling & control, inventory control, quality control & inspection, vehicle routing, traffic & materials handling, & equipment maintenance policy. Transformational Process- function or system that transforms inputs (e.g., materials & labour) into outputs of greater value (e.g., products/services)operations function is responsible to match demand and supply. (user of resources to transform inputs to desired outputs).

e.g locational → transportational, exchange → retailing, storage → warehousing -

has inputs → Throughput → output Input = Production factors resources (technical & human) Throughput (transformation process) 1/cycle time Output - product or services productivity = output / input labor productivity = policies processed / employee hours

Triangle of Goals- Time, cost & quality are in general goals. d. Know the Pros and Cons of Vendor Management Inventories Systems Vendor controls inventory on buyer side - Buyer provides information on inventory & sales - the supplier takes full responsibility for maintaining an agreed inventory level of the material, usually at the buyer's consumption location (usually a store). - a third party logistics provider (3PL) can also be involved to control that the buyer has the required level of inventory by adjusting the demand and supply gaps. Pros For Buyer ·Increase of inventory availability ·Reduction of procurement activities ·Fewer stock-out with higher inventory turnover ·Lower operating, purchasing and administrative costs / SC relationship strategic strength ·Greater customer satisfaction and increased sales Cons - carry cost, damage etc. For end-user: ·Increased service level and reduced stock outs VMI - Vendor-Managed Inventory - Vendor control the inventory at the buyer side - Buyer provides information on inventory and sales - 1) Vendor is on-site: Employee positioned fulltime @ customer’s facility - 2) Physical replenish inventory on a visit - 3) Vendor has access to customer's inventory system (MRP/ERP) - 4) Bar-Code & (Picture) - 5) Vendor rent out space next door/ Inside the customer’s location Benefits - Protects against “Lost Sales Cost of Inventory” Pros - Customers who can’t plan - guaranteed to remain independent from suppliers ***Bullwhip effect - The magnification of variability in orders in the supply chain: little variability in retail orders….can lead to greater variability for a fewer number of wholesalers, and……can lead to even greater variability for a single manufacturer. - Tendency for larger order size fluctuations as orders are relayed through the SC - Creates unstable production, schedules, expensive capacity change cost, longer lead times ** damage can be minimized with supplier coordination & planning ** Behavioral causes ·misuse of base-stock policies

·misperceptions of feedback and time delays ·panic ordering reactions after unmet demand ·perceived risk of other players' bounded rationality Operational causes ·dependent demand processing(demand is non-transparent & causes distortion in information) ·lead time variability ·lot-sizing/order synchronization ·quantity discount ·trade promotion and forward buying ·anticipation of shortages is something to avoid Supplier → Factory → Distributor Reason for bullwhip effect Countermeasures Information coordination Demand non-transparency Neglecting to order in an attempt to reduceAutomated ordering and monitoring of inventory in order to avoid overstock or shortage inventory

Coordinated and accurate lot size definition Order batching Use of everyday low prices (EDLP) instead of promotions Promotions Validation of customer demand through historical data of customer ordering Shortage gaming Policies to control returns or canceled orders. Product returns Risks: Dependence, contractual obligation, no influence on flexibility or production, interface issues logistics info exchange misuse of critical info/ patents - reduction of production depths, externalisation of non-efficient process, limit difficult to imitate processes. - 50% of outsourcing projects are successful - shifting risk, less money spent experienced workers etc fixed costs to variable costs Make or buy is the issue… Cheaper, better use of resources, focus on core competencies, quality issues , tax benefits, know-how sharing, risk sharing

Purchasing- process of procuring the proper requirement, at the time needed, for the lowest possible costs from a reliable source. Purchasing deals with commercial activities & related to transactional, ordering processes. Procurement covers a broader scope than purchasing & covers both acquisitions from third parties and from in-house providers. Involves appraisal & the critical “make or buy” decision Sourcing strategies can be classified according to three basic features: ● ● ●

number of suppliers (single, dual, and multiple sourcing) geographical supplier distribution (local, national, international and global sourcing sourcing principles (sourcing on-stock, JIT, particular sourcing).

1. WHAT to source ? → sourcing objects units, modules, systems, services) 2. WHAT is the process/ tool and organisation to source? sourcing process/tool (manual electric) sourcing organisation → individual cooperative 3. FROM WHERE to source ? → Geographical dimensions (local, continental, glocal, llc) 4. From WHOM to source ? → # of suppliers ( sole, single, double, multiple 5. WHEN to source? → stock sourcing (fill stock to already have what is required) - 69 Demand Tailroad sourcing ( → source only, when needed)

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Just in Time (JIT) ( → exact synchronization with production needed)

- ·Order management: - Determination of order volumes, frequencies, times & specification of logistical conditions. Supervision of accurate deliveries, goods reception, invoice control & approval - ·Supplier base research, observation and analysis: - i.e., analysis and evaluation of the supplier base, assessment of potential new partnerships and elaboration of (strategic sourcing) recommendations, preparation of negotiations, contracts Make or buy decisions: - Identification of internal/external value adding scope depending on the core competencies, but also comparison of capacities, lead times, costs, etc. - ·Supplier management: - i.e., auditing suppliers, running performance management assessments e.g., regarding on-time deliveries, quality , reliability, flexibility, Number of suppliers - Single sourcing- (Pros) long term agreements, price stability, low transaction costs, Scale effects, suppliers included in product development process at a very early stage - (Cons) inefficient price policy, lead time, quality/service issue, lack of collaboration with many vendors Geographical Aspects- Local, national, international, global sourcing. Sourcing principles - Sourcing on-stock - (Just in time (JIT) sourcing - having only the required inventory when needed; to improve quality to zero defects; to reduce lead time by reducing set-up times, queue length and lot sizes; to incrementally revise the operations themselves; and to accomplish these things at minimum cost”. “continuous improvement and eliminate all waste e. Know and define the different Forecasting Methods - Forecast of product demand - determine how much inventory is needed, how much product to make, and how much material to purchase from suppliers to meet forecasted customer needs. This also determines the kind of transportation that will be needed, and where plants, warehouses, and distribution centers will be located so that products and services can be delivered on time. - Forecasting Method: a. Qualitative: Based on judgement, opinion, past experience or best guesses to make forecast. Most common type of forecasting method for the long-term strategic planning process. (sales estimates, customer survey, expert view and best is Delphi method). i. Regression (Casual) Forecasts: attempt to develop a mathematical relationship (in the form of a regression model) between demand and factors that cause it to behave the way it does. Relate demand to other factors that cause demand behavior.

ii. Delphi Method: a procedure for acquiring informed judgements and opinions from knowledgeable individuals using a series of questionnaires to develop a consensus forecast about what will occur in the future. It has been especially useful for forecasting technological change and advances. iii. Time Series Analysis: statistical techniques that make use of historical data accumulated over a period of time. Time series methods assume that what has occured in the past will continue to occur in the future. The method assumes that identifiable historical patterns or trends for demand over time will repeat themselves. They include the moving average, exponential smoothing, and linear trend line. Popular method because relatively easy to understand and use. f. Know and define the elements of Lean Production/ Manufacturing - Lean production - (specifies value) integrated set of activities designed to achieve high volume production using minimal inventories(raw materials, work in process and finished goods). **Also involves elimination of waste in production effort. *Involves timing of production resources (e.g parts arrive at the next workstation = Just in time =JIT. - 5s, 7 wastes poka-yoke, visualization centers, TPM total preventive maintenance, standardisation & standard operations - waste is anything that does not add value 5 lean principles 1. specify value from customers point of view (first time quality) 2. Identify the Value Stream (process mapping) physical and info flow plus durations 3. Make value continuously flow- remove all obstacles. 4. LEt the customers pull according to his demand. (avoid overproduction) 5. seek perfection (following 1-4) 7 wastes of Lean production +1 1. Motion & movements 2. Inventory 3. Not meeting customer requirements 4. Transportation 5. Waiting 6. Overproduction 7. Over-processing or bad processing 8. Defects - seven wastes are the roots unprofitable activity (MINT WOOD) ***** - Elements of lean production - To eliminate waste: - Flexible resources - multifunctional workers, general purpose machines, takt time (production pace to match customer demand) - Cellular layouts - manufacturing cells, cycle time to match takt time by changing worker paths - To smooth the flow:

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Pull systems - relies on customer requests preventing over and under production and forcing systems to work in coordination with each other; workers take only what is needed to be processed immediately - Kanbans - cards that correspond to a standard quantity of production - Small lot sizes - improves quality and reduces lead time - Quick setups - convert internal setup to external setup (activities that can be performed in advance) - Uniform production levels - smoothing production requirements on the final assembly line For continuous improvement: - Quality at the source - involves procedures or mechanisms that make problems visible - Total productive maintenance - ensure all machines are running smoothly - Supplier networks - LT supplier contracts, synchronized production, precise delivery schedules

g. Be prepared to solve cases regarding the following: *********** a. Location Factor Rating – Utility Value Analysis b. Transportation Problem and Decision Analysis Little’s Law- Little's Law = puts the inventory L (e.g avg amount of objects in a system) in relation to the throughput rate λ , L= λ * W W is waiting time for the general inspection Rapid plant assessment * RPA helps calculate avg inventory that is carried -

under steady state conditions, the average number of items in a queuing system equals the average rate at which items arrive multiplied by the average time that an item spends in the system.” L = average number of items in the queuing system (e.g., work-in-progress inventory in the system W = average waiting time in the system for an item λ = average number of items arriving per unit time L=λ*W

Key drivers for the throughput- key processes with their durations that cause delays or prolong the throughput time Cycle Time - is the average successive time between completions of successive units (e.g assembly line, to put your task successfully or avg. ) Utilization- Is the ratio of time that is actually activated relative to the time that it is available for use. (e.g Taxi driver 9-5 available to use) Buffer- refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage. e.g stage 1. → buffer → stage 2 painting → ouse → next operation. Blocking - process stops when there is no place available, occurs when activities in a stage must stop bc no place to deposit item completed Starving - process stops when no work is there when activities stop because NO WORK e.g

employee waiting to work bc another workstation has not finished, worker will be idle *Bottleneck*- process is unbalanced when capacity is not sufficient.(occurs when the limited capacity of a process causes work to pile up or become unevenly distributed in the flow of a process. e.g employee works to slow in a multi-stage process work will begin to pile up in front of that employee. (one person checking tickets at a concert). *How to overcome Bottleneck* - Feedback, learn and see use a value stream analysis, see how long things take maybe switch around tasks . Pacing- is the heartbeat of a process. fixed time of the movement of ties through the process. (e.g fixed timing of the assembly line in a car factory. Rapid Plant Assessment - is designed to assist you in rapid evaluation of the state of your plant including manufacturing and service operations facilities. -

judges, rapid aduit, relative leanness of operation, prioritize areas of improvement, devise action plan.

c. Process Selection d. Queuing Theory - Waiting Line Analysis e. Assembly Line Balancing ***************** Efficiency = sum of task times (T) . T . Actual # of workstations (NA) x Cycle time (C) NA x C Max production = production time per day / bottleneck time Balance delay - total idle time on the line = 1- efficiency) expressed in %. f. Forecasting g. Capacity Planning

1. 2. 3. 4. 5.

h. ABC Classification ****(3.3,4) A- Close require inventory control because of their high value(tight supervision big value) B & C- items less control Unit cost x annual usage Add all of them up then each part divided by the total to find its % of total value divide annual usage by annual usage by annual usage total % cumulative is found by …….?? FInd out ***************** lastly, group items in ascedning order in ABC with item #’s, % total value, % total quantity.

i. Economic Order Quantity (model) - ( Fixed- order quantity) - The optimal order quantity that will minimize total inventory costs. - Most traditional form of re-ordering inventory(AKA economic lot-size model). Assumptions (continuous cycle) - demand is known with certainty and is constant over time

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no shartages allowed the order quantity is received all at once EOQ- carrying cost & ordering cost inversely react to one another as ordering size increases, fewer orders are required, therefore ordering cost decreases

Annual ordering cost = cost per order (Co) x # of orders per year (D)/ Q (q is only variable) C and D are constant parameters. Annual ordering cost = CoD . Q Annual carrying cost = CrQ computed by multiplying Annual per-unit carrying cost (C) X average inventory level 2

Total annual inventory cost = TC = Co + CcQ Q 2 j. Reorder Point Calculations (arrives when hits 0) reorder point - inventory depleted at a certain point. where: R = dL d= Demand rate per period L=Lead time Class notes 11/01/2018 Materials requirements planning A computerized inventory control and production planning system Objective: maintain the lowest possible level of inventory Determines when component items are needed & scheduling them to be ready at the that time Dependent Demand – demand for components are dependent on the demand for the finished good Discrete Demand – demand is more discretionary Complex Products – requires coordination of component production Erratic Orders – batch, job shop processes, more specialized Assemble-to-Order – MRP is essential for this type of production MPS – a schedule of finished products that drives the MRP process Cumulative Lead Time – the total length of time needed to manufacture a product Lead time- length of time for new order placement. Capacity Planning - routing file open orders, load profile for each process, MRP order releases. Capacity – the maximum capacity to produce Load profiles- A graphic comparison of load versus capacity Effective daily capacity = (no. Of Machines or Workers) X (hours per shift) X (no. Of shifts) X (utilization) X efficiency) Utilization – the percentage of available working time that a worker actually works or a machine actually runs.

Efficiency – how well a machine or worker performs compared to a standard output level. Load – the standard hours of work (or equivalent units of Production) assigned to a facility e.g 40 hrs/week = full Time (constraint 1) >40hrs = Overtime can be 1.5, 2.0, 3.0 (constraint 2) Time (#3) customer service level (4) quality(5) CRP – creates a load profile that identifies under-loads and overloads by projecting the load from a given material plan onto the capacity of a system Major Inputs include: -Planned order releases from the MRP process -A Routing File specifying which machines or workers are required to complete the order, in what order, and how long it should take -An Open Orders File containing information on the status of jobs that have already been released but not yet completed Load profile under load - acquire new work, pull work ahead, reduce normal capacity Overload- eliminates unnecessary requirements, reroute jobs to alternative machines, increase normal capacity, split lo...