My APICS CPIM BSC Notes

Testing questions 13 сентября 2011 г. 10:20

The primary purpose of a cycle count program is to identify causes of inventory errors The primary objective of cycle counting is to identify and fix the causes of errors Turnover = COGS / Avg Inventory Order point = Demand during lead time + Safety Stock The lot size affects the product mix cycle Electronic data interchange (EDI) reduces paperwork The master production schedule (MPS) is an anticipated build schedule Driver costs = variable transportation costs Advantage of point-of-use inventory over central storage is reduced material handling Total employee involvement will result in an increase of coaching role for first-line supervision In projecting demand for a standard design commodity competitive pricing is typically most important. The primary activities of manufacturing planning and control are production planning and inventory management. It is important to monitor the forecast to improve forecasting methods. Lean / JIT sees suppliers as an upstream work center. In the Toyota Production System the control department concept was the key to breaking down the silos that cripple an organization Load profile shows required capacity at each workcenter (where as workcenter profile shows only Rate Capacity)

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S1: Introduction to SCM 15 июня 2011 г. 9:15

Customer does not buy a product or service, but a solution to a problem or a need [1-19]. Supply Chain: The global network used to delivery products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash [1-38]. Value Chain consists of processes that directly add value to the products and services that a company sells. Value Chain is a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers. “Ultimately it is the customer who pays the price for service delivered that confirms value and not the producer who simply adds cost until that point” SC is the subset of the VC (1-45). KPIs should represent the 3 types of measures (1-47): • Strategic • Tactical • Operational

• • • •

Balanced Scorecard (BSC) (1-47) gives a balanced perspective by including metrics and performance from the following areas: Customer prospective Business process p. Financial p. Innovation and learning p. KPIs should not be generic; they need to measure in areas that are critical to the goals of the company. The major objective of materials managements is to provide the required level of customer service. Manufacturing planning and control (MP&C) is the system used by manufacturing to recognize demand for the products, plan the resourced required to produce them, and execute and control production (1-53).

Layered approach to planning (details) Business planning

long-term planning

in currency

Production Plan

medium to long-term

at product family level

Master scheduling

short to medium-term at the end item product level

Material requirement planning short-term

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at the end item or product component level

Production Environments 3 марта 2012 г. 8:19

Production Environments Env.

When to choose

Benefits

VATI Type

ETO

Unique design or massive customization is required; complex products

Enables response to specific customer requirements

ATO

Product which have high number of configurations or require customization.

Low FG inventory levels; wide range of product offerings

X

MTO

Simple RM, many products (variations)

Customization; reduced inventory; improved service levels

V

MTS

High-volume standard products; predictable Low manufacturing costs; meet demand. customer demands quickly Used when required LT to customer is shorter than manufacturing LT F.i., MTS products are expected to be available on demand.

MC

High-volume product with large variety

A

Environment Characteristics [MRP 6-35] Characteristic

MTS

ATO

MTO

ETO

Interface between production and customer

low

medium

medium

high

Customer delivery time

short

medium

long

long

Production volume of each unit

high

medium

low

low

Production range (# of products)

narrow

medium

broad

broad

Basis for production planning and scheduling

forecast

forecast and backlog

backlog; RM forecast backlog; RM forecast

Seasonality (likelihood)

high

medium

low

none

Order promising FG based on availability of...

components & subassemblies

RM, capacity

RM, capacity, engineering

Handling of demand uncertainty

Safety Stock

Overplanning of c&sa (= SS in c&sa)

Little uncertainty Very little uncertainty exists after receipt of exists after receipt of order order

Final assembly schedule

n/a MPS used

Determined by customer orders

Determined by customer orders

BOM used

Standard Planning BOM BOM for each product

BOM unique for each BOM unique for each order order

Manufacturer is likely to stock

FG

RM

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Determined by customer orders

Work layouts 2 сентября 2011 г. 18:59

Process

Layout

Description

Flow processes

Product Layout

Intermittent processes

Process (Functional) Layout Cellular Layout

Stations set up in work cells, which have equipments grouped into product families. Operators are cross-trained on each operation. Work cells are traditionally set up in a "U" or "L" shape. [9-23], MM pg. 118 (14.8 Process systems)

Project processes Fixed position

Layout

+

Product L. low WIP inventory Process L.

-

Notes

high investments each workstation is flexible capable of producing wide variety of products

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S2: Demand Management 17 июня 2011 г. 9:09

• • • •

Marketing Mix Product (design, qty, warranty policy, etc.) Price Promotion Place

• • • •

Basic demand patterns: [2-13] Trend: increasing, decreasing, and level Seasonal Random Cyclical: over long time spans Principles of Forecasting [2-19] 1

Forecasts are not 100% accurate

They are not expected to be.

2

Forecast must include estimate of error

% or min-max range

3

Forecasts are more accurate for product groups than for individual items

4

Forecasts are more accurate in the short term

It means that lead time reaction allows to react to more accurate forecasts

Forecasting techniques [2-23] (Detailed in MPR) • Qualitative • Quantitative • Extrinsic • Intrinsic ○ Moving Average ○ Exponential Smoothing

The purpose of tracking forecasting is to compare with actual demand and to measure its accuracy [2-41]. In the process, we can learn the following: • Why demand differs from the forecast • Take demand circumstances into account • How to improve the forecast Forecast error types: [2-41] • bias; • random error. Mean Absolute Deviation (MAD) = Sum (Abs errors) / No. of periods

Sales Forecast deviation - SCM Implications [2-45] One way to deal with forecast error is to reduce reliance of forecasts, especially long-term forecasts.

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Tracking signal = Mean Deviation / MAD, MD 0 means that bias is present

Tracking signal 16 сентября 2011 г. 11:51

Tracking signal monitors any forecasts that have been made in comparison with actuals, and warns when there are unexpected departures of the outcomes from the forecasts. Forecasts can relates to sales, inventory, or anything pertaining to an organization’s future demand. The tracking signal is a simple indicator that forecast bias is present in the forecast model. It is most often used when the validity of the forecasting model might be in doubt. One form of tracking signal is the ratio of the cumulative sum of forecast errors (the deviations between the estimated forecasts and the actual values) to the mean absolute deviation.[1] The formula for this tracking signal is: Tracking signal = Σ (at − ft) / MAD where at is the actual value of the quantity being forecast, and ft is the forecast. MAD is the mean absolute deviation. The formula for the MAD is: MAD = Σ|at − ft| / n where n is the number of periods. Plugging this in, the entire formula for tracking signal is: Tracking signal = Σ(at − ft) / Σ|at − ft| / n Another proposed tracking signal was developed by Trigg (1964). In this model, et is the observed error in period t and |et| is the absolute value of the observed error. The smoothed values of the error and the absolute error are given by: Et = βet + (1 − β)Et−1 Mt = β|et| + (1 − β)Mt−1 Then the tracking signal is the ratio: Tt = |Et / Mt| If no significant bias is present in the forecast, then the smoothed error Et should be small compared to the smoothed absolute error Mt. Therefore, a large tracking signal value indicates a bias in the forecast. For example, with a β of 0.1, a value of Tt greater than .51 indicates nonrandom errors. The tracking signal also can be used directly as a variable smoothing constant.[2] There have also been proposed methods for adjusting the smoothing constants used in forecasting methods based on some measure of prior performance of the forecasting model. One such approach is suggested by Trigg and Leach (1967), which requires the calculation of the tracking signal. The tracking signal is then used as the value of the smoothing constant for the next forecast. The idea is that when the tracking signal is large, it suggests that the time series has undergone a shift; a larger value of the smoothing constant should be more responsive to a sudden shift in the underlying signal. Pasted from

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S3: [pic] Master Planning and Control 22 июня 2011 г. 9:05

Manufacturing Planning and Control Strategic Planning

Business Planning

Sales & Operations Planning

Resource Planning (RP)

Master Scheduling

Rough-Cut Capacity Planning (RCCP)

Material Requirements Planning (MRP)

Capacity Requirements Planning (CRP)

Input/Output Control Production Activity Control (PAC) Operation Sequencing

Execution

Production Planning - setting level of manufacturing output to best satisfy currently planned sales while meeting other BP objectives. Master Planning = Priority planning - the function of 1. determining what material is needed and when; 2. maintaining proper due dates for required materials.

S&OP Planning develops plans for products at family level for 1 to 3 years. S&OP Planning translates the strategic business plan into production rates (PP)that meet company goals. S&OP Planning includes: • demand management; • production and resource planning.

1. 2. 3. 4. 5. 6.

RP - capacity process run at S&OP planning Stage (also at BP level, pg. 3-59). RP: plans resource availability for PP based on average usage for product families. Determine the bill of potentially constraining resources for each product family in the production plan Determine the UOM for each resource Determine the resource capacity availability for each resource in each period Calculate the load on each resource in each period Compare the load to the available capacity Take action to revise the production plan, or adjust capacity where loading problems occur

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• • • •

1. 2. 3. 4.

Master Scheduling Purpose: Disaggregate PP at the product family level to the end item level Create priority plan (due dates and quantities) for end item manufacturing Basis for calculating RCCP Drive material requirements plan Item

S&OP

Master Scheduling

Objective

Supply Rate by Product Family

Anticipated Build Schedule

Item Planned

Product Family

End Item or Planning BOM

Planning Horizon

Longest Lead Time Resource Plant and Equipment

Longest Cumulative Lead Time for End Items

Constraints

Resource Capacity

Critical Workcenters

Time Periods

monthly

weekly or daily

Planning Focus

Product volume

Product mix

Process Output

Production Plan

Master Production Schedule

4 steps to create Master Schedule Preliminary MS for individual end items, Aggregation of individual MS, RCCP, Resolve differences between req. and available capacity. RCCP: validates resources availability for MPS at work centers level to produce end items (usually using weekly time buckets). [5-27] Key resources: labor, machinery, WH space, supplier's capabilities Resource Planning vs. Rough-Cut Capacity Planning [MPR, 7-48] RP

RCCP

Validates… Production Plan

Production Schedule

Time basis monthly

daily/weekly

Controls

all potentially constraining resources for identified critical workcenters

Horizon

medium- to long-term

short- to medium-term

Input/output control The objective of input/output control is to balance the flow of work by monitoring and controlling the input to and output from the work centers.

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Layered approach to planning 4 марта 2012 г. 16:51

Layered approach to planning Process

Level

Horizon

Business Planning

Sales volume ($)

2 to 10 years

S&OP Planning

Family level

1 to 3 years

Master Scheduling

End item level

3 to 18 months

MRP

Component items below the end-item level

longest leadtime

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Production Strategies 22 июня 2011 г. 9:19

Production Strategies [3-13] Chase (demand Production = Demand matching)

Stable inventory Capacity at max demand JIT production level required Workforce issues

Level

Optimal manufacturing costs

Production = Average Demand

Subcontracting Production on minimum Demand level Low inventory Hybrid

combines the aspects of both the chase and level production planning methods

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High inventory Requires accurate sales forecast May be more expensive than in-house production

Master Schedule 23 июня 2011 г. 10:32

Master Production Schedule (MPS) is 1 line from in Master Schedule that shows production volume [3-41]. Master Schedule example

Available-to-promise (ATP) - uncommitted portion of inventory and planned production [3-55]. For Period 1 = Inventory Calculated for each period where MPS receipt is scheduled. (All orders until the next receipt are counted).

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MRP - Material Requirements Planning

S4: MRP Definitions 28 июля 2011 г. 8:40

Term

Definition

BOM

List of the components necessary to build an end product

Planning BOM

Material requirements for average product in a family [4-23] Artificial grouping of BOM items used to facilitate Master Scheduling and Material Planning

Where-Used

Inversion of BOM [4-25]

Pegging

Shows relationship of material demand back to the parent causing it [4-25]

Lead time

the time it takes to make or receive the component [4-31]

Offsetting

the process of determining when a planned order release is needed in advance of the planned order receipt date

Exploding

the process of determining the total of each component needed for a parent

Planned Order

generated automatically by planning software when it encounters net requirements (when PAB falls below SS ). Planned Orders generate planned order receipts.

Firm Planned Order Planned order that has been frozen in quantity and time. Fixed by the master scheduler and cannot be changed by the system. The master scheduler has the responsibility to manage firm planned orders. A tool that allows the planner to override the logic of MRP system. Released Order

A firm commitment: production or purchase order. Once released, a planned order becomes an Open Order. It appears as Scheduled Receipt at due date.

Open Order

=Released order

Planned Order Receipt

The quantity planned to be received at a future date as a result of a Planned Order Release [4-61]

Scheduled Receipt

Open Order that has assigned due date.

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MRP Record 28 июля 2011 г. 9:02

Line

Time

Notes

Gross requirements

Week 1 Week 2 ...

required at the beginning of the period

Scheduled receipts

available at the beginning of the period

Projected Available Balance (PAB)

projected available balance at the end of the period

Net requirements

required at the beginning of the period Net requirement = Gross requirements - On-hand Inventory - Scheduled Receipt = неудовлетворенный спрос Если Net requirement > 0, to PAB упадет ниже 0.

Planned order receipt

available at the beginning of the period

Planned order release

available at the beginning of the period

Intersection of a source of MPS requirement with a time period is called a time bucket [from Q&A]

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S5: Capacity Management and Production Activity Control 7 августа 2011 г. 16:02

Production Activity Control [5-40]

Priority Planning

Capacity Planning

Manufacturing Lead Time [5-30] Queue (Backlog)

Setup

Run

Wait

Move

- // -

Operation time

-*-

Interoperation time

- // -

The queue time can comprise 95% or manufacturing lead time. [DSP 6-25] However Interoperation time is most elastic. Load [5-29] Load - Demand on resources The following steps result in the calculation of load per period at each work center: • Component requirement are generated by MRP: planned and released order quantities and due dates; • Component requirements are converted into operation time required at each work center.

• • • •

Production Activity Control objectives: [5-41] Execute MPS and MRP Optimize use of resources Minimize WIP (work in progress) Maintain customer service Input/output control The objective of input/output control is to balance the flow of work by monitoring and controlling the input to and output from the work centers. I/O report compares what occurs at a work center against what was planned, manages queues and leadtimes.

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Capacity Terms & Calculation 7 августа 2011 г. 20:12

Term

Definition

Utilization

= Hours actually worked / Available hours

Efficiency

= Standard hours of work produced / Hours actually worked

Rated Capacity

= Available time * Utilization * Efficiency [standard hours]

Operation time per piece = Setup time + Run time (per routing or work center file) Operation time per order = order quantity * operation time per piece [DSP, 6-37] Available time

The number of hours a work center can be used

Maximum demonstrated capacity

The highest amount of actual output produced in the past when all efforts have been made to optimize the resource

Capacity available

The capability of a system or resource to produce a quantity of output in a particular time period

Theoretical capacity The maximum output capacity, allowing no adjustments for preventive maintenance, unplanned downtime, shutdown, etc. Demonstrated capacity

proven capability calculated from actual performance data and expressed in standard hours

Rated capacity

= Theoretical capacity * Utilization * Efficiency

Productive capacity The maximum of the output capabilities of a resource OR the market demand for that output for a given time period Protective capacity

quantifiable capacity that is, or can be made available, at a nonconstraint work center that contributes to protection (against idle time) of the constraint.

Safety capacity

quantifiable capacity that is available over and above productive capacity that includes an allowance for planned events, maintenance, as well as unplanned events. It includes protective capacity.

Excess capacity

output capability at a nonconstraint work center that exceeds productive and protective capacity

Idle capacity

generally not used capacity including protective and excess capacity

Activation

the use of nonconstraint resources to produce above the rate required by the system constraint

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Information flow 8 августа 2011 г. 18:49

Data requirements [5-29] Data

Source

Open shop orders

Shop order file

Planner order releases

MRP

Where work is done

Routing file

Time needed (st. hours) Routing file Lead times

Routing file or Work center file

Work center capacity

Work center file

Routing Data [DSP, 6-27] Operation number (for sequencing) Operation description Planned work center Standard setup times Additional data for sequence-dependent setups F.i., changeover matrix Standard run time per unit, quantity, or batch Tooling

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Dispatching & Priority Control 9 августа 2011 г. 0:40

Priority control establishing sequence in which orders are to be run (at each workstation).

[5-65]

Dispatching

selecting and sequencing of available jobs to be run at individual workstations and the assignment of these jobs to workers

APICS Dictionary

Dispatching

process of translating production plan into output (action)

(http://www.transtutors.com/homeworkhelp/industrial-management/productionplanning-and-control/dispatching.aspx)

Dispatching rules [5-65] First come, first served (FCFS) Earliest job due date (EDD) Earliest operation due date (ODD) Shortest process time (SPT) Critical ratio (CR)

CR = time to due date / work remaining In case CR < 1 the order will be late. Lowest CR orders are run first.

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S6: Aggregate Inventory Management 9 августа 2011 г. 12:44

Inventory - stocks or items used for: Production

RM, WIP

Operations

Maintenance, Repair, Operating supplies (MRO)

Customer service FG, repair parts, spares Aggregate Inventory Management objectives: • Support business strategy and operations • Ensure that inventory management supports financial objectives • Balance customer service, operations efficiency, and inventory investment cost objectives or, shortly [7-7] • to provide SL • to minimize the sum of all costs involved Operating Efficiency [6-17] Inventory can make manufacturing operations more productive Dealing seasons demand with load leveling by building up anticipation inventory during periods of low demand

Reduces changeover costs

Allowing inventory to build up enables longer production runs

Distributes setup costs over a larger quantity of products

Higher purchasing quantities

Taking advantage of discounts and lower order costs per unit.

Functions of Inventory [6-15] Anticipation inventory

is build up in advance of future demand, such as a peak selling season, or production shutdown

Safety stock (Fluctuation inventory)

covers random fluctuation in supply, demand, and lead time. Prevents or reduces the probability of stockout.

Lot-size inventory (Cycle stock) consists of items purchased or manufactured in lot-size quantity greater than needed. Transportation inventory (pipeline stock)

in transit in the distribution network

Hedge inventory

buildup to buffer against some event that may not happen f.i.: expected price increase at the market

Buffer - A quantity of materials awaiting further processing. Inventory costs [6-21] Item costs Carrying costs

= Capital + Storage + Risks

Ordering costs

Factory orders: [6-25] • Production control costs • Setup and teardown costs • Lost capacity costs Purchase orders: Purchasing costs

Stockout costs

Capacity-related costs

• Backorder costs • Lost sales • Lost customers Result from changing production levels and very with the number of changes: [6-29] BSC Page 18

costs

[6-29] • Overtime • Hiring/layoff • Training These costs can be minimized by leveling production.

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Financial Inventory 9 августа 2011 г. 18:24

Balance Sheet [6-33] Account

Description

Examples

Assets

Items of value to the company

Cash, inventory, machinery, buildings, accounts receivable (AR), patents

Liabilities

Obligations of the business

Accounts payable (AP), wages payable, long and short-term debt

Owner's equity

Net worth of business

= Assets - Liabilities

Income Statement [6-33] Account Description

Examples

Revenue Income from sales of goods and services

Cash, accounts receivable

Expense Cost of goods sold

Direct labor, direct materials, and factory overheads

Expense General and administrative expenses

All other costs: advertising, taxes, wages

Performance Measures [6-45] Inventory Turns (Turnover) = COGS / Avg Inventory Days of supply (DOS) = Inventory on hand / Avg daily usage

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S7: Item Inventory Management 9 августа 2011 г. 18:00

Lot-size decision rules [7-9] Lot-for-lot

Items are ordered in amounts necessary, when they F.i., dependent demand items. are needed Used for A-items (expensive)

Fixed order quantity

The same amount each time even if it exceeds what is needed; interval between orders may vary

Easy to implement

Economic order quantity (EOQ) see below Used for C-items (inexpensive)

Order n periods of supply

• • • • • •

Part period balancing (PPB) [APICS Dictionary]

A dynamic lot-sizing technique that uses the same logic as the least total cost method, but adds a routine called look ahead/look back. When the look ahead/look back feature is used, a lot quantity is calculated, and before it is firmed up, the next or the previous period’s demands are evaluated to determine whether it would be economical to include them in the current lot. See: discrete order quantity, dynamic lot sizing.

Wagner-Whitin algorithm [APICS Dictionary]

A mathematically complex, dynamic lot-sizing technique that evaluates all possible ways of ordering to cover net requirements in each period of the planning horizon to arrive at the theoretically optimum ordering strategy for the entire net requirements schedule. See: discrete order quantity, dynamic lot sizing.

Cost to carry inventory Storage facility cost Counting, transporting, and handling Risk of obsolescence Insurance and taxes Risk of loss Opportunity costs EOQ [7-13], [MM p. 80] EOQ model manages the tradeoff between ordering cost and inventory carrying cost. EOQ point is reached when Ordering costs = Carrying costs [7-21].

Q

order (lot) size (Q/2 - average inventory level)

с

cost per unit of inventory

i

annual carrying cost rate

A

annual demand (MA: any other period can be taken as well)

S

ordering cost (per 1 order)

EOQ = (2 * Demand * Cost Per Order / inventory carrying cost / Inventory unit cost) 1/2 Order Quantity Constraints Minimum quantity can be used to meet a supplier minimum Maximum quantity can be set to recognize storage or transportation limits Minimum monetary value can be used to order at least a supplier- or purchasing-established minimum purchase order charge Maximum monetary value can be used to limit inventory investment levels Minimum days’ supply can be used to prevent multiple orders for the same period

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Minimum days’ supply can be used to prevent multiple orders for the same period Maximum day’s supply is used to support inventory turns and targets, and to recognize shelf-life constraints

Service Levels [7-39], [MM p. 86] The costs of stockout, all of which are difficult to calculate precisely, include: • Backorder costs • Lost sales • Lost customers Safety Factors [7-41], [MM p. 86], [DSP 2-17] Desired Service Level % σ Safety Factor the Safety Factor 50%

0

0

80%

0.84

1.05

90%

1.28

1.60

95%

1.65

2.06

98%

2.05

2.56

Safety Stock = MAD Safety Factor * MAD [7-40] 1 σ of SS = 84% customer service. The method taken from Materials Management by Arnold/Chapman . Here Service Level is linked to σ.

Note that the service level is the percentage of order cycles without a stockout.

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Order point 14 сентября 2011 г. 13:18

The reorder point (ROP) is the level of inventory when an order should be made with suppliers to bring the inventory up by the Economic order quantity ("EOQ"). Order point [7-29] Order point = Demand during lead time + Safety Stock OP = DDLT + SS Target inventory level (max stock) = Demand (Review period + Lead time) + SS The next several demand periods are estimated (not average of all known demand). Determining when the Order Point is reached [7-43], [MM p. 87] Имеется в виду способ физического учета. Two-bin system

A quantity of an item equal to the order point quantity is set aside and not touched until all the main stock is used up. When this stock needs to be used, the production control or purchasing department is notified and a replenishment order is placed.

Used for C-items, which are not expensive and it is best to spend min. time and money controlling them.

Perpetual inventory record system

A perpetual inventory record is a continual account of inventory transaction as they occur. At any instant, it holds an up-to-date record of transactions. At a minimum, it contains the balance on hand, but it may also contain the quantity on order but not received, the quantity allocated but not issue and the available balance.

Ex.: SAP system

Kanban

Lean/JIT method that uses a signal (see S9).

Order systems [7-47], [MM p. 88] Characteristic

Order Point system Periodic Review system (Fixed-interval order system)

Interval between orders Variable

Fixed

Order quantity

Variable

Fixed

ABC Inventory Control [7-55], [MM p. 76] Based on Pareto's Law. Possible ABC characteristics: • Annual usage (amount) • Scarcity of material • Quality problems

Auditing Inventory Records [7-65], [DSP 2-39] Periodic Inventory

Inventory counts are performed at some recurring interval

Period for different items can be determined using ABC system

Cycle Counting

Occurs continuously, with a few items counted each day by trained employees

Continuous counting and evaluation with objective to improve the processes that affect inventory accuracy (and ultimately customer service)

The Cycle Counting Process [2-39a] Process/Procedures

how

Education/Training

responsible personnel

Accountability/Responsibility What to do when a discrepancy is found

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Cycle Counting Options [2-41] ABC Classification

A items should be counted more frequently than B and C items

At a reorder point

Assuming that inventory level will be low and there be a smaller qty to count

When a replenishment lot is received

When remaining stock is minimum

At zero balance

When remaining stock is minimum

At negative balance

which indicates error

After a set # of transactions

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S8: Purchasing and Physical Distribution 18 августа 2011 г. 9:02

Types of purchased items [8-7] RM and components Are consumed during the production process Capital items

Includes equipment and technology

MRO

Used in general operations and maintenance

Services

Activities that support the production or distribution functions

Purchasing Cycle [8-23] Generate requisition (PR)

A need for an item may be identified by a user, an MRP system, or a purchase plan

Issue PO

Purchasing reviews PR and selects a supplier. PO includes: quantity, part number, delivery date, etc.

Follow up

PO tracking

Receive goods Approve payment

Once goods are received and accepted, payment is approved. PO is closed.

Types of sourcing [8-15] Sole S.

Only one supplier, no alternative suppliers exist

Not ideal, however unavoidable if the goods are unique

Single S.

One active supplier, but other suppliers are available

The purpose is to focus on a long-term relationship with a single partner

Multiple S.

More than one supplier

Reduces risks of unavailability, can lower costs through competition

Distribution Inventory Planning Systems [8-43] System

Characteristic

Advantages

Disadvantages

Pull

Decentralized system

Each center acts independently Demand data may be more timely and accurate

Lack of coordination Risk of low SL Disrupted factory schedules

Push

Centralized system; based on centrally made forecast

Coordination within the system

Not fully responsive to local developments

Distribution requirements planning (DRP)

Collaboration between Distribution Center (DC), central supply, and the factory.

The marketing mix is made up of product, promotion, price and place and the latter is created by physical distribution. [MM p. 101]

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Warehousing 18 августа 2011 г. 9:24

Service functions of Warehouses [MM p. 107] Type

Storage time Activities

Purpose

General WH

long period

min. operations

Protect goods until they are needed F.i., anticipation inventory

Distribution WH

brief

Focus on movement and handling Movement and mixing

Role of Warehouses [MM p. 108] [8-71] Transportation consolidation

Reduce transportation costs by receiving consolidated shipments in truckload (TL) quantities and breaking them down into shipments of same or mixed products for further distribution ( TL -> LTL) and vice versa (LTL -> TL) when purchasing from suppliers.

Product mixing

Mixing of products that are produced at different location (received in different loads)

Service

Provide better delivery times and reliability to customers by being close to the market

Warehouse Process [8-71]

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Distribution 14 сентября 2011 г. 12:39

Physical distribution activities - affect customer service level and the cost of providing it. [MM pg. 100]

Transportation

typically the largest component (30-60%) Transportation adds place value to the product.

Distribution inventory

includes all FG at any point in the distribution system second most important item (25-30%) Inventory create time value by placing product close to the customer.

Warehouses (DC)

Storage of inventory

Material handling Protective packaging Order processing [and communication]

Transportation costs

Depend on...

Line-haul c.

distance moved

Pickup and delivery c.

pickups number, weight moved

Terminal handling c.

number of operations (number of times a shipment is handled, loaded, and unloaded)

Billing and collecting c. (paperwork)

number of shipments

Line-haul costs (LHC) include: [8-67] • fuel • wages • wear and tear of the vehicles

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Market boundaries 19 января 2012 г. 10:42

Laid-down cost (LDC) is the delivered cost of product to a particular geographic point. [MM p. 109] LDC =ProductCosts +TransportationPerKm * DistanceKm. Market boundary. The market boundary is the line between 2 or more supply sources where the laiddown cost is the same.

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S9: Lean/JIT and Quality Systems 1 сентября 2011 г. 19:00

Product and Quality Cycle [9-7] Step

Location

Quality management system objectives (Ensure quality of …)

Product Definition

Marketplace

Market Tangible and intangible characteristics Price Estimate of sales volume [MA: incorrect sales volume forecast means low quality of Product Definition] Voice of the customer is valuable for this process

Product Design

Create product specs, performance requirements, materials, dimensions, tolerances

Product Manufacturing

Manufacturing must make the product to the specifications

Product Consumption Marketplace (Use) • • • •

Customer satisfaction through value to the customer: Performance (fitness-for-use) - primary characteristics (to the customer) Features - secondary characteristics Conformance - standards and government regulations Warranty

Definitions [9-9] Lean/JIT

minimizing activities that do not add value to the customer (value chain)

Quality management systems (QMS)

system that documents the structure, responsibilities, and procedures required to achieve effective quality management

Total quality management (TQM) Quality function deployment (QFD)

A never-ending process to improve everything an organization does to satisfy customers. Continuous improvement is necessary because of the competition. MA: No competition = Monopoly = No improvements methodology designed to ensure that all the major requirements of the customer are identified and met or exceeded (House of Quality)

Quality at the source A system that eliminates the need for incoming inspection by the customer. Example: a producer's responsibility to provide 100% acceptable quality material to the consumer. [9-65] Employee Involvement (EI) Employee Empowerment

Using experience, creative energy, and intelligence of all employees be treating them with respect, keeping them informed, and including them and their ideas in decision-making process [9-31] Giving nonmanagerial employees the responsibility and the power to make decisions regarding their jobs of tasks делегирующий стиль руководства

Statistical Process Control (SPC)

Application of statistical techniques, such as control charts, to monitor and adjust an operation [9-49]. SPC is used to look for trends and can spot changes in variation that may be due to problems in processes.

Total Productive Maintenance

Preventive maintenance plus continuing efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling, and promote continuous flows [9-27]

Supplier Partnership The establishment of a working relationship with a supplier organization whereby two organizations act as one.

QMS Principles, Practices, and Tools [9-10] Practice/Tool

Define

Design

Manufacture Consume

Customer Focus/Value

x

x

x

Quality function deployment (QFD) x

x

x

Eliminate Waste

x

x

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x x

Eliminate Waste

x

Work cells

x

Total Productive Maintenance

x

x

Employee Focus

x

x

x

x

Supplier Partnership

x

x

x

x

x

x

x

Statistical Process Control

x

x

Quality Tools

x

x

x

x

Quality-Related Costs

Six sigma

• • • • • •

x

x

x

Customer Focus [9-13] Customers have requirements to their suppliers: High quality level High flexibility (volume, specifications, delivery) High service level Short lead time Low variability in meeting targets Low cost

QFD uses a structured process "House of Quality" [9-14] Identify customer requirements