Flashcards
Productions & operations: Exam 2
Cards in this deck (73)
- 1SeasonalityVariation in business demands in short time period. (needs of raw materials, assets, personnel)
- 2Aggregate planning definitionIntermediate-range capactity planning that covers a time horizon of 2 to 18 months.
-organizations that use season or other variations in demand - 3Aggregate planning is also known assales operations and planning
- 4What is the goal of aggregate planningachieve a production plan that will effectively utilize the organizations resources to satisfy demand
- 5What are the 3 planning levels1)long range plans
2)intermediate plans
3)short range plans - 6What goes into intermediate planning?-Employment
-Output
-Finished-goods inventories
-subcontracting
-backorders - 7Why do we use aggregate planning?it shows us a bigger picture approach to a group of products rather than individual
- 8why do organizations use aggregate planning?1)Planning- it takes time to implement plans
2)strategic-it is not possible to predict with accuracy the timing and volume of demand for individual items
3)it is connected with the budgeting process
4)it can synchronize flow in the supply chain, affects costs, equipment utilization, employment levels, and customer satisfaction - 9Explain the planning sequence:business plan->aggregate plan
->master schedule - 10What are the units used for aggregation**the plan must be in units that can be understood by firms non-operations personnel**
-aggregate units of output per month
-dollar value of total monthly output
-total output by factory
-measures that relate to capacity such as labor hours - 11How do most organizations deal with variation?most organizations use rolling 3,6,9, and 12 month forecasts.
-they are updated periodically
-allows planners to take changes into account for expected demand or supply and revise plans - 12Strategies for dealing with variation:-maintain a certain amount of excess capacity to handle increases in demand
-Have flexiblilty w/ changes: hire temporary workers & use over time
-wait before committing to a certain level of supply capacity
-schedule products or services with known demands first - 13Basic overview of aggregate planning:1) forecast of aggregate demand for the intermediate range
2)develop a general plan to meet demand requirements
3) update the aggregate plan periodically (ex. monthly) - 14What are the two things that aggregate planners are concerned with?1)Demand Quantity- if demeand exceeds capacity, attempt to achieve balance by altering capacity, demand, or both.
2) Timing of Demand- even if demand and capacity are approximately equal, planners still often have to deal with uneven demand within the planning period. - 15What are the inputs for aggregate planning?1)Resources:
workforce/production rates, facilities, equiptment
2)Demand forecast
3)Policies: workforce changes, subcontracting, overtime, inventory levels, back orders
4) costs: inventory carrying, back orders, hiring/firing, overtime, inventory changes, subcontracting - 16What are the outputs of aggregate planning?1) Total cost of a plan
2) Projected levels of : inventory, output, employment, subcontracting, back ordering. - 17What are some aggregate planning strategies:1)proactive- alter demand to match capacity
2)reactive- alter capacity to match demand
3) Mixed - some of each - 18What are some Demand Options?1) Pricing- examples are black friday and happy hour. used to shift demand from peak to off peak periods
price elasticity is important.
2)promotion- example would be happy hour. advertising and other forms of promotion
3) back orders- orders are taken in one period and deliveries promised for a later period.
4)New Demand - 19What are some supply options?-Hire and layoff workers(labor intensive industries, skill level, union restrictions.)
-Overtime/slack time
-Part-time workers
-Inventories
-Subcontacting - 20What are some PURE aggregate planning strategies?1) Level Capacity Strategy- having a steady rate of regular time output while meeting variations in demand by a combination of options(ex. inventories, overtime, part-time workers, subcontracting, and back orders)
2) Chase Demand Strategy- matching capacity to demand; the planned output for a period is set at the expected demand for that period. - 21The level approach:-capacities are kept constant over the planning horizon
-Advantages: stable output rates and workforce
-Disadvantages: greater inventory costs, increased overtime and idle time, resource utilization vary over time - 22Describe the Chase Approach:-Capacities are adjusted to match demand requirements over the planning horizon.
-Advantages: investment in inventory is low, labor utilization is high
-Disadvantages: the cost of adjusting output rates and/or workforce levels - 23Techniques for Aggregate Planning1) determine demand for each period
2) determine capacities for each period
3)identify company or departmental policies that are pertinent
4)determine unit costs
5)develop alternative plans and costs
6)select the plan that best satisfies objectives. otherwise return to step 5 - 24Trial and error techniques:-consists of developing simple table or graphs that enable planners to visually compare projected demand requirements with existing capacity
-alternatives are compared cased on their total costs
-disadvantage of such an approach is that it does not necessarily result in an optimal aggregate plan - 25What is Inventory?A stock or store of goods
- 26What are independent demand items?Items that are ready to be sold or used.
- 27Why are inventories a vital part of business?1. for operations
2. contributes to customer satisfaction - 28What are some types of inventory?-Raw materials and purchased parts
-Work-in-process (WIP)
-Finished goods inventories or merchandise
-Tools and supplies
-Maintenance and repairs (MRO) inventory
-Goods-in-transit to warehouses or customers (pipeline inventory) - 29What are the two major concerns of inventory management?1)Level of customer service:
Having the right goods available in the right quantity in the right place at the right time
2)Costs of ordering and carrying inventories:
The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds - 30What are the two basic functions concerning inventory?1) Establish a system for tracking items in inventory
2) Making decisions about when to order and how much to order. - 31What are the requirements of an effective inventory management?1. A system that keeps track of your inventory
2. A reliable forecast of demand
3. knowledge of lead time variability
4.reasonable estimates of holding costs, ordering costs shortage costs
5. a classification system for inventory items - 32What are some inventory counting systems?1) Periodic system: physical count of items in inventory made at periodic intervals
2) Perpetual Inventory system: system that tracks the removals from inventory continuously, therefore monitoring current levels of each item. (an order is placed when the inventory drops to a predetermined minimum level)
3) Two-bin system: two containers of inventory; reorder when the first bin is empty - 33Why have forecasting in inventory?Inventories are necessary to satisfy customer demands, so it is important to have a reliable estimate of the amount and timing of demand.
- 34What is the Point-of-sale system(POS)?A system that electronically records actual sales. Such demand info is useful for enhancing forecasting and inventory management.
- 35What is Lead time?Time interval between ordering and receiving the order
- 36What are some different inventory costs?1)Purchase cost-
The amount paid to buy the inventory
2)Holding (carrying) costs-
Cost to carry an item in inventory for a length of time, usually a year
3)Ordering costs-
Costs of ordering and receiving inventory
4)Setup costs-The costs involved in preparing equipment for a job
Analogous to ordering costs
5)Shortage costs- Costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit - 37Describe the A-B-C classification system approach:-the approach classifies inventory according to some measure of importance, and allocating control efforts accordingly.
A: very important
10 to 20% of the number of items in inventory and about 60 to 70 % of the annual dollar value
B: Moderately imporant
C: Least important
-50 to 60 percent of the number of items in inventory but only about 10 to 15 percent of the annual dollar value - 38what is cycle counting?A physical count of items in the inventory
- 39How much accuracy is needed in cycle counting management?A items: ± 0.2 percent
B items: ± 1 percent
C items: ± 5 percent - 40What is the Economic order quantity(EOQ) model?Economic Order Quantity (EOQ) models identify the optimal order quantity by minimizing the sum of annual costs that vary with order size and frequency
- 41What is the basic EOQ model used for?The basic EOQ model is used to find a fixed order quantity that will minimize total annual inventory costs
- 42What are some assumptions of the EOQ model?Assumptions:
-Only one product is involved
-Annual demand requirements are known
-Demand is even throughout the year
-Lead time does not vary
-Each order is received in a single delivery
-There are no quantity discounts - 43What is the quantity discount?Price reduction for larger orders offered to customers to induce them to buy in large quantities
- 44When is the right point to reorder?When the quantity on hand of an item drops to this amount, the item is reordered.
- 45Determinants of the reorder point are:1)The rate of demand
2)The lead time
3)The extent of demand and/or lead time variability
4)The degree of stockout risk acceptable to management - 46What does demand or lead time uncertainty create?Demand or lead time uncertainty creates the possibility that demand will be greater than available supply
- 47How can you reduce the likelihood of a stockout?To reduce the likelihood of a stockout, it becomes necessary to carry a safety stock
- 48What is safety stock?Stock that is held in excess of expected demand due to variable demand and/or lead time
- 49What happens as the amount of safety stock carried increases?the risk of stock out decreases and
This improves customer service level - 50What is service level?-The probability that demand will not exceed supply during lead time
-Service level = 100% - Stockout risk - 51How much safety stock should you have?The amount of safety stock that is appropriate for a given situation depends upon:
1)The average demand rate and average lead time
2)Demand and lead time variability
3)The desired service level - 52What is the fixed order interval (foi) model?Orders are placed at fixed time intervals
- 53Reasons for the FOI model:1)Supplier’s policy may encourage its use
2)Grouping orders from the same supplier can produce savings in shipping costs
3)Some circumstances do not lend themselves to continuously monitoring inventory position - 54What is the single period model?Model for ordering of perishables and other items with limited useful lives
- 55Explain the shortage cost:-Generally, the unrealized profit per unit
-C shortage = Cs = Revenue per unit – Cost per unit - 56Explain Excess cost:-Different between purchase cost and salvage value of items left over at the end of the period
-C excess = Ce = Cost per unit – Salvage value per unit - 57What is the goal of the single period model?The goal of the single-period model is to identify the order quantity that will minimize the long-run excess and shortage costs
- 58How can you offer cost reduction and customer satisfaction?Improving inventory processes can offer significant cost reduction and customer satisfaction benefits
- 59What are some areas that could lead to improvement in the inventory process?Areas that may lead to improvement:
-Record keeping
-Records and data must be accurate and up-to-date
-Variation reduction
-Lead variation
-Forecast errors
-Lean operations
-Supply chain management - 60What are the trial-and-error assumptions?1.Determine demand for each period
2.Determine capacities for each period
3.Identify company or departmental policies that are pertinent
4.Determine unit costs
5.Develop alternative plans and costs
6.Select the plan that best satisfies objectives. Otherwise return to step 5 - 61What are some trial and error techniques?-Trial-and-error approaches consist of developing simple table or graphs that enable planners to visually compare projected demand requirements with existing capacity
-Alternatives are compared based on their total costs
-Disadvantage of such an approach is that it does not necessarily result in an optimal aggregate plan - 62Trial and error technique assumptions:-The regular output capacity is the same in all periods
-Cost is a linear function composed of unit cost and number of units
-Plans are feasible
-All costs are associated with a decision option can be represented by a lump sum
-Cost figures can be reasonably estimated and are constant for the planning period
-Inventories are built up and drawn down at a uniform rate throughout each period
-Backlogs are treated as if they exist the entire period - 63What are some mathematical techniques?1.Linear programming models
2.Simulation models
(Computerized models that can be tested under different scenarios to identify acceptable solutions to problems) - 64Describe the aggregate planning used in hospitals, airlines, and restaurants:1.Hospitals:
Aggregate planning used to allocate funds, staff, and supplies to meet the demands of patients for their medical services
2.Airlines:
Aggregate planning in this environment is complex due to the number of factors involved
Capacity decisions must take into account the percentage of seats to be allocated to various fare classes in order to maximize profit or yield
3.Restaurants:
Aggregate planning in high-volume businesses is directed toward smoothing the service rate, determining workforce size, and managing demand to match a fixed capacity
Can use inventory; however, it is perishable - 65Aggregate planning in manufacturing and services is similar, but there are some key differences related to what:1.Demand for service can be more difficult to predict
2.Capacity availability can be more difficult to predict
3.Labor flexibility can be an advantage in services
Services occur when they are demanded and performed - 66Describe the master schedule:-The heart of production planning and control
-The result of disaggregating an aggregate plan
-Shows quantity and timing of specific end items for a scheduled horizon - 67What are the master schedulers duties?1.Evaluating the impact of new orders
2.Providing delivery dates for orders
3.Deals with problems:
-Evaluating the impact of production or delivery delays
-Revising master schedule when necessary because of insufficient supplies or capacity
-Bring instances of insufficient capacity to the attention of relevant personnel so they can participate in resolving conflicts - 68Inputs of the master production schedule:-Beginning Inventory
-Forecast
-Customer Order - 69Outputs of the Master Production schedule:-Projected inventory
-Master production schedule
-Uncommitted inventory - 70Describe the different periods of the "time fence":1-3: Frozen (firm or fixed)
4-5: Slushy (somewhat firm)
6-9: Liquid (open) - 71The master production schedule (MPS) is what?one of the primary outputs of the master scheduling process
- 72Once a tentative MPS has been developed,what must happen?it must be validated
- 73Rough cut capacity planning (RCCP) is a tool used during what?Validation Process
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- Flashcards on Productions & operations: Exam 2, created by brayera on 20/11/2013.
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