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Module 1

Why is manufacturing important to the economy?
It addes value to products to generate wealth
In a traditional manufacturing environment, which of the following objectives are in conflict?
Minimizing production costs and decreasing inventory investment
Which of the following statements is true?
The objectives of marketing and production can be met with higher inventories
WHich of the following production environments (mfg strategies) produces the longest delivery lead time?
Make-to-order
Which of the following is a major objective of materials management?
Provide the required level of customer service (and manage materials)
Which of the following are primary activites of manufacturing planing and control?
Production planning and inventory management
Which of the following systems is the performance measure that related to daily work routines, such as cycle time and utilization?
Operations
Which of the following systems is unique in its focus on the reduction of defects by reducing variation?
Six Sigma
Which of the following statements is true about the product layout (continuous process)?
There is little buildup of WIP
Which of the following statements is true regarding process layout (intermittent manufacturing)?
Each workstation must be flexible
Value
The worth of an item, good or service
Make-to-stock
A production environment where products can be and usually are finished before receipt of a customer order
Voice of the customer
Actual customer descriptions in words for the functions and features customer desire for goods and services
Tactical Plan
The set of functional plans (production plan, sales plan, marketing plan) synchronizing activities across functions that specify production levels, capacity levels, staffing levels, funding levels, and so on, for achieving the intermediate goals and objectives to support the organization’s strategic plan
Mass customization
The creation of high-volume product with large variety so that a customer may specify an exact model out of a large volume of possible end items, while manufacturing cost is low due to large volume.
Layout
Physical arrangement of resources or centers of economic activity (machines, groups of people, workstations, storage areas, aisles) within a facility
Engineer-to-order
Products whose customer specifications require unique engineering design, significant customization, or new purchased materials
Assemble-to-order
A production environment where a good or service can be assembled after receipt of a customer’s order
Gross profit
Earnings from an ongoing business after direct costs of goods sold have been deducted from sales revenue for a given period (gross)
Make-to-order
A production environment where a good or service can be made after recipt of a customer’s order
Supply Chain
The global network used to delivery products and services from raw materials to end customers thru an engineered flow of information, physical distribution, and cash.
Enterprise Resource Planning
Framework for organizing, defining, and standardizing the business processes necssary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage
What is the primary goal of manufacturing?
To create value for producers and customers. In this way, wealth is created for society as a whole.
What is CRM (Customer Relationship Management)?
The philosophy based on putting the customer first. It involves the collection and analysis of information to support customers
What are the 3 major factors affecting organizations today?
Global competition, regulatory influences, and customer expectations
Order Qualifiers
Those competitive characteristics that a firm’s products must exhibit to be viable competitors
Order Winners
Those competitive characteristics that cause a firm’s customer to choose that firm’s goods and services over those of its competitors
What influences the chioce of production environment (ETO, MTO, MTS, ATO)?
Lead time expectations, product design input from customers, product volume and variety, product life cycle
What are the phases of the product life cycle?
Introduction, Growth, Maturity, Decline, Phase-out
What are the 3 choices of processes and layouts?
Intermittent, Flow, and Project
What are two types Flow manufacturing?
Repetitive/Line & Continuous Flow
What are the advantages of Flow manufacturing?
Low WIP, Short throughput and mfg lead times, Low unit costs
Supply Chain Management
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a cmpetitive infrastructure, leveraging world-wide logistics, synchronizing supply with demand, and measuring performance globally
Basic elements of Supply Chain Management
Suppliers > Producers/Manufacturers > Distributors > Retailers > Consumers > Flow of information, cash, goods, and services
3 types of performance measures
Strategic, Tactical, Operational
Strategic performance measures
Relate to the long-term goals of a business. Examples include profitability, market share, growth, and productivity
Tractical performance measures
Relate to intermediate-term goals and objectives to support the organization’s strategic plan. Examples include adherence to production plans and budgets, percentage on-time delivery, and inventory turns
Operational performance measures
Relate to daily work routines. Examples include work center cycle times, utilization, and efficiency
What is the function of the Balance Scorecard?
to assess performance against KPIs for a certain time period
What is the role of Materials Management?
Balance conflicting objectives of marketing, production, and finance by managing the flow of materials. Balancing resources of the company with demand
Lean/JIT focus?
– identifying and eliminating non-valued-added activities and resources, which are considered waste
– creating continuous flow in manufacturing as a result of pull by the customer
– empowering employees
– continuous improvement
TQM (Total Quality Management) key principles?
– Customer focus
– Identifying costs of quality
– Taking actions to solve problems
– Continous improvement
Six Sigma important elements?
– variation causes defects
– goals is to have no more than 3.4 defects per million opportunities (six sigma level performance)
– continuous improvement and problem solving to reduce variation and defects
Theory of Constraints
A holistic management philosophy based on teh principle that systems have constraints that limit their ability to meet the system’s goals. It’s objective is to achieve throughput goals by identifying and managing a few leverage points
Which of the following is a characteristic of demand?
Seasonal variation
Product A is made from components B and C. Component B is made from parts D and E. Which items should be forecast?
Only A (end item)
Which of the following is the best statement about the general principles of forecasting?
Every forecast should include an estimate of error
What important assumption is made about quantitative forecasting methods?
The past is a valid indicator of the future
Which forecasting technique takes the average demand for some past number of periods?
Moving average
Why is it important to monitor the forecast?
To improve our forecasting methods
Which of the following statements is most accurate?
The seasonal index is an estimate of how much the demand during the season will be above or below the average demand
Which of the following causes forecast error?
Random variation from the average demand
Which of the following statements is most accurate?
Independent demand items should be forecast
Which of the following statements is most accurate?
The circumstances relating to demand data should be recorded
Order Qualifiers
Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace
Random Variation
A fluctuation in data that is casued by uncertain or random occurrences
Moving Average
An arithmetic average of a certain number (n) of the most recent observations. As each new observation is added, the oldest observation is dropped.
MAD – Mean Absolute Deviation
The average of these absolute values of the deviation of observed values from some expected value
Dependent
Demand that is driectly related to or derived from the bill of material structure from other items or end products
Trend
Methods for forecasting sales data when a definite upward or downward patter exists
Seasonal
Inventory built up to smooth production in anticipation of peak seasonal demand
Forecast
An estimate of future demand
Intrinsic
A forecast based on internal factors, such as an average of past sales. Ant. Extrinsic Forecast
Exponential Smoothing
A type of moving average forecasting technique in which planners can choose the relative weighting of the latest period’s actual demand and its forecast in developing the forecast for the next period
Qualitative
An approach to forecasting that is based on intruitive or judgemental evaluation
Order Winners
Those competitive characteristics that cause a firm’s customers to choose that firm’s goods and services over thsoe of it competitors
Independent
The demand for an item that is unrelated to the demand for other items
Bias
A consistent deviation from the mean in one direction (high or low)
Quantitative
An approach to forecasting where historical demand data is used to project future demand
Extrinsic
A forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts
Demand
A need for a particular product or component
225 Units
Beginning Inventory = 100
Ending Inventory = 100
Sales Forecast:
Month 1 2 3 4 5
Qty 150 175 200 300 300
What is the required monthly production to achieve level production?
8
Periods 1 2 3 4 5
Forecast 30 30 30 30 25
Actual Demand 22 18 25 20 20
What is the MAD for the data given?
104
Month 1 2 3 4 5 6
Projection 100 100 100 100 100 100
Demand 95 102 105 105 104 103
The project for the 7th month using a three-month moving average is?
1,200,000
Revenue 2,500,000
Direct Labor 300,000
Direct Material 500,000
Overhead 400,000
G&A Expenses 150,000
What is total Cost of Goods Sold (COGS)?
1,300,000
Revenue 2,500,000
Direct Labor 300,000
Direct Material 500,000
Overhead 400,000
G&A Expenses 150,000
What is total Gross Income?
1,150,000
Revenue 2,500,000
Direct Labor 300,000
Direct Material 500,000
Overhead 400,000
G&A Expenses 150,000
What is total Net Income?
What important assumption is made about quantitative forecasting methods?
The past is a valid indicator of the future
Which of the following causes forecast error?
Random variation from the average demand
Under which of the following circumstances will firms generaly make-to-stock?
Required delivery timers are shorter than the time needed to make the product
Which of the following statements is most accurate about the MPS?
If it is poorly done, we can expect past-due schedules and unreliable delivery promises
Which of the following statements is true about the product layout (continuous process)?
There is little buildup of work-in-process inventory
What is the name of the set of priority planning techniques for planning component items below the end-item level?
Material requirements planning
Which of the following is a major input to an MRP system?
The master production schedule
Wha tis hte term for the ability to relate the demand for a item shown on an MRP record back to the parent causing the demand?
Pegging
Which statement is correct?
Planned order receipts show when the order is released
58 hours
A work center consists of 2 machines working 8 hours a day and 5 days a week. Historically, utilization has been 80%, and efficiency has been 90%. To the nearest hour, what is the rated capacity?
What term indicates the percentage of time the work center is active compared to the available time?
Utilization
Which of the following company objectives are in conflict?
Maximum customer service and low-cost plant operation
Which of the following are considered ordering costs?
Production control costs
Which of the following costs is relevant to inventory management decisions?
Storage costs
What term is used for the ratio of standard hours or work produced to hours actually worked?
Efficiency
Which of the following statements is most accuarte?
A bottleneck will control the throughput of all products processed by it (5,10)
8
Level 0 1 2 2 1 1
Part A B C E C G
Qty 2 2 2 4 4
How many units of part C are required to produce one unit of part A?
A & B only
Level 0 1 2 2 1 1
Part A B C E C G
Qty 2 2 2 4 4
Which of the items in the BOM are parents?
Total = $11,500
Average = $11.50 per unit
To make a particular component requires an overhead [fixed] cost of $6000 and a variable unit cost of $5.50 per unit. What is the total cost and the average cost of producing a lot of 1000?
40 days
A company has 7000 units on hand and the annual usage is 42,000 units. There are 240 working days in the year. What is the days of supply?
week 1
Complete the table:
Week 1 2 3 4 5 6
Gross Requirements 10 10 10 10 10 10
Projected Available 20
Net Requirements
Planned Order Receipts
Planned Order Release
__What week is the first that requires action?
Planning Horizon
The amount of time a plan extends into the future. It is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and for capacity changes of primary work centers
Capacity Available
The capability of a system or resource to produce a quantity of output in a particular time period. Capacity available is based on the following: Available time, Utilization, and Efficiency
Available Time
No. of machines (or workers) x hrs/day x days/wk
Utilization %
hrs actuall worked / hrs of available time x 100%
Efficiency %
std hours actually worked / hours of work produced x 100%
Rated Capacity (std hrs)
available time x utilization x efficiency
Demonstrated Capacity (std hrs)
sum of std hrs for N past periods / N past periods
Operation Time
Setup time plus run time
Critical Ratio
Time remaining / Work remaining
Capacity
Measured in terms of output per time period
Inventory Turnover
Annual COGS / Avg inventory in dollars
Annual Ordering Costs
No. of orders per year x cost per order ($)
Quality
Conformance to requirements or fitness for use
Sales & Ops Planning, Master Scheduling
Master Planning
Production Plan
What is the output of the Sales & Ops Plan?
Families
What types of products are forecasted at the Sales & Ops level?
End-Items
What types of products are forecasted at the Master Scheduling level?
Components & Subassembly
What types of products are forecasted at the Material Requirements Planning level?
Master Production Schedule
What is the output of Master Scheduling?
Sales & Ops Planning, Master Scheduling, Materials Requirements Planning
What does Priority Planning consist of?
Tactical Plan
What type of plan is the Sales & Ops plan?
Production Plan
What type of plan is the Master Schedule?
Resource Planning
What type of capacity planning does Sales & Ops Planning utilize?
Rough-Cut Capacity Planning
What type of capacity planning does Master Scheduling utilize?
Capacity Requirements Planning
What type of capacity planning does Material Requirements Planning utilize?
Input/Output Control, Operation Sequencing
What are the major outputs of Production Activity Control (PAC)?
Marketing Mix
Product, Price, Promotion, Place
Independent & Dependent
2 types of demand
Forecast, Customer Orders, Replenishment Orders, Interplant Transfers, Other (promos, prototypes, etc)
5 sources of demand
Trend, Seasonal, Random, Cyclical
4 basic demand patterns
Stable Demand
Demand that retains general shape over time, are easier to forecast, and remain consistently within predetermined or expected upper and lower limits allowing for random variation
Dynamic Demand
Demand that is less predictable, harder to forecast and make forecasting prone to error. Over the long run, dynamic demand has a random pattern (typically).
Business, Sales & Ops, Master Scheduling
Demand forecasts support planning at what 3 levels?
Marketing Management’s role
To develop and implement marketing plans for products with order winning and qualifying characteristics
Demand Management
A process that influences and shapes demand though marketing and sales activities, and recognizes demand through forecasting and customer orders.
Marketing Management, Customer Relationship Management, Demand Planning
3 processes that related to demand
Qualitative & Quantitative
2 categories of forecasting techniques
Extrinsic & Intrinsic
2 types of quanititative forecasting
Moving Average & Exponential Smoothing
2 types of Intrinsic Forecasting
Exponetial Smoothing Formula
(a)(latest or actual demand) + (1-a)(previous or “old” forecast)
Seasonal Forecast
Deseasonalized Demand x each Seasonal Index
Deseasonalized Demand = total forecast for a year / number of periods
Seasonal Index = period average demand / avg demand for all periods
Bias & Random Variation
2 forms of forecasting error
Why is MAD important?
Indicates the relative cost of different levels of customer service
Level Schedule
A production schedule that generates material and labor requirements that are as evenly spread over time as possible
Planning Horizon
The amount of time a plan extends into the future
Hybrid
A production strategy that combines the aspects of both the chase and level production strategies
Production Planning
A process to devlop tractical plans based on setting the overall level of manufacturing putput to best satisfy the current planned levels of sales
Resource
Anything that adds value to a good or service in its creation, production, or delivery
Due date
The date when purchased material or production material is due to be available for use
Master Production
A type of schedule; a line on the master grid that reflects the anticipated build scheduel for those items assigned to the master scheduler
Scheduled Receipt
An open order that has an assigned due date.
Resource Planning
Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity
Master Planning
A group of business processes taht includes the following activities: demand management, production adn resource planning; and master scheduling
Rough-Cut
A type of capacity planning; the process of converting the master production schedule into requirements for key resources, often including lable, machinery, warehouse space, supplier’s capabilities, and, in some cases, money.
Chase
A production strategy that maintains a stable inventory level while carying production to meet demand
Level Production Strategy
Which basic production planning strategy wil build inventory and aboid the costs of exces capacity?
Similiarity of manufacturing process
For the purposes of production planning, product families should be established on the basis of…
600 units
If the opening inventory is 100 units, sales are 500 units, and the ending inventory is 200 units, what will manufacturing produce?
Required delivery times are shorter than the time needed to make the product
Under which of the following circumstance will firms generally make-to-stock
The forecast of individual end items
The information needed to develop a master schedule will come from which of the following?
It is an agreed-upon plan between production and marketing/sales
Which of the folling is a characteristic of MPS?
To maintain the desired level of customer service
Which of the follwing is an objective of MPS?
If it is poorly done, we can expect past-due schedules and unreliable delivery promises
Which of the following statements is most accurate about the MPS?
Available-to-promise
What is the portion of inventory or production that is not committed to customer orders called?
Changes far out in the planning horizon can be made with little or no cost to manufacturing
Which of the following is true about time fences in a master schedule system?
Priority Planning
The function of determining what material is needed and when. master scheduline gna material erquirements planning are the elements used for planning and replanning process to maintain proper due dates on required materials
The quantities demanded of each product family or product line in each period; Disired inventory level; The resources of equipment, labor, and material needed in each period; The availability of needed resources
What are the concerns of production planning?
Chase, level, subcontractin, hybrid
Four basic production strategies
Chase Production Strategy
Production schedule matches the quantity demanded by period
Level Production Strategy
Production level is equal to the average demand
Subcontracting Production Strategy
Production level is equal to the level of the minimum demand, and the rest is fulfilled through subcontracting
Hybrid Production Strategy
Used to balance customer srevice, inventory, and stable labor objectives

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