Test1 Review

2/28/19

Session 1 Operations Management Foundations

 Core competencies: Bundles of skills or knowledge sets that enable a firm to provide the greatest level
of values to its customers in a way that is difficult for competitors to emulate and that provides for
future growth. Core competencies are embodied in the skills of the workers and in the organization.
They are developed through collective learning, communication, and commitment to work across levels
and functions in the organization and with the customers and suppliers. For example, a core
competency could be the capability of a firm to coordinate and harmonize diverse production skills and
multiple technologies. To illustrate, advanced casting processes for making steel require the integration
of machine design with sophisticated sensors to track temperature and speed, and the sensors require
mathematical modeling of heat transfer. For rapid and effective development of such a process,
materials scientists must work closely with machine designers, software engineers, process specialists,
and operating personnel. Core competencies are not directly related to the product or market.

 Enterprise Resource Planning (ERP): Framework for organizing, defining, and standardizing the business
processes necessary to effectively plan and control an organization so the organization can use its
internal knowledge to seek external advantage.

 Flexibility: The ability of the manufacturing system to respond quickly in terms of range and time, to
external or internal changes. Six deferent categories of flexibility, volume flexibility, rerouting flexibility,
and material flexibility. In addition, flexibility involves concerns of product flexibility. Flexibility can be
useful in coping with various types of uncertainty. 2) the ability of a supply chain to mitigate, or
neutralize, the risks of demand forecast variability, supply continuity variability, cycle time plus lead-
time uncertainty, and transit time plus customs-clearance time uncertainty during periods of increasing
or diminishing volume.

 Operations management: The systematic direction of the processes involved in the sourcing,
production, and delivery of products and services.

 Outsourcing: Process of having suppliers provide goods and services that were previously provided
internally. Outsourcing involves substitution- the replacement of internal capacity and production by
that of the supplier.

1. Which of the following is NOT a trend in modern operations management?

a. Increased use of the Internet
b. Increased globalization
c. Increased competition
d. Declining product customization
2. In a service process, the output can be inventoried
a. True
b. False
3. List at least two of the five competitive dimensions – Responsiveness, Velocity, Flexibility, Quality,
Cost
4. List at least two of the six trends in Operations Management – 1) Demand-driven, 2) Collaborative
and systemic, 3) Agile and scalable, 4) Fast flow, 5) Digital, and 6) Environmental and social
responsibility.
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Session 2: Introduction to Manufacturing Management

 Batch manufacturing: A type of manufacturing process in which sets of items are moved through the
different manufacturing steps in a group or batch.

 Manufacturing planning and control (MPC) system: A closed-loop information system that includes the
planning functions of production planning, and capacity requirements planning. Once the plan has been
accepted as realistic, execution begins. The execution functions include input-output control, detailed
scheduling, dispatching, anticipated delay reports (department and supplier), and supplier scheduling. A
closed-loop MRP system is one example of manufacturing planning and control system.

 Production Kanban: A signal, usually a card, used to trigger the production of a part.

 Push system
1) In production, the production of items at times required by a given schedule planned in advance.
2) In material control, the issuing of material according to a given schedule or issuing material to a job
order at its start time.
3) In distribution, a system for replenishing field warehouse inventories where replenishment decisions
making is centralized usually at the manufacturing site or central supply facility.

1. Which of the following demand fulfillment approaches typically provides the longest delivery
time?
a. Engineer-to-order
b. Make-to-order
c. Assemble-to-order
d. Make-to-stock
2. A bill of material whose purpose is to simplify forecasting, master scheduling, and MRP is called
a. Summarized parts list
b. Where used bill
c. Planning bill
d. Multipurpose bill
3. The manufacturing process used to make a wide variety of highly customized products in
quantities as small as one unit is a
a. Production line
b. Continuous flow process
c. Job shop
d. Fixed position
4. List the three essential strategic choices as the foundation of manufacturing strategy that must be
determined by the manufacturing manager. 1) Product manufacturing environment choice, 2)
Manufacturing process choice, and 3) Plant layout choice.
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Session 3 Manufacturing Product Structures

 Bill of material (BOM)

1) A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly
showing the quantity of each required to make an assembly. It is used in conjunction with the mater
production schedule to determine the items for which purchase requisitions and production orders
must be released. A variety of display formats exist for bills of material, including the single-level bill of
material, indented bill of material, modular (planning) bill of material, transient bill of material, matrix
bill of material, and costed bill of material.
2) A list of all the mate3rials needed to make one production run of a product, buy a contract
manufacturer, of piece parts/components for its customers. The bill of material may also be called the
formula, recipe, or ingredients list in certain process industries.

 Efficiency: A measurement (usually expressed as a percentage) of the actual output to the standard
output expected. Efficiency measures how well something is performing relative to existing standards; in
contrast, productivity measures output relative to a specific input (tons/labor hour). Efficiency is the
ration of 1) actual units produced to the standard rate of production expected in a time period or 2)
standard hours produced to actual hours worked (taking longer minutes less efficiency) or 3) actual
dollar volume of output to a standard dollar volume in a time period. Illustrations of these calculations
follow. (1) there is a standard of 100 piece per hour and 780 units are produced in one eight-hour shift;
the efficiency is 780/800 converted to a percentage, or 97.5 percent. (2) the work is measured in hours
and took 8.21 hours to produce 8 standard hours; the efficiency is 8/8.21 converted to a percentage or
97.5 percent. (3) the work is measure in dollars and produces $780 with a standard of $800; the
efficiency is 780/800 converted to a percentage, or 97.5 percent.

 Routing: Information detailing the method of manufacturing of a particular item. It includes the
operations to be performed, their sequence, the various work centers involved, and the standards for
setup and run. In some companies, the routing also includes information on tooling, operator skill levels,
inspection operations and testing requirements, and so on.

 Standard costs: The target costs of an operation, process, or product including direct material, direct
labor, and overhead changes.

 Work center: A specific production area, consisting of one or more people and/or machines with similar
capabilities that can be considered as one unit for purposes of capacity requirements planning and
detailed scheduling.

1. Which of the following statements is true?

a. The same part number can be used to identify similar products
b. A part has one, and only one, part number
c. The same part on different bills of material will have a different number
d. An item can be either a parent or a component, but not both
2. In the BOM example below, which of the following are considered component items?
a. B, E, and F only
b. B, E, F, and G only A
c. B, C, D, E, and F only
B C
d. B, C, D, E, F, and G only
D E

B F G
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3. How many units of item C are required to produce one unit of item A?
a. 2
b. 4 Level Item Qty per
c. 6 0 A
d. 8 1 B 2
4. Which of the items in the bill of material are parents? 2 C 2
a. A only 2 E 2
b. B, C, and G only 1 C 4
c. A and B only 1 G 4
d. A, B, C, and G only
5. Work center utilization is a percent measurement comparing the actual production output to the
expected or standard output.
a. True
b. False
6. A work center has 80 available hour of direct labor a day but actually only works 70 hours a day.
What is the work center’s utilization percent? 87.5%
7. A work center produced a job requiring 24 standard hours in 23 hours. What is the work center’s
efficiency percent? 104.3%
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Session 4: Basics of Material Requirements Planning (MRP)

 Dependent demand: Demand that is directly related to or derived from the bill of material structure for
other items or end products. Such demands are therefore calculated and need not an should not be
forecast. A given inventory item may have both dependent and independent demand at any even time.
For example, a part may simultaneously be the component of an assembly and sold as a service part.

 Gross requirement: The total of independent and dependent demand for a component before the
netting of on-hand inventory and scheduled receipts.

 Lead-time offset: A technique used in MRP where a planned order receipt in one time period will
require the release of that order in an earlier time period based on the lead time for the item.

 Order point: A set inventory level where, if the total stock on hand plus on order falls to or below that
point, actions taken to replenish the stock. The order point is normally calculated as forecasted usage
during the replenishment lead time plus safety stock.

 Service level: A measure (usually expressed as a percentage) of satisfying demand through inventory or
by the current production schedule in time to satisfy the customers’ requested deliver dates and
quantities. In a make-to-stock environment, level of service is sometimes calculated as the percentage
of orders picked complete from stock upon receipt of the customer order, the percentage of line items
picked complete, or the percentage of total dollar demand picked complete. In make-to-order and
design-to-order environments, level of service is the percentage of times the customer-requested or
acknowledged date was met by shipping complete product quantities.

1. Which of the following is (are) elements in an MRP system?

a. the computer
b. bills of material
c. inventory records
d. all of the above
e. none of the above
2. A major input to an MRP system is:
a. the production plan
b. the capacity plan
c. shop-floor activity planning and control
d. the master schedule
e. none of the above
3. Which of the following are controlled by the materials planner?
a. firm planned orders
b. planned orders
c. released orders
d. exception messages
e. all of the above
4. Which of the following comes directly from external customers?
a. Dependent demand
b. Independent demand
c. Bill of materials
d. Order quantity
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5. Service parts experience which of the following types of demand?

a. Independent
b. Dependent
c. Independent and Dependent
d. None of the above
6. In material requirements planning, the process of placing the exploded requirements in the proper
time periods, based on the assembly lead times involved, is known as:
a. scheduling
b. offsetting
c. netting
d. all of the above
e. none of the above
7. The document that shows the component parts and the number of parts needed to make one of
an assembly or subassembly is called:
a. a route sheet
b. a material requirements plan
c. a bill of material
d. a material requisition
e. none of the above
8. Complete MRP grid like homework
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Session 5 Managing with MRP

 Exception report: A report that lists or flags only those items that deviate from the plan.

 Firm planned order (FPO): A planned order that can be frozen in quantity and time. The computer is not
allowed to change it automatically; this is the responsibility of the planner in charge of the item that is
being planned. This technique can aid planners working with MRP systems to respond to material and
capacity problems by firming up selected planned orders.

In addition, firm planned orders are the normal method of stating the master production schedule.

 Net change MRP: An approach in which the material requirements plan is continually retained in the
computer. Whenever a change is needed in requirements, open order inventory status, or bill of
material, a partial explosion and netting is made or only those parts affected by the change.

 Planning horizon: The amount of time a plan extends into the future. For a master schedule, this is
normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components
and core capacity changes of primary work centers or of key suppliers. For longer term plans the
planning horizon must be long enough to permit any needed additions to capacity.

 Priority planning: The function of determining what material is needed and when. Mater production
scheduling and material requirements planning are the elements used for the planning and preplanning
process to maintain proper due dates on required materials.

1. During an MRP generation where no safety stock is specified, the first net requirement is
triggered for a period when the PAB
a. First becomes negative
b. First becomes zero
c. Is less than the gross requirement for the next period
d. Is less than the lot size
2. During the MRP generation, the key purpose of the bill of material is to provide
a. A pick list of components needed
b. A structure to guide the explosion process
c. A structure to guide netting
d. A list of assembly details
3. What happens when the planning horizon is shorter than an item’s cumulative lead time?
a. Customer service level improves
b. Item cumulative lead time shortens
c. Lower level items cannot be planned
d. Higher level items cannot be planned