BUS606 Study Guide

Site: Saylor Academy
Course: BUS606: Operations and Supply Chain Management
Book: BUS606 Study Guide
Printed by: Guest user
Date: Friday, June 21, 2024, 2:44 AM

Navigating this Study Guide

Study Guide Structure

In this study guide, the sections in each unit (1a., 1b., etc.) are the learning outcomes of that unit. 

Beneath each learning outcome are:

  • questions for you to answer independently;
  • a brief summary of the learning outcome topic; and
  • resources related to the learning outcome. 

At the end of each unit, there is also a list of suggested vocabulary words.

 

How to Use this Study Guide

  1. Review the entire course by reading the learning outcome summaries and suggested resources.
  2. Test your understanding of the course information by answering questions related to each unit learning outcome and defining and memorizing the vocabulary words at the end of each unit.

By clicking on the gear button on the top right of the screen, you can print the study guide. Then you can make notes, highlight, and underline as you work.

Through reviewing and completing the study guide, you should gain a deeper understanding of each learning outcome in the course and be better prepared for the final exam!

Unit 1: Introduction to Operations and Supply Chain Management

1a. Explain the relationship between productivity and optimization

  • What is Operations and Supply Chain Management (OSCM)?
  • How do economic principles of supply and demand affect OSCM?
  • How has concern for environmental issues affected OSCM?
  • How are additive manufacturing techniques affecting OSCM?
The goal of Operations and Supply Chain Management (OSCM) is to transform resources such as people, materials, technology, and information (called inputs) into goods or services (called outputs). OSCM must add value to these resources and optimize this transformation process. Operations and Supply Chain Managers first determine strategic decisions (long-term decisions that are broad) and tactical decisions (short-term decisions that are narrow in scope and focus on day-to-day issues).
 
An essential aspect of operations management is the three steps of production planning:
 
  1. Production planning determines where, when, and how production will occur;
  2. Production control is concerned with controlling quality and costs, scheduling, and the day-to-day operations of running the factory or service facility; and
  3. Improving efficiencies.
While once OSCM was a more internal function of an organization, at times producing products that did not meet the consumer's needs, global competitiveness now requires a much more global supply chain with which to transform resources. With the increasing worldwide concern over environmental issues, Green Supply Chain Management is emerging to comply with increasing regulations for environmental protection.
 
From an economic standpoint, OSCM is affected by the principles of supply and demand. For an organization to match its supply to the exact goods or services that a consumer demands, OSCM must always consider optimizing the supply chain.
 
Remember, the goal of OSCM is to optimize the transformation of resources into goods and services. At times, optimization may increase costs due to small production runs and the complexity of component parts. However, adaptive manufacturing techniques are increasingly used to reduce some of the costs. Adaptive manufacturing techniques include ideas such as 3D printing one heart valve, manufacturing lighter weight fabrics to reduce weight and lower costs, or even embedding a part within a mechanism to reduce assembly time.
 
To review, see:


1b. Describe the main tools used to analyze problems in OSCM, such as flowcharts, facility layout design, waiting line analysis, and statistical process control (SPC)

  • What is a flowchart, and how can it be used on OSCM?
  • Why is facility layout design important in OSCM?
  • What is waiting-line analysis?
  • What tools can help us manage the quality of our products?
  • How does statistical process control (SPC) affect OSCM?
A flowchart is a visual representation of a given task's flow, workflow, or process. Flowcharts use standardized symbols so that everyone understands the process. Flowcharts are typically read from left to right and top to bottom. You will learn more about flowcharts in a later unit.
 
Facility placement and layout are important considerations for both manufacturing and services. The placement of a facility has a dramatic effect on costs, and the purpose of an effective layout is to reduce production costs or increase consumer satisfaction.
 
Waiting-line analysis is a mathematical tool that can study queuing theory. Queuing theory describes the arrival pattern of customers in a service organization, the structure (layout) of the facility, and the tasks completed in the facility. While we often think of waiting-line analysis when waiting in line for something, we can study queuing theory in operations management to establish an efficient waiting-line system.
 
Organizations recognize they must provide quality products to consumers. Over the years, methods have been developed to help organizations produce high-quality products. Total Quality Management (TQM), developed by Dr. W. Edwards Deming, focuses on continuous improvement by all employees. Six Sigma strives to measure the defects in the production process and eliminate them, resulting in "zero defects". Lean manufacturing eliminates steps in the production process that do not add the benefits consumers seek. Just-in-Time (JIT) manufacturing requires that production materials arrive at the time needed rather than storing inventory. Statistical Process Control provides a statistical analysis to measure and control quality.
 
To review, see Improving Production and Operations.
 

1c. Explain the role of organizational leadership in finding project opportunities and overcoming organizational challenges related to projects

  • How can leaders affect and change productivity issues in the workflow?
  • What internal and external threats exist for the supply chain? How can we implement supply chain security (SCS)?
  • Have you changed how you secure products in the past few years through online shopping, grocery pick-up, and new transportation services?
  • How can organizational leaders control "green" OSCM practices? Would changes affect the profitability of the organization?
Because the goal of OSCM is to optimize the transformation of resources, organizational leaders must understand the basic concepts of workflow and the influences on that workflow. Once a workflow is established, leaders can use cycle time and bottlenecks to affect production and productivity. Inventory of parts and finished products must be controlled, spoilage/scrape, overtime of employees, and overspeed of the production line. Tools discussed in the previous section, such as TQM and Lean Management, can help leaders understand production optimization.
 
September 11, 2001, forever changed supply chain management and demonstrated the need to secure worldwide supply chains. Supply chain security (SCS) encompasses those practices applied to address threats to the supply chain. The current trend is to take a multi-layered approach to the security of the supply chain. This multi-layered approach includes:
 
  1. ACI programs to capture cargo information;
  2. Certification or credentialing programs to ensure that supply chain actors are proven to be legitimate;
  3. Technologies such as RFID and GPS tracking; and
  4. ISPS code provides for the security norms for port installations.
Securing supply chains, even the development of new chains, has become increasingly difficult in a world where consumer preferences change very quickly. Operations and supply chains must be designed to respond to these changing preferences. Some of the traditional and new supply chains include (1) full-scale manufacturing and sourcing, (2) benchmarking, (3) ramp-up, and (4) prototype. The rate of changing consumer preferences and the need to control the supply chain affects the type of supply chain needed for organizations. For example, consumer preferences for toys change quickly, while preference for farm equipment changes slowly. Similarly, less control is needed in fashion since shirts can be manufactured globally, while up-scale automobiles require much more control over the supply chain.
 
Introduced previously in the course is Green Operations and Supply Chain Management. Due to environmental factors like the COVID-19 pandemic, we have seen much uncertainty in supply chains. As supply chains become more uncertain, less emphasis is often placed on internal green practices and external environmental issues. Research has shown us that leaders rarely change their internal green practices; however, they switch their allocation of spending on pollution prevention to pollution control. Research does show that it "pays to be green".
 
To review, see:
 

1d. Explain areas of uncertainty in OSCM, such as delays or breaks in supply of production inputs and demand forecasting, and possible methods to deal with them

  • How has changing consumer preferences influenced the task of OSCM?
  • Who in the organization influences the optimization of the supply chain and helps when problems occur in the supply chain?
  • What are the four main links in a supply chain? What happens when one of these links is broken?
  • What are services, and how is the OSCM different for services and goods?
With mass-produced products, the manufacturer chooses the production output, and consumers purchase that output. Henry Ford, the inventor of the Model T Ford in 1908, famously said that the consumer could buy any color of this vehicle as long as it was black. All Model T Fords were black! Now, however, the operations and supply chain managers must be more versatile; they must communicate to the organization the consumer's preferences, and they must develop the flow of goods and services back to the consumer through the management of the supply chain. Said another way, these managers must satisfy customer needs while controlling production and supply chain costs.
 
While operations and supply chain managers are ultimately responsible to the consumer and the organization, they have help from customer service, marketing, engineering, finance, information technology, and quality control. These functional areas in an organization work together to manage the supply chain normally and when the supply chain is broken or ineffective.
 
The supply chain consists of 4 major links: (1) manufacturing and operations, (2) transportation, (3) purchasing, and (4) warehouse and distribution centers. If you go to your favorite restaurant and they are out of your favorite dish, which link is broken, and which functional area in the organization is responsible for this break? This short scenario identifies how crucial all functional areas of a business work are in working with OSCM and why all functional areas of an organization flow into the OSCM function.
 
A good can be stored, transported, resold, and purchased again. A service, however, is intangible. A service is not a tangible product that a consumer can touch. A service cannot be stored, resold, or purchased again. The service is often produced and consumed simultaneously – think haircuts or pedicures! The consumption of these services is inseparable from their production, referred to as inseparability. However, services still have a supply chain that must be managed. In addition to services being inseparable, services have perishability and heterogeneity. One of the most important links in the service supply chain is the client-based relationship.
 
To review, see:

Unit 1 Vocabulary

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.
 
  • ACI program
  • adaptive manufacturing techniques
  • benchmarking
  • bottlenecks
  • certification/credentialing
  • client-based relationship
  • continuous improvement
  • customer service
  • cycle time
  • demand
  • engineering
  • finance
  • flowchart
  • full scale manufacturing and sourcing
  • good
  • green supply chain management
  • heterogeneity
  • information technology
  • inseparability
  • ISPS code
  • Just-in-Time inventory (JIT)
  • lean manufacturing
  • manufacturing and operations
  • marketing
  • multi-layered approach
  • overtime/overspeed
  • perishability
  • production control
  • production planning
  • prototype
  • purchasing
  • quality control
  • ramp-up
  • service
  • Six Sigma
  • spoilage/scrape
  • strategic decisions
  • supply
  • Supply Chain Security (SCS)
  • tactical decisions
  • Total Quality Management (TQM)
  • transportation
  • warehouse and distribution centers

Unit 2: Process and Service Design Capacity Management

2a. Explain how economies of scale factor into production system design 

  • What are economies of scale and how do they differ from diseconomies of scale?
  • How do large stores like Costco benefit from the economy of scale?

In economies of scale, we reach a position where the output goes up and the cost per unit goes down.
 
It's important to remember that, in the short run, operations are running with fixed costs with variable costs allowed to change; in the long run, all costs are variable. A small factory, for example, might have an average cost of $10 to produce 100 units. A medium-sized factory might have an average cost of $8 to produce 200 units that are the same as the small factory. A large factory might have an average cost of $6 to produce 300 units that are the same as the other factories. If you plotted these points, you would have a downward-sloping economy of scale.
 
Large manufacturing plants and large firms can keep their costs down by using the economy of scale. As costs for labor, for example, go up, these larger entities can replace employees with machines to keep costs lower. The restaurant chain Chipotle has just introduced a robot named "Chippy" that fires the tortilla chips for customers. Chippy joins "Flippy", a robot White Castle (another restaurant chain) uses to make burgers. As the federal minimum wage in the U.S. has increased, organizations are replacing high-cost workers with robots.
 
Diseconomy of scale occurs if a large plant or firm becomes so large that increasing levels of managers are needed – often resulting in loss of effective communication. In this case, as the level of output increases, the costs increase.
 
To review, see More on Economies of Scale.
 

2b. Use Little's Law to analyze production capacity 

  • How do increasing wait times in a manufacturing production queue affect your resources?
  • How can cross-docking save you money?

Queuing theories, like Little's Law, can help us understand why on rainy days, streets and highways are more crowded and why fast-food restaurants need a smaller dining room than regular restaurants with the same customer arrival rate. Little's Law can also help ensure that consumers receive their products on time by optimizing the wait time of the manufacturing system. Increasing wait times affect the entire manufacturing process, potentially leading to lost customers.
 
Cross-docking enables an organization to reduce or eliminate the need for product storage. Through this technique, which we can determine mathematically, organizations can reduce transportation time, thereby optimizing their operations and serving their customers. To be effective, cross-docking depends on reliability in the supply chain, effective internal and external communication, qualified employees, and strategic management by the leadership in the organization.
 
To review, see:

 

2c. Identify where buffers will help flow of production 

  • In dealing with the uncertainty of consumer demand and changing customer preferences, how can safety stock help optimize the supply chain?
  • Can safety stock cause a competitive disadvantage to organizations?
  • How does the need for safety stock affect production planning?

Business operations can use safety stocks to react to changing demand, supply, and manufacturing yield within their production line. Safety stock can help organizations prevent stockouts of their resources, such as raw materials and packaging. Safety stocks can be beneficial for manufacturers, although manufacturers who use lean management to control their operating processes do not like the inventory hold-over that can occur when safety stock numbers are not optimized.
 
Too much safety stock, or too little safety stock, can affect business operations. Holding too many raw materials, for example, can be costly to an organization. Storage can also result in expired dates, theft, or the breaking down of the raw material. Holding too little safety stock causes its own problems: you may lose sales and thus customers if your order delivery is late or canceled.
 
We introduced production planning in Unit 1. The forecasting done in production planning can help an organization develop an effective safety stock program. Using technology and collaboration with partners in the supply chain can also help an organization determine the optimal safety stock. Finally, Enterprise Resource Planning (ERP) models can optimize the level of safety stock.
 
To review, see Safety Stock.
 

2d. Identify possible bottlenecks in production and propose solutions 

  • How can a production flow analysis help identify bottlenecks in the production process?
  • What effect does the human factor have on production flow analysis and bottlenecks?

Production flow analysis (PFA) provides a visual representation of the production process in an organization – identifying the activity to make each part and the machines used in each activity. The PFA is composed of (1) production flow analysis, (2) company flow analysis, (3) factory flow analysis, (4) group analysis, (5) line analysis, and (6) tooling analysis.
 
The goal of PFA is to identify bottlenecks in the production process and improve those areas in which the bottleneck occurs. A bottleneck is a congestion in a production system when workloads arrive more quickly than the system can handle them. Once these bottlenecks are identified, organizations might redesign the layout of their factory, look at scheduling activities differently, or cluster machines together.
 
While robotics and other technologies are increasingly used in production, humans are still involved, and humans are not standardized. Humans exhibit varying operation times for the same task in an assembly line process. What might take one person 10 seconds to tighten two bolts might take another person 13 seconds. These variations in time could affect the quality and the product's reliability; production set-up is essential as a poorly designed assembly line could lead to added costs or lowered profits. Mathematical formulas exist to ensure that human factors do not cause bottlenecks, leading to system failure.
 
To review, see Multi-layer Network-Based Production Flow Analysis and Designing an Assembly Line for Reliability.
 

Unit 2 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • bottleneck
  • company flow analysis
  • cross-docking
  • diseconomy of scale
  • economy of scale
  • Enterprise Resource Planning (ERP)
  • factory flow analysis
  • group analysis
  • Lean Management
  • line analysis
  • Little's Law
  • Production Flow Analysis (PFA)
  • production planning
  • safety stock
  • stock outs
  • tooling analysis

Unit 3: Operations and Performance Analysis

3a. Construct a flowchart for a production or service process with performance metrics 

  • What is a flowchart, and how are flowcharts useful in operations supply chain management?
  • How does a flowchart differ from a cross-functional flowchart?
  • Can you use different types of flowcharts in operations supply chain management?
  • How would you construct a flowchart of a simple production process?

Frank and Lillian Gilbreth developed the first flowcharts in 1921 to support their important work in finding the best way to complete a task. Industrial engineers embraced this new tool, and computer scientists used flowcharts to design computer algorithms in the 1950s and 1960s. A flowchart is simply a diagram to analyze, design, document, and manage a process, whether the flowchart is for a good or service.
 
As processes become more complex, a cross-functional flowchart might be necessary. While a simple flowchart does not indicate who or what organizational unit is responsible for an activity, a cross-functional flowchart assigns responsibility to specific organizational units. For example, different organizational units were necessary in developing this course, including a subject matter expert, an instructional designer, and a quality assurance reviewer, each with specific tasks assigned for each unit. A business might also use a cross-functional flowchart to indicate that more than one organizational unit might share responsibility for a single process.
 
While there are several systems to classify different types of flowcharts, one of the more common classification systems models flowcharts based on different user groups: (1) document flowcharts, (2) data flowcharts, (3) system flowcharts, and (4) program flowcharts.
 
Flowcharts generally use a standard set of shapes to indicate different events in the process, such as a terminal, a process, or a decision.
 
To review, see Flow Chart Symbols.
 

3b. Describe the advantages and disadvantages of lean production systems 

  • How are Lean 5S and Kaizen the same? How do they differ?
  • How does Lean Manufacturing differ from more traditional manufacturing?

Both Lean 5S and Kaizen have a similar goal: continuous improvement. However, Lean 5S does this by removing waste (ineffective processes), while Kaizen uses the principles of continuous improvement. Both systems have specific steps for workplaces to follow. A second common factor between these systems is the need for constant training of workers.
 
Traditionally, firms have gained economies of scale by producing faster, thus lowering the cost of production. This strategy uses a "push" system to push the product to the customer. A significant disadvantage of this strategy is the inability of the system to respond to different customer demands. Lean manufacturing uses a "pull" system, where production is based on actual, not forecasted, customer demand.
 
To review, see Lean Manufacturing.
 

3c. Describe risk mitigation solutions in terms of uncertainty and potential breaks in production 

  • In what operational areas can risk occur?
  • How can we mitigate, or reduce, the risks of people?
  • How can we mitigate the risk of process failures?
  • How can a system risk affect the organization?

Risk can occur in four main operational areas: people, process, system, or external events. The risks that can occur in these operational areas and the losses that can be incurred make up operational risk management.
 
People risks go beyond your employees and include personnel throughout the supply chain and even your customers. Human resource management is a critical factor in mitigating people risks. Processes include the procedures and practices organizations use to conduct their business. Process risks can occur because the process is not well-designed, or the risks can involve the human resources who run the processes. Processes may need to be redesigned or employees better trained. System risks involve the risks associated with technology, both hardware and software. Both accidental failures and intentional acts, like a cyberattack, can impact system risk. An organization or supplier is greatly affected if a data breach occurs. External risk factors are external to the organization, such as natural disasters, utility failures, and the loss of key suppliers.
 
Risk management aims to have processes in place to mitigate people, process, system, and external risks. Can you think of any organizations you work with that had no risk management plan for a global pandemic? Do you think your bank, hair salon, or local grocery store had a risk management plan for the pandemic?
 

3d. Describe how queueing theory relates to customer service waiting lines 

  • What can queueing theory tell us about customer service experiences?
  • Who are the stakeholders responsible for evaluating, redesigning, and implementing queueing theory in the customer service experience?
  • What effect might service prototypes have on improving customer experiences?

Unit 2 introduced Little's Law, a theory that describes the importance of understanding wait times in queues. This same theory can help us understand how, in service industries, we can improve the customer service experience. This idea, improving customer experiences, can be implemented through Service Design.
 
Service designers research, develop ideas, and test experiences to build better customer experiences. As part of the research, service designers begin with the groups of people related to the service: employees, customers, and government officials, when necessary. These groups of people are referred to as stakeholders. Stakeholders work with the service designers to develop ideas to improve customer experience. These new ideas are developed into service prototypes, and feedback is gathered from all stakeholders. Once an improved design meets the needs of all stakeholders, the design can be implemented to improve the customer experience.
 
The next time you stand in a queue – waiting to board an airplane, enter a sports arena, or enter a concert venue – think about how you can improve your own customer experience!
 
To review, see What is Service Design?
 

3e. Perform a waiting line analysis on a service industry firm where uncertainty of demand for customer service varies over time within a predictable pattern 

  • What are typical components of a queue/waiting line?
  • How do these typical components fit into supply chain management?
  • How can we measure the customer experience to meet the goal of better customer service with a minimum wait time?

The next time you are waiting in a queue, look at the behavior of yourself or others. Typically, everyone uses each of the components of a queue:

  • the arrival process;
  • the behavior of customers (including balking, reneging, and jockeying);
  • the service times;
  • the service discipline; and
  • the service capacity.

The service discipline encompasses different methods to move new arrivals through the queue: First Come First Served, Service in Random Order, Last Come First Served, Priorities, Processor Sharing, and Round Robin. Can you identify common waiting lines that use these different order types for customers moving through the queue?
 
We can analyze wait times for manufacturing firms as well. Some examples include operation supply chain managers who want to identify the appropriate route(s) for their finished goods or determine the safety stock levels throughout the supply chain.
 
Performance measures should be conducted to ensure whatever service discipline you choose meets the goal of better customer service and minimum waiting time. Some examples of these performance measures include distribution of the waiting and sojourn times, number of customers, amount of work, and busy periods.
 
To review, see A Survey on Queuing Systems with Mathematical Models and Applications.
 

Unit 3 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • arrival process
  • balking
  • cross-functional flowchart
  • data flowchart
  • document flowchart
  • external risk
  • flowchart
  • jockeying
  • Kaizen
  • Lean 5S
  • operational risk management
  • people risk
  • process risk
  • program flowchart
  • reneging
  • service capacity
  • service design
  • service discipline
  • service prototype
  • service time
  • stakeholders
  • system flowchart
  • system risk

Unit 4: Scheduling Model Analysis

4a. Describe typical scheduling and control functions, such as determining the number of jobs to assign to a machine in manufacturing or scheduling daily and hourly work times in services personnel

  • How are scheduling problems described?
  • How does a dedicated machine in manufacturing differ from a parallel machine?
  • What parameters make up the task set?
  • What criteria constitute the optimality criteria?

Scheduling problems in manufacturing consist of three parameters: (1) the processing (machine set), (2) the task set, and (3) the optimality criteria.
 
In production systems, machines are either dedicated or parallel. Dedicated machines can be further defined as flow-shop, open-shop, and job-shop. Parallel machines can be further defined as identical processors, uniform processors, and unrelated processors.
 
The task system corresponds to the applications for manufactured goods. Each task can be described by several parameters: number of operations, execution time, ready time, deadline, resource requirements, and weight.
 
The final parameter is the optimality criteria, consisting of schedule length, maximum lateness, mean flow time, and mean tardiness.
 
To review, see Scheduling in Manufacturing Systems: The Ant Colony Approach.
 

4b. Explain how shop floor layout factors into scheduling processes and using resources efficiently 

  • What is plant layout, and what are the objectives of an effective plant layout?
  • How do the types of plant layouts differ?
  • What are the advantages and disadvantages of each different plant layout?

In plant layout, we look at the arrangement of equipment, material, and staffing to achieve as high productivity as possible. There exist many objectives of good plant layout, including reducing bottlenecks in the production process, minimizing employee movement, and increasing the flexibility for future changes in product design, among others. Four layout categories exist: process layout, product layout, combination layout, and fixed-position layout.
 
In a process layout, machines are arranged according to their function. In product layout, operations are performed in a sequence, and machines are organized based on that sequence. In a combination layout, the plant is arranged as both a process and a product layout – using both layouts' advantages. In a fixed position layout, the product remains stationary, and the production moves around the product – think airplanes and shipbuilding.
 
Each of these four layouts has advantages and disadvantages. Make sure you understand all of these and think about what products are made through each type of layout.
 

4c. Use priority rules to determine the optimum number of jobs and machines to schedule 

  • What is production scheduling?
  • What are some common priority rules to use for scheduling?

Production scheduling consists of the activities performed in manufacturing to manage and control the execution of the production process. A schedule describes in detail (in terms of minutes and seconds) which activities must be performed and how resources should be used to satisfy the plan. Detailed scheduling involves determining the allocation of machines to competing jobs over time, subject to constraints.
 
Because machines can handle one task at a time, priority rules must be set in place as part of the scheduling process. Some common priority rules include earliest due date, where jobs are scheduled by the earliest due date of competing orders; longest processing time, where scheduling assigns the highest priority to the jobs with the longest processing time; shortest processing time, where the highest priority is given to jobs with the shortest processing time, first-come, first-serve, and preferred customer order.
 
To review, see Job Sequencing and Priority Rules.
 

4d. Analyze service industries in terms of personnel scheduling and estimating daily demand 

  • What are the different methods we can use to schedule personnel?
  • Can you think of service industries that would use these different scheduling methods?

Personnel scheduling is applicable in many service industries, such as airlines, hospitals, and banks. Scheduling personnel should balance the employee's needs, the customer's, and the tasks involved. Scheduling conflicts or poorly arranged schedules can lead to a loss of motivation by the employees and fatigue, accidents, and mistakes (in the case of overscheduling personnel). Scheduling personnel in a small service organization might be easy, but as service organizations become large and complex, some scheduling methods are available for the organization to use. Scheduling must always conform to the workload pattern so that schedules are effective and efficient.
 
Some scheduling models include a fixed schedule method, which is used when the workload is predictable; a rotation schedule method, which ensures a balance between shifts; pattern schedule method, which sets the shift rotation by day of the week and is mainly applied where the workdays usually change cyclically from one schedule period to another; coverage schedule method, which is used where the pattern of the workload is not consistent, and a lot of flexibility is required; assignment schedule method that combines the aspect of time when one will be working and the assignment to be carried out; and team schedule method, where employees are scheduled as a group.
 
To review, see Scheduling IT Staff at a Bank: A Mathematical Programming Approach.
 

Unit 4 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • assignment schedule method
  • combination layout
  • coverage schedule method
  • earliest due date
  • first-come, first-served
  • fixed position layout
  • fixed schedule method
  • flow-shop
  • identical processors
  • job-shop
  • longest processing time
  • open-shop
  • pattern schedule method
  • preferred customer order
  • process layout
  • production scheduling
  • product layout
  • rotation schedule method
  • schedule
  • shortest processing time
  • team schedule method
  • uniform processors
  • unrelated processors

Unit 5: Demand Forecasting

5a. Explain the difference between qualitative and quantitative forecasting 

  • What is forecasting, and what is the difference between forecasting and planning?
  • What methods can forecasters use to predict demand?

Forecasters develop scenarios of what the future might look like; planners develop the actions that need to take place based on the forecast. Forecasting is hindered by external uncertainty (external to the organization), and planning is hindered by internal uncertainty (internal to the organization).
 
Forecasters can use both qualitative and quantitative forecasting in making their forecasts. Qualitative forecasting uses non-statistical tools; these forecasters rely on past experiences and inferences. Qualitative forecasting may use experts, upper management, and market research in the forecasting process. The main disadvantage of qualitative forecasting is subjectivity. Quantitative forecasting, on the other hand, relies on data to make predictions. Statistical confidence intervals are used to predict the confidence of these predictions.
 
A third option is hybrid forecasting, a combination of statistical and non-statistical methods. A hybrid model can result in a forecast that evens out the uncertainties of using only qualitative or quantitative forecasting models. Hybrid models are less effective in high-demand volatility markets.
 
To review, see Forecasting and Measuring Forecast Accuracy in a Pharmacy.
 

5b. Create quantitative forecasting analyses using linear regression, moving average, and exponential forecasting techniques

  • How can we use linear regression for forecasting in OSCM?
  • How do correlation and covariance apply to linear regression?
  • When can we use the moving average to forecast demand?
  • How does the moving average differ compared to exponential smoothing?

Regression analysis allows us to infer a relationship between two variables. In economic terms, we can use regression analysis to infer the relationship between supply and demand and use that relationship to predict supply based on a certain level of demand. In OSCM, we can infer relationships between unit costs and demand. Testing the relationship between two variables can greatly help decision-making and strategic planning.
 
As part of regression analysis, understanding correlation and covariance are important. Correlation tells us how closely the variables are related to each other. Covariance tells us how variables vary together. Regression analysis, correlation, and covariance allow us to infer the relationship between variables. Because regression analysis is neither precise nor perfect, we can only make inferences based on the results of the analysis.
 
We can also use the moving average to forecast demand. Moving average is only used when the time series of data points is constant; that is, seasonality cannot be accounted for in this model. All historical data points have the same "weight", so changes in demand might show more slowly in this model. Exponential smoothing applies exponentially decreasing weights to older data to "smooth out" the effects of trend-like or seasonal-like data.
 
To review, see:

 

5c. Identify possible trends from a scatter plot that indicate positive, negative, linear, or non-linear relationships in data 

  • What is a scatter plot?
  • How does a scatter plot indicate a positive association?
  • How does a scatter plot indicate a negative association?
  • How can a scatter plot show a linear versus a non-linear relationship?

We can show the association between two different variables using a scatter plot. If the data we plot on the scatter plot shows an increase in both the y variable and the x variable (as variable y increases, variable x also increases), we have a positive association between these two variables. If variable y decreases and variable x increases, we have a negative association. We can also determine that the two variables are not associated with each other.
 
A linear relationship means that we can draw, or calculate, an almost straight line through the scatterplot data. A non-linear relationship means that we cannot draw a straight line – the line may be curved.
 
We can calculate how closely related the two variables are; this calculation provides an R value between -1 and 1. An R value of 1 shows a strong positive association; an R value of -1 shows a strong negative association; an R value of 0 indicates the two variables are not associated.
 
Can you see how comparing variables in a production process might be helpful? You could calculate the association between the number of workers on the assembly line and the quality of the finished product. In a retail store, you could calculate the association between the number of salespeople on the sales floor and the sales value.
 

5d. Interpret forecasting errors and use them to quantify the uncertainty in a forecast 

  • What are forecast errors, and how do these errors influence an organization?
  • What are the common forecast errors we see, and how are they calculated?

Forecasting errors happen all the time; after all, we are not working with perfect data. However, the size of the forecasting error is important. A forecasted/actual error of $50 might not be a problem, but what about a forecasted/actual error of $5,000? Large errors in forecasting can lead to shortages or overstock of products, less-than-ideal cash flow, and other costly errors.
 
We can identify several types of forecasting errors: Bias, Mean Absolute Deviation (MAD), Mean Absolute Percentage Error (MAPE), and Mean Squared Error (MSE). Each of these types of errors can be easily calculated.
 
Types of forecast errors include bias. This type of error can be a positive bias or a negative bias error. What are the consequences to a firm if they suffer from long-term positive or negative bias? Mean Absolute Deviation (MAD) is concerned with the absolute value of the error, not with whether the error is calculated to be positive or negative. The Mean Absolute Percentage Error (MAPE), like the MAD, does not give directional movement in the errors – it simply provides a percentage value rather than a number value. The Mean Squared Error (MSE) penalizes the larger error values over the small error values, allowing us more information with which to adjust our forecasting model.
 
To review, see Forecasting Errors.
 

Unit 5 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • bias
  • correlation
  • covariance
  • exponential smoothing
  • forecasting
  • forecasting error
  • Mean Absolute Deviation (MAD)
  • Mean Absolute Percentage Error (MAPE)
  • Mean Squared Error (MSE)
  • moving average
  • negative bias
  • planning
  • positive bias
  • qualitative forecasting
  • quantitative forecasting
  • regression analysis
  • weighted moving average

Unit 6: Process and Inventory Management

6a. Describe lean operations and how it factors into business processes and inventory management 

  • How does lean manufacturing improve efficiency?
  • How can Kanban and Total Quality Management (TQM) principles help with the efficiency of the manufacturing process?
  • How might a supply chain be different for easily perishable items?

When designing an efficient manufacturing process, keep in mind these ten tips: keep it moving, keep it small, keep it logical and sequential, make it ergonomic, economize on movement, optimize parts presentation, do it online, minimize wasteful handling, keep it open and flexible, and keep it simple.
 
A Kanban system is a lean work scheduling system that involves: visualizing the workflow, limiting works-in-progress (WIP), and measuring the lead, or cycle, time. The goal of a Kanban system is to maximize a team's productivity by reducing idle time.
 
While lean supply chains are effective, easily perishable items must receive additional considerations in the supply chain. Easily perishable items include food and medicines. Consumers of these products tend to be very conscious about expiration dates. Additionally, partners in the supply chain must invoke special processes, such as refrigeration, and deal quickly with disruptions in the supply chain, such as transportation breakdowns and refrigeration breakdowns. Considering that COVID-19 vaccines had very short expiration dates and required very specialized delivery methods, you can see that a lean, highly effective supply chain needed to be designed quickly.
 
To review, see:

 

6b. Determine whether a process is in control or not, how to return the process to being in control, and quantify a process capability after it has returned to control 

  • How do you know when a process is in or out of control?
  • How can Statistical Process Control be used to develop the quality of a product that the consumer requires?

Determining when a manufacturing process is in control or out of control is vital to an organization. Determining the efficiency of the process or identifying problems early can save an organization time and money. Statistical Process Control is one method of continuous improvement that will help an organization collect data, measure data, and make corrections. Any process can be statistically analyzed, including the speed of manufacturing, the number of defects, overall product quality, and more. Organizations can use SPC to reduce the variations in the process.
 
Control charts can be used in the SPC to depict when a process is in control (when the data remains within an upper- and lower-limit control limit). When data is outside the control limit, it is out of control.
 
When a process is out of control, that is, when the data collected has variations outside the control limits, corrections must be made.
 
To review, see Statistical Process Control.
 

6c. Determine the optimal order quantity and order time for a given inventory model 

  • How can the food service industry determine the optimal quantity of order time for its inventory?

In food service, optimal order quantity and order time is essential. Because of the perishability (for fruits, vegetables, and meat), seasonality (ice cream in the summer versus hot drinks in the winter), and specific transportation needs, ordering the correct quantity at the right time is vital.
 
While the examples used in this unit revolve around food services, the basics of inventory control are applicable across industries:

  1. Set up systems to track and record inventory;
  2. Develop specifications and procedures for ordering and purchasing;
  3. Develop standards and procedures to efficiently receive deliveries; and
  4. Determine the frequency and processes for reconciling inventory and analyze inventory data to determine any areas for improvement.

To review, see Managing Inventory Control and Procurement.
 

6d. Determine the economic order quantity for an inventory system that minimizes total holding and ordering costs for a given time period 

  • What is Economic Order Quantity (EOQ)?
  • In what way does effective inventory management meet the needs of the consumer?
  • How does inventory control maintain low levels of stock while also meeting the consumer's needs and maximizing the organization's profit?

In traditional inventory control systems, organizations would keep stock on hand to handle fluctuations in consumer demand. However, more recently, the cost of keeping that stock on hand has been defined as a cost to maintain that supply.
 
Today, combining the improvement of information support systems, differentiating the supply sources, and improved transportation methods allow an organization to reduce their stock level without losing quality to the customer, which helps decrease the enterprise's total expenses. Inventory systems like JIT can help organizations maintain customer satisfaction while maintaining maximized profits.
 
Safety stock is that point of stock that leads to neither under-stock nor over-stock in fluctuating demand. In other words, safety stock helps to even out fluctuating demand. Because inventory is a cost to an organization, forecasting future demand, forecasting error, and using Economic Order Quantity (EOQ) calculations could help an organization maximize consumer demand and organization profits. Economic Order Quantity (EOQ) is the level of inventory that minimizes total inventory holding costs and order costs. Linear regression or multilinear regression can be used to help determine the EOC.
 
To review, see Stochastic Inventory Management in a Shortage and Determining Safety Stock with Uncertain Demand.
 

Unit 6 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • control charts
  • Economic Order Quantity (EOQ)
  • in control
  • Just-in-Time
  • Kanban system
  • out of control
  • Statistical Process Control (SPC)

Unit 7: Facility Analysis – Location and Layout Planning

7a. Describe the criteria for choosing a facility location for manufacturing and service industry firms 

  • What criteria should be considered when choosing a facility location?
  • How might these criteria vary based on the industry?

When choosing a plant location, a cost optimization model is often used by assigning monetary values to the decision attributes. The attributes, or criteria, most often includes market demand, production and storage capacity, production cost, and supply reliability. The cost optimization model can be extended by adding uncertainty into the model – the uncertainty of population, changing market trends, and unpredictability of demand.
 
In the food production industry, additionally, decision attributes must be considered. For example, the assumption of a consistent supply of raw materials, which is possible in most industries, is not possible in the food industry. Deterioration of quality, seasonality of raw materials, unstable climate, and natural disasters must all be part of the determination of location.
 
Even in some industries where raw materials were assumed to be stable, we saw the manufacturing of computer chips disrupted by the worldwide pandemic, leading to production issues for many other industries. Do you think the computer chip manufacturers had a contingency plan developed for such an incident?
 
To review, see Plant Location Selection for Food Production.
 

7b. Compare facility location models, such as the factor rating system, linear programming, and the centroid method, using numerical criteria 

  • How does a locational cost volume profit analysis help us determine a location for a facility?
  • How can we use linear programming to choose the lowest transportation costs between destinations?
  • How has the introduction of Geographic Information Systems affected facility locations?

A locational cost volume profit analysis allows us to determine the best facility location based on forecasted demand over a period of time. By looking at forecasted demand, fixed costs, and variable costs, an analysis can be completed to help decide on a plant location.
 
Linear programming can be used to determine the most effective way to transport products from one location to another with the lowest transportation cost. Products must be transported throughout the supply chain, from wholesalers to distributors, to retailers. Lowering the cost of transportation would increase profits. Because the shipping cost is directly proportional to the number of units shipped, the solution can be determined through linear programming.
 
Geographic Information Systems (GIS) allow us to collect data to store, manage, analyze, and visualize spatial data. While the research study focused on the use of GIS to better understand urban design, land use, and transportation systems, the field of logistics can also benefit from GIS. GIS can help organizations choose restaurant or grocery store locations. GIS can also be used to track inventory during the manufacturing process.
 
To review, see Locational Cost Volume Profit Analysis, Minimizing the Cost of Transportation, and Using Geographic Information Systems.
 

7c. Determine which types of layout are optimal for producing a given product

  • What are the main types of layouts?
  • What industries use each type of layout?

In facility layout, you are trying to determine the best placement for the physical layout of your process. Think about the layout of a manufacturing plant versus a hospital versus a grocery store. All of these organizations have different layout needs. Broadly, we can break the layout planning into two system types: Type 1 is for intermittent processing systems or Process Layout, and Type 2 is for repetitive processing systems or Product Layout. Some organizations use a Hybrid model that combines elements of both Type 1 and Type 2 layouts. Finally, you can have a Fixed-Position Layout, a Type 2 system, where the product is too big to move.
 
To review, see Location, Location, Location: Where Do We Make It? and Introduction to Facility and Product Layout Planning.
 

7d. Evaluate the output efficiency of a given facility layout 

  • What is Assembly Line Balancing, and why is it necessary?
  • How can we classify Assembly Line Balancing?
  • How are these classifications the same? How are they different?
  • What computational models exist to measure output efficiency?

Assembly Line Balancing (ALB) is when an organization uses its resources to meet production rates at a minimum cost. When an assembly line has process changes – such as adding or deleting tasks based on the product produced, a change of components, or a change in processing times, ALB is needed.
 
The problem of ALB can be classified into four categories:

  1. Deterministic Single Model (DSS)
  2. Stochastic Single Model (SSM)
  3. Deterministic Multi/mixed Model (DMM)
  4. Stochastic Multi/mixed Model (SMM)

In the Deterministic models, task times are known, with little variation. The difference between the single and multi/mixed model is the producing a single product versus producing multiple products on one assembly line. In the Stochastic models, task times vary depending on human behavior, complex processes with low reliability, the skill of the workers, and more.
 
Several researchers have developed computational models to measure the efficiency of layouts: Rank and Assign Methods, Tree Search Methods, and Random Sampling Methods.
 
To review, see Mixed Assembly Line Balancing.
 

Unit 7 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • Assembly Line Balancing (ALB)
  • Deterministic Multi/mixed Model (DMM)
  • Deterministic Single Model (DSM)
  • facility layout
  • fixed-position layout
  • Geographic Information System (GIS)
  • hybrid model
  • intermittent processing layout
  • linear programming
  • locational cost volume profit analysis
  • process layout
  • product layout
  • rank and assign methods
  • repetitive processing system
  • Stochastic Multi/mixed Model (SMM)
  • Stochastic Single Model (SSM)
  • tree search methods

Unit 8: Supply Chain Distribution and Logistics

8a. Determine the optimal number and location of distribution centers for a given product type 

  • How can the number and location of distribution centers affect demand uncertainty?
  • How do transportation needs affect distribution centers?

Centralizing the inventory at distribution centers is considered an effective way to manage customers' demand uncertainty to achieve appropriate service levels to customers. Designing a distribution network consists of three subproblems: location allocation, vehicle routing, and inventory control.
 
Central to any supply chain is transportation. Goods must be moved from the manufacturers through the assemblers, distribution centers, retailers, and final consumers. Designing a logistics system in conjunction with distribution centers is important to keeping costs low. Location-Routing Problem (LRP) is a newer form of logistics addressing the location of facilities, such as distribution centers and depots, while simultaneously considering routing (transportation) needs.
 
To review, see Location, Routing, and Inventory and Location-Routing for Distribution Centers.
 

8b. Describe what areas of logistics have changed with the rise of e-commerce and why 

  • How have manufacturing paradigms shifted from small artisans to mass customization?
  • How have these shifting paradigms affected manufacturing?

The rise of mass customization based on consumer demand may forever change manufacturing processes. What began 500 years ago with small craft production through the standardization of products led to mass production, then lean production. With the rapid increase of online purchasing and global markets, manufacturing is again evolving into mass customization.
 
To respond to consumer demand for more customized goods and services, manufacturers must offer more product options or variants of their standard products. Manufacturers must focus less on standard production and more on products, processes, and production systems that support product variety and adaptability. Through mass customization, manufacturers can provide products with enough variety and customization that nearly everyone finds what they want. No longer must consumers purchase automobiles from a car lot; they can build one online to their exact model type, color, and accessories. Automobile manufacturers can attain economies of scope by limiting the options available to the consumer.
 
Personalized production is a new trend affecting manufacturers. With personalized production, individual customer demand is met by integrating the individual into the design of products.
 
Even with shifting manufacturing paradigms, mass production will always be needed for commodities such as sugar, milk, and general-purpose products.
 
To review, see The Life Cycle of Manufacturing Networks in the Mass Customization Era.
 

8c. Describe how firm size and logistics complexity indicate why some businesses use third party logistics 

  • What are 1PL, 2 PL, 3PL, and 4PL?
  • What are some advantages and disadvantages of using 3PL for an international aid organization?

1PL stands for first-party logistics. The use of 1PL means that the producer of the good or service uses their own transportation system to deliver the product. 2PL stands for second-party logistics. With 2PL, you use a second party to transport or ship your goods. 3PL is third-party logistics. With 3PL, you contract for multiple integrated services.
 
Using 3PL has many advantages: these organizations are well-versed in integrated supply chains, combine shipping to create economies of scale, and allow for easier up- and down-scaling for the organization. As demand fluctuates, organizations do not need to contend with layoffs or rehiring as the 3PL company provides those services.
 
3PL organizations can be a good choice for maintaining low transportation and shipping costs. However, there are some disadvantages. In the case of global health and aid distribution, 3PL organizations may not have experience in a particular region of the world. Additionally, 3PL organizations may not be able to deal with security constraints or standards of neutrality and impartiality needed by the aid organization.
 
A 4PL organization is often an entity separate from the organization it is serving. Additionally, 4PLs often manage all functions of the supply chain.
 

8d. determine optimal transportation mode depending on the type of logistics, such as 1PL and 2PL 

  • How important is the mode of transportation to an organization?
  • What are the broad categories of transportation?
  • What are new trends in transportation modes?

Shipping COVID-19 vaccinations by Pfizer required very specialized equipment, including maintaining specific frozen temperatures using dry ice; these conditions had to be maintained for worldwide shipping times of up to 3 days. Additionally, the sensors used to control temperature had to be returned to Pfizer – requiring a reverse supply chain. Can you see how important transportation was just for this one process?
 
Determining the mode of transportation depends on the product, the urgency of the shipping, and the restrictions necessary for moving that product. The major modes of transportation are trains, trucks, airplanes (cargo and passenger planes), ships, and pipelines. Easily transported products with a more standardized shipping routine, such as toilet paper, might use the least costly form of transportation. Sometimes, though, much like the Pfizer vaccine, other factors determine the mode of transportation. People living in rural areas that are not serviced by roads and ships – such as Northern Alaska – must depend on small computer planes to bring goods and services to their small villages.
 
Another determination of the transportation mode is how much product you must ship: Less than a Truck Load (LTL), Less than a Container Load (LCL), Full Truck Load (FTL), Full Container Load (FCL) or bulk – such as oil and wheat.
 
Finally, can you think of what new modes of transportation are on the horizon? Amazon is experimenting with drone delivery; perhaps robot deliveries are next. We are seeing more and more bicycle carriers delivering food and groceries. Might a company like SpaceX create a new mode of transportation with its rocket program?
 

Unit 8 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • 1PL (First-person logistics)
  • 2PL (Second-person logistics)
  • 3PL (Third-person logistics)
  • 4PL (Fourth-person logistics)
  • bulk
  • craft production
  • Full Container Load (FCL)
  • Full Truck Load (FTL)
  • lean production
  • Less than a Container Load (LCL)
  • Less than a Truck Load (LTL)
  • Location-Routing Problem (LRP)
  • mass customization
  • mass production
  • personalized production

Unit 9: Supply Chain Integration and the Bullwhip Effect

9a. Describe possible supply chain integration strategies to help mitigate supply and demand uncertainty depending on the product or industry 

  • How can a supply chain mitigate demand uncertainty?
  • How can a supply chain mitigate supply uncertainty?
  • Is there a way for a supply chain to mitigate both demand and supply uncertainty?

Mitigating demand and supply uncertainty is crucial in supply chain management, particularly in light of increasingly unstable markets and logistics. Lean supply chains were developed to help mitigate demand and supply uncertainty variability. Lean supply chains helped reduce demand uncertainty by standardizing production, allowing customers to choose from a fixed list of options to add to the standardized product.
 
However, mitigating supply uncertainty is gaining importance in supply chain management. Volatility in supply affects business processes, leading to developing new processes, purchasing new materials, using different suppliers, or negotiating new customer requirements.
 
Depending on the certainty/uncertainty of demand and supply, we can look at four different models of supply chains:

  1. Efficient supply chains;
  2. Risk-hedging supply chains;
  3. Responsive supply chains; and
  4. Agile supply chains.

To review, see Agile Information Systems for Mastering Supply Chain Uncertainty.
 

9b. Describe a range of supply-chain strategies, such as agile supply chains and risk-hedging supply chains, as a function of supply chain type and product type 

  • How does an agile supply chain differ from a lean supply chain?
  • What type of product is likely manufactured with lean manufacturing? Agile manufacturing?

Supply chain managers must rely on their ability to reduce costs, increase customer service, and provide a competitive advantage. Both lean manufacturing and agile manufacturing can help supply chain managers achieve their goals. Lean manufacturing focuses on resource efficiency and high performance; agile manufacturing focuses on satisfying customer requirements. Some manufacturing is done through a hybrid model that combines lean and agile manufacturing attributes.
 
Lean manufacturing attempts to eliminate all waste, including time. Lean manufacturing focuses on resource efficiency and high performance. Agile manufacturing can react quickly to changing consumer demand and quickly change production, making highly customizable products available to consumers. However, this agility can increase manufacturing and transportation costs.
 
To review, see Modeling Lean and Agile Approaches: A Western Canadian Forest Company Case Study.
 

9c. Analyze the efficiency and responsiveness of a given supply chain with performance metrics 

  • What are some key factors affecting supply chains?
  • Why is it necessary to assess each partner's performance in the supply chain?

Our business landscape is rapidly changing. Globalization, uncertainty, growing competition, more demanding customers, disruptions to supply chains, and pressure to cut costs are just a few characteristics we face. Measuring, tracking, and managing supply chain processes is critical. Performance management (PM) relates to applying processes, methods, metrics, and technologies to create an effective and efficient supply chain.
 
To keep costs down and efficiency high, it is necessary to assess each member company within the supply chain and assess the entire supply chain. These assessments are completed to eliminate waste within the supply chain and meet the requirements of the end customer.
 
Many PM systems do not work for supply chain analysis. Most PM systems focus on one organization, not the multilayered organizations that make up a supply chain. Additionally, most PM systems use historical data; supply chains need to look forward with predictive analytics. Finally, most PM systems focus on business areas other than the supply chain, such as internal, financial, and functional systems.
 
Using powerful algorithms, a unified, predictive PM system can be built to provide information about what will happen (forecast). Additionally, the PM system can explain why something happened and what should be done to resolve performance problems. As a unified system, all supply chain members provide and receive data from all other members in the chain.
 
To review, see Proactive Supply Chain Performance Management with Predictive Analytics.
 

9d. Illustrate the bullwhip effect through consumer-to-producer analyses of increasing order variability 

  • What is the bullwhip effect?
  • What cause and effect can the bullwhip effect have on a supply chain?
  • Can the bullwhip effect be decreased?

The bullwhip effect in supply chains is used to describe fluctuating inventory due to demand changes. These fluctuations start small but can generate much larger problems up or down the supply chain. This phenomenon is named the bullwhip effect because when an individual snaps their wrist while holding a whip, it creates fluctuating wave effects that increase in size.
 
The bullwhip effect can be caused by imperfect forecasting methods, gaming among companies when demand exceeds supply, and price variations that cause supply chain members to over-order when the price is low. The consequences of the bullwhip effect include higher inventory levels, agility reductions in the supply chain, a decrease in customer service levels, ineffective transportation, and missed production schedules.
 
In one study, researchers evaluated the bullwhip effect in a system with one manufacturer and two retailers (one traditional store and one online store). In this study, the researchers analyzed nonlinear characteristics of the supply chain with consumer return. In China, where this study was done, online retailers must provide a 7-day return policy, while traditional stores do not have this return policy. Using a simulation, the researchers compared the bullwhip effect with different iterative states. Their conclusions show that the profit of the traditional store will be reduced with the growth of the online retailer's return rate. Using statistical analyses, the manufacturer can help the online retailer maintain a low return rate; otherwise, the profits of the traditional retailer will be reduced. While this study was only a simulation with very strict parameters (one manufacturer and two retailers), it does provide a process whereby manufacturers can help the supply chain maintain profits for the entire chain.
 
To review, see Bullwhip Entropy Analysis and Chaos Control and Information Coordination in Supply Chain Systems.
 

Unit 9 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • agile manufacturing
  • bullwhip effect
  • lean manufacturing
  • performance management

Unit 10: Project Management

10a. Explain the role of project management within operations management 

  • What is project management?
  • How does project management inform operations management?
  • What are the key attributes of project management?

In Project management, we apply knowledge, skills, tools, and techniques to project activities to meet the project requirement. Project management includes planning, putting the project plan into action, and measuring progress and performance.
 
A close reading of the above paragraph might raise the question: What is a project? Is an entire supply chain or the manufacturing process a project? A project, in terms of project management, has specific criteria:

  1. Projects are unique.
  2. Projects are temporary and have a start and end date.
  3. Projects are completed when the project goals are achieved.

Is the supply chain or the manufacturing process a project based on these criteria? No! The supply chain and manufacturing process are established, not unique. The supply chain and manufacturing process are permanent, not temporary. The supply chain and manufacturing process do not go away once a consumer receives the good or service.
 
How might we use project management in operations supply chain management? Let's assume you want to design a new product for manufacturing or determine the best location for your first overseas distribution center. These are projects that meet the three criteria listed above. Once you have designed your new product, you can create a static assembly line to produce the product (operations management). Once you have determined your overseas distribution center's location and built it, it becomes part of the static operations management function.
 
The project management process works with the following constraints: cost, scope, quality, risk, resources, and time. The triple constraint, traditionally consisting of time, cost, and scope, are the competing constraints you must be most aware of. For example, decreasing the time allocated for the project could affect the scope of the overall project.
 
To review, see An Overview of Project Management.
 

10b. Create Gantt chart schedules to indicate the link between work structures and activities in a project 

  • What is a Critical Path Analysis (CPA), and why is it necessary?
  • What are the essential elements of a Critical Path?

Critical Path Analysis (CPA) is a tool used to determine the shortest possible time to complete a project. As projects become complex, they require significant investment and risk. The CPA can identify the relationships between the project activities and work out the most efficient way, or path, to complete the project.
 
To complete a CPA, you need a list of the activities necessary to complete the project, the duration of each activity, and the dependencies of the activities. For example, Activity C might need to be completed before Activity D can begin.
 
As you diagram your critical path, you will determine the critical path, which is the longest path of planned activities to the completion of the project, the earliest start time (EST), and the latest finish time (LFT) that each activity can start and finish without making the project last longer, and which activities are critical and which activities have float (that is, those activities that can be delayed without making the project longer).
 

10c. Perform an earned value management analysis of a given project

  • What is Earned Value Management?
  • What is the process of determining EVM for a project?
  • What are the key calculations in EVM?

Earned Value Management (EVM) measures and monitors project progress in terms of cost, time, and technical/physical achievement against a defined scope of work. Can you see how EVM is important in project management?
 
Technically, EVM can be determined by following these ten steps:

  1. Develop a Work Breakdown Structure (WBS)that includes the entire agreed-upon scope of the project;
  2. Develop an Organizational Breakdown Structure (OBS) that ensures responsibility for work accomplished;
  3. Distribute the total budget across elements of the WBS;
  4. Schedule the work contained in the WBS;
  5. Identify a method to measure achievement;
  6. Baseline the plan;
  7. Record all costs;
  8. Collect and analyze performance data;
  9. Produce forecasts for remaining work; and
  10. Incorporate authorized changes promptly.

The first two calculations needed for EVM are Schedule Variance (SV) (a measure that indicates whether work is ahead or behind schedule) and Cost Variance (CV) (which indicates whether the work that has been done is over or under budget). Next, we determine the Cost Performance Index (CPI) and the Schedule Performance Index (SPI). These indices indicate the cost and schedule variances in proportion to the scale of the work so far. The next step is to predict the Estimated Cost at Completion (ECC) and the Estimated Time at Completion (ETC). Based on the current trend of the project, this forecast will tell us what our expected cost and time are at the completion of the project.
 
To review, see 10 Steps to EVM and Earned Value Analysis.
 

10d. Perform a critical path analysis to "crash" a given project 

  • What does "crashing" a project mean?
  • What elements do we study when we "crash" a project?
  • Why would we want to "crash" a project?

Crashing or compressing a project is done to reduce the time a project takes. The activities in the critical path are assessed to determine if the activities can be completed in less time, with cost savings.
 
In addition to the critical path, we can also add to our analysis any incentives an organization might pay to decrease the time duration of the project. We can also add indirect costs to our crashing analysis. The indirect costs will increase as the duration of the project increases.
 
Crashing a project can reduce project time and find the optimal project time. However, crashing a project increases direct costs, increases management time, and may increase risk in the project.
 
To review, see Project Time Compression: Crashing a Project.
 

Unit 10 Vocabulary 

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

  • cost
  • cost performance index (CPI)
  • cost variance (CV)
  • crashing
  • critical path analysis (CPA)
  • earliest start time (EST)
  • earned value management
  • estimated cost at completion (ECC)
  • estimated time at completion (ETC)
  • float
  • latest finish time (LFT)
  • project management
  • quality
  • resources
  • risk
  • schedule performance index (SPI)
  • schedule variance (SV)
  • scope
  • time
  • triple constraint