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96 Cards in this Set
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What are the 3 types of inventory? 
1) Raw Materials 2) WorkinProcess 3) Finished Goods 

What are the 3 purposes of Inventory? 
1) Smoothing Production 2) Economies of Scale 3) Protection against Uncertainty 

TC= D/Q x S + Q/2 xH What does each Stand for? 
TC= Total Costs H= holding costs D= Demand S= Set up cost Q= order size 

TC= D/Q x S + Q/2 xH What does each D/Q x S equal? 
annual order costs 

TC= D/Q x S + Q/2 xH What does Q/2 x H equal? 
annual holding costs 

TC= D/Q x S + Q/2 xH What does Q/2 equal? 
average inventory level 

How do you find the best order size for EOQ? 
Q= Square root of ( 2 x D x S/ H) 

How do you find how many times a year you would order under EOQ? 
D/Q 

How do you find the length of the order cycle for EOQ? 
Q/D x 250 Business days 

How do you find the reordering point? 
= Daily Demand x Order time 

What is the reordering point? 
an inventory level, not a point in time 

Why are we concerned about the reordering point? 
at this point we should place an order; it allows us to have enough inventory to satisfy demand while considering the amount of lead time it takes for the next order to come in. 

When is comes to the sawtooth diagram for EPQ, what are the teeth split into? 
Phase 1: Production and consumption phase Phase 2: Consumption Phase 

TC= D/Q x S + Q/2 (Pd/P) xH What does each stand for? 
TC= Total Costs D= Demand Q= production size P= Production rate S= Set up costs H= Holding Costs d= daily demand 

TC= D/Q x S + Q/2 (Pd/P) xH What does D/ Q equal? 
times to set up production 

TC= D/Q x S + Q/2 (Pd/P) xH What does Q/2 (Pd/P) xH equal? 
annual holding costs 

TC= D/Q x S + Q/2 (Pd/P) xH What does Q/2 (Pd/P) equal? 
average inventory level 

How do you find the best production quantity for EPQ? 
Square Root of (2 x D x S/ H) x Square Root of (P/pd) 

How do you find how much time will pass between production set ups? 
Q/D x 250 business days 

How do you find the most inventory you'd have in EPQ? 
Q x (Pd/P) 

How do you find the run time of the ordering policy is EPQ? How do you find how long you spend producing a single order? 
Q/P 

How do you find the portion of time you actually produce the SKU? 
run time/ ordering cycl 

if P>d 
you are producing faster than daily demand 

How do you find ROP for EPQ? 
daily demand x lead time 

Service level 
probability you have enough inventory; probability that the demand will not exceed supply during the lead time 

Safety stock 
extra units have for uncertainty; stock held in excess of expected demand; "blanket" is sawtooth diagram on top 

When looking at the normal distribution curve, what is the service level? 
the left side, the shaded area that included probability 

How do you find the service level? 
z= x mean/ standard deviation look on z chart for probability 

Aggregate Planning 
devising a strategy to meet changing demands on the system; mediumterm capacity planning (less than 1 year); for companies that only produce 1 product 

How do you find ending inventory in aggregate planning 
= Beginning Inventory + Production  Demand 

What are the 3 inputs of MRP? 
1) Bill of Materials 2) Master Production Schedule 3) Current Inventory REcords 

Bill of Materials 
how you build you materials; dependent demand 

Finished Good? A) Has no parent B) Has no children 
A


Raw Materials? A) Has no parent B) Has no children 
B 

How is MPS different from the aggregate plan? 
MPS results from aggregate planning 

Myopic 
not enough time to respond to problem; short planning horizon 

Freezing 
MPS policy where there is no changes after finalized 

Nervous 
a technique where you change and things change the entire plan; very sensitive 

What are the advantages of MRP? 
versatility 

What are the disadvantages of MRP? 
1) Nervous technique 2) Bling to capacity constraints 

Kanban Card 
permission to produce; never leaves producing work center 

If there are more kanban cards in a system what does that mean? 
1) more inventory 2) more holding costs 

If there are less cards in kanban cards in a system what does that mean 
1) Less inventory 2) high risk of stock out 

How do you find the number of Kanban cards in a system? 
N= D x T x (1+X)/ C 

N= D x T x (1+X)/ C What does everything stand for? 
D= usage rate of consuming center T= lead time C= Container size X= policy variable (always between 0 and 1) 

N= D x T x (1+X)/ C What is the safety stock? 
1+ X 

N= D x T x (1X)/ C Which part tells you how many cards you need in your system? 
D x T/ C 

How do you make your system leaner? 
if you can reduce ordering costs 

Allegory of Lake: What does the boat symbolize? 
production system 

Allegory of Lake: What does water level symbolize? 
inventory level 

Allegory of Lake: What do the rocks symbolize? 
source of uncertainty in system; problems 

What are some things that you should do in the allegory of the lake? 
1) reduce water level 2) hit big rocks 1st which are biggest problem, deal with right away to solve 

What does JIT run well with? 
level production 

What does JIT deal with? 
only WIP and raw materials 

What are the 5 general principals of JIT? 
1) Reduce lot size and ordering costs 2) No more safety stock 3) Smooth production 4) Improve material handling and facility layout 5) Reduce the number of outside vendors you deal with 

When is planning called scheduling and scheduling called planning? 
when you have a longerterm planning you call it planning, when you have shorterterm planning you call it scheduling 

Flowtime 
length of time job stays in the system 

How do you find the flow time? 
add up the duration of each job 

Tardiness 
due date  flow time of job 

What does the rule of shortest processing time do? 
tends to minimize flow time 

Critical ratio 
= time remaining/ work remaining = due date/ duration 

When the critical ratio is greater than 1 what does that mean? 
you have enough time 

When the critical ratio is between 0 and 1 what does that mean? 
it is not late yet, but will be when finished 

When the critical ratio is less than 0 what does that mean? 
the job is already late 

What does the rule of earliest due date do? 
tends to minimize tadiness 

What does Johnson's Rule do? 
minimize makespan 

Makespan 
how long it takes you to finish every job 

How do you apply Johnson's Rule? 
Select the job with the shortest time in any work center. If that time refers to the first work center, schedule that job first. If that job refers to the second work center schedule that job last. Repeat until all jobs are scheduled 

Old definition of quality 
conformance to specification 

Newer definition of quality 
ability of product or service to meet or exceed customer specification = customer perception  customer expectation 

What are sources of lower customer perception? 
1) facility is messy 2) service is bad/rude 3) instruction is not clear 

What are sources of higher customer expectation? 
1) previous experience 2) Price 3) advertising 4) New product 

What is a tool that helps inspect raw materials and finished goods? 
acceptance sampling 

what is a tool that helps inspect WIP? 
control chart 

SPC 
statistical process control 

If a company use traditional Approach what do they do? 
1) Heavily rely on inspection; hire full time inspectors 2) Believe there is an ideal amount of inspection (based on economies argument) 

Type II error 
you think something is right but is wrong (customer risk) 

Type I error 
think something is wrong but it is right 

What are the 5 TQM elements? 
1) everyone is a quality control inspector 2) The customer defines quality 3) Fix problems at their source 4) Involve suppliers in quality control program 5) The commitment of top management 

Poka Yoke 
mistak proofing; trying to make desired outcome inevitable in system 

What is TQM?

continuous improvement; never stop checking quality 

What does a Fishbone diagram help with? 
fixing problems at their source 

Random variation 
is natural variation from the process of manufacturing; cannot be avoided, based on normal distribution 

Assignable Variation 
a variation which can be traced back to a specific source 

Where does natural variation lie on a control chart? 
between the upper a lower control limit 

Where does assignable variation lie on a control chart? 
outside 

If something is truly random what should you see? 
you should not see a pattern. 

What is type 1 error related to? 
producers eros 

What is type 2 error related to 
customer risk 

When should you use a smaller z value for control charts? 
when you are picky, creates a smaller control area 

When should you use a larger z value for control charts? 
if you are not picky; larger control area 

If you know the probability of what you want the control chart to be what do you do to find the upper and lower limits? 
take the probability and divide by 2. Then find on the Z chart 

If you know the percentage of type 1 error you allow what do you do to find the upper and lower limits?

Divide that percentage in half. Take the result and subtract from 0.5. Then find on z chart 

How do you find the probability of a type 1 error with a control chart? 
1 prob. of within control limits 

What is sample range? 
difference between smallest one and largest one in sample 

When using P charts how do you find the proportion? 
take the number of the sample/ sample size 