Term
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Definition
| Process of projecting the values of one or more variables into the future. In operations management, forecasting refers to the demand forecasting for services or products |
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Term
| Good forecasting and demand planning system results in what? |
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Definition
Higher capacity utilization
Reduced inventories and costs
More efficient process performance
More flexibility
Improved customer service
Increased profit margins |
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| Poor forecasting can result in poor inventory and staffing decisions which results in what? |
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Definition
Part shortages
Inadequate customer service
Many customer complaints |
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Term
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Definition
Length of time on which a forecast is based
-Short range forecasts: 0 to 3 months
-Medium range forecasts: 3 months to 2 years
-Long range forecasts: more than 2 years |
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Definition
Set of observations measured at successive points in time or over successive periods of time
Provide the data for understanding how the variable that we wish to forecast has changed historically |
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Definition
| A characteristic of a time series pattern where there is a underlying pattern of growth or decline in a time series |
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Definition
| a time series characteristic that's characterized by repeatable periods of ups and downs over short periods of time |
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Definition
| Time series characteristic where there is a regular pattern in a data series that takes place over long periods |
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Term
| Random Variation or Noise |
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Definition
| Time series characteristic where there is an unexplained deviation of a time series from a predictable pattern such as a trend, seasonal or cyclical pattern |
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Term
| Irregular (one time) variation |
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Definition
| Time series characteristic that is a one time variation that is explainable |
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Term
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Definition
Difference between the observed value and the forecast for a given time period
Et = At -Ft
where Et= forecast error for period t
At= actual demand for period t
Ft= forecast for period t |
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Term
| Cumulative sum of forecast errors (CFE) |
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Definition
A measurement of the total forecast error that assesses the bias in a forecast
CFE = Sum (At-Ft) |
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Term
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Definition
A measurement of the dispersion of forecast errors
MSE = [Sum (At-Ft)^2]/n |
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Term
| Mean absolute deviation (MAD) |
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Definition
A measurement of the dispersion of forecast errors
MAD = [Sum(Absolute value(At-Ft))]/n |
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Term
| Mean absolute percent error (MAPE) |
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Definition
A measurement that relates the forecast error to the level of demand and is useful for putting forecast performance in the proper perspective
MAPE = [[Sum (Absolute value (At-Ft))/At]*100]/n |
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Definition
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Definition
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Term
| Moving average (MA) forecast |
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Definition
An average of the most recent k observations in a time series
Works best for short planning horizons when there is no major trend, seasonal, or business cycle patterns
As the value of "k" decreases, the forecast reacts more quickly
Ft+1 = Sum (most recent "k" observations)/k |
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Term
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Definition
A time series method in which each historical demand in the average can have its own weight; the sum of the weights equal 1
May be desirable to put more weight on recent observations |
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Term
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Definition
Forecasting technique that uses a weighted average of past time series values to forecast the value of the time series in the next period
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Definition
Requires historical data
Relationship between the factor to be forecasted and other external or internal factors can be identified |
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Term
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Definition
| A causal method in which one variable (the dependent variable) is related to one or more independent variables by a linear equation |
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Definition
| The variable that one wants to forecast |
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Definition
| Variables that are assumed to affect the dependent variable and thereby "cause" the results observed in the past |
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Term
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Definition
| A method for building a statistical model that defines a relationship between a single dependent variable and one or more independent variables, all of which are numerical |
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Term
| Reasons for using judgmental factors |
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Definition
Greater accuracy
Ability to incorporate unusual or one time events
The difficulty of obtaining the data necessary for quantitative techniques |
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Term
| What is the first step in developing a practical forecast? |
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Definition
| Understand the purpose, time, horizon and level of aggregation |
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Term
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Definition
Any asset held for future use or sale
In some service firms, inventories provide capacity available for serving customers such as hotel rooms, airline seats, and concert seats |
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Term
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Definition
| Involves planning, coordinating, and controlling the acquisition, storage, handling, movement, distribution, and possible sales of raw materials, parts and sub assemblies, supplies and tools, and other assets that are needed to meet the customer wants and needs |
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Term
| Work in Process (WIP) Inventory |
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Definition
| Consists of partially finished products in various stages of completion |
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Definition
| Completed products ready for distribution or sale to customers |
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Definition
| Inventory that has been ordered but not yet received and is in transit |
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Definition
| Built up during the off-season to meet future estimated demand |
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Definition
| The portion of total inventory that varies directly with lot size (Q) |
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Definition
| Determination of how frequently and in what quantity to order inventory |
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Definition
| Surplus inventory that a company holds to protect against uncertainties in demand, lead time and supply changes |
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Term
| Inventory managers deal with what 2 fundamental decisions? |
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Definition
1. When to order items from a supplier or when to initiate production runs, if the firm makes its own items
2. How much to order or produce each time a supplier or production order is placed |
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Definition
| About making tradeoffs among the costs associated with the decisions |
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Term
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Definition
Incurred from the work involved in placing a purchase order with suppliers
Costs from activities include search for and selecting a supplier, processing the order and receiving documents, and inspecting, unpacking and storing items that have been received |
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Term
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Definition
Incurred from the work involved within a factory to produce an item
Costs from activities include the paperwork, equipment setup and calibration, startup scrap, and the opportunity cost of producing no output while the setup is done |
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Term
| Inventory holding costs or inventory-carrying costs |
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Definition
Expenses associated with holding inventory
Typically measured as a percentage of the dollar value of inventory per unit of time (generally 1 year)
-Costs are associated with maintaining the facility
-Difficult to allocate such costs to a SKU
-Reflects the opportunity cost associated with using the funds invested in inventory for alternative uses |
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Term
| Shortage or stockout costs |
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Definition
Costs associated with a SKU being unavailable when needed to meet the demand
-Examples of shortage costs include overnight shipping for emergency orders, compensation for shortages and interruptions to manufacturing and assembly lines for internal customers
Difficult to quantify precisely from an accounting perspective and often represent a judgmental "penalty cost" |
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Definition
| Price paid for the purchased goods or the internal cost of producing them |
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Definition
| Single item or asset stored at a particular location |
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Definition
| Unrelated to the demand for other SKU's and must be forecast |
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Definition
| Directly related to the demand of other SKUs and can be calculated without needing to be forecast |
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Definition
| When uncertainty is not included in its characteristics |
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Definition
| Incorporates uncertainty by using probability distributions |
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Definition
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Term
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Definition
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Term
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Definition
| Time between placement of an order and its receipt |
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Definition
| Inability to satisfy demand for an item. When a stockout happens the item is either back-ordered or a sale is lost |
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Term
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Definition
| Occurs when a customer is willing to wait for an item |
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Term
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Definition
| Occurs when the customer is unwilling to wait and purchases the item elsewhere |
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Term
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Definition
| SKU deteriorates or becomes obsolete after a certain period of time |
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Term
| Fixed Quantity Systems (FQS) |
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Definition
The order quantity or lot size is fixed; the same amount, Q is ordered every time
The process of triggering an order is based on the inventory position
A new order is triggered whenever the inventory position for the item reaches the reorder point. The size of the order is Q |
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Term
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Definition
| On hand quantity (OH) plus any order placed but not have arrived minus any backorders |
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Term
| Economic Order Quantity (EOQ) |
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Definition
| Lot size that minimizes total annual inventory holding and ordering costs |
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Term
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Definition
The demand rate is constant and known with certainty
There are no constraints on lot size
The only relevant costs are holding costs and ordering/setup costs
Decisions for items can be made independently of other items
Lead time is constant and known with certainty |
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Term
| Time between orders (TBO) |
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Definition
| Average elapsed time between receiving (or placing) replenishment orders of Q units for a particular lot size |
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Term
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Definition
| Items for which demand is influenced by market conditions and is not related to the inventory decisions for any other item held in stock |
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Term
| Continuous review (Q) systems |
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Definition
| Designed to track the remaining inventory of an item each time a withdrawal is made to determine whether it is time to reorder |
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Term
| Periodic Review (P) systems |
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Definition
(Fixed Period Reorder systems)
an item's inventory position is reviewed periodically rather than continuously |
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Term
| Scheduled receipt (SR) or Open order |
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Definition
| an order that has been placed but has not yet been received |
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Term
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Definition
| Predetermined minimum level that an inventory position must reach before a fixed order quantity Q of the item is ordered |
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Term
| Periodic review (P) system |
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Definition
A system in which an item's inventory position is reviewed periodically rather than continuously
Sometimes called a fixed interval reorder system |
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Term
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Definition
Q systems: Review frequencies can be tailored to each item, possible quantity discounts, lower, less-expensive safety stocks
P Systems:Convenient to administer, orders for multiple items from the same supplier ma be combined, inventory position (IP) only required at review |
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Term
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Definition
| Include materials, equipment, facilities, information, technical knowledge and skills and people |
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Term
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Definition
| Deals with the planning, execution, and control of all the resources that are used to produce goods or provide services in a value chain |
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Term
| Objectives of resource management |
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Definition
Maximize profits and customer satisfaction, minimize costs
For government and not-for profit organizations, it is to maximize benefits to their stakeholders |
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Term
| What are the 3 levels for resource planning? |
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Definition
Aggregate planning (Level 1)
Disaggregation (Level 2)
Execution (Level 3) |
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Term
| Aggregate Planning (Level1) |
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Definition
Development of a long-term output and resource plan in aggregate units of measure
Typically define output levels over a planning horizon of 1 to 2 years, focusing on product families or total capacity requirements
Aggregate planning later translates into monthly or quarterly production plans, taking into account capacity locations such as supply availability, equipment and labor
Most challenging when demand fluctuates over time |
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Term
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Definition
| The cooperation between marketing and manufacturing to create more feasible aggregate demands |
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Term
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Definition
| Utilizing overtime/undertime, subcontracting during peak months |
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Term
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Definition
| Hiring and firing employees-often times, not a feasible alternative |
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Term
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Definition
| Building inventories or carrying back orders |
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Term
| Level production strategy |
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Definition
| Plans for the same production rate in each time period |
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Term
| Chase production strategy |
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Definition
| Sets the production rate equal to the demand in each time period |
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Term
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Definition
| Process of translating aggregate plans into short-term operational plans that provide the basis for weekly and daily schedules and detailed resource requirements |
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Term
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Definition
| Moving work from one workstation to another, assigning people to tasks, setting priorities for jobs, scheduling equipment, and controlling processes |
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Term
| Master Production Schedule (MPS) |
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Definition
| plan of how many finished items are to be produced and when they are to be produced |
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Term
| Objectives of the Master production schedule (MPS) |
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Definition
Translates the aggregate plan into a separate plan for individual finished goods.
Provides input to the MRP system
Generates priorities for scheduling by setting due dates for the productions of individual items |
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Term
| Master Requirements Planning |
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Definition
| Forward-looking, demand-based approach for planning the production of manufactured goods and ordering materials and components |
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Term
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Definition
Time-phased report for purchasing, production manager, and accounting and financial functions
Minimize unnecessary inventories
Reduce costs |
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Term
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Definition
| The demand for an item that occurs because the quantity required varies with the production plans for other items held in the firm's inventory |
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Term
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Definition
| Any product that is manufactured from one or more components |
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Term
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Definition
| An item that goes through one or more operations to be transformed into or become part of one or more parents |
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Term
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Definition
| Defines the hierarchical relationships between all items that comprise a finished good, such as subassemblies, purchased parts, and manufactured in-house parts |
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Term
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Definition
| A record that shows an item's lot-size policy, lead time, and various time-phased data |
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Term
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Definition
| Total demand derived from all parent production plans |
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Term
| Projected on-hand inventory |
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Definition
| An estimate of the amount of inventory available each week after gross requirements have been satisfied |
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Term
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Definition
| Specifies the planned quantity and time an order is to be released to the factory or a supplier |
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Term
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Definition
| An estimate of the time between placing an order for an item and receiving the item in inventory |
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Term
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Definition
| Rule that determines the timing and size of order quantities |
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Term
| Fixed order quantity (FOQ) |
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Definition
a rule that maintains the same order quantity each time an order is issued
Dictated by equipment capacity limits, quantity discounts, truckload capacity, minimum purchase quantity, EOQ |
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Term
| Periodic order quantity (POQ) |
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Definition
A rule that allows a different order quantity for each order issued but tends to issue the order at predetermined time intervals
-The order quantity equals the amount of the item needed to cover P weeks worth of gross requirements |
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Term
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Definition
| a rule under which the lot size ordered covers the gross requirements of a single week |
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Term
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Definition
| A computer-generated memo alerting planners about releasing new orders and adjusting the due dates of scheduled receipts |
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Term
| Capacity requirements planning (CRP) |
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Definition
| A technique used for projecting time-phased capacity requirements for workstations; its purpose is to match the material requirements plan with the capacity of key processes |
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Term
| Manufacturing resource planning (MRP II) |
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Definition
| A system that ties the basic MRP system to the company's financial system and to other core and supporting processes |
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Definition
| A record of a firm's parent-component relationships and all of the materials, equipment time, staff, and other resources |
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Definition
| Refers to the assignment of start and completion times to particular jobs, people or equipment |
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Definition
| A schedule that rotates employees through a series of workdays or hours |
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Definition
| A schedule that calls for each employee to work the same days and hours each week |
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Term
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Definition
| Constraints imposed on the workforce schedule are the resources provided by the staffing plan and the requirements placed on the operating system |
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Definition
| Refers to determining the order in which jobs or tasks are processed |
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Term
| Criteria for evaluating sequences |
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Definition
Process focused performance criteria
Customer focused due date criteria
Cost based criteria |
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Definition
| Amount of time a job spent in the shop or factory |
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Definition
| Time needed to process a given set of jobs |
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Term
| True or False: Inventory Turnover is the average inventory value divided by the cost of goods sold |
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Definition
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Term
| True or False: In supply chain dynamics, the bullwhip effect results from over-ordering as you proceed upstream in the supply chain |
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Definition
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Term
| What is not directly related to a supply chain? |
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Definition
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| True or False: A measure of capacity is the number of seats on an airplane per flight. |
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Definition
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Term
| True or False: Economies of scale occur when the average unit cost of the good or service begins to increase as the capacity and/or volume of throughput increases. |
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Definition
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Term
| What is a short-term capacity decision? |
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Definition
| Amount of warehouse space to rent for a new promotional item |
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Term
| An automobile insurance company needs to determine the size of staff needed to process 350 applications per day. A typical application takes 25 minutes. If the average utilization of a staff person is .75(75%) and each person works seven hours each day, how many loan officers are necessary? |
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Definition
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| True or False: Inventory turnover is the cost of goods sold divided by the average inventory value. |
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Definition
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Term
| True or false: Because of random variations, forecasts are never 100% accurate. |
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Definition
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| True or False: A major difference between MSE and MAD is that MAD is influenced much more by large forecast errors than by small errors. |
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Definition
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Term
| True or false: If more periods are included in a simple moving average, the forecast will be more responsive than if less periods are included |
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Definition
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Term
| What kind of forecasts are needed to plan work-force levels, allocate budgets among divisions and schedule jobs and resources? |
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Definition
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Term
| For single exponential smoothing, what places more emphasis on recent data? |
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Definition
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Term
| True or false: Examples of inventory in some service organizations include airline seats and call center phone lines. |
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Definition
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Term
| True or false: Larger orders require higher inventory holding costs but ordering costs are lower. |
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Definition
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Term
| True or false: Because the fixed quantity system orders the same amount each time, time between orders will be constant, even with variable demand. |
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Definition
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Term
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Definition
| Inventory that has been ordered but not yet received and is in transit |
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Term
| What does not affect inventory position? |
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Definition
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