Inventory Management and Quality Control, Exams of Nursing

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OSCM 373: EXAM 3

Objectives of Inventory Management - correct answer ✔✔1. Satisfactory levels of customer service

• having the right goods available in the right quantity in the right place at the right time

2. While keeping inventory costs (ordering and carrying) within reasonable bounds (minimize) Performance Measures - correct answer ✔✔1. Customer Satisfaction

• number and quantity of backorders
• customer complaints

2. Keeping Costs Low

• Inventory Turnover ABC Classification System - correct answer ✔✔Classifying inventory according by importance, and allocating control efforts accordingly A Items: Very Important
• 10-20% of inventory
• 60-70% of dollar value B Items: Moderately Important C Items: Least Important
• 50-60% of inventory
• 10-15% of dollar value To classify arrange by values in descending order

Periodic System - correct answer ✔✔Physical count of items in inventory made at periodic intervals Pros:

• many items ordered at same time
• savings in processing and shipping of orders Cons:
• lack of control between reviews
• have to keep extra stock to protect against shortages Perpetual System - correct answer ✔✔System that keeps track of removals from inventory continuously, thus monitoring current levels of each firm Pros:
• continuous control
• can optimize quantity and place orders when inventory drops to a predetermined level Cons:
• added cost of record keeping
• usually has to be accompanied by a periodic physical count Reorder Point - correct answer ✔✔specifies the level to which the inventory balance of an item must fall before an order to replenish stock is initiated Determinants:
• rate of demand
• lead time (interval between ordering and receiving the orders)

• extent of demand or lead time variability
• degree of stockout risk acceptable to management Holding Costs - correct answer ✔✔Carrying Costs cost to carry an item in inventory for a length of time, usually a year Includes:
• Rent
• Equipment
• Materials
• Labor
• Insurance
• Security
• Interest Ordering Costs - correct answer ✔✔Setup Costs
• Costs involved in placing an order (or preparing equipment for a job) Single Period Model - correct answer ✔✔Model for ordering of perishables and other items with limited useful lives goal is to identify an order quantity that will maximize profit Quality - correct answer ✔✔the ability of a product or service to consistently meet or exceed customer expectations Dimensions of Product (Good) Quality - correct answer ✔✔- Performance

• Aesthetics
• Special Features
• Conformance
• Reliability
• Durability
• Perceived Quality
• Serviceability Dimensions of Service Quality - correct answer ✔✔- Convenience
• Reliability
• Responsiveness
• Time
• Assurance
• Courtesy
• Tangibles
• Consistency Benefits of Good Quality - correct answer ✔✔- enhanced reputation
• increased market share
• ability to charge higher prices
• greater customer loyalty
• lower liability costs
• fewer production of service problems
• lower production costs
• higher profits Consequences of Poor Quality - correct answer ✔✔- loss of business
• lower productivity
• high failure costs

• liability Costs of Quality - correct answer ✔✔Prevention Costs
• cost of presenting defects from occurring
• planning, administration, training, quality assurance, design, production Appraisal Costs
• costs of activities designed to ensure quality or uncover defects
• inspectors, testing, test equipment, labs, quality control Failure Costs
• costs incurred by defective parts/products or faulty services Internal Failure Costs
• costs incurred to fix problems that are detected before the product.service is delivered to the customer External Failure Costs
• all costs incurred to fix problems that are detected after the product/service is delivered to the customer Random Variability - correct answer ✔✔natural variation in the output of a process created by countless minor factors Assignable (Abnormal) Variability - correct answer ✔✔nonrandom variation whose cause can be identified What to Inspect - correct answer ✔✔- count number of times defect occurs
• measure the value of a characteristic Where to Inspect in the Process - correct answer ✔✔- raw materials and purchased parts

• finished products
• before a costly operation
• before an irreversible process How much to inspect - correct answer ✔✔sampling vs full inspection Statistical Process Control Steps - correct answer ✔✔1. Sample Process Outputs

2. Compute Sample Stats
3. Compared to Upper & Lower Control Limits
4. Create a Control Chart
5. Look For Patterns
6. Type I or Type II Error Control Charts - correct answer ✔✔a time ordered plot of sample statistics used to distinguish between random and nonrandom variability x-bar chart - correct answer ✔✔used to monitor the central tendency of a process Type I Error - correct answer ✔✔narrow control limits

• low z produces a false positive concluding a process is not in control when it actually is
• manufacturers risk Type II Error - correct answer ✔✔wide control limits
• high z

producers a false negative concluding a process is in control when it is not

• consumers risk P-Chart - correct answer ✔✔control chart used to monitor the proportion of defectives in a process R-Chart - correct answer ✔✔track a gain or loss in dispersion Quality Is Free - correct answer ✔✔spending money on prevention saves even more money on failure costs it is possible to have high quality and low cost at the same time firms should get it right the first time Lean Operations - correct answer ✔✔a philosophy that encompasses every aspect of thee process, from design to after the sale of the product peruses a system that functions with minimal levels of waste, inventory, space, and transactions ultimate goal is a balanced system Supporting Goals of Lean Operations - correct answer ✔✔Demand Drive
• flexible system
• reduce setup and lead times Waste Reduction
• eliminated waste
• minimize inventory

Continuos Improvement

• eliminate disruptions
• poor quality Sources of Waste - correct answer ✔✔1. Inventory
• idle resource, requires space, holding cost

2. Overproduction

• overuse of manufacturing resources

3. Waiting time

• time, requires space

4. Unnecessary Transporting

• handling cost

5. Processing Waste

• unnecessary production steps, scrap, paperwork

6. Inefficient Work Methods

• reduced productivity

7. Product Defects

• rework costs, consumer dissatisfaction

8. Loss of Employee Potential Building Blocks - correct answer ✔✔1. Product Design

2. Process Design
3. Personnel / Organizational Elements
4. Manufacturing Planning & Control Product Design - correct answer ✔✔Standard Parts

• less training, lower costs, routing purchasing Modular Design
• fewer parts, simpler assembly, purchasing, handling Highly Capable Systems with quality built in
• quality designed into the product and production process Concurrent Engineering
• brining together design and manufacturing personnel together nearly in the design phase to prevent engineering changes Process Design - correct answer ✔✔Seven aspects

1. Small lot sizes
2. Setup Tim reduction
3. Manufacturing cells
4. Quality improvement
5. Production flexibility
6. A balanced system
7. Little Inventory Storage
8. Fail Safe methods Small Lot Size - correct answer ✔✔ideal lot size is 1

goal to reduce lot size as much as possible benefits:

• reduced in process inventory
• lower carrying costs
• greater flexibility in scheduling
• increased visibility of problems and balancing operations Setup Time Reduction - correct answer ✔✔Covert activities from internal to external Single Minute Exchange of Die Work in parallel Workers trained to do set up steps Quality Improvement - correct answer ✔✔Focus on finding and eliminating the causes of problems Automation (jidoka)
• automatic detection of defects during production
• two mechanisms (one to detect other to stop production) Balanced System - correct answer ✔✔work assigned to each workstation must not exceed cycle time Takt-Time - correct answer ✔✔the cycle time needed to match customer demand minimizes WIP inventory

Inventory Storage - correct answer ✔✔gradually reduce inventories in order to uncover problems and then resolve them Cross Trained Workers - correct answer ✔✔workers are trained to perform several parts of a process and operate a variety of machines facilitates flexibility and helps in line balancing Workers as Assets - correct answer ✔✔well trained and motivated workers are the heart of a lean system they are given greater authority to make decisions but more is expected of them Continuous Improvement - correct answer ✔✔Kaizen kers in lean systems have greater responsibility for quality, and are expected to be involved in problem solving and continuous improvement Push System - correct answer ✔✔work is pushed to the next station as it is completed without regard to readiness work may pile up Pull System - correct answer ✔✔work movies on in response to demand from the next stage in the process requires steady flow of reparative work large variations in volume, product mix, or product design will undermine the system

communication works backward (with previous workstation) Just in Time Kanban - correct answer ✔✔a card affixed to each container when a workstation needs to replenish its supply of parts a worker withdraws one container each container holds a predetermined quantity the worker removes the card from containers and posts it the posted card is picked up by a stock person who replenishes the container Vendor Partnerships - correct answer ✔✔small number of suppliers close relationships with vendors local suppliers are preferred will operate under JIT Lean Services - correct answer ✔✔focus on time needed to perform the service speed is often winner Supply Chain - correct answer ✔✔the sequence of organizations their facilities, functions, and activities that are involved in producing and delivering a product or service

sometimes referred to as value chains Supply Chain Strategy Allignment - correct answer ✔✔aligning supply and distribution strategies with organizational strategy deciding on the degree to which outsourcing will be employed Decoupling Point - correct answer ✔✔where supply has to match demand The Bull Whip Effect - correct answer ✔✔Tendency of consumers of a material or product in short supply to buy more than they need in the immediate future. Caused of Bull While Effect - correct answer ✔✔Lack of information Safety Stock Structure

• longer lead times create stronger bullwhip effect Local Optimization
• lack of cooperation
• ordering involves fixed cost
• incentive to place batch orders Problems With Bull Whip Effect - correct answer ✔✔high demand fluctuations require capacity in shipment, production, and inventory high overall costs in the supply chain Improvements for Bull Whip Effect - correct answer ✔✔Information Sharing
• replenishment based on need

• vendor managed inventory to replenish when suppliers are low Short Lead Timees Cooperation Logistics - correct answer ✔✔the part of supply chain involved with the forward and reverse flow of goods, services, cash, and information Includes:
• inbound and outbound transportation
• inventory
• material handling
• warehousing
• order fulfillment & distribution
• third party logistics
• reverse logistics Shipping Alternatives - correct answer ✔✔Considerations:
• cost
• coordination
• flexibility
• time/speed
• availability
• regulations
• environmental issues