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51 Cards in this Set

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  • Back

Types of Resource Planning

1. Materials Planning

2. Capacity Planning

-Long-range planning: >1 yr

-Intermediate-range planning: 6-18 months

-Short-range planning: 1 day-6 months

Aggregate Planning

-Specify the optimal combination of:

Production rate

Workforce level

Inventory on hand

-Product group or broad category (aggregation)

-Long-range planning period (>1 yr)

-Goals: meet demand, inventory policy, use capacity efficiently, minimize costs


-External: economy, market demand, raw material availability, competitors, external capacity

-Internal: current physical capacity, current workforce, inventory levels, activities required for production

Key Demand Strategies

-Chase: Match production to customer order rate by hiring/firing employees

-Level: Stable workforce with constant output. Inventory and backlogs absorb fluctuation in demand.

-Combination: stable workforce with variable hours (overtime/flexible schedules)

Costs Relevant to Aggregate Planning

-Labor costs

-Hiring, Firing, Training costs

-Inventory holding costs

-Backordering costs

Master Production Scheduling (MPS)

Determine amounts and dates of each end item to be produced

-Inputs: Beginning inventory, forecast, customer orders

-Outputs: Projected inventory, MPS, uncommitted inventory

-Driven by rough cut capacity planning and materials requirements planning

Rough Cut Capacity Planning

Verifies equipment and labor availability

Materials Requirements Planning

Breaks end product requirements into a materials plan for component parts.

-Inputs: MPS, Inventory records, bill-of-material (product structure of components)

MRP Outputs

-MRP Explosion: Process of converting planned production of parent item into component gross requirements.

-Planned orders: order to be released in future

-Rescheduling of production

-Inventory status data

Manufacturing Resource Planning (MRP II)

-Goal: Plan and monitor all resources of a manufacturing firm (closed loop): manufacturing, marketing, finance, engineering.

-Simulate the manufacturing system

Enterprise Resource Planning Systems (ERP)

Information system connecting all functional areas and operations of an organization and in some cases, suppliers and customers via common software infrastructure and database.

-ERP provides means for supply chain members to share info so that scarce resources can be fully utilized to meet demand while minimizing supply chain inventories

Categories of Inventory

1. Finished goods

2. Raw materials

3. Work-in-process (WIP)

4. Maintenance, repair, and operating supplies (MRO)

2 primary functions of inventory

1. Buffer uncertainty in the marketplace

2. Decouple dependencies in the supply chain (Dependent demand)

Inventory related costs

-Item cost

-Ordering costs

-Carrying/holding cost: risk, storage, insurance, taxes, capital or finance.

-Stockout costs

Inventory Accuracy

Refers to how well the inventory records agree with physical count

Cycle Counting

Physical inventory taking technique done on a regular basis (not once or twice a year) to reconcile discrepancies between the physical inventory and inventory record

Inventory System

Set of policies and controls that monitor levels of inventory and determines:

1. How much to order

-Economic Order Quantity (EOQ) -Price Break Model

2. Inventory level to be maintained

-Reorder Point -Safety Stock

3. When to order

-ABC inventory analysis -Inventory turnover analysis

Economic Order Quantity

Goal is to find order quantity (Q) that minimizes the total cost (TC) of managing inventory.

-Simple model: known/constant


Annual Demand




units per order


Ordering cost


Holding rate

Continuous Review System (Q System)

Always ordering same quantity, reorder point varies

Periodic Review (P) System

P system requires that inventory be check after a fixed interval

Order quantity varies to bring inventory to predetermined level

ABC Method of Inventory Analysis

Determine annual $ usage

Rank items according to annual $ usage

Average Inventory Turnover

Higher average inventory turnover is better. Cost of goods sold/Avg aggregate inventory level (Raw/WOP/finished goods costs)






of inventory

Distribution Centers

Emphasize rapid movement of products through the facility


Practice of unloading an inbound vehicle and reloading the product onto an outbound vehicle

Private Warehousing

High throughput volume, market density, customer service, security

Stable demand

Special physical control

Public Warehousing

Low throughput volume, market density, customer service, security

Fluctuating demand

No special physical control

Centralized Warehousing

Low customer service, substitutability, SS requirement, operating costs

High product value

Special warehousing requirements

Large purchase size

Diverse product line

Longer lead times

Decentralized warehousing

High customer service, substitutability, SS requirement, operating costs

Low Product value

Small Purchase size

Limited product line

Shorter lead times

Productivity Ratio

(Lbs/Day)/(labor hours/day)

Trends in warehousing

Expansion of services

Third party providers

Reduced labor intensity: increased automation

Integration of warehouse and logistics information systems


Time and place utility

products delivered at right time and desired location

Common Carriers

Offer transportation services to all shippers at published rates between designated locations without discrimination

Contract Carriers

Not bound to serve general public. Serve specific customers under control.

Exempt Carriers

Exempt from regulation of services & rates if transporting certain products (i.e. produce, livestock, coal, or newspapers)

Private Carrier

Not subject to economic regulation. Typically transports goods for the company that owns it. (i.e. Hyvee)

Modes of Transportation

Motor carriage, rail, air, water, pipeline


Cost of Transportation Mode, low to high

Pipeline, water, railroad, motor, air

Transit time, low to high

Air, motor, railroad, water

Accessibility, low to high

Water, air, railroad, motor

Carrier selection determinants

Price, Transit time, reliability, capability, accessibility, security

Bill of Lading

Legal document between the shipper and carrier detailing various aspects of the transportation

Freight Bill

Carrier's invoice for charges for a given shipment

Credit terms are stipulated by the carrier and can vary extensively

Credit may be denied if the charges are worth more than the freight

Carrier Reduction Strategy

Reducing # of carriers a shipper uses to help improve relationships, management, and costs

has some risk

Transportation Regulation and Deregulation

Deregulation of freight transportation in 80s let to market freedom in pricing, open markets, and long term contracts

Major exceptions of deregulation: Pipeline, rail

Foreign Trade Zones

Goods enter without customs, can be stored indefinitely or reexported. If the final product is exported out of the country, no domestic duty/tax need to be paid. If the final product is imported into the country, duties and taxes paid only with the goods leave the FTZ.