Linear Programming Shadow Price for any constraint function is the amount by which the optimal Z-value is improved. Bullwhip effect results from order
amplification in the supply chain.Trucking is most used in the U.S.Air Transportation: -rapidly growing segment of transportation industry -Lightweight, small
items -Quick, reliable, and expensive Water Transportation: -One of the oldest means of transportation -Low-cost, high-volume, slow What you may find in
Inventory: Raw materials, Purchased parts and supplies, Labor, In-process (partially completed) products, Component part, Working capital, Tools, machinery,
and equipment, Finished goods 2 Key Questions in Inventory -When to order? -How much to order?Basic Inventory Categories Raw Materials, component
parts, subassemblies, and supplies: inputs to manufacturing and service-delivery processes (dependent) Work-in-process (WIP) Inventory: partially finished
products in various stages of completion that are awaiting further processing. (Little’s Law) Finished goods inventory (independent): completed products ready
for distribution or sale to customers Pipeline Inventory: inventory that has been ordered but not yet received and is in transit Anticipation Inventory: built up
during the off-season to meet future estimated demand Safety Stock Inventory: an additional amount of inventory kept over and above the average amount
anticipated to meet demand.Characteristics of Inventory Systems Stock-keeping unit (SKU): a single item or asset stored at a particular location Each item is
identified by its (SKU). Maintaining data integrity on thousands of SKUs is really difficult, but has to be done.Inventory Management Infrastructure ABC
inventory (Pareto) analysis: gives managers useful information to identify the best methods to control each category of inventory. A vital few SKUs represent a
high percentage of the total inventory dollar-value.ABC Inventory (Pareto) System “A” items are key. They account for a large dollar value but relatively small
percentage of total times. Approximately 5-15% of items, yet 60-80% of total dollar usage.“C” items account for a small dollar value but a large percentage of total
items; can be managed using automated computer systems 50-60% of items yet about 5-15% of total dollar usage.“B” items are between A and C Inventory
Costs Ordering (Setup) Cost cost of replenishing inventory Holding (Carrying) Cost cost of holding an item in inventory Shortage Cost temporary or
permanent loss of sales when demand cannot be met Two Types of Inventory Control Systems Fixed-order-quantity system (Continuous) Pre-determined,
constant amount ordered when inventory declines to predetermined level. Fixed-time-period system (Periodic) Order placed for variable amount after fixed
passage of time. Assumptions of Basic Fixed-Order-Quantity EOQ Model Demand is known with certainty, Demand is relatively constant over time, No
shortages are allowed, Lead time for the receipt of orders is known and constant, The order quantity is received all at once. Telematics The science of sending,
receiving, and storing information via telecommunication devices, Two-way wireless communication capabilities between equipment and its external environment,
Familiar telematics Global Positioning System integration into automotive.RFIDs: Radio frequency identification (RFID) tags (chips) embedded in packaging,
products, or shipping containers to constantly update the status of the SKU.Lean Operations and Just-In-Time AKA: Stockless-Production, Zero-Inventory, LeanProduction, Continuous-Flow, Material-as-Needed.The basic payoffs of lean operating systems: Elimination of waste, Increased speed and response,
Improved quality, and reduced cost, The benefits they provide to organizations, Reduced Inventory, Improved Quality, Lower Cost, Less Space, Shorter Lead
Time, Increase Productivity, Greater Flexibility, Incr. Supplier Relationships, Simplified Scheduling & Control, Incr. Capacity, Better use Resources, More Product
Options.Lean Production is an integrated set of activities designed to: Achieve high-volume production, Use minimal inventories (raw materials, work in
process, and finished goods), Eliminate waste, With the logic that nothing is produced until needed.JIT Production Anything over the minimum is waste, Typically
applied to repetitive manufacturing, Ideal lot size is one, Vendors ship several times a day, JIT exposes problems otherwise masked by inventory, No Extra
Inventory.Inventory masks probs of: bad qual, long set-ups, breakdowns, bad suppliers, bad layout. Four Basic Lean Principles 1.Eliminate Waste: including
overproduction, waiting time, processing, inventory, unneeded motion, looking for things, rework, counting. 2.Increased Speed and Response: designs efficient
responses to customers need and the competitive environment 3.Improve Quality: poor quality creates waste 4.Reduce Cost: simplifying processes and
improving efficiency translates to reduced costs.Small lot and Single-Piece Flow Batching is the process of producing large quantities of items as a group
before being transferred to the next operation.Lean operating systems seek to reduce batch sizes using single-piece flow. Basic Elements of JIT 1.Flexible
resources 2.Cellular layouts 3.Pull production system 4.Kanban production control 5.Small-lot production 6.Quick setups 7.Uniform production 8.Quality at the
source 9.Total productive maintenance 10.Supplier networks.Flexible Resources Multifunctional workers, General purpose machines, Study operators and
improve operations.JIT Cellular Layouts Facilitate The Pull-Production System Pull Production: a system in which items or services are produced only when
called for by the users (demand).Reducing Setup Time Present desired settings, Use quick fasteners, Use locator pins, Prevent misalignments, Eliminate tools,
Make movements easier.Internal Set-up: shut off machine to perform External Set-up: adjust while machine running.Cells: U-shaped, flow in one direction, can
add workers and routes, balanced, less inventory, less set-up cost, less handling, more control.Quality at the Source Taiichi Ohno: workers, not inspectors, are
ultimately responsible for quality.Jidoka worker authority to stop production line, worker qual responsibility. Andon lights: signals worker’s quality problems
(Green=okay, yellow=questions, red=line stop).Poka-yoke: Helps prevents defects, any “foolproofing” device that helps prevents defects/faults from occurring,
Japanese for “mistake proofing” Quality Circles: set time to analyze probs and improve.Total Productive Maintenance (TPM) Preventive Maintenance, AVOID
all breakdowns. Suppliers Locate near Customer, smaller and easier to load trucks and ships, strd. containers, exact delivery time, cert. the suppliers, not pay on
delivery (send bill).Services Incr. Quality, faster response, lower costs, incr. service, synchronize, profits up.Kanban (card): maintains pull discipline flow,
Withdraw-Kanban triggers containers, Production Kanban triggers making a certain quantity.Forecasting Future Events (Time Series) Time series: uses
historical data assuming the future will be like the past (an assumption)Qualitative methods Based on experience.Quantitative methods Mathematical
models.Types of Forecasts Qualitative Uses experienced inputs -Management judgment, expertise, opinion -Use management, marking, purchasing,
engineering Delphi method -Solicit forecasts from top-level CEOs & COOs Causal Modeling -Uses explanatory variables to predict outcomes.Time Frame
Short-range to medium-range -daily, weekly monthly forecasts of sales data -up to 2 years into the future Long-range -Strategic planning of goals, products,
markets -planning beyond 2 years into the future.Demand Behavior Trend -gradual, long-term up or down movement Cycle -up & down movement repeating
over long time frame Seasonal Pattern -periodic oscillation in demand which repeats. Random movements follow no pattern.Time Series Methods Statistical
methods using historical data Naïve forecast (Forecast = data from last period), Moving Averages, Exponential smoothing, Linear trend line, Seasonal
Decomposition.The Moving Average Average several periods of data, Dampen, smooth out changes, Use when demand is stable with no trend or seasonal
pattern, Weighted Moving Average Highest weight goes with the most current data, unless otherwise specified.Exponential Smoothing Weights most recent
data more strongly, Reacts more to recent changes, Widely used, accurate method.