003 - SCPro - LB04 - MAD Rev PDF

Iker Lopategi
LB4 Manufacturing and Service Operations

191025700_003
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SESSION METHODOLOGY
 PRACTICE EXAM
 8 Learning Blocks
 20 Questions per Learning Block
 20 QUESTIONS
 One question per LB learning objective
 Each Learning Objective linked to a Concept in a Paper
 UNDERSTANDING THE LEARNING OBJECTIVE

 Correct answer
 Revisit the Paper
 Tips and Tricks in the questions
LB4 – Manufacturing and Service Operations

REFERENCE MATERIAL
LB-4: MANUFACTURING AND SEVICE OPERATIONS
1. Introduction to Operations (M)
2. Chapter 15: Materials and Resource Requirements Planning (H)
3. A More Sustainable Global Supply Chain (L)
4. Chapter 5: Manufacturing and Service Process Structures (M)
5. Chapter 14: Performance Measurement Along the Supply Chain (H)
6. Chapter 6: Managing Quality (M)
7. Made in America Rethinking the Future of US Manufacturing (H)
8. Mapping a Lean Strategy (H)
9. Moving Your Manufacturing? (M)
(H) / (M) / (L) = High / Medium / Low importance based on teacher’s experience
LB4 – Manufacturing and Service Operations

QUESTION 1
Chapter 1, Introduction to Operations Management,

What Is Operations Management
topic on pages 2-5.
QUESTION 1 LB4 – Manufacturing and Service Operations

What Is Operations Management topic on pages 2-5.
For a manufacturing facility, what term is best

described as the net increase between the final value
of a product and the value of all the inputs?
Answer 1 Efficiency
Answer 2 Operations Management
Answer 3 Transformation
Answer 4 Value Added

For a manufacturing facility, what term is best described as the net

increase between the final value of a product and the value of all the
inputs?
Value added is the net increase between the final value of a product and the value of -all
the inputs.
Efficiency is being able to perform activities well and at the lowest possible cost.
Operations management is the function that plans, organizes, coordinates and controls
the resources needed to produce goods and services.
Transformation is the physical change of raw materials into products.

The role of operations management is to transform inputs into finished

goods or services. For operations management to be successful, it must add
value during the transformation process. Two ways to add value are to reduce
the cost of activities and to make operations more efficient.
An important role of operations is to analyze all activities, eliminate those that

do not add value, and restructure processes and jobs to create greater
efficiency.

QUESTION 2

Operations Management Decisions
topic on pages 7-10.

Operations Management Decisions topic on pages 7-10.
A baked goods manufacturer is developing a new line of crackers.

The manufacturer is trying to determine which type of oven would
give the crackers a crispy texture while minimizing the production
time.
Which type of operations management decision would be used in

selecting the type of oven used?
Answer 1 Operations strategy

Answer 2 Process Selection
Answer 3 Product Design
Answer 4 Quality Management

A baked goods manufacturer is developing a new line of crackers. The

manufacturer is trying to determine which type of oven would give the
crackers a crispy texture while minimizing the production time.
Which type of operations management decision would be used in selecting

the type of oven used?
Process selection is the type of operations management decision that would be used in
selecting the oven type. Process selection decisions focus on answering what the unique
features of the process are that give a product its unique characteristics.
Operations strategy decisions focus on what the unique features of the business are that will
make it competitive.
Product design decisions focus on what the unique features of the product are.
Quality management decisions focus on how managers will ensure product quality, measure
quality and identify quality problems.




QUESTION 3
Chapter 15, Materials and Resource
Requirements
Planning, Introduction

Chapter 15, Materials and Resource Requirements
Planning, Introduction topic on pages 447-448.
What term is best described as the process that when and how
much of raw materials, parts and subassemblies are needed for
production?
Answer 1 Capacity Requirements Planning

Answer 2 Distribution Requirements Planning
Answer 3 Facility Planning
Answer 4 Material Requirements Planning

What term is best described as the process that when and how much
of raw materials, parts and subassemblies are needed for
production?
Material requirements planning is the process that calculates when and how
much of raw materials, parts and subassemblies are needed for production.
Capacity requirements planning is the process to determine if sufficient

resources, such as labor, equipment, space and suppliers, are available when
needed for production.
Distribution requirements planning is the process to plan when and how to
supply finished goods at the right time to the right places in the distribution system.
Master production scheduling (not Facility Planning) is the process to plan the
required quantities of end items to be completed for each time bucket and for a
number of Ws into the future

Material Requirements Planning
• Primary function is to match supply with demand

• Determines how much and when to produce using a time-phased schedule
that is based on lead time
– MAIN GOAL: right quantities of raw materials, parts, and subassemblies are
available when needed for production
• considers both actual orders and forecasts
• considered a push system
• differs from kanban (pull) scheduling. In kanban (pull) scheduling,
production decisions are triggered directly from actual customer demand.
• In practice, firms often use a combination of MRP for planning (purchasing)
and kanban (pull) scheduling to trigger production on the shop floor.




QUESTION 4

Planning, MRP Process

Planning, MRP Process topic on pages 455-461.
Based on the materials requirements planning (MRP) record

provided, what are the net requirements in W 3?
MRP Record W1 W2 W3
Lead Time = 1 W Gross Requirements 50 50 60

On-Hand Inventory = 25 Schedudled Receipts 100
Safety Stock = 25 Available Inventory 75 25 65
Order Quantity = 100
Net Requirements
Planned Order Receipts 100
Answer 1 0
Answer 2 25 Planned Order Releases 100
Answer 3 35
Answer 4 40

Net Requirements are the minimum quantity required in the period based on gross
requirements minus the sum of scheduled receipts and available inventory at the
beginning of the period. If the total of available inventory plus the scheduled
receipts is greater than the gross requirements, then the net requirement is zero.
NR = GR – (Sch.Rcp + Av.Inv)
• Gross Requirements: The total amount of an end item that is required by all of
its parents during each period.
• Scheduled Receipts: The total quantity of items from orders placed in the past
and due to be delivered by the beginning of the period.
• Planned order release: The quantity of an item that is planned to be ordered in
a period.
• Planned order receipt: The quantity that is planned to arrive at a period.
• Available inventory: Inventory quantity that is available at the end of a period.
• Available Inventory (AI) = AI at the start of the period + Scheduled Receipts –
Gross Requirements

Based on the materials requirements planning (MRP) record

provided, what are the net requirements in W 3?
MRP Record W1 W2 W3
Lead Time = 1 W Gross Requirements 50 50 60

On-Hand Inventory = 25 Schedudled Receipts 100
Safety Stock = 25 Available Inventory 75 25 65
Order Quantity = 100
Net Requirements 0 0 35
Wk1: NR=50-(100+75)=0 Planned Order Receipts 100
AI=25+100-50=75 Planned Order Releases 100
Wk2: NR=50-75=0 Wk3: NR=60-25=35

AI=75-50=25 AI=25+100-60=65
QUESTION 5

Planning, Understanding Capacity Requirements Planning (CRP)

Based on the capacity requirements planning data provided, what

is the processing load in W 3 in hours?
CAPACITY REQUIREMENTS
Processing Time = 100 minutes per unit
W1 W2 W3 W4
Planned order releases 60 75 90 60
Processing load (hours) Answer 1 90
Available capacity (hours) 120 120 120 120 Answer 2 120
Answer 3 150
Answer 4 210

Based on the capacity requirements planning data provided, what

is the processing load in W 3 in hours?
CAPACITY REQUIREMENTS
Processing Time = 100 minutes per unit
W1 W2 W3 W4
W3:
Processing load (hours) 150 PL = 90u * 100min/u
Available capacity (hours) 120 120 120 120 PL = 9000min
PL = 150 hours

When under-loading occurs, the extra capacity could be used to build

anticipation inventory. If under-loading is an ongoing problem, the
organization should find new business or develop new products to use
the capacity or it should reduce the capacity.
When overloading occurs, the organization could use overtime,

outsource some operations, increase delivery lead times or create a
backlog of orders. If capacity is available earlier, goods could be made
in advance and held in inventory.
A cross-functional team that includes operations, sales, marketing,

finance, supply and engineering should decide upon the best approach
to manage capacity to meet the organization's objectives.

W1 W2 W3 W4
Processing load (hours) 100 125 150 100
Available capacity (hours) 120 120 120 120
Overloading
- Increase Capacity (overtime)
- Build up Stock
- Increase Lead Time of deliveries.


QUESTION 6

Planning, Advances in Planning Systems

What is a key benefit of using compatible advanced planning and

scheduling (APS) systems that extend across supply chain
partners?
Answer 1 The supply chain partners can assess materials

requirements and resource capacity constraint decisions made in the past
Answer 2 The supply chain partners can review finished goods

inventories throughout the distribution network.
Answer 3 The supply chain partners can jointly plan their operations
using what-if analysis to identify options and create contingency plans
Answer 4 Supply chain partners have greater visibility into what

supply and demand conditions occurred the previous week.

What is a key benefit of using compatible advanced planning and

scheduling (APS) systems that extend across supply chain partners?
A key benefit of using compatible APS systems is the supply chain partners can
jointly plan their operations using what-if analyses to identify options and create
contingency plans.
Another key benefit is being able to assess materials requirements and resource
capacity constraints before they occur.
Determining the optimal positioning of finished goods inventories is a function of

distribution requirements planning systems.
APS systems anticipate supply and demand conditions into the future.

Advanced Material Planning
• A planning process that simultaneously considers materials requirements along with

resource capacity constraints
• Optimizes all related costs:
– Inventory
– Labor
– Capital
• APS systems use the same fundamental explosion logic of MRP integrating materials and
capacity planning into one system
• Advantages:
– Provide greater visibility into the current status and into plans for the future
– Allow potential problems to be identified and assessed before they occur
– Supply chain partners can jointly plan their operations using what-if analyses
– Typically, organizations implementing APS see tremendous reductions in order fulfillment

lead times, large improvements in information accuracy, reductions in inventory, and lower
costs.

QUESTION 7
A More Sustainable Global Supply Chain on

pages 6-7.

A More Sustainable Global Supply Chain on pages 6-7.
What are the three most common standards that supply chain
organizations use to track sustainability data in their supply
chains?
Answer 1 Carbon Disclosure Project, Ceres Principals and Global

Reporting Initiative (GRI)
Answer 2 Carbon Disclosure Project, Greenpeace International and

Leadership in Energy and Environmental Design (LEED)
Answer 3 Conservation International and Global Reporting Initiative (GRI),

and Non-Governmental Organization (NGO)
Answer 4 Conservation International, Greenpeace International and

Leadership in Energy and Leadership in Energy and Environmental Design (LEED)

A More Sustainable Global Supply Chain on pages 6-7.
What are the three most common standards that supply chain
organizations use to track sustainability data in their supply chains?
The three most common standards that supply chain organizations use to track
sustainability data in their supply base are:
1) Carbon Disclosure Project which was launched in 2002 by institutional investors.
2) Ceres Principals which was created by an investor-focused action group organized
after the Exxon-Valdez oil spill,
3) Global Reporting Initiative which was launched by the United Nations in 1997.
Leadership in Energy and Environmental Design are industry sustainability standards

for building construction and interiors. Conservation international and Greenpeace are
non-governmental organizations that play a major role in driving corporate involvement in
sustainability.

QUESTION 8
Chapter 5, Manufacturing and Service Process Structures,

Process Structures

Process Structures topic on pages 128-133.
A beauty salon offers a variety of hair, nail and spa treatments.

Customers select from a pre-defined list of services, which are priced
separately. However, customers can customize the services, such as
selecting the style of haircut and the color of nail polish.
Which type of marketing orientation is the beauty salon utilizing for

its customers?
Answer 1 Assemble to order

Answer 2 Engineer to Order
Answer 3 Make to Order
Answer 4 Make to Stock

A beauty salon offers a variety of hair, nail and spa treatments.

Customers select from a pre-defined list of services, which are
priced separately. However, customers can customize the
services, such as selecting the style of haircut and the color of
nail polish.
Which type of marketing orientation is the beauty salon utilizing

for its customers?
The beauty salon is utilizing the make to order (MTO) marketing orientation for
its customers. The basic design of MTO products covers the needs of broad
groups of customers, but allows for some customization during production or
service delivery.

Engineer to order (ETO)

• Unique, customized products
• Designed for individual customers.
– A customer must place an order before work begins because each product requires an
entirely new design.
Make to order (MTO)
• Products that have similar designs but are customized during production.
• Triggered by a customer order at the very early stages of production.
Assemble to order (ATO)
• Products produced from standardized components and modules, stored in
inventory.
• Components and modules do not change with customer orders,
– but they can be assembled in different ways to create end product configurations that
meet individual customer needs.
Make to stock (MTS)
• Finished goods that are held in inventory in advance of customers orders.
• Typically standardized, mature products.

QUESTION 9

Process Structures

A manufacturer of interior components for automobiles produces

basic models of the components with a moderate level of volume and
variety. Although there are some differences between the production
flow pattern across models, there are dominant flow patterns. The
manufacturer uses some common inputs, and its employees and
equipment are moderately flexible. Cleaning and setup time can be
high, which reduces the available capacity.
Which type of process structure would the manufacturer most likely

utilize for the interior of the components?
Answer 1 Batch
Answer 2 Mass customization
Answer 3 Project
Answer 4 Repetitive process

A manufacturer of interior components for automobiles produces

basic models of the components with a moderate level of volume and
variety. Although there are some differences between the production
flow pattern across models, there are dominant flow patterns. The
manufacturer uses some common inputs, and its employees and
equipment are moderately flexible. Cleaning and setup time can be
high, which reduces the available capacity.
Which type of process structure would the manufacturer most likely

utilize for the interior of the components?
The manufacturer would most likely utilize the batch process structure for
interior components. Batch process characteristics include dominant flow
patterns, some common inputs, setup time can be high and moderately
flexible employees and equipment.


QUESTION 10

Unique Aspects of Service Processes

A hospital provides routine and specialized medical services to

the community. It has a high degree of capital intensity and
customer interaction, but only a moderate degree of
customization in the services it provides. Its key operating issues
include keeping up-to-date on new technology and scheduling in
order to ensure effective utilization of technology.
In which quadrant of the service process matrix would the
hospital most likely be classified?
Answer 1 Mass service

Answer 2 Professional service
Answer 3 Service factory
Answer 4 Service shop

The service process matrix.

A hospital provides routine and specialized medical services to the

community. It has a high degree of capital intensity and customer
interaction, but only a moderate degree of customization in the
services it provides. Its key operating issues include keeping up-to-
date on new technology and scheduling in order to ensure effective
utilization of technology.
In which quadrant of the service process matrix would the hospital

most likely be classified?
The hospital would most likely be classified in the service shop quadrant
of the service process matrix. Service Shops have higher customization /
customer interaction and higher investment in facilities and equipment.

Professional Services.
• Lawyers, doctors, consultants, and accountants interact closely with clients to deliver customized
services.
• Tend to be time-consuming and costly (providers are highly skilled and educated)
– However, by reducing the degree of customization, some firms have reduced time and costs.
Stores such as Target, Walmart, and CVS have medical clinics staffed with nurse practitioners.
These clinics treat minor ailments, quickly and at a much lower cost than a traditional family doctor.
Service Factory.
• Trucking companies, airlines, and hotels are examples of service factories.
• Low: Customer contact, customization, and labor intensity.
• High: Investment in facilities and equipment
A range of standard services is offered to customers who tend to value low price above all else.
Operations managers in service factories are mainly concerned with utilizing equipment and facilities
to a maximum extent, because these fixed assets account for the majority of operating costs.
Matching capacity and demand to keep equipment and facilities busy is important to both
competitiveness and profitability.

Service Shops.
• Automobile repair shops and hospitals are examples of service shops,
• High degree of capital intensity and high customer interaction,
• Low / moderate degrees of customization.
Keeping up-to-date on new technology and scheduling to ensure effective utilization of technology
are key operations issues. Imagine, for example, the difficulty of scheduling auto repair shop
operations when you typically have large spikes in demand on Mondays.
Some organizations have specialized to reduce the variety of services offered to move
from service shops to mass services (described next). For example, muffler replacement
and oil changes are mass services.
Mass Services.
• Retail banks, grocery stores, gas stations, and other retail outlets, meet the standard
needs of a large volume of customers.
• Low customer contact/customization and
• High labor intensity.

QUESTION 11

Operations Layout

Operations Layout topic on pages 136-140.
Demand for a product is 192 units per day, operations run

continuously for 8 hours per day and there are five tasks (Task A,
B, C, D and E) required to produce the product. Based on the data
provided, what is the theoretical minimum number of
workstations?
Time
Task Predecessors
(minutes)
A None 1
Answer 1 4 B A 2
Answer 2 5 C B 4
Answer 3 10 D B 3
Answer 4 12 E C, D 2

Operations Layout topic on pages 136-140.
Demand for a product is 192 units per day, operations run continuously for 8
hours per day and there are five tasks (Task A, B, C, D and E) required to
produce the product. Based on the data provided, what is the theoretical
minimum number of workstations?
Time Takt time

Task Predecessors Available prod. time per day / Output needed per day
(minutes)
A None 1 Theoretical number of stations
B A 2 Total of all task times / Takt time
C B 4
Efficiency
D B 3
[Sum of all task times / (Actual workstations X Takt time)] x 100
E C, D 2

QUESTION 12
Chapter 14, Performance Measurement Along the Supply Chain,
Supply Chain Performance Measurement Systems

What term is best described as the average time required for

supply chain members to provide an unplanned and agile
response to a sustainable 20 percent increase in production?
Answer 1 Cash-to-Cash cycle time

Answer 2 Order cycle time
Answer 3 Manufacturing Cycle Time
Answer 4 Production Flexibility

What term is best described as the average time required for supply
chain members to provide an unplanned and agile response to a
sustainable 20 percent increase in production?
Supply chain production flexibility is the average time required for supply chain
members to provide an unplanned, sustainable 20% increase in production.
Average production flexibility for best-in-class supply chains is from one to two
weeks.
Cash-to-Cash cycle time is the average number of days between paying for raw-
materials and getting paid for product.
Supply chain cycle time is the average number of days between the purchase
order being placed with suppliers and final placement of product in the customer’s
location.
Supply chain manufacturing cycle time is the average time required to produce a
unit of product from raw materials to product shipment.

Specific Supply Chain Performance Measures
1. Total Supply Chain Management cost (as percentage of sales)

– Leaders (4-5 %)
– Standard (6 %)
2. Supply Chain cash-to-cash cycle (days)
– Average days between payment of raw materials and getting paid by clients
3. Supply Chain Production Flexibility (Days)
– Days needed by a firm to increase the production a 20%
– Best in class organizations: 1-2 weeks
4. Supply Chain Delivery Performance (% orders)
– Orders arriving on or befor the required delivery date
5. Supply Chain Perfect Order Fulfilment Performance (% orders)
– Orders arrived on time, in full, correct documentation, billed accuratelly.
6. Supply Chain e-Business Performance (% orders)
– Average orders received on time
7. Supply Chain Environmental Performance (plenty of measurements)

SCOR Model
KPIs

QUESTION 13

The Balanced Scorecard

Chapter 14, Performance Measurement Along the Supply
Chain, The Balanced Scorecard topic on pages 496-499.
What is a key weakness of the balanced scorecard approach to

performance measurement?
Answer 1 The balance scorecard is too customer focused
Answer 2 The balanced scorecard does not show what an

organization’s competitors are doing.
Answer 3 The balanced scorecard requires both bottom-up and top-

down measures to be effective.
Answer 4 The balanced scorecard requires tracking significant

number of measures in each of the four perspectives.

What is a key weakness of the balanced scorecard approach to

performance measurement?
The balanced scorecard can be used successfully as a basis for an

employee reward structure.
A weakness of the balanced scorecard approach is it does not show what an

organization’s competitors are doing.
The scorecard relies on top-down metrics.
Experts have recommended tracking only 20 to 30 measures.

Kaplan and Norton (1992) still in use in 80% US businesses:
Allows to align an organization’s performance measures with its strategic plans and
goals.
Scorecarding is designed to provide managers a formal framework for achieving a

balance between nonfinancial and financial results across short- and long-term planning
horizons.
Pros:
• Helps organizations to track performance and identify areas of weakness
• Top-Down Measures.
Cons:
• Sometimes difficult to take BSC from concept to reality. Need to invest in IT to
measure appropriately
• Inability to show what one’s competitors are doing
• Exclusion of employee, supplier and alliance partner contribution

BSC 4 Perspectives

QUESTION 14

Traditional Performance Measures

Based on the data provided, what is the material productivity?
Inputs and Outputs Amount

Units produced 5,000
Labour Hours 25,000
Labour Cost $20 per hour
Answer 1 0.010 Materials Purchased $ 40,000
Answer 2 0.048 Lease Pyments $ 65,000
Answer 3 0.077
Answer 4 0.125

Based on the data provided, what is the material productivity?
Material productivity is calculated by dividing the number of units produced by the

materials purchased.
Material productivity is 0,125, which is 5,000 units divided by $40,000 materials
purchased
Inputs and Outputs Amount

Units produced 5,000
Labour Hours 25,000
Labour Cost $20 per hour
Materials Purchased $ 40,000
Lease Payments $ 65,000

QUESTION 15
Chapter 6, Managing Quality,

Knowledge of TQM Tools

Knowledge of TQM Tools topic on pages 200-204.
What term is best described as a total quality management tool for

identifying problems in which a graph shows the range of values
of a measurement and the frequency with which each value
occurs?
Answer 1 Histogram
Answer 2 Pareto Chart
Answer 3 Scatter Diagram
Answer 4 Statistical process control

What term is best described as a total quality management tool for

identifying problems in which a graph shows the range of values of a
measurement and the frequency with which each value occurs?
The histogram is a total quality management (TQM) tool for identifying problems in which a
graph shows the range of values of a measurement and the frequency with each value occurs.
Pareto chart is a TQM tool for organizing data based on the principle that the 80% of problems
result from the 20% of the causes.
Scatter diagram is a TQM tool for generating ideas that show the relationship between two
measurementsd.
Statistical process control is a TQM tool for identifying problems that monitors standards,
makes measurements and takes corrective action as a product or service is being produced.

TQM Tools
- Tools for generating ideas
Cause & Effect Diagram

(Fishbone or Ishikawa)
Scatter Diagram
Check Sheet

TQM Tools
- Tools for organizing data
Pareto Chart
Flowchart (Process
Diagram)

Statistical Process Control Chart
Flowchart (Process Diagram)

QUESTION 16
Made in America: Rethinking the Future of US Manufacturing,

How Taxation Affects Manufacturing
topic on pages 5-6.

How Taxation Affects Manufacturing topic on pages 5-6.
Based on the production volume, pre-tax profit and tax rate data
provided for two countries (country A and country B) what is the
overall effective tax rate?
Production Pre-Tax Tax

Country
Volume Profit Rate
A 30% $ 5,000 40%
Answer 1 18,8% B 70% $ 15,000 30%
Answer 2 32,5%
Answer 3 35%
Answer 4 25%

Based on the production volume, pre-tax profit and tax rate data
provided for two countries (county A and country B) what is the
overall effective tax rate?
Production Pre-Tax Tax

Country
Volume Profit Rate
A 30% $ 5,000 40%
B 70% $ 15,000 30%

Generally the success of manufacturing is based on measures such as:
• Cost efficiency by reducing total supply chain costs

• Capital efficiency by optimizing capital infrastructure investments
and reducing working capital
• Tax efficiency by maximizing after-tax profit
– By shifting assets and jobs to countries where tax rates generally are
lower, many companies can significantly reduce their tax liabilities.

QUESTION 17

Managing Supply Chain Challenges

Managing Supply Chain Challenges topic on pages 11-12.
A manufacturer of personal care products is considering moving

some of its manufacturing activities onshore in order to offset the
higher transportation costs of its offshore manufacturing.
Which type of analysis would the manufacturer use to calculate its
cost of manufacturing in one location and serving its customers in
the other locations?
Answer 1 Economics of scale

Answer 2 Plant rationalization
Answer 3 Return on Investment
Answer 4 Total Landed Cost

A manufacturer of personal care products is considering moving some of its

manufacturing activities onshore in order to offset the higher transportation
costs of its offshore manufacturing.
Which type of analysis would the manufacturer use to calculate its cost of
manufacturing in one location and serving its customers in the other
locations?
Total landed cost analysis considers unit costs, transportation costs, inventory and
handling costs, transportation costs, duties and taxation, and the costs of finance. It is a
good way to calculate the cost of manufacturing or sourcing in one location and serving
customers in other locations.
Economies of scale assess how the unit cost to produce a product changes in relation
to changes in production volume.
Plant rationalization considers how production economies of scale can be leveraged to

reduce capital investments.
Return on investment is used to evaluate the efficiency of an investment.

When crude oil prices were low, many companies outsourced or

offshored some or all of their manufacturing operations. As crude oil prices
rise, transportation costs become far more important relative to manufacturing
and fixed facility costs. The rise in prices result in three key cost-optimization
considerations.
• Regional distribution centers become more attractive in order to minimize

distances between distribution centers and retail outlets.
• Sourcing and production become closer to demand by moving more

sourcing and manufacturing activities onshore.
• Supply chains become more flexible by changing from a dedicated

manufacturing strategy to a flexible manufacturing strategy.


QUESTION 18
Mapping a Lean Strategy, The Lean Supply Chain Defined through
Step 2: Drawing the Future State of your Supply Chain
topics on pages 3-8.

How are the four key attributes of a lean supply chain best
defined?
Answer 1 Applied, predictable, visionary and waste
Answer 2 Back-end quality, customer-focused, disciplined, and valued
Answer 3 Collaborative, planned, stable and visible
Answer 4 Function-oriented, rigorous, strategic and systematic.

How are the four key attributes of a lean supply chain best
defined?
The four key attributes of a lean supply chain are best defined as
collaborative, planned, stable and visible. The goal of the lean
supply chain is to deliver the highest value to the customer at the least
total cost to the system. It relentlessly focuses on lead-time reduction
by eliminating all non-value-creating activities (waste). This is
accomplished through rigorous process discipline, inventory reduction
and first-time quality.

Step 1: Drawing the current state of your supply chain
1. How do you draw the value-stream map of the current condition of

your supply chain?
2. What information is key to understanding the current condition of

your supply chain?
3. How do you break down the supply chain into manageable pieces
in order to paint a realistic picture of the current state?
4. Who should be part of a cross-functional team to complete an

accurate value-stream map of the supply chain?
5. How do you analyze the value-stream map of your supply chain to

understand the current condition?

Step 2:Drawing the future state of your supply chain
1. How do you use guiding principles to map future state of your supply chain?
2. How do you determine what steps to take to get from the current state to the
future state?
3. How do you prioritize and manage all the things you need to do?
4. How do you ensure continuous momentum towards the vision of the future
state?
5. What challenges will you face moving from the current state to the future
state, and how do you overcome those challenges? Under each step is a
series of questions that should be asked and answered in order to design a
lean supply chain.

Lean principle past and present:
– Reduction of cost thoroughly removing all forms of organizational waste

– JIT production and elimination of waste from overproducing
– Pull systems and use of kanban techniques to replace complicated MRP systems
– One-piece production and conveyance of reduced lot sizes
– Level production and mix-model production lines
– Jidoka, or “quality at the source”, to ensure first time quality
– Full utilization of workers’ capability
– Full consideration of workers’ safety
– Visual management or “self display” of workers’ progress and workers’ ability to “stop the line”
– Elimination of inventories in order to expose problems in the production system

QUESTION 19
Moving Your Manufacturing?,

The RFQ and Decision Process

The RFQ and Decision Process topic on pages 53-56.
In selecting which products to outsource for manufacturing

operations, when is a company most likely to keep the
manufacturing operations in-house?
Answer 1 When the product has competitive price pressures in major markets
Answer 2 When the product is early in the life cycle and has production issues that have not
been resolved
Answer 3 When the product is in the decline phase of the life cycle and requires a large
amount of internal resources
Answer 4 When the product is not a core competency of the company

In selecting which products to outsource for manufacturing

operations, when is a company most likely to keep the manufacturing
operations in-house?
A company is most likely to keep the manufacturing operations in-house instead of

outsourcing when the product has production issues that have not been resolved.
Any product issues should be resolved before manufacturing operations are moved.
A product with competitive price pressures may drive a company to consider

outsourcing as a way to reduce costs.
A product that is realistically at the end stage of its product life cycle, instead of the
early stage, is most likely to be manufactured off-shore.
A product that is a core competency of the company is most likely to be kept in-house.

Key elements at the next level of decision-making include the

following.
• Product selection that is dependent upon a number of product and

marketplace factors.
• Selecting candidates and locations that is identifying CM candidates and

locations for the RFQ process.
• Compiling and delivering the RFQ information that is dependent upon how
clear and complete the information request is.
• Response analysis that is dependent upon providing a standardized response

template.
• Decision and communication process that is dependent upon a cross

functional team and clear expectations.

Example on data needed for

the RFQ process

QUESTION 20
The Product Transition Process

The Product Transition Process topic on pages 53-56.
A baby care products company is moving the manufacturing of baby

travel products from an existing contract manufacturer (CM) to a new
CM. Baby strollers is the first product to be transitioned to the new
CM.
What is the most critical action that the company must take in order
to avoid interruptions in the raw materials for the new CM?
Answer 1 Ensure the existing CM does not cancel purchase orders with suppliers before the new
CM has established a supply pipeline.
Answer 2 Ensure the existing CM has sufficient buffer of finished goods inventory
Answer 3 Ensure the new CM is receiving engineering change orders that occur after the initial
transfer of bill of materials and production data.
Answer 4 Ensure the product goes through a pilot build and qualification process at the new CM
before manufacturing is transitioned.

A baby care products company is moving the manufacturing of baby travel

products from an existing contract manufacturer (CM) to a new CM. Baby
strollers is the first product to be transitioned to the new CM.
What is the most critical action that the company must take in order to avoid
interruptions in the raw materials for the new CM?
To avoid interruptions in the raw materials supply, the company must ensure the existing
CM does not cancel purchase orders with suppliers before the new CM has
established a supply pipeline.
Ensure the existing CM transfers a sufficient buffer of finished goods inventory is to

avoid interruptions of supply to customers.
Ensuring the new CM is receiving engineering change orders is to maintain data

integrity.
Ensuring the product goes through a pilot build and qualifications process is to
verify the product is being built correctly.

Transition of a major materials pipeline is a very detailed process, which requires

consideration of limiting factors such as resource constraints, revenue requirements and
contractual requirements. Elements to consider include:
• High-level schedule that is jointly developed by the original equipment manufacturer

(OEM) and the CM.
• Team formation that is cross-functional at both the OEM and CM.
• Data integrity that is directly related to the success of the entire transition process.

• Transition buffer that is one of the more difficult decisions in the process.
• Materials pipeline protection and materials transfer that is a major risk in the transition
process.
• Equipment transfer that is complex in terms of the logistics of moving equipment.
• Pilot and qualification process that is required to have a high confidence level in the
product quality at the new location.

Iker Lopategi
LB4 Manufacturing and Service Operations
191025700_003
THANK YOU
http://cscmpcertification.org

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Iker Lopategi

LB4 Manufacturing and Service Operations

Become a Supply Chain Superstar

 UNDERSTANDING THE LEARNING OBJECTIVE

LB4 – Manufacturing and Service Operations

1. Introduction to Operations (M)

2. Chapter 15: Materials and Resource Requirements Planning (H)

3. A More Sustainable Global Supply Chain (L)

4. Chapter 5: Manufacturing and Service Process Structures (M)

5. Chapter 14: Performance Measurement Along the Supply Chain (H)

6. Chapter 6: Managing Quality (M)

7. Made in America Rethinking the Future of US Manufacturing (H)

8. Mapping a Lean Strategy (H)

9. Moving Your Manufacturing? (M)

LB4 – Manufacturing and Service Operations

Chapter 1, Introduction to Operations Management,

QUESTION 1 LB4 – Manufacturing and Service Operations

For a manufacturing facility, what term is best

QUESTION 1 LB4 – Manufacturing and Service Operations

For a manufacturing facility, what term is best described as the net

Transformation is the physical change of raw materials into products.

QUESTION 1 LB4 – Manufacturing and Service Operations

The role of operations management is to transform inputs into finished

An important role of operations is to analyze all activities, eliminate those that

QUESTION 1 LB4 – Manufacturing and Service Operations

Chapter 1, Introduction to Operations Management,

QUESTION 2 LB4 – Manufacturing and Service Operations

A baked goods manufacturer is developing a new line of crackers.

Which type of operations management decision would be used in

Answer 1 Operations strategy

QUESTION 2 LB4 – Manufacturing and Service Operations

A baked goods manufacturer is developing a new line of crackers. The

Which type of operations management decision would be used in selecting

QUESTION 2 LB4 – Manufacturing and Service Operations

QUESTION 2 LB4 – Manufacturing and Service Operations

QUESTION 2 LB4 – Manufacturing and Service Operations

QUESTION 2 LB4 – Manufacturing and Service Operations

QUESTION 3 LB4 – Manufacturing and Service Operations

Answer 1 Capacity Requirements Planning

QUESTION 3 LB4 – Manufacturing and Service Operations

Capacity requirements planning is the process to determine if sufficient

QUESTION 3 LB4 – Manufacturing and Service Operations

Material Requirements Planning

• Primary function is to match supply with demand

QUESTION 3 LB4 – Manufacturing and Service Operations

QUESTION 3 LB4 – Manufacturing and Service Operations

QUESTION 3 LB4 – Manufacturing and Service Operations

QUESTION 3 LB4 – Manufacturing and Service Operations

Chapter 15, Materials and Resource Requirements

QUESTION 4 LB4 – Manufacturing and Service Operations

Based on the materials requirements planning (MRP) record

Lead Time = 1 W Gross Requirements 50 50 60

QUESTION 4 LB4 – Manufacturing and Service Operations

QUESTION 4 LB4 – Manufacturing and Service Operations

Based on the materials requirements planning (MRP) record

Lead Time = 1 W Gross Requirements 50 50 60

Wk2: NR=50-75=0 Wk3: NR=60-25=35