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PRODUCTION/OPERATIONS MANAGEMENT (2 
nd
Day, p.m.) 
1. What is a Kanban?  How is a Kanban used? 
A kanban control system uses a signaling devise to regulate just-in-time flow.  In Japanese, kanbanmeans “sign” or instruction card.  In a paperless control system, containers can be used instead of cards.The cards or containers make up the kanban pull system.Kanban is a card or other device that communicates demand for work or materials from the precedingstation.  It means “signal” or visible record.  When a worker needs materials or work from the precedingstation he uses a kanban card.  This is card is the authorization to move or work on parts.  In kanbansystem, no part or lot can be moved or worked out without one of these cards.The system works this way.  A kanban card is affixed to each container.  When a workstation needs toreplenish its supply of parts, a worker goes to the area where these parts are stored and withdraws onecontainer of parts.  Each container holds a predetermined quantity.  The worker removes the kanban cardfrom the container and posts it in designated spot where it will be clearly visible, and the worker movesthe container to the workstation.  A stock person who replenishes the stock with another container and soon down the line then picks up the posted kanban.  Demand for parts triggers replenishment and partsare supplied as usage dictates.  Similar withdrawals and replenishments all controlled by kanbans – occur all the way up and down the line from vendor to finished good inventories.  If the supervisor decides thesystem is too loose because inventories are building up, he may decide to tighten the system andwithdraw some kanbans.  Conversely, if the system seems too tight, additional kanbans may beintroduced to bring the system into balance.
2. Explain why simulation is often considered as an appropriate technique for maintenance problems.
Simulation is a standard tool in business and manufacturing used to determine production schedules,inventory levels, and maintenance problems.  Whenever, a mathematical technique fails, we turn tosimulation to save us.Simulation in maintenance and business generally refers to using a digital computer to performexperiments on a model of a real system.  These experiments may be undertaken before the real systemis operational, to and in its design to see how the system might react to change in its operating rules or toevaluate the system’s response to changes in its structure.  Simulation is particularly appropriate tosituations in which the size or complexity of the problem makes the use of optimizing techniques difficultor impossible.Simulation is often considered as an appropriate technique for maintenance problems since it is the onlymethod available to determine the possible effects of machine breakdowns and preventive maintenanceto process and maintain costs.  The actual damage or breakdown of machines is difficult to observe andusually expensive.  The maintenance activity is done on a long-term basis and usually takes a very longtime to see the results.
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3. Explain the effect(s) of the following situations on the total inventory costs: (a) if inventory holding costs per unit increases as inventory increases, (b) if you are leasing the warehouse where the inventory is stocked? 
Virtually all inventory models use cost minimization as the optimization criterion.  An alternativeperformance criterion is profit maximization.  Cost minimization and profit maximization is essentiallyequivalent criteria for estimating inventory control problemsHolding cost or carrying cost (also known as inventory cost) is the sum of all costs that are proportional tothe amount of inventory physically at hand at any point in time.  The components of the holding cost are:a) Cost of providing the physical space to store the items (includes lease, rental of warehouse.b) Taxes and insurancec) Breakage, spoilage, deterioration and obsolescenced) Opportunity cost of alternative investmentWe generally measure inventory in units rather in money values (e.g. pesos, dollars).  We also expressthe holding cost in terms of dollars per unit per year.  If the inventory level varies on a continuous basiswe would expect inventory levels to change over time.a) The total inventory costs will increase when inventory holding costs per unit increases as inventoryincreases.  As shown in the following equation: Total cost = annual carrying (holding) cost + Annualordering cost.If the holding (carrying) cost increases as the inventory increases, the Total Cost increase if wemaintain a high level of inventory and activity of ordering is still periodic.  If we maintain a high levelon inventory and we limit the activity of ordering, the Total Cost will not be too high.  Balancing thetwo aspects, the holding cost and ordering cost can minimize the total cost.b) Likewise, the total inventory costs will increase if you are leasing the warehouse where the inventoryis stocked, since this leasing cost will be included in the holding (inventory) cost.  Having a high levelof inventory will result to a low rental cost per unit of inventory.  Thus, to maximize rental cost weshould stock more or have more inventories.
4. How can a manager evaluate the effectiveness of a maintenance function? 
The total cost (maintenance costs + breakdown costs) must be examined to discover the mostsatisfactory maintenance policy.  Data must be systematically gathered and analyzed.  The costsassociated with equipment failure and the costs of overhaul work must be compared and a maintenanceplan must be prepared, which offers a satisfactory match of costs and equipment availability.To evaluate the effectiveness of a maintenance function, the manager should see to it that the followingmaintenance objectives are achieved:a) Enable product quality and customer satisfaction to be achieved through correctly adjusted, servicedand operated equipment.b) Maximize the useful life of the equipment.c) Keep equipment safe and prevent the development of safety hazards.d) Minimize the total production costs directly attributable to equipment service and repair.e) Minimize the frequency and severity of interruptions to operating processes.f) Maximize production capacity from the given equipment resources.
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5. What is the rationale for (a) a phantom bill of material, (b) a planning bill of material,(c) a pseudo bill of material? 
a) A phantom bill of material is usually prepared for sub-assembly components that exist onlytemporarily and go directly into another assembly.  They used to receive special treatment, lead timesare zero and handled as an integral part of their presentation.  They are never inventoried. b) A planning bill of material is prepared for items with fractional options.  For example, it can specify 0.3of a part or 30% of the unit’s produced containing that part and 70% that is not included.c) A pseudo bill of material is prepared to simplify the scheduling and control and makes it easier toforecast the use of different materials.  It is similar to a planning bill of material or kit number 
6. Assume that your company is using a DRP system and that your men ignored carrying cost in the allocation of stock.  Will your lot sizes be affected?  Explain your position.
The lot sizes will be affected.  It will place more orders that increase inventory and carrying cost.  Totalinventory should be minimized.  Additionally, lot sizes in a DRP system should be kept as small aspossible within the constraints of ordering and transportation costs.
7. Explain  the trade-off  between  operator-performed  maintenance  versus  supplier- performed maintenance.
Many of the activities associated with effective preventive maintenance require particular knowledge andtraining, meaning that maintenance is a specialized service to production.  In the early period of equipment requisition or warranty, it is best for the company to avail of supplier-performed maintenanceand acquire transfer of knowledge and technology on maintenance procedures.Operator-performed maintenance are conducted for office machines and equipment performed byemployees of a certain company.  This will be a better option for the company if they have hightechnology and high-powered, top-of the-line machines in operation.  It also occupies a large building andrequires a lot of maintenance workPreventive maintenance cost less if done by the operator.  A maintenance department conducts supplier-performed maintenance, manufacturer field  services, and  the  depot services (return  equipment).Supplier-performed maintenance should be resorted by a company who does not operate complicatedmachines or maintain only a small amount of equipment, since they will have to incur additionalmanpower costs for maintenance purposes.
8. Explain the assumptions behind the center-of-gravity method.  How can the model be used  in  a  service  facility  location?  What  is  the  rule  on  center  of  gravity  in transportation/distribution? 
The center-of-gravity method is a technique for locating single facilities that considers the existingfacilities, the distances between them, and the volumes of goods to be transported.  It assumes thatinbound and outbound transportation costs are equal, and it does not include special shipping costs for less than full loads.The model is often used to locate intermediate or distribution warehouses.  It begins by placing theexisting locations on a coordinate grid system.  The choice of coordinate system is entirely arbitrary.  Thisis to establish relative distances between locations.  The center-of-gravity is calculated from the X and Ycoordinates which result in the minimal transportation costs.
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