Operations and Supply Chain Management The Core

184 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
Lead time The time needed to respond to a customer order.
Customer order decoupling point Where inventory is positioned in the supply chain.
Make-to-stock A production environment where the customer is served “on-demand” from
finished goods inventory.
Assemble-to-order A production environment where preassembled components, subassemblies,
and modules are put together in response to a specific customer order.
Make-to-order A production environment where the product is built directly from raw materials
and components in response to a specific customer order.
Engineer-to-order Here the firm works with the customer to design the product, which is then
made from purchased material, parts, and components.
Lean manufacturing To achieve high customer service with minimum levels of inventory
investment.
​Total number of combinations = ​N​ 1 ​ × ​N​ 2 ​ × · · · × ​N​ n ​ [6.1]
LO6–2 Understand production process mapping and Little’s law.
∙ Process mapping is the drawing of a diagram that depicts the material flow and inventory in
a process.
∙ Material in a process is in one of two states. The first state is where material is moving or
“in-transit” and the second is when material is sitting in inventory and acting as a “buffer”
waiting to be used. Material that is in a manufacturing process in a factory can be considered
in-transit and is referred to as “work-in-process.”
∙ Little’s law is a mathematical relationship between units in inventory and time.
Total average value of inventory The total investment in inventory at the firm, which includes
raw material, work-in-process, and finished goods.
Inventory turn An efficiency measure where the cost of goods sold is divided by the total
average value of inventory.
Days-of-supply A measure of the number of days of supply of an item.
Little’s law Mathematically relates inventory, throughput, and flow time.
Throughput The average rate (e.g., units/day) that items flow through a process.
Flow time The time it takes one unit to completely flow through a process.
​Inventory = Throughput rate × Flow time​ [6.2]
LO6–3 Explain how manufacturing processes are organized.
∙ Manufacturing layouts are designed based on the nature of the product, the volume needed to
meet demand, and the cost of equipment.
∙ The trade-offs are depicted in the product–process matrix, which depicts the type of layout
relative to product volume and the relative standardization of the product. Break-even
analysis, which is discussed in Chapter 6A, is useful for understanding the cost trade-offs
between alternative equipment choices.
Project layout For large or massive products produced in a specific location, labor, material, and
equipment are moved to the product rather than vice versa.
Workcenter A process with great flexibility to produce a variety of products, typically at lower
volume levels.
Manufacturing cell Dedicated area where a group of similar products are produced.