WGU- C720 EXAM| 65 QUESTIONS WITH 100% CORRECT ANSWERS 2023.

Operational Stategies Module 1,2,12, 16 - Questions Main Objectives: how a business achieves organizational goals & competitive advantage through operations & inventory management Inventory Models EOQ EPQ QDM (Purpose of EOQ and EPQ is to minimus costs of ordering/ holding inventory Holding/Carrying Costs The costs of holding inventory; includes costs for storage space, interest paid on borrowed money to finance the inventory, and any losses incurred due to damage or obsolescence. Economic Order Quantity (EOQ) costs for ordering/holding inventory per order Finished goods *Demand is known *cost per unit not dependent on quantity * Entire order delivered at once when holding goes up, ordering goes down & vice-versa EOQ = intersection point where total annual variable costs for holding and ordering inventory coincide. Economic Production Quantity (EPQ) A model that helps companies control the cost of ordering, receiving, and holding inventory; this model allows for incomplete inventory to arrive, thus proving useful for businesses that produce their own parts; also known as Production Order Quantity. RAW Materials *Inventory is arriving into storage and sent out into a production process* Quantity discount Model (QDM)/ Transportation discounts A discount offered in price for ordering above a specified amount discount offered on shipping costs for ordering above a specified amount Revenue Sharing When 2+ companies partner and divides the profits received based on an agreement between all parties involved. Reserve Capacity When a company stores, or pays another company to store, excess inventory to be used for unexpected demand Key Processes Organizations must have: a. Strategy development b. product development c. system development to produce services and goods d. order fulfillment to leverage impact Primary Constraints in a System Market (Demand), Process (throughput) Product (Supply) Types of Inventory/Demand Inventory 1. Raw materials - Parts, materials from suppliers 2. WIP - partly finished parts, components, subassemblies or modules 3. Finished goods - Goods ready to ship to the customer 4. Replacement parts Inventory - for machinery or equipment as those parts wear out. 5. Supplies - things to support the production process but not the actual product 6. Transportation (pipeline) - shipped through distribution system Vender Managed Inventory (VMI) Available-to-Promise Demand 1. Independent/Dependent 2. Dependent 3. Seasonal 4. Peak 5. Chase 6. Uneven/ Unexpected Vender Managed Inventory (VMI) When the vendor/supplier coordinates its own inventory replenishment by receiving daily point-of-sale (POS) data from retail stores. Thus reducing costs and improving delivery performance between the supplier and the retailer. - Available-to-promise Inventory that has not yet been sold. Used to determine whether new orders can be accepted within given time period. Customer orders booked - "on-hand inventory" Pipeline Inventory Inventory from the time it leaves the warehouse until it is delivered to the customer (transportation) Independent Demand/Dependent Demand Independent Demand: that is not controlled directly by the company, such as finished products Dependent Demand: for an item generated by a company's production process, such as components for a computer that a company is producing. Demand items must be produced before others in a production process that require adequate inventory levels. (To manage this inventory companies often use material requirements planning (MRP) Seasonal Demand Ex Christmas, Halloween - The variations in the level of purchasing of a product by consumers according to the time of year. Peak Demand Occurs as the result of a planned event, advertising, promotion, such as a release date; a pro of planning for peak demand is that one can guarantee that capacity is available at anytime to meet peak expected demand by scheduling properly. Con is that capacity is often underutilized during non-peak times, whereby wasting money; sufficient capacity is available at all time to ensure that capacity is available during peak demand. Chase Demand The process of varying the workforce and using overtime to adjust production rates to match demand by varying the workforce or using overtime; this strategy requires a flexible workforce. (overtime, cutting hours, changing number on duty depending on how busy) Safety Stock A level of inventory to protect against unexpected demand or supplier delays as to keep overall production levels constant. (safety cushion of inventory) Stock-out When the inventory runs out, or is depleted. Service Level The percentage of replenishment orders that are received before a stock-out occurs; considers the probability of a stock-out vs the costs of inventory to find the right percentage. Uneven / Unexpected Demand Uneven - When demand is not even throughout the day. Unexpected - occurs due to a usually unexpected event (see safety stock) SWOT Analysis Analyzing the internal (Strengths, Weaknesses) and external (Opportunities, and Threats) environment; used to aid in strategic planning to assist in planning to achieve objectives, and develop competitive advantage Operations Inputs vs Outputs The process used to acquire inputs: 1. people 2. capital - Facilities and equipment 3. material and transform them into outputs: 1. products 2. services Productivity Output / Input A mathematical calculation. It is the ratio of outputs divided by inputs consumed to achieve those outputs. *the goal is achieving more output given the amount of inputs, thus saving money and reducing production costs. Increases in productivity mean organizations can do the same work with less effort, or more work with the same effort. (Reduce costs, lower prices) outputs worth more to consumers than cost of inputs Labor Productivity = Quantity or Value of units Produced/ Labor Hours or Labor cost Operations Manager They allocate resources Periodic vs. Perpetual Inventory System Periodic Review System: Company either does not know their inventory level or if the supplier will only deliver at a specific interval during their order window. Randomly monitors inventory levels Adv. Low- cost disAdv. Inability to determine exact inventory balances without a physical count, cannot guarantee safety stocks *The cost of the PRS does not typically involve expensive computer equipment or software Perpetual Inventory System Perpetual Inventory System or Continuous Review system An inventory system that continuously monitors of inventory levels, such as using barcode scanners at grocery stores. Adv. Always have a good inventory count Disadv. cost to maintain ABC Analysis Used to determine which inventory items should receive the highest level of control. Done through multiplying the dollar value of each item by its annual usage. Items are ranked by dollar usage, from highest to lowest. Following the Pareto Principle, the first 20% of the items are assigned to Class A, characterized as having close control (very tight control and accurate records) and monitoring through a perpetual inventory system. Class B items comprise the next 30%, and they deserve less attention. (tightly controlled with good records) Class C items are the last 50% of stocked items, characterized by lowest dollar usage and can be monitored loosely through a periodic review system. (simplest controls possible and minimal records - larger safety stocks maintained to avoid stock-outs) Pareto Principle (80/20 rule) The principle that only 20% of all items account for 80% of total dollar usage. While the remaining items frequently account for 20% of the dollar usage *Focusing efforts where pay off is the highest (JURAN)