Assemble to Order Strategy Quiz and Flashcards: Chapter 5

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Questions and Answers

What is a key performance measure for Make to Stock (MTS) strategy?

Distribution network efficiency

Inventory turnover ratio

On-shelf availability (OSA) (correct)

Order lead time

How does Assemble to Order (ATO) strategy help reduce risk?

By increasing the number of finished product specifications

By increasing the number of distribution levels

By holding infinite inventories of finished products

By shifting the decoupling point upstream (correct)

What is a challenge faced by firms aiming for 100% On-shelf availability (OSA)?

Limited production capacity

Risk of stockouts

High distribution costs

Infinite inventories (correct)

Which companies mentioned in the text use Assemble to Order (ATO) as their basic strategies?

Dell and BMW Signup and view all the answers

What is the purpose of shifting the decoupling point upstream in logistics strategy?

To reduce the risk of holding unsold inventory Signup and view all the answers

What could be a consequence of aiming for 100% On-shelf availability (OSA) according to the text?

High distribution network costs Signup and view all the answers

What is the strategy called when the final 'make' processes such as assembly and test are completed within the customer-required D-time?

Assemble to order (ATO) Signup and view all the answers

What is the term used to describe the vertical broken line that separates D-time from P–D time in Figure 5.3?

Customer order decoupling point (CODP) Signup and view all the answers

What is the significance of the customer order decoupling point (CODP) in terms of planning and controlling materials?

It separates the processes carried out speculatively from those carried out to known customer orders. Signup and view all the answers

Which of the following scenarios is considered most beneficial when P-time is greater than D-time?

The firm can use time-based approaches to reduce the time the customer waits for delivery. Signup and view all the answers

Which of the following is a potential concern when P-time is less than D-time?

The firm may not be able to respond quickly enough to changes in customer demand. Signup and view all the answers

What is the primary goal of using time-based approaches to reduce the time the customer waits for delivery of an industrial product?

To bring the order fulfillment lead time closer to the customer-required D-time Signup and view all the answers

What is the primary purpose of the computerized estimating program used in the JIT system?

To calculate the tender price based on material, labor, and overhead costs Signup and view all the answers

What is the main exception to the use of standard drawings and instructions in the JIT system?

The fabricated cubicle that houses the packaged substations Signup and view all the answers

What is the purpose of the simple CAD/CAM system mentioned in the text?

To enable the design and associated manufacturing instructions to be completed quickly Signup and view all the answers

How are the presentations of the panels in the JIT system separately worked on and designed?

Through the use of the simple CAD/CAM system Signup and view all the answers

How are the activity durations for each manufacturing process determined in the JIT system?

They are picked up from the works order Signup and view all the answers

What is the purpose of the master production scheduling (MPS) system in the JIT system?

To manage the activity durations for each manufacturing process Signup and view all the answers

What strategy involves moving the CODP to product design to reduce speculative processes?

Make to order (MTO) Signup and view all the answers

In the Wiltshire Distribution Transformers case study, what strategy did the focal firm move from?

Engineer to order (ETO) Signup and view all the answers

What is a likely consequence of making to order when D-time is shorter than P-time?

Customer selecting alternatives Signup and view all the answers

Which strategy can dissatisfy customers when competitors can deliver within the customer's D-time?

Make to order (MTO) Signup and view all the answers

What is the likely long-term action a customer might take if they find themselves needing an alternative due to P-time exceeding D-time?

Developing alternative suppliers Signup and view all the answers

In coping with P-time exceeding D-time, what strategy might a company adopt to forecast demand and supply?

Forecast demand and supply from stock (MTS) Signup and view all the answers

What is the primary advantage of reducing the Economic Order Quantity (EOQ) towards the Just-In-Time (JIT) ideal?

It simplifies the ordering process through paperless systems and regular pick-up routes Signup and view all the answers

Which of the following statements is true regarding the Economic Order Quantity (EOQ) model?

It is suitable for ordering products with independent demand, such as automotive spare parts and office supplies Signup and view all the answers

If demand goes up rapidly, how does an Economic Order Quantity (EOQ) system typically respond?

It tends to make replenishments that lag the demand trend Signup and view all the answers

What is the primary purpose of using periodic order quantity and target stock levels instead of the Economic Order Quantity (EOQ) model?

To overcome the deficiencies of EOQ models in handling fluctuating demand Signup and view all the answers

Which of the following statements is true regarding the Economic Order Quantity (EOQ)?

Both a) and b) are true Signup and view all the answers

In the context of retailing, how can economies be achieved similar to reducing the Economic Order Quantity (EOQ) towards the Just-In-Time (JIT) ideal?

By using Point-of-Sale (POS) systems and centralized ordering instead of store-based ordering Signup and view all the answers

Study Notes

Timeliness in Logistics Pipeline

Two basic strategies for managing timeliness in the logistics pipeline are Make to Stock (MTS) and Make to Order (MTO)
Assemble to Order (ATO) is a strategy in between MTS and MTO

Make to Stock (MTS)

Key task is to offer products for customers to buy from available inventory
Customer service is determined by availability, measured by on-shelf availability (OSA)
Achieving 100% OSA would require infinite inventories, so a compromise of around 98.5% OSA is targeted
MTS firms need to plan inventory availability through a distribution network, involving multiple levels (regional, national, and local)

Assemble to Order (ATO)

Shifting the decoupling point (CODP) upstream reduces risk of holding unsold finished products and missing sales opportunities
ATO strategy is used by companies like Dell and BMW, where final assembly and testing are completed within the customer-required D-time
Allows for customization and rapid delivery, e.g., BMW 3-series with around a million finished vehicle specifications

Customer Order Decoupling Point (CODP)

Separates D-time from P-D time in the logistics pipeline
Downstream from the CODP, processes are carried out for known customer orders, while upstream processes are speculative
Importance of CODP in planning and controlling materials will be discussed in Chapter 6

Case Study: Wiltshire Distribution Transformers

Implemented a Just-In-Time (JIT) system to reduce order fulfillment lead time
Features of the new system include:
- Engineer enters design details into a computerized estimating program
- Selected options are added from a list of 700 possibilities
- Tender price is calculated, and customer delivery date is agreed upon
- Works order calls up standard drawings and instructions
- CAD/CAM system enables quick design and manufacturing instructions
- Output includes CNC tapes for fabrication and set-up schedules

Make to Order (MTO)

CODP is moved to product design, reducing speculative processes further
Wiltshire Distribution Transformers moved from engineered to order (ETO) to MTO by developing standard modular designs

Strategies for P-time > D-time

Options include attempting to make to order, forecasting demand and supplying from stock (MTS), or developing alternative strategies
Making to order in these circumstances may dissatisfy customers, leading to loss of business

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Test your knowledge on the assemble to order (ATO) strategy which involves completing final 'make' processes like assembly and test within the customer's required D-time. Explore how companies like Dell use this strategy to quickly supply customized products.

Chapter 5: Assemble to Order Strategy Quiz

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