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Businesswide Concepts Self-Assessment

Introduction
Course Overview
Welcome to the CPIM Basics of Supply Chain Management Businesswide Concepts SelfAssessment course. This introduction is presented as a series of questions and answers regarding the CPIM program, the course, and further preparation for the certification examinations. The CPIM certification is the recognized standard for individual assessment in the field of production and inventory management. The certification is designed to validate the candidates in-depth knowledge of a variety of subjects specific to the field. APICS has ensured that CPIM exams are consistently reliable and that the highest professional standards are used in developing and administering the program. The program consists of five examinations and the candidate must pass all five examinations to earn the CPIM designation. The examinations that make up the program are: Basics of Supply Chain Management (BSCM) Master Planning of Resources (MPR) Detailed Scheduling and Planning (DSP) Execution and Control of Operations (ECO) Strategic Management of Resources (SMR)

A CPIM Exam Content Manual is published annually by APICS. It is a key resource for anyone preparing for the APICS certification examinations. The manual addresses all five of the examinations by documenting the scope of the module, the content outline, the key terms, and primary and secondary references. The CPIM Exam Content Manual can be ordered directly from APICS. To obtain contact information for APICS, select this link. The APICS Web site is www.apics.org. APICS is located in Alexandria, Virginia, USA, and the telephone numbers are: 1.800.444.2743 and 703.354.8851. The fax number is 1.703.354.8106.

Course Components
This course gives you a chance to review key content points and assess your understanding of the Businesswide Concepts segment of the APICS CPIM Basics of Supply Chain Management tested body of knowledge. It covers basic businesswide concepts, including production environments and financial fundamentals. It also covers three of the more common companywide management approaches and their interrelationships. It is composed of seven subtopics. There is a summary of key learning points and a set of assessment items for each topic. The topics in this course are shown below. Click on each topic to see a brief description. Organization Fundamentals Organization Fundamentals provides a basis for understanding the supply chain and related organizational dynamics. A supply chain includes all activities and processes used to provide a

product or service to the final customer. It also includes the activities and processes to manage the flows of information, funds, and returned goods among the supply chain entities. Operating Environments Operating Environments explores a series of interrelated decisions that the organization must make. The primary market factor that must be considered in the design of the operating environment is the customer delivery expectation. Once it is understood, the organization must determine: How to meet those expectations Which modes of processing to employ How to lay out the production facilities How to plan and control the flow of work through the facility

These interrelated choices define the operating environment for the operations function of the organization. Financial Fundamentals Financial Fundamentals introduces basic elements and categories of financial information and discusses how they are necessary to construct essential financial statements that are used to report the financial health and performance of an organization. It also explores how the financial data is used to analyze performance of the organization and how operations affects the financial performance of the organization. Manufacturing Resource Planning (MRP II) Manufacturing Resource Planning (MPR II) is a method for effective planning and control of all resources in a manufacturing organization. It is an integrated method that facilitates development of consistent plans at multiple levels and across all functions of the organization. MRP II also enables the organization to measure actual performance to those plans. Just-in-Time (JIT) Just-in-Time (JIT) is an operating philosophy that embodies principles of waste reduction and continuous improvement over time. It encompasses the successful execution of all activities from design to delivery. The intent of continuous improvement is to eliminate or minimize non-valueadded activities. Lean production is another initiative that focuses on eliminating waste. The differences and similarities between the two initiatives are explored in this course. Total Quality Management (TQM) Total Quality Management (TQM) is a philosophy that focuses on understanding customer requirements and translating them into products, services, and processes that meet or exceed those requirements. It includes a structured process and set of tools for identifying opportunities for and implementing improvements. Impact of Environment on System Design and Deployment Impact of Environment on System Design and Deployment explores the relationships between Just-in-Time (JIT), Manufacturing Resource Planning (MRP II), and Total Quality Management (TQM). JIT and TQM are sometimes viewed as alternatives to MRP II, but the three are complementary and can be effectively integrated. Concurrently focusing on meeting customer expectations in the most competitive fashion is the focus of MRP II. Simplifying operations using JIT and TQM simplifies MRP II system operation and improves business performance. Successful integration requires understanding all three approaches and how they complement each other.

CPIM Exam Preparation

The tested body of knowledge for each of the examinations is very broad. It is defined by the literature for the field of resource management. Therefore, the teaching and testing cannot be exhaustive. They must be samplings of the broad body of knowledge. This course presents questions that are similar to those on the certification examination. Your performance in the course will help you identify areas where you may want to do additional preparation before taking the certification examination.

Course Scoring
Each question (also referred to as an item) in this course is scored as correct or incorrect. Your score for each topic and your score for the course are maintained and reported to you in the course summary. Your score for this course will be posted to your training plan record, so that you have a record of your scores for the four self-assessment courses for the Basics of Supply Chain Management module. You will be given feedback on why the correct answer is correct and why the other options are not the best choice. You will also be given pointers to the core course that covers the topic being tested and to references that support the testing item. If you find that you need to understand specific terms, you will be able to easily link to terms in the APICS Dictionary.

BSCM Examination
The Basics of Supply Chain Management module introduces the concepts and terminology related to managing the complete flow of material from suppliers to customers. It provides the foundation for the entire program. The Basics of Supply Chain Management module is made up of four major topic areas. The topic areas, and the approximate percentage of questions on the BSCM examination from each area, are shown in the following table:

Topic Area Businesswide Concepts Demand Planning Transforming Demand into Supply Supply

Approximate Weight 24% 17% 35% 27%

Organization Fundamentals
Overview
This topic presents a summary of the key learning points for the Basics of Supply Chain Management Organization Fundamentals course and nine assessment items on that area of the tested body of knowledge. The learning points are grouped around four specific subtopics:

Basic concepts Supply chain entities Flows in the supply chain Organization dynamics

The assessment items give you an opportunity to check your understanding of that area of the tested body of knowledge. You will receive feedback on each item, and your score will be maintained and presented to you at the completion of the course.

Basic Concepts
There has been an evolution to move from a transactional or adversarial relationship with suppliers to cooperative relationships. In the past, organizations would pit one supplier against the other to obtain the lowest price, and treated each transaction as if it were the last. Today, many organizations are establishing mutually beneficial, long-term relationships with key customers and/or suppliers to find ways to eliminate non-value-added activities. The intent is to lower overall costs and create more profit for all, but at the same time, lower the cost to the customer. This cooperation and drive to reduce or eliminate the non-value-added activities led to the development of the supply chain to manage the flow of material through the many entities. The supply chain now comprises cooperative design, planning, execution, control, and monitoring of all activities from the initial raw material through many stages of processing, distribution, and final delivery to the ultimate user. Many different organizations act in concert as if one large organization.

Supply Chain Entities and Flows


There are several types of entities in a supply chain and a single firm may participate in multiple supply chains. The objective of the supply chain is to create net value for the entire supply chain and to build a competitive infrastructure that will leverage the logistics, synchronize the supply and demand, and establish and maintain performance measurements that optimize the supply chain. A critical component of the supply chain is the management of the flow of material and services in one direction through the chain to the customer or end user, as well as the flow of information and funds back through the chain to all members of the chain. There are three basic phases of material flow though the supply chain. Click on the arrow to learn about each.

Organization Dynamics
The culture, objectives, and performance measurements heavily influence the behavior of employees of an organization. They all must be consistent and mutually supportive to lead to the desired behavior. There is a potential for conflict among the objectives of the various functions in the organization. These functional objectives must be balanced.

The management of the supply chain requires a great deal of time and effort. It requires each entity to challenge the current practices to maximize the efficiency and agility of the entire supply chain, not just their entity. This requires constant performance measurement to seek and eliminate non-value-added activities and errors. The benefits are reduced costs, reduced inventory, increased customer satisfaction, increased market share, and greater profit.

Operating Environments
Overview
Every organization is faced with decisions that define the environment in which it operates. This topic presents a summary of the key learning points for the Basics of Supply Chain Management Operating Environments course and nine assessment items on that area of the tested body of knowledge. The learning points are organized around four specific subtopics: Defining the operating environment Satisfying customer demand Manufacturing process choices Facility layout choices

The assessment items give you an opportunity to check your understanding of that area of the tested body of knowledge. You will receive feedback on each item, and your score will be maintained and presented to you at the completion of the course.

Defining the Operating Environment


There are four interrelated decisions an organization makes regarding its products and production facilities that define the environment in which it operates. Click on the arrow to see each of the decisions.

The choices that the organization makes must be aligned with the variety of products it offers and with the production volume for each of them. The choices are also affected by the relationship between the customer-demanded delivery lead-time and the cumulative lead-time. When the organization makes a choice on one of the decisions, the reasonable choices for the others become limited.

Satisfying Customer Demand


The primary considerations for the organization in determining how to meet customer delivery expectations are the customer delivery expectations, the product design stability, and projected demand. Taking these into consideration, the organization can satisfy the customer demand by one of four basic approaches. The choice made on this dimension determines where inventories

will be maintained in the manufacture and distribution of products. The four approaches to meeting customer demand are: Make-to-stock (MTS) Used when the customer is not involved in the design or configuration of the product and expects a short delivery lead-time. This approach requires making products based on a forecast of enditem demand and stocking them in anticipation of customer demand. Assemble-to-order (ATO) Used when the customer configures the product from a predefined set of features and options. This approach requires making some subassemblies based on a forecast of demand and assembling or finishing them to meet specific customer orders. Make-to-order (MTO Used when the specific configuration of a product is not known until the customer order is received. Raw materials may be acquired and stocked and common components may be produced to a plan, but no resources are committed to a specific product configuration until a customer order is received. Engineer-to-order (ETO) Used when the customer is heavily involved in the specification or design of the product. The design of the product begins during the contract negotiations or after the order is received. Typically, production resources are not committed until the design is approved.

Manufacturing Process Choices


The manufacturing process choice determines the method of processing for the work that is to be performed. This choice affects the type of skills and equipment that will be employed and how the production facility will be laid out. The process choices must be aligned with the approach to satisfying customer demand, the facility layout, and the method of planning and controlling work. The manufacturing process choices are project, batch, line, and continuous production. Project This type of process is used to produce large and frequently one-of-a-kind items, where the design of the project is determined after the order is received, and is consistent with the engineerto-order approach to satisfying demand. Batch This type of process is used to produce items of a similar design and may cover a wide range of order volumes. When this type of process is employed, the work flows in a batch or lot can be uniquely identified and tracked. It is consistent with all approaches to satisfying customer demand. Line This type of process is used to produce a narrow range of standard items with very similar designs. The items typically pass through the same sequence of operations. It is most consistent with the make-to-stock approach to meeting customer demand, but it is also used with the assemble-to-order approach. Continuous production This type of process is used to produce a very narrow range of products through a fixed

sequence of operations. The process typically moves the material from the beginning of the process to the end. This type of manufacturing process is very expensive to shut down and restart, so it is typically kept operating 24 hours per day, seven days per week. It is consistent with the make-to-stock approach.

Facility Layout Choices


After the organization has determined the type of process it will use to satisfy customer demand, it must decide on the physical arrangement of the resources within the facility. This choice is called the facility layout choice. The choices are project (also known as fixed-position), functional, product, work cell, and cellular. The facility layout choice must be consistent with the approach to satisfying customer demand, the process choice, and the planning and control of the flow of work. Click on each facility layout choice below for more details. Project This layout is used to produce one-of-a-kind products, and when the product is bulky or difficult to move. The position of the product is fixed and the material, equipment, and people come to the product. This layout is consistent with the engineer-to-order approach and with project manufacturing processes. Functional This layout is used to produce a wide variety of products in low to moderate volumes. Workstations are grouped according to the functions they perform. The flow of work through the facility varies widely. This layout is consistent with all of the approaches to meeting customer demand, but is most often associated with the make-to-order approach. Product This layout is consistent with the make-to-stock approach and is used to produce a narrow variety of products in moderate to high volumes. The workstations are arranged sequentially based on the routing of a single product or a family of products with similar routings. Work cell This layout provides a bridge between the functional and product layout. A work cell is a group of workstations that produces a family of parts having similar routing. An organization with volumes that are too low or product variety that is too wide to support a product layout can implement work cells to gain the benefits of a product layout for a portion of the product. This layout is consistent with all of the approaches to meeting customer demand. Cellular This layout is an extension of the work cell. A key distinction is that the operators are dedicated to the cell in a cellular layout. This layout is most consistent with the make-to-stock and assembleto-order approaches.

Financial Fundamentals
Overview
Since almost everything done in an organization can be expressed in financial terms, it is important to understand how organizations capture, categorize, and report the flow of funds. Most

organizations are required by taxing, securities, and accounting agencies and non-governmental organizations to report financial information. It is also important for managers and owners of an organization to evaluate the financial health and performance of the organization. This topic presents a summary of the key learning points for the Basics of Supply Chain Management Financial Fundamentals course and nine assessment items on that area of the tested body of knowledge. The learning points are organized around four specific subtopics: Classification of financial data Essential statements Analysis of performance Effect of operations on financial performance

The assessment items give you an opportunity to check your understanding of that area of the tested body of knowledge. You will receive feedback on each item, and your score will be maintained and presented to you at the completion of the course.

Classification of Financial Data


An organization takes in funds in the form of revenue from the sale, rental, or lease of goods, and/or as compensation for services rendered. It, in turn, incurs expenses for the goods and services that it uses. The income and expenditures must be captured and categorized. The things of value the organization owns are referred to as assets. The amount the organization owes is referred to as liability. The amount that is left over after the liability is subtracted from the assets represents what is left for the owners of the organization and is referred to as owners equity. This information is the basis for the financial reports and for analyzing the financial performance of the organization. The expenses that an organization incurs can be classified in many ways. A basic breakdown is whether or not the expense was incurred to produce a product or service. Those expenses that are incurred to produce a good or service are classified as cost of goods sold or cost of sales. Those expenses that were not incurred to produce a good or service are classified as general and administrative expenses (G&A). The cost of goods sold can be broken down into four lower-level classifications based on whether the expenditure was for materials, labor, or overhead. Direct costs. Associated with a specific operation or job. Indirect costs. Not directly incurred by a job or operation and are overhead costs. Fixed costs. Relatively stable over a range of production volume. Variable costs. Vary directly with a change of one unit in the production volume.

Essential Financial Statements


There are three essential financial statements that provide the basic information about the financial performance and status of the organization. Those statements are the income statement, balance sheet, and funds flow statement.

Income statement Displays the revenue, expenses, and profit or loss for the organization for a period of time. Balance sheet Provides a picture of the value of the assets an organization owns, the liability that it owes, and the owners equity at a point in time. Funds flow statement Shows the stream of cash and its timing into and out of the organization.

Financial Analysis
Ratios that will help evaluate the financial health and performance of the organization over time and in comparison with other organizations can be derived from the essential financial statements. Many ratios can be derived from the financial statements. There are three commonly used measures of financial return generated by an organization. Return on Investment A measure of the return that the investment in the business is providing. It is usually expressed as a percentage of earnings produced by an asset to the amount invested in the asset. Return on investment can be used to evaluate a potential investment and as a measure of the ongoing performance of an organization. Return on Assets A variation of the return-on-investment ratio that measures the return generated by all of the assets of an organization. Return on Owners Equity A measure of the return generated by the investment of the owners or stockholders of the organization. No other assets are considered when calculating this ratio. Operations management has a significant effect on the financial performance of the organization. Two measurements that evaluate the inventory investments are the inventory turnover ratio and the days of supply. Both measure the velocity at which inventory moves through the organization. The inventory turnover ratio represents the number of times an organization sells its inventory in a year. The days of supply is a measure of the number of days the organization can operate with its on-hand inventory.

MRP II
Overview
Manufacturing Resource Planning (MRPII) is a method for the effective planning of all resources of a manufacturing organization. It is an architecture that includes manual processes and procedures, as well as computerized processes. This topic presents a summary of the key learning points for the Basics of Supply Chain Management Manufacturing Resource Planning (MRP II) course and nine assessment items on that area of the tested body of knowledge.

The learning points are grouped around these subtopics: Characteristics of MRP II MRP II planning hierarchy

The assessment items give you an opportunity to check your understanding of that area of the tested body of knowledge. You will receive feedback on each item, and your score will be maintained and presented to you at the completion of the course.

MRP II Characteristics
There are three important characteristics of the MRP II architecture that are summarized below. MRP II is made up of an integrated series of priority and capacity planning processes. These processes balance the demand for the organizations products with the resources that are available to the organization. These plans are hierarchical from the top down. At each level, the priority plan is tested for feasibility before being passed to the next level and finally for execution. The outputs from these processes are integrated with financial reports such as the business plan, purchasing commitments, shipping budgets, and inventory projections. MRP II is a closed-loop architecture. The plans are revised on a regular basis by deleting the just-completed period and adding a period to the end of the planning horizon. The plans are broken down into more detail at each level. If a significant variation from the higher-level plan occurs, the higher-level planning processes are informed of it so that the variation can be incorporated in the next planning cycle. Similarly, the planning processes are notified when a significant variation occurs in the execution of the plans so that the variation can be incorporated in the next planning cycle. An effective MRP II system allows what-if analysis, simulation, and modeling. This enables management to experiment and see the effects of decision-making before taking action. MPR II systems have been extended to incorporate both functional and technical extensions to model the whole organization in a system called Enterprise Resources Planning (ERP).

MRP II Planning Hierarchy


The MRP II architecture is hierarchical. The plans are developed from the top down and the plans approved at one level establish the boundaries for the lower-level plans. There are six levels in the hierarchy as described

Just-in-Time
Overview

Just-in-Time (JIT) is an operating philosophy and set of tools that focus on eliminating all forms of waste in all processes through continuous improvement. Just-in-Time is based on the understanding of customer requirements and their definition of value and meeting those requirements in an efficient and effective manner. It encompasses all activities required to produce a final product. JIT is often thought of as applying to operations with high production volumes of a narrow range of products, but it can be applied to all manufacturing and many service environments. Just-in-Time philosophy has evolved into lean production, but the objectives and principles of Just-in-Time still apply. This topic presents a summary of the key learning points for the Basics of Supply Chain Management Just-In-Time (JIT) course and eight assessment items on that area of the tested body of knowledge. The learning points are grouped around three specific subtopics: JIT philosophy JIT principles JIT tools and techniques

The assessment items give you an opportunity to check your understanding of that area of the tested body of knowledge. You will receive feedback on each item, and your score will be maintained and presented to you at the completion of the course.

JIT Philosophy
As global competition has increased, organizations have had to do two things to remain competitive. First, they have had to become more efficient and effective in the use of all resources. Second, they have had to become more flexible in their ability to respond to changes in customer requirements, technologies, and market conditions. JIT supports both of these forms of improvement. Click the arrow below to see the five interrelated primary elements of the JIT approach:

JIT Principles
The five elements of JIT are combined with eight principles to define the environment. Employee involvement The cooperation and involvement of everyone in the organization is required for effective and efficient creation and maintenance of a Just-in-Time environment. Process flexibility If the organization is to be able to respond to changes in customer demand, technology, and market conditions, then the people and equipment must be flexible. In addition, the organization must be able to change from the production of one item to the production of another item quickly. Uninterrupted flow of work Waste is created either when any resource is committed to outputs that are not wanted by the customer or when resources sit waiting. Uninterrupted flow of work should eliminate the waste of material, people, and equipment waiting.

Flow manufacturing This emphasizes that the manufacturing operations should be organized so that the work flows from the initial operation to the finished product with few or no interruptions or stocks of inventory. Flow manufacturing and uninterrupted flow of work depend on all items being as close to defectfree as possible. Quality at the source This states that each process should be made to produce defect-free output instead of inspecting the output and removing the defective units. Total productive maintenance For a process to produce defect-free output and uninterrupted flow of work, the equipment must be in excellent condition and the operators must be responsible for it. Continuous improvement In an effective JIT environment, better is never good enough. There is an ongoing cycle of understanding, improving, and stabilizing processes. Collaboration with customers and suppliers The final principle states that to improve its processes, an organization must work with key customers and suppliers.

JIT Tools and Techniques


A basic tool for implementing JIT is to pull production through the system based on internal and external demands. The methods used to signal that demand are referred to as pull signals and can take many forms. A term that is commonly used for all forms of pull signals is kanban. A relatively level rate of production and uniform capacity across the workstations are two prerequisites for successful use of a pull production system. This means that a limited range of items can be produced and that the changeover time from one item to the next must be short. Material stored near the point where it is to be used also promotes flow manufacturing and uninterrupted flow of work. This point-of-use storage reduces the material movement and transaction reporting. The material usage can be calculated by backflushing the quantity produced by the bill of material quantities.

Total Quality Management


Overview
Total quality management (TQM) is a philosophy that focuses on understanding the customer requirements and delivering processes, products, and services that meet or exceed those requirements. It includes a structured process and a set of tools. This topic presents a summary of the key learning points for the Basics of Supply Chain Management Total Quality Management course and eight assessment items on that area of the tested body of knowledge. The learning points are grouped around three specific subtopics: Quality concepts Principles of TQM

Commonly used quality tools

The assessment items give you an opportunity to check your understanding of that area of the tested body of knowledge. You will receive feedback on each item, and your score will be maintained and presented to you at the completion of the course.

Quality Concepts
There are several perspectives through which quality can be defined. It is important that each perspective is understood and that all participants are referring to the same perspective when quality is being discussed. There are the two components of quality. Quality of design. Measures the customers satisfaction with the characteristics and features of the product and/or service. Quality conformance. Measures an operations ability to deliver products and services that are defect-free.

The total cost of quality can be broken down into three categories. Click on the arrow to learn about each category.

Principles of TQM
Total quality management is a management approach to long-term success through understanding customer requirements and delivering products and services that meet or exceed those requirements. It is based on the involvement of all members of the organization improving all processes, all goods and services, and the culture of the organization. The four key principles of total quality management are to: Involve every employee in the organization in the processes Empower employees to take actions to prevent production of defective goods and services Ensure quality at the source rather than using inspection to detect defects Continually improve processes

Commonly Used Quality Tools


Many tools can be used to understand specific situations and improve quality. A subset of these tools are so commonly used that they are referred to as the seven tools of quality or the seven statistical tools of quality.

Tool

Approximate Weight

Check sheet Flow chart Scatter diagram Histogram Pareto chart Cause-and-effect diagram Control chart

A data-recording device that is typically defined by the individuals who are going to use it to capture data A tool for documenting how the work gets done in a process A graphical tool to analyze the relationship between two variables A form of bar chart that is used to represent a frequency distribution A graphical tool that is used for ranking items from the most significant to the least significant A tool for illustrating main causes and sub-causes that lead to an effect or symptom A graphical illustration of the performance of a process compared to predetermined control limits over time The control chart is an output of statistical process control, which refers to the application of statistical techniques to analyze, monitor, and adjust a process. A process is said to be in statistical control when only random variation exists.

Impact of Environment
Just-in-time (JIT), manufacturing resource planning (MRP II), and total quality management (TQM) are frequently viewed as inconsistent or conflicting initiatives. This perspective is incorrect. The three can be implemented concurrently and integrated to improve the performance of the organization. This topic presents a summary of the key learning points for the Basics of Supply Chain Management Impact of Environment on System Design and Deployment course and eight assessment items on that area of the tested body of knowledge. The learning points are grouped around three specific subtopics: Relationships among JIT, MRP II, and TQM Effect of JIT on MRP II Effect of TQM on MRP II

The assessment items give you an opportunity to check your understanding of that area of the tested body of knowledge. You will receive feedback on each item, and your score will be maintained and presented to you at the completion of the course.

Relationships among JIT, MRP II, and TQM


Effective and efficient planning and execution are necessary for success in all types of operations. MRP II provides an architecture for effective operations planning and control. It was initially designed to support push production for execution of the plans. Just-in-Time is a philosophy of manufacturing that includes pull production for short-range planning and control. Pull production can be integrated into the MRP II architecture. Total quality management is an approach to improving quality. Just-in-time and total quality management are like two sides of a coin. Both are focused on meeting or exceeding customer requirements by involving all employees in improving all processes. TQM tools can be used to identify opportunities for improvement and JIT methods can be used to define and implement the process improvements. By reducing variability and improving the flow of material, JIT and TQM can simplify the MRP II planning processes.

Effect of JIT on MRP II


When JIT and MRP II are implemented together and integrated, the JIT efforts to eliminate waste by making work flow continuous simplifies the planning and control environment and requires some changes to the typical MRP II applications. The long-range planning processes are not likely to change. Six elements of a JIT implementation can have a significant effect on the MRP II implementation. Reduction in lead-times Allows the planning horizon at each level to be reduced. This would allow shortening of the forecasting horizon and reducing the amount of inventory held to compensate for variation in supply and demand. Schedule driven production Simplifies the master scheduling process and the capacity planning calculation because they only have to be revised when there are schedule changes. Reduction in numbers of stocking levels Reduces the number of inventory transactions that must be processed, the storage space and personnel required, and the detailed planning processes. Point-of-use storage Further reduces the number of inventory transactions and the amount of stockkeeping resources required. However, it requires frequent reconciliation of the physical and book balances of the point-of-use inventory. Pull signals Eliminates the use of manufacturing orders and the queues of work at most workstations. This, in turn, greatly simplifies the prioritization and work selection procedures. Backflushing production Greatly reduces the number of inventory transactions and simplifies production reporting.

Effect of TQM on MRP II

The focus on producing defect-free goods and services can simplify the planning processes. The time and effort spent planning and scheduling resources that would have produced defective goods and reworking those goods can be reduced or eliminated. The use of certified suppliers can eliminate the need to inspect goods from those suppliers and reduce the planning lead-time for those goods. The reduced variability in the lead-time and quality level for those goods will simplify the planning and follow-up efforts.