Part B: Exam on Operations in the TOC Way



Sample Exam Questions for TOCICO Supply Chain Logistics Certification

Operations the TOC Way

1.

A certain product family is subject to a very significant seasonality. The peak season lasts 2 months, during which a certain work center X is a clear CCR. The production lead-time during the off-peak periods is one week, and during the peak periods it is more than 3 weeks. Customers expect the deliveries to be one week all the time. How do you recommend overcoming the problem?

2. A stocked product has a replenishment level of 100 units. However, only 9 units are now in stock, and a production order of 30 units is stuck somewhere in the shop.

1. What should be the quantity and buffer status of the new production order for that product?

2. Should the older production order (of 30 units) be expedited? If you miss any information, state clearly what is missing, then assume what it is and answer the question.

3. In a mixed environment, having both MTO and MTS orders, the foreman of the CCR explains to you how he decides what to do next:

“I get every day the DBR schedule for my work center, but it does not help much because the depended setups are not considered. I have to look for the maximum setup reduction I can get from what I have in the buffer, but I still give precedence to MTO orders that should be shipped within less than a week or to MTS products where the stock is below one day of sales. When setup reduction is not an issue I prefer doing MTO first, unless I’m told of a shortage in a stocked product.”

Buffer management reports are run every morning and distributed to all the work centers. The CCR is not considered a bottleneck, but it is certainly the most loaded work center in the shop.

3.1 Explain in your own words to the foreman how to correct his procedure.

3.2 Why do you think the foreman does not fully obey the buffer management reports?

4. In one of your implementations of DBR you are faced with the following problem:

A foreman of one of the non-constraint department seems offended by the suggestion that his department should be subordinated to the CCR

❖ He claims that it was his own initiative that improved his department that clearly made his department as the best one in the company

❖ Why should the department that failed to improve be considered “the constraint” and be the focus of managerial attention?

How would you approach the problem? What level of resistance is this?

Distribution the TOC Way

Part 1:

Novels And More is a book publisher who specializes in adventure books for young kids. Mira Schloss is the most popular author that made Novels And More so prosperous. Each of Mira’s books sold at least half a million copies.

There is a pattern to the life cycle of a book. All the old books by Mira are still selling about 3,000 copies a month. But, a new book by Mira Schloss is selling about 200,000 copies in the very first day. Total sales of a new book are about 350,000 copies in the first week.

For the less famous writers the pattern is not so volatile. Take the reliable Moses Moss books. A new book usually sells 10,000 copies in the first week and stays at that level for at least 10 weeks. Then sales would go down and continue at much lower pace of 500 copies a month.

Robin Hud, the CEO of Novels And More was thinking about those numbers after she got the returns of the last Mira Schloss book: 241,569 copies had been returned by the distributors because they lost the faith of selling them and they have the contractual right to do so. All in all the distributors still carry about 60,000 copies on the shelf.

It was not just the relative disappointment from Mira’s last book that troubled Robin. She knew that the cost of printing an additional copy is only 5% of the price the distributors pay. So, she was still making good money. But, isn’t this a huge waste?

But, is this the real problem? In order to sell 500K copies you must have at least 700K copies on the shelves. Even then some shops run out, but others end up with too much. Books are too cheap to be transported from one shop to the other.

“And when a shop is short of a book, do I really lose the sale?” Robin asked herself. If the customer was a dedicated reader of Mira or Moses they would have found the book somewhere. The problem lies with first-time readers and non-too-dedicated readers who buy only when they see the book with their own eyes and like the looks of it. Is it possible to reach all the book shops with enough copies to catch the eye of those readers?

Then an idea emerged to Robin. “All my books are organized around writers. Any sale of my books depends whether the customer likes the particular writer. Suppose I could influence the shops, through the distributors, to keep in display at least one full set of all the writer’s books. Each book would appear only once in the set, but the impact to the eye of the customer would be significant. Then, all I need to do when no new book appears is to ensure the completeness of the set at every shop. Is this possible?”

1. In what way can the TOC solution deal with the problem of a new book by Mira Schloss? (10%)

Suppose you are Boston-Books, a large book-chain and distributor within the Boston area. Robin approaches you with her idea. Robin promises to keep stock of ALL the books of her chosen authors, and she will supply you any book from those writers whenever you need it.

2. What are the benefits to you of Robin’s idea? What are the negatives? What necessary assumptions would you like to test? (15%)

3. Suppose you like to test Robin’s idea. Describe the scope of the test. How would it work? What should be Robin’s part in it and how are you going to test it?

4. You have implemented a B2B system in many of the book-shops allowing them to order books easily through your web-site. However, only 25% of them really order daily. Most of the shops still order weekly and their order is not one-to-one based on their actual sales. How does this situation affect the above? How do you contemplate to motivate them to cooperate with your ideas?

Part 2.

Office-X is a large distribution channel of office supplies. It has about 50K different SKUs in stock, coming from about 420 suppliers. At any time, about 1,000 of the SKUs are new, meaning they have been on the shelf for less than a month. Some of the items are highly seasonal, while others do not show any seasonality. Office-X has one central warehouse and 8 regional warehouses from which local deliveries are made. Office-X is enthusiastic to implement the distribution solution.

1. How are you going to set the initial replenishment levels?

i. Take into account the new products

ii. There are no formal records regarding the actual response time of the suppliers

2. The recorded replenishment time of a certain product is two weeks. As it turned out the initial replenishment level was twice what it should be. How long would you expect the dynamic buffer management to reduce the initial level to about the right size?

Remember: it is better to be approximately right than precisely wrong.

3. One product, which is strictly managed according to TOC, is causing almost every month some TDD to be applied to it. That product is also causing considerably high IDD figures. Can you tell whether the product is a fast runner or a slow mover? Explain the relevant cause and effect for that product.

4. The shipping time from a very reliable supplier is 8 weeks. The supplier ships every week according to the actual sales. The sales fluctuate considerably. How much on-hand stock would you expect to see, on average, at the sales points and at the central warehouse?

5. The distributor keeps products P11 and P12, which are identical products, except that different suppliers supply them. The customer does not care about the identity of the supplier. The distributor has to work with both suppliers as each one cannot supply the full amount. How would you manage the two products?

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