F5 Homework

Sob sob! Homework is so difficult! I understand the lecture but I don't know how to do the question...... What am I going to do?! The question knows me but it is absolutely a stranger to me! Question marks flying all over my head now....... ????????

This question has four parts. I have done two of them. The other two...... Hmmm.... Foreign language.... Why are the questions in ACCA so long!!! Even before I can start doing it, I feel like sleeping already...... Read and read and read.... -_- zzz

Here's the two parts that I've done:

(a) Explain briefly what Optimized Production Technology and Theory of Constraints involve, what they aim to achieve and the circumstances in which they might be relevant.

Both OPT and TOC involves the approach to continuous improvement. Their main objective is to meet customers’ satisfaction effectively, efficiently and economically.

OPT concentrates more on maximizing its production level and at the same time respond only to the demand of its customers – having as little buffer stocks as possible at any time. OPT is concerned for quality and continual improvements of its products. Total Quality Management and the Just-In-Time System are tools to optimize the production process – ideally zero defects. For example Samsung Electronics is very concern about the quality of their products which impacts heavily on its reputation and brand. Therefore there is a need for them to manufacture only to satisfy customer orders and reduce overall quality cost over time through prevention and detection.

TOC seeks to identify a company's bottlenecks and exploit them so that throughput is maximized and inventories and operating costs are minimized. Its main objective is to increase return and reduce cost. TOC has a short-term focus – throughput margin analysis based on materials and material related costs. Its major use is for the optimization of the production flow and for short-term product mix. An example will be a firm that has three machines, whereby one of them is old and unreliable. And this machine’s output turnout to be the lowest amongst the three machines. This machine will be the bottleneck or constraint of the firm. Therefore TOC will be used to strengthen this weakest link and either change this machine or send it for repair and maintenance, hence increasing its output. This process will continue as to achieve the maximum throughput contribution with the lowest related costs.

(b) Outline the three key measures used in the theory of constraints and describe the four step approach that can be taken in the management of bottleneck resources.

The three key measures used in the Theory of Constraints are namely throughput, inventory and operating expense.

Throughput is defined as the rate at which the system generates money through sales, not through production. Goods are not considered an asset until sold. Inventory is defined as the money invested in goods that the firm intends to sell or material that the firm intends to convert into sellable items. The concept of value-added and overhead are not considered. Operating expense includes all the money the firm spends converting inventory into throughput.

The objective of the firm therefore is to increase throughput and decrease inventory and operating expense in such a way to increase profit. Anything that prevents this objective to be accomplished is a constraint.

There are four steps that the management can take to ensure that the constraint is strengthened.
· Identify the constraint
· Identify the throughput which the constraint is able to withstand
· Strengthen the constraint
· Keep reassuring which link is the constraint

Tough paper I would say! F5 = SCARY = TERRIFYING = FREAKING

Ok.. You've seen my answers.. As you can see.. It's bad yea! For (a), I don't know if I am answering the question and for (b), I don't know how to explain the four step approach - only know what are the four steps.

3Ps to tackle F5! Way to go!! ~~~