Operations Management Final
What will the change in the value of cash-to-cash cycle if ARd is reduced by 4 days and Id is increased by 3 days while all other things remain the same?
Decrease by 1 day
Which of the following industry types will not benefit greatly from the application of MRP?
Fabricate-to-order
Fixed-time-period inventory models are "event triggered".
False
A job has 5 days of processing time left to do before completion, and today is the 10th day of the month. If the job is due on the 14th day of the month, what is its critical ratio?
0.8 CR (critical ratio) is calculated as the difference between the due date and the current date divided by the number of work days remaining. Orders with the smallest CR are run first. (14 10)/5 = 0.8.
A job has 10 days of processing time left to do before completion, and today is the 5th day of the month. If the job is due on the 15th day of the month, what is its critical ratio?
1 CR (critical ratio) is calculated as the difference between the due date and the current date divided by the number of work days remaining. Orders with the smallest CR are run first. (15 5)/10 = 1.0.
Assume there are five jobs (i.e., A, B, C, D, and E) that need to be sequenced in a production schedule. The remaining operating time necessary for completion of job A is 4 days (i.e., job A will take 4 more days to complete), B will take 7 days, C will take 8 days, D will take 2 days, and E will take 5 days. All jobs are available now and the time now is 0. Using SOT rule sequence the jobs and find the schedule(single machine scheduling problem). What is the completion time of job B as per your schedule?
18
Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. The airline knows from past history that an average of 29 customers (with a standard deviation of 18) cancel their reservation or do not show for the flight. Revenue from a ticket on the flight is $120. If the flight is overbooked, the airline has a policy of getting the customer on the next available flight and giving the person a free round-trip ticket on a future flight. The cost of this free round-trip ticket averages $238. Super Discount considers the cost of flying the plane from New York to Los Angeles a sunk cost. By how many seats should Super Discount overbook the flight?
21
Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has estimated the annual demand for this model at 1,700 units. His cost to carry one unit is $65 per year per unit, and he has estimated that each order costs $30 to place. Using the EOQ model, how many should Ray order each time?
40 Units
The four sub-functions: procurement, manufacturing, sales and distribution in the manufacturing operating cycle. Chhose the most appropriate choice which describes the goal of these sub-functions.
A and C only The manufacturing operating cycle has the goal of approaching the management of the firm with a more holistic approach. Each function will have its own objective as described in A and C. B is not a separate objective. See Exhibit 17.3 and the write-up immediately preceding it.
What is an example of an issue that might be addressed by supply chain event management?
A customer complains that a product arrived damages
Transaction processing is real-time means (choose the most appropriate answer)
A, B and C only. A. A customer could know the status of his or her balance with the firm as soon as he/she mails the check. B. An inventory receipt will show up as soon as it is received, but it could be in the pending approval category. C. A production batch completion will be transmitted to all appropriate tables as soon as it is entered. Real-time processing means that as soon as the transaction is entered into the system, the effect of items such as inventory status, order status, and accounts receivable is known to all users of the system. This leads to multiple benefits: there is no delay in the processing of the transaction; the amount of detail available in the system is extremely rich; and it allows for immediate analysis, which can be valuable in making improvements. All of these benefits make the system more responsive. However if a check is mailed, it will not be processed until it is received and deposited in the bank and entered into the system. So E is the answer.
What information is necessary to calculate the cash-to-cash cycle time?
Accounts payable, cost of sales, accounts receivable, inventory Cash-to-cash cycle time is a measure of cash flow and takes many metrics into consideration, including accounts payable, inventory, cost of sales, sales, and accounts receivable. The actual formula is Average days of accounts receivable + Average days of inventory Average days of account payable = Cash-to-cash cycle time.
What is an important difference between capacity planning in services and capacity planning in manufacturing operations?
All of these Demand volatility Utilization affects service Time Location Although capacity planning in services is subject to many of the same issues as manufacturing capacity planning, and facility sizing can be done in much the same way, there are several important differences. Service capacity is more time and location dependent, it is subject to more volatile demand fluctuations, and utilization directly affects service quality.
Assume you are sequencing jobs using Johnson's rule. A particular job requires 7 hours to assemble and then is followed by 8 hours in the painting department. Which of the following is where you would schedule this job?
As early as possible in the unfilled job sequence. Johnson's rule states: 1. List the operation time for each job on both machines. 2. Select the shortest operation time. 3. If the shortest time is for the first machine, do the job first; if it is for the second machine, do the job last. In the case of a tie, do the job on the first machine. 4. Repeat Steps 2 and 3 for each remaining job until the schedule is complete. Because the shortest operation time is on the first process, do the job as early in the schedule as possible.
Assume you are sequencing jobs using Johnson's rule. A particular job requires 3 hours to assemble and then is followed by 2 hours in the painting department. Which of the following is where you would schedule this job?
As late as possible in the unfilled job sequence. Johnson's rule states: 1. List the operation time for each job on both machines. 2. Select the shortest operation time. 3. If the shortest time is for the first machine, do the job first; if it is for the second machine, do the job last. In the case of a tie, do the job on the first machine. 4. Repeat Steps 2 and 3 for each remaining job until the schedule is complete. Because the shortest operation time is on the second process, do the job as late in the schedule as possible.
"A measure that is used to determine how many times the same asset can be used to generate revenue and profit" is the definition of which of the following?
Asset turns There are numerous supply chain matrices that can assist in measuring the performance of the supply chain. Asset turns is just one measure that can be useful in this capacity. Other related areas of interest include delivery performance, fill rate, lead time, supply of inventory, and cash-to-cash cycle time.
Which of the following is an input file necessary to run an MRP system?
Bill of materials (BOM) file
According to the theory of constraints, which of the following is a financial measurement that can be used to measure the firm's ability to make money?
Cash flow We have three measures of the firm's ability to make money: 1. Net profit—an absolute measurement in dollars. 2. Return on investment—a relative measure based on investment. 3. Cash flow—a survival measurement.
What industries find CRP most useful?
Consumer product and retail industries CRP stands for "collaborative replenishment planning" and is particularly useful in the consumer product and retail industries. These applications allow manufacturers to collaborate with their strategic retail customers to increase revenue, improve service, and lower inventories levels and costs.
Which of the following is one of the major functions of shop-floor control?
Conveying shop-order status information to the office
Which of the following is not a benefit of running large batches in a manufacturing setting?
Create larger inventories Although running large batches does create larger inventories, overall this cannot be seen as a benefit. For sales, larger inventories appear on the surface to be desirable, but this is not true because a one-year supply of product A is of no help when product B is needed. The advantages of holding extra inventory do not tend to balance out the disadvantages.
Assume there are five jobs (i.e., A, B, C, D, and E) that need to be sequenced in a production schedule. The remaining operating time necessary for completion of job A is 4 days (i.e., job A will take 4 more days to complete), B will take 7 days, C will take 8 days, D will take 2 days, and E will take 5 days. Which job should be scheduled first if you use the SOT priority rule for job sequencing?
D SOT (shortest operating time) says to run the job with the shortest completion time first. Job D at two days has the shortest operating time remaining.
Compared with a service operation, a manufacturing operation's capacity is which of the following?
Demand can be smoothed by inventory policies Service capacity is more time-and location-dependent (than manufacturing capacity); it is subject to more volatile demand fluctuations, and utilization directly affects service quality. Also, unlike goods, services cannot be stored for later use.
Which of the following is one of Dr. Eli Goldratt's rules of production scheduling for optimized production technology?
Do not balance capacity, balance the flow. Goldratt's rules of production scheduling (Exhibit 23.1): 1. Do not balance capacity—balance the flow. 2. The level of utilization of a non-bottleneck resource is determined not by its own potential but by some other constraint in the system. 3. Utilization and activation of a resource are not the same. 4. An hour lost at a bottleneck is an hour lost for the entire system. 5. An hour saved at a non-bottleneck is a mirage. 6. Bottlenecks govern both throughput and inventory in the system. 7. The transfer batch may not and many times should not be equal to the process batch. 8. A process batch should be variable both along its route and in time. 9. Priorities can be set only by examining the system's constraints. Lead time is a derivative of the schedule.
Which of the following is a fixed-order-quantity inventory model?
Economic order quantity model There are two general types of multi-period inventory systems: fixed-order-quantity models (also called the economic order quantity, EOQ, and Q-model) and fixed-time-period models (also referred to variously as the periodic system, periodic review system, fixed order interval system, and P-model).
What is the common name for a computer system that integrates application programs in accounting, sales, manufacturing, and other functions in a firm by way of a shared database?
Enterprise Resource Planning (ERP)
How often are major software changes typically made to ERP?
Every 3 to 5 years Although minor "hot" topic features are added to ERP frequently, major software revisions that involve changes to the structure of the database, changes to the network, and computer hardware technologies are made every 3 to 5 years.
A capacity cushion is the amount of capacity less than expected demand.
False
A production facility develops virtuosity and works best when it focused on a widely varied set of production objectives.
False
According to the theory of constraints, a bottleneck is any resource whose capacity is greater than the demand placed on it.
False
An output of MRP is a bill of materials (BOM) file.
False
Asset turns is a measure of cash flow.
False
ERP systems can be inefficient at handling the numerous transactions that document the activities of a company.
False
In a price-break model of lot sizing, the lowest cost quantity is always feasible.
False
In a process sequence where a product flows from process A to process B, process B is called the contingent process.
False
Low rates of capacity utilization in service organizations are never appropriate.
False
Microsoft Dynamics is the largest ERP vendor.
False
OPT stands for optimal purchasing technique.
False
Quality management software supports the activities associated with planning and performing repairs and preventive maintenance.
False
Scheduling hourly work times using the "first-hour principle" ensures that no excess labor will be used during the work shift.
False
Shortage costs are precise and easy to measure.
False
The "dollar days" inventory measurement results from a complex algorithm used to compute individual units of inventory and their respective ordering and holding costs.
False
The standard fixed-time-period model assumes that inventory is never counted but determined by EOQ measures
False
Under the STR/OP sequencing priority rule, orders with the jobs with the longest STR/OP are run first.
False
According to the theory of constraints, a bottleneck is any resource whose capacity is greater than the demand placed on it.
False A bottleneck is defined as any resource whose capacity is less than the demand placed upon it.
According to the theory of constraints, a non-bottleneck is any resource where capacity is less than the demand placed on it.
False A non-bottleneck is any resource whose capacity is greater than the demand placed on it.
Accounts receivable is the amount owed the firm by its suppliers.
False Accounts receivable is the amount owed the firm by its customers. The accounts receivable amount will depend on the firm's credit policy and its ability to deliver product in a timely manner.
One of the weaknesses of SAP is the inability to link with most mobile devices.
False As part of SAP, there are mobile supply chain management applications that help people plan, execute, and monitor activity using mobile and remote devices.
A system that "backward schedules" is designed to determine and report the earliest date an order can be completed.
False Backward scheduling starts from some date in the future (possibly a due date) and schedules the required operations in reverse sequence. The backward schedule tells when an order must be started in order to be done by a specific date.
In the functional silo approach, the purchasing function typically considers quality a goal.
False Because purchasing focuses on cost as its primary driver, quality is more of a constraint than a goal.
Data warehouses are useful mechanisms to support daily routine tasks.
False Data warehouses help to facilitate queries not built into standard ERP system software. They tend to support higher-level decision support applications.
The economic order quantity (EOQ) lot-sizing technique produces or acquires exactly the amount of product that is needed each time period with none carried over into future periods.
False EOQ assumes that parts are used continuously during the period. The lot sizes generated by EOQ do not always cover the entire number of periods. For example, the EOQ might provide the requirements for 4.6 periods (when another EOQ would be needed).
Because the scope of ERP packages is very large, it is rarely necessary to add additional software.
False Even though the scope of applications included in standard ERP packages is very large, additional software will usually be required because of the unique characteristics of each company.
When moving product, it is optimal to focus on the lowest price quote of each individual distribution stage.
False Focusing on the lowest quote for moving a product from one stage to the next may inadvertently result in a higher total cost of moving materials into and out of the overall firm.
ERP systems can be inefficient at handling the numerous transactions that document the activities of a company.
False In fact, the strength of ERP is its ability to very efficiently handle the many transactions that document the diverse activities of a company.
Only manufacturing affects the inventory account.
False Inventory account gives the value of the entire inventory within the company and is affected by all three functional areas: purchasing, manufacturing, and sales and distribution.
Johnson's rule, a priority rule used in sequencing production jobs, is used only in production situations where we are dealing with one machine or one stage of production activity.
False Johnson's rule is used when there are n jobs to schedule on two machines.
Low-level coding in MRP indicates the exact status of each item managed by the system in "real time."
False Low-level coding (is where) each item is placed at the lowest level at which it appears in the structure hierarchy.
In a net change MRP program, a change in one item will result in a completely new inventory plan and schedule for every item in the master production schedule.
False Net change systems are ''activity'' driven, and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in ''real time'' the exact status of each item managed by the system.
The LCFS and Johnson's priority rules are basically the same except LCFS uses due dates as a major determiner of job sequence.
False The aim of Johnson's rule is to minimize the flow time from the beginning of the first job until the finish of the last. Johnson's rule consists of the following steps: 1. List the operation time for each job on both machines. 2. Select the shortest operation time. 3. If the shortest time is for the first machine, do the job first; if it is for the second machine, do the job last. In the case of a tie, do the job on the first machine. 4. Repeat Steps 2 and 3 for each remaining job until the schedule is complete. Johnson's rule makes no reference to when a job arrives at the work center. Also, LCFS makes no reference to due dates.
Fixed-time-period inventory models are "event triggered."
False The basic distinction is that fixed-order-quantity models are "event triggered" and fixed-time-period models are "time triggered."
Scheduling hourly work times using the "first-hour principle" ensures that no excess labor will be used during the work shift.
False The first-hour rule is explained by example in the text. Note the following sentence in the exposition of that example: ''Note the overstaffing between 2 p.m. and 6 p.m.''
The fixed-order-quantity inventory model favors less expensive items because average inventory is lower.
False The fixed-order-quantity model favors more expensive items because average inventory is lower.
The deeper one looks into the product creation sequence, the more the requirements of dependent demand items tend to smooth out and become even over time.
False The requirements of dependent demand items tend to become more and more lumpy as we go farther down into the product creation sequence.
In a process sequence where a product flows from process A to process B, process B is called the contingent process.
False The term ''dependent events'' refers to a process sequence. If a process flows from A to B to C to D, and each process must be completed before passing on to the next step, then B, C, and D are dependent events. The ability to do the next process is dependent on the preceding one.
According to the theory of constraints, throughput is the rate at which product is passed through the manufacturing system.
False Throughput is the rate at which money is generated by the system through sales.
The effects of statistical variations in processing times in a dependent sequence will eventually cancel themselves out due to the law of averages.
False When statistical fluctuations occur in a dependent sequence without any inventory between workstations, there is no opportunity to achieve the average output. When one process takes longer than the average, the next process cannot make up the time.
Microsoft Dynamics is the largest ERP vendor.
False The largest ERP vendor is SAP, which offers a comprehensive scope of products across many industries.
Which of the following is not an important concept in TOC?
File Drum, buffer and rope are discussed in the text. The concept of capacity-constrained resource (CCR) is also discussed. File is not discussed as a TOC concept.
On which four major areas do ERP modules typically focus?
Finance, manufacturing and logistics, sales and marketing, human resources ERP systems from various vendors are organized in different ways, but typically modules are focused on at least the following major areas: finance, manufacturing and logistics, sales and marketing, and human resources.
For a high-volume type of manufacturing, which of the following is the typical production scheduling approach?
Finite forward scheduling See Exhibit 22.1. High-volume manufacturing schedules are characterized as finite forward scheduling
When work is scheduled in detail using the setup and run time required for each order, it is called which of the following?
Finite loading A finite loading approach actually schedules in detail each resource using the setup and run time required for each order.
A product tree can do which of the following?
Help to compute component usage
Which of the following is a "focusing step" of Dr. Eli Goldratt's theory of constraints?
Identify system constraints Exhibit 23.3 is identified in the text as containing Mr. Goldratt's five focusing steps of theory of constraints: 1. Identify the system constraints. 2. Decide how to exploit the system constraints. 3. Subordinate everything else to that decision. 4. Elevate the system constraints. 5. If, in the previous steps, the constraints have been broken, go back to Step 1, but do not let inertia become the system constraint.
For low-volume shop type of manufacturing, which of the following is the typical production scheduling approach?
Infinite forward scheduling
For a mid-volume type of manufacturing, which of the following is the typical production scheduling approach?
Infinite forward scheduling See Exhibit 22.1. Mid-volume manufacturing scheduling is characterized as infinite forward scheduling.
When work is assigned to a work center based on what is needed over time it is called which of the following?
Infinite loading Infinite loading occurs when work is assigned to a work center simply based on what is needed over time.
A material requirements planning system is an example of which of the following scheduling systems?
Infinite loading, backward scheduling A material requirements planning (MRP) system is an example of an infinite, backward scheduling system for materials.
According to the theory of constraints, which of the following is an operational measurement that can be used to measure the firm's ability to make money?
Inventory
Which of the following is a negative aspect of JIT compared to synchronous manufacturing?
JIT does not allow very much flexibility in the products produced. Comparing JIT to synchronous manufacturing, JIT does an excellent job in reducing lead times and work-in-process, but it has several drawbacks: 1. JIT is limited to repetitive manufacturing. 2. JIT requires a stable production level (usually about a month long). 3. JIT does not allow very much flexibility in the products produced. 4. JIT still requires work-in-process when used with kanban so that there is "something to pull." 5. Vendors need to be located nearby because the system depends on smaller, more frequent deliveries.
Which of the following is not one of the categories of manufacturing inventory?
Just-In-Time Manufacturing inventory is typically classified into raw materials, finished products, component parts, supplies, and work-in-process.
Which of the following is an approach to dealing with a bottleneck?
Keep a buffer inventory in front of it to ensure that it always has something to work on
Which of the following is not a priority rule used to schedule the sequence of jobs in a production operation?
Last-in, first-out FCFS (first-come, first-served); SOT (shortest operating time); EDD (earliest due date first); STR (slack time remaining); STR/OP (slack time remaining per operation); CR (critical ratio); LCFS (last-come, first-served); random order or whim.
Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal?
Least total cost
Which of the following is a dynamic lot-sizing technique that calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot size in which these are most nearly equal?
Least total cost
Which of the following is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost?
Least unit cost
Which of the following is not one of the major functions of shop-floor control?
Load machine hours into workstations. The major functions of shop-floor control are (1) assigning priority of each shop order; (2) maintaining work-in-process quantity information; (3) conveying shop-order status information to the office; (4) providing actual output data for capacity control purposes; (5) providing quantity by location by shop order for WIP inventory and accounting purposes; and (6) measuring efficiency, utilization, and productivity of manpower and machines.
At a decision point in a decision tree, which machine would you select when trying to maximize payoff when the anticipated benefit of selecting machine A is $45,000, with a probability of 90%; the expected benefit of selecting machine B is $80,000, with a probability of 50%; and the expected benefit of selecting machine C is $60,000, with a probability of 75%?
Machine C EMV of machine A = 0.9 x 45,000 = 40,500; EMV of machine B = 0.5 x $80,000 = $40,000; and EMV of machine C = 0.75 x 60,000 = $45,000. Since $45,000 > $40,500 > $40,000, you would select machine C.
In the cash-to-cash cycle calculation, if the cost of goods sold per day increases, but all other data such as average inventory and average payables and receivables remain the same, then the value of cash-to-cash cycle will
May go up or down, but cannot tell without more information Increase in the cost of goods sold per day will reduce the inventory days, and the accounts payable days. Since in the formula for cash-to-cash cycle (Average days of Cash-to-cash cycle time = accounts receivable + Average days of inventory - Average days of account payable), inventory days is + and accounts payable days is -, it is not possible to say the net effect. Hence D is the answer.
The objectives of work center scheduling include which of the following?
Minimizing setup costs
According to the theory of constraints, which of the following is a financial measurement that can be used to measure the firm's ability to make money?
Net profit We have three measures of the firm's ability to make money: 1. Net profit—an absolute measurement in dollars. 2. Return on investment—a relative measure based on investment. 3. Cash flow—a survival measurement.
Which of the following is an input to the master production schedule?
None of these Exception reports BOM file Planned order schedules Inventory records file
Demand for an item is 1,800 units per year. Each order placed costs $10; the annual cost to carry items in inventory is $4 each. In what quantities should the item be ordered?
Optimal Order Quantity 95 units
Which of the following is considered a primary report in an MRP system?
Planned order schedule
According to the theory of constraints, which of the following is a kind of time that makes up the cycle time in production?
Process time The following kinds of time make up production cycle time: 1. Setup time 2. Processing time 3. Queue time 4. Wait time 5. Idle time
A BOM file is also called which of the following?
Product tree The BOM file is often called the product structure file or product tree because it shows how a product is put together.
What three functional areas make up the manufacturing operating cycle?
Purchasing, manufacturing, and sales distribution
Which of the following is a principle of work center scheduling?
Reschedule every day
A useful measure of inventory performance is called "dollar days." In which of the following areas are dollar days measurements not useful?
Research and development
Which of the following priority rules used in scheduling the sequence of production is calculated as the time remaining before the due date minus the remaining processing time, with the smallest value being run first?
STR See Exhibit 22.3. STR (slack time remaining) is calculated as the time remaining before the due date minus the processing time remaining. Orders with the shortest slack time remaining (STR) are run first.
Which of the following priority rules used in scheduling the sequence of production is calculated as the slack time remaining in the schedule divided by the number of remaining operations, with the smallest value being run first?
STR/OP See Exhibit 22.3. STR/OP (slack time remaining per operation) says orders with the shortest slack time per number of operations are run first.
The local supermarket buys lettuce each day to ensure really fresh produce. Each morning any lettuce that is left from the previous day is sold to a dealer that resells it to farmers who use it to feed their animals. This week the supermarket can buy fresh lettuce for $7.00 a box. The lettuce is sold for $18.00 a box and the dealer that sells old lettuce is willing to pay $2.00 a box. Past history says that tomorrow's demand for lettuce averages 255 boxes with a standard deviation of 40 boxes. How many boxes of lettuce should the supermarket purchase tomorrow?
Should purchase 255 + 0.4888(40) = 274.551 or 275 boxes of lettuce. Cu = $18 − $7 = $11 Co = $7 − $2.00 = $5.00 NORMSINV(0.6875) = 0.4888
Which of the following is most closely related to the reason a firm might implement MRP?
So it can order the right parts MRP is a logical, easily understandable approach to the problem of determining the number of parts, components, and materials needed to produce each end item. MRP also provides the schedule specifying when each of these items should be ordered or produced.
Which is not one if the main functions of SAP?
Supply chain redesign
Which is not one of the main functions of SAP?
Supply chain redesign SAP is a major ERP vendor. It approaches the details of supply chain planning and control by dividing its supply chain software into four main functions: supply chain planning, supply chain execution, supply chain collaboration, and supply chain coordination.
When developing cost models, which of the following is not included as a cost to place an order?
Taxes
Which of the following is an input to the master production schedule (MPS)?
The aggregate plan
Which of the following is a main benefit of processing transactions in real time?
The amount of detail available in the system is extremely rich. It allows for immediate analysis, which can be valuable in making improvements. There is no delay in the processing of the transaction. Real-time processing means that as soon as the transaction is entered into the system, the effect of items such as inventory status, order status, and accounts receivable is known to all users of the system. This leads to multiple benefits: there is no delay in the processing of the transaction; the amount of detail available in the system is extremely rich; and it allows for immediate analysis, which can be valuable in making improvements. All of these benefits make the system more responsive.
Which of the following is a tool of shop-floor control?
The anticipated delay report
A difference between project and continuous flow categories of process flow structures is which of the following?
The size and bulk of the project
Which of the following is not an aspect of ERP that determines quality?
The software should narrowly focus on a single function. There are four aspects of ERP software that determine the quality of the ERP system. The software should be multifunctional, integrated, capable of facilitating base planning, and modular in structure. Modular structure will allow it to be combined into a single expansive system, narrowly focused on a single function or connected with software from another source.
What are two of the main objectives of ERP?
Transaction processing and decision support When an item is purchased from a vendor, a specific sequence of events occurs: solicitation of an offer, acceptance of an offer, delivery of goods, storage in inventory, and final payment. The effective handling of these steps can be divided into two categories; transaction processing and decision support. ERP assists in effective execution of both of these objectives.
A BOM file is often called a product structure file or product tree because it shows how a product is put together
True
A SAP system can accommodate items that must be maintained in inventory while simultaneously supporting JIT efforts for other items.
True
A limitation of traditional finance metrics is that they primarily tell a story of past events.
True
According to the theory of constraints, the term "productivity" is defined as all those actions that bring a company closer to its goals.
True
An input to the material requirements planning (MRP) system is an inventory records file.
True
Because services cannot be stored for later use, service managers consider time as one of their supplies or resources.
True
Capacity can be defined as the amount of available resources inputs relative to requirements for output over a particular period of time.
True
Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.
True
MRP stands for manufacturing requirements planning
True
Safety stock can be computed when using the fixed-order-quantity inventory model by multiplying a z value representing the number of standard deviations to achieve a service level or probability by the standard deviation of periodic demand
True
The economic order quantity (EOQ) lot-sizing technique uses the "square root formula" to balance setup cost and carrying cost.
True
The frequency of adding to productive capacity should balance the costs of upgrading too frequently and the costs of upgrading too infrequently.
True
The term "enterprise resource planning (ERP)" can mean different things.
True
According to the theory of constraints, a capacity-constrained resource (CCR) is one whose utilization is close to capacity and could be a bottleneck if it is not scheduled carefully.
True A capacity-constrained resource (CCR) is one whose utilization is close to capacity and could be a bottleneck if it is not scheduled carefully.
A modular bill of materials is the term for an item that can be produced and stocked as a subassembly.
True A modular bill of materials is the term for a buildable item that can be produced and stocked as a subassembly.
A work center is a physical area of the business in which productive resources are organized and work is completed.
True A work center is an area in a business in which productive resources are organized and work is completed.
A backward schedule tells when an order must be started in order to be done by a specific date.
True Backward scheduling starts from some date in the future (possibly a due date) and schedules the required operations in reverse sequence. The backward schedule tells when an order must be started in order to be done by a specific date.
When selecting an ERP system, it is possible to take a multivendor approach.
True By purchasing from multiple vendors, it may be possible to assemble a package that provides for the "best in class" of each available module.
Capacity flexibility means having the ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another.
True Capacity flexibility means having the ability to rapidly increase or decrease production levels or to shift production capacity quickly from one product or service to another.
Drilling down means descending through an existing hierarchy to bring out more and more details from a database.
True Drilling down means descending through an existing hierarchy to bring out more and more details from a database. It is a more complex strategy for extracting information from a database than a basic query.
A typical ERP system has modules that use the same user interface, similar to that of Microsoft Office products.
True ERP provides identical or similar interfaces so that it is much easier for users trained on one module to become proficient in using another.
ERP systems allow for integrated planning across the different functional areas in a firm.
True ERP systems allow for integrated planning across the different functional areas in a firm and additionally support integrated execution across functional areas.
Economies of scope exist when multiple products can be produced at a lower cost in combination than they can separately.
True Economies of scope exist when multiple products can be combined and produced at one facility at a lower cost than they can be produced separately.
When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.
True Equation 20.1 states that we should continue to increase the size of the order so long as the probability of selling what we order is equal to or less than the ratio Cu/(Cu + Co).
On an assembly line, a transfer batch can be one unit.
True In an assembly line, we have a process batch of infinity and a transfer batch of one unit.
Outsourcing is a common source of external capacity.
True In some cases, it may be cheaper to not add capacity at all, but rather to use some existing external source of capacity. Two common strategies used by organizations are outsourcing and sharing capacity.
Sharing capacity is a common source of external capacity.
True In some cases, it may be cheaper to not add capacity at all, but rather to use some existing external source of capacity. Two common strategies used by organizations are outsourcing and sharing capacity.
MRP is most valuable where a number of products are made in batches using the same productive equipment.
True MRP is most valuable in industries where a number of products are made in batches using the same productive equipment.
MRP stands for Material Requirements Planning.
True MRP stands for material requirements planning.
Departments within a firm often are at odds with each other because reward systems are often not synchronized with the basic goal of the firm: to make money.
True Marketing and production should communicate and conduct their activities in close harmony. In practice, however, they act very independently. There are many reasons for this. The difficulties range from differences in personalities and cultures to unlike systems of merits and rewards in the two functions. Also, the measurement system within a firm should encourage the increase of net profits, return on investment, and cash flow. The firm can accomplish this if, at the operations level, it rewards performance based on the amount of throughput, inventory, and operating expense created.
One of the principles of work center scheduling is that, while certainty of standards, routings, and so forth is not entirely possible in a shop, certainty should always be an objective to work toward.
True Much of our discussion of work center scheduling systems can be summarized in the following principles: 10. Certainty of standards, routings, and so forth, is not possible in a shop, but always work toward achieving it.
One of the principles of work center scheduling is that the effectiveness of any shop should be measured by speed of flow through the shop.
True Much of our discussion of work center scheduling systems can be summarized in the following principles: 2. The effectiveness of any shop should be measured by speed of flow through the shop.
One of the principles of work center scheduling is to match work center input information to what the worker can actually do.
True Much of our discussion of work center scheduling systems can be summarized in the following principles: 8. Match work center input information to what the worker can actually do.
Net change MRP systems are "activity" driven.
True Net change systems are ''activity'' driven, and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in ''real time'' the exact status of each item managed by the system.
In a net change MRP system, requirements and schedules are updated whenever a transaction is processed that has an impact on the item.
True Net change systems are 'activity' driven, and requirements and schedules are updated whenever a transaction is processed that has an impact on the item. Net change enables the system to reflect in 'real time' the exact status of each item managed by the system.
Priority rules are the rules used to obtain a job sequence in production scheduling.
True Priority rules are the rules used in obtaining a job sequence.
Safety stock can be defined as the amount of inventory carried in addition to the expected demand.
True Safety stock can be defined as the amount of inventory carried in addition to the expected demand.
A limitation of traditional financial metrics is that they primarily tell a story of past events.
True The balance sheet, the income statement, and expense statements contain fiscal measures that are less helpful to guide decision makers in creating future value through investment in things such as infrastructure and innovation.
The fixed-order-quantity inventory model requires more time to maintain because every addition or withdrawal is logged.
True The fixed-order-quantity model requires more time to maintain because every addition or withdrawal is logged.
The least unit cost method of lot-sizing technique adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.
True The least unit cost method is a dynamic lot-sizing technique that adds ordering and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.
The time-phased plan specifying how many and when the firm plans to build each end item is called the master production schedule (MPS).
True The master production schedule (MPS) is the time-phased plan specifying how many and when the firm plans to build each end item.
In production scheduling, the process of determining which job to start first on some machine or in some work center is known as sequencing or priority sequencing.
True The process of determining the job order on some machine or in some work center is known as sequencing or priority sequencing.
Theoretically, all schedules are feasible when finite loading is used.
True Theoretically, all schedules are feasible when finite loading is used.
Synchronous manufacturing refers to the entire production process working together in harmony to achieve the goals of the firm.
True Underlying Goldratt's work is the notion of synchronous manufacturing, which refers to the entire production process working in harmony to achieve the profit goal of the firm.
Using the probability approach, we assume that the demand over a period of time is normally distributed.
True Using the probability criterion to determine safety assumes that the demand over a period of time is normally distributed.
Which of the following is one of Dr. Eli Goldratt's rules of production scheduling for optimized production technology?
Utilization and activation of a resource are not the same. Goldratt's rules of production scheduling (Exhibit 23.1): 1. Do not balance capacity—balance the flow. 2. The level of utilization of a non-bottleneck resource is determined not by its own potential but by some other constraint in the system. 3. Utilization and activation of a resource are not the same. 4. An hour lost at a bottleneck is an hour lost for the entire system. 5. An hour saved at a non-bottleneck is a mirage. 6. Bottlenecks govern both throughput and inventory in the system. 7. The transfer batch may not and many times should not be equal to the process batch. 8. A process batch should be variable both along its route and in time. 9. Priorities can be set only by examining the system's constraints. Lead time is a derivative of the schedule.
You are a newsvendor selling San Pedro Times every morning. Before you get to work, you go to the printer and buy the day's paper for $0.30 a copy. You sell a copy of San Pedro Times for $1.50. Daily demand is distributed normally with mean = 290 and standard deviation = 58. At the end of each morning, any leftover copies are worthless and they go to a recycle bin. a. How many copies of San Pedro Times should you buy each morning? b. Based on a, what is the probability that you will run out of stock?
a. 339 b. 20 Co = $0.30, Cu = $1.20 Service level = (1.20)/(1.20 + 0.30) = 0.80. z-value for 80% is 0.84. Q = 290 + 0.84 × 58 = 339
You are a newsvendor selling San Pedro Times every morning. Before you get to work, you go to the printer and buy the day's paper for $0.50 a copy. You sell a copy of San Pedro Times for $1.35. Daily demand is distributed normally with mean = 350 and standard deviation = 70. At the end of each morning, any leftover copies are worthless and they go to a recycle bin. a. How many copies of San Pedro Times should you buy each morning? b. Based on a, what is the probability that you will run out of stock?
a. Optimal Order Quantity 373 units b. Probability 37
