OPSM 3830 Week 4

The limitations on decision making caused by costs, human abilities, time, technology, and availability of information.

Bounded rationality

With _____, increasing the output rate results in decreasing the average unit cost, if the output rate is less than the optimal rate.

Economies of scale

Which of the following is not a cause of poor decision?

Following the process

which are the correct descriptions of the three time fence phases?

Frozen, slushy, liquid

Which of the following is not a way to deal with variations?

Get as accurate a forecast as possible of future demand.

Which of the following is not a reason for economies of scale?

Decision making becomes easier as output rates increase

_______ strategies involve influencing the level of demand. ______ strategies involve capacity options. ______ strategies involve an element of each of these approaches.

Demand, Supply, Mixed.

Which of the following is not a cause of failure in the decisions making process?

Having suitable alternatives

Which of the following statements about aggregate planning is not true?

If capacity and demand and approximately equal for the planning period, no additional work is required.

Which of the following is the correct formula for projected on-hand inventory?

Inventory from previous week - current week's requirement

Which of the following describes a leading capacity strategy?

It builds capacity in anticipation of future demand increases.

What is the main disadvantage of a linear programming approach to aggregate planning?

It can only optimize one objective.

With cost-volume analysis, what is the assumption regarding variable cost per unit?

It is the same regardless of volume

Which of the following statements about intermediate planning is true?

It relates to general levels of employment, output, and inventories

Choose the alternative with the best average payoff of any of the alternatives.

Laplace

Which of the following data sources is not an input to aggregate planning?

Lead times for purchased parts and components

How many products does cost-volume analysis involve.

One

Which of the following describes the aggregate planning strategies for dealing with mismatched supply and demand?

Proactive, reactive, mixed.

Which of the following is the correct formula for the break-even point?

Q= FC/R-v

In which of the following cases can the emphasis on efficiency, over utilization, be misleading?

When the effective capacity is low compared to design capacity.

When is production triggered?

When the projected on-hand inventory becomes negative

A capacity cushion is _____ minus _____ demand. It is used when there is uncertainty about future demand.

capacity, expected

Two important terms in financial analysis are ______ flow and ____ value.

cash , present.

A ________ _________ strategy matches planned output to expected demand for each period.

chase demand

Which of the following is not a reason for diseconomies of scale?

construction costs increase more quickly as the facility size increases

Effective capacity is the ______ capacity ______ allowances such as maintenance.

design, minus

Utilization is the ratio of actual output to _____ capacity. It is expressed as a _____.

design, percent

With ______, increasing the output rate results in increasing the average unit cost, if the output rate is more than the optimal rate.

diseconomies of scale

Besides cost-volume analysis, managers should consider ____ analysis, ______ theory, _______ -line analysis, and/or______.

financial, decision, waiting, simulation.

Increasing ______ allows the firm to be more responsive to changing market conditions.

flexibility

Aggregate planning takes a high-level approach to planning, focused on _______ of similar products and services rather than on ________ items.

groups, individual

Sales and operations planning makes _____ -range decisions to balance supply and demand, integrating financial and operations planning. It should be shared with supply chain partners.

intermediate

Aggregate planning is capacity planning for the ________ range. Its goal is to effectively match a company's resources with ________ ________.

intermediate, expected demand.

The three primary capacity strategies are _____ , ______, and ______.

leading, following, tracking.

A _______ _______ strategy maintains a _______ rate of regular-time output while meeting variations in demand by a combination of options.

level capacity, steady.

A constraint _____ limits the performance of a system in achieving its _____ .

limits, goals

Choose the alternative with the best of the worst possible payoffs

maximin

Design capacity is the ______ output rate a process is _______ for.

maximum, designed

Choose the alternative that hs the least of the worst regrets.

minimax regret

A decision tree is made up of a number of _____ that have _____ emanating from them.

nodes, branches

Supply chain partners should be consulted during the _______ stage, especially if new or _______ products are involved.

planning, changed

The master production schedule indicates the ______ and _______ of planned completed production.

quantity, timing

_______ is the difference between a given payoff and the best payoff for a state of nature.

regret

Before increasing capacity, it is important to make sure an organization's ______ ______ can handle the ramp up

supply chain

The aggregate planners form a plan that is a ______ projection of service staff requirements.

time-phased

Environment in which it is impossible to assess the likelihood of various future events.

uncertainty

Yield management uses_______ pricing to try to ________ revenue. Pricing reflect the current capacity ________.

variable, maximize, availability.

Simulation models allows aggregate plan candidates to be tested under a _____ of _______. It does not guarantee an _______ solution.

variety, circumstances, optimal

Which of the following statements about strategies for meeting uneven demand is/are true?

1. A chase demand strategy can cause instability in the workplace because plans can change frequently. 2. A combination of both level output and chase demand strategies may be a good idea. 3. Many companies like the idea of a level workforce.

Decisions that lend themselves to a decision theory approach tend to have which of the following elements? check all that apply.

1. A list of alternatives for the manager to choose from 2. A known payoff for each alternative under each possible future condition. 3. A set of possible future conditions that will have a bearing on the results of the decision.

Which of the following is/are reasons companies engage in aggregate planning?

1. Accurately forecasting timing is impossible 2. It takes time to implement plans 3. It can help synchronize flow through the supply chain.

Which of the following statements about intermediate and aggregate planning is/are true?

1. Aggregate planning decisions define the framework in which operating decisions will be made. 2. It is included in business plans along with long-term planning.

Which of the following are inputs to the master schedule?

1. Beginning inventory 2. Forecasts for each period 3. Customer orders

Improving which of the following aspects of a firm's operations can increase its capacity?

1. Bottleneck management 2. Utilization 3. Efficiency

Which of the following may prove to be challenging ways to measure capacity?

1. Capacity based on revenues generated 2. Capacity based on units of output

Which of the following statements accurately reflect the (strategic) importance of capacity decisions?

1. Capacity decisions can affect competitiveness 2. Capacity decisions impact how well a firm can meet its demand 3. Capacity decisions affect operating costs.

In the context of forecasting capacity requirements, identify some of the basic demand patterns.

1. Cyclical 2. stable

Which of the following are ways to enhance the development of capacity strategies?

1. Decide whether to use a following or leading strategy. 2. Consider the overall impact on the system and environment.

Which of the following are points for consideration when deciding whether to outsource or produce in-house?

1. Demand patterns 2. The level of expertise available in-house 3. The fixed costs

Place the following steps for aggregate planning in the correct order.

1. Determine demand for each period. 2. Determine capacities for each period. 3. Identify relevant company/departmental policies. 4. Determine all relevant costs. 5. Develop alternative plans and compute the cost for each. 6. Select the best plan.

Place the following steps in the capacity planning process in the correct order.

1. Estimate future capacity requirements. 2. Evaluate existing capacity and identify gaps. 3. Identify alternatives for meeting requirements. 4. Conduct financial analyses of each alternative. 5. Assess key qualitative issues for each alternative. 6. Select, implement, and monitor the best alternative to pursue.

Which of the following are assumptions of cost-volume analysis?

1. Everything produced can be sold. 2. Revenue per unit exceeds variable cost per unit. 3. The variable cost per unit is the same regardless of the volume. 4. The revenue per unit is the same regardless of volume.

Place the following steps for resolving constraint issues in order:

1. Identify the most pressing constraint. If it cannot be easily overcome, go to the next step. 2. Change the operation to achieve maximum benefit, given the constraint. 3. Make sure all other parts of the process support the constraint. 4. Explore and evaluate alternatives for overcoming the constrain. 5. Repeat until the level of constraints is acceptable.

Place the steps to a decision theory approach in the correct order from first to last.

1. Identify the possible future conditions. 2. develop a list of possible alternatives 3. Determine the payoff associated with each alternative for every possible future conditions 4. If possible, estimate the likelihood of each possible future condition. 5. Evaluate alternatives according to some decision criterion and select the best alternative.

The decision process consists of the following steps. Place them in the correct order from the first step to the last.

1. Identify the problem 2. Specify objectives and criteria for a solution 3. develop suitable alternatives 4. analyze and compare alternatives 5. select the best alternative 6. implement the solution and monitor to see that desired results are achieved

Which of the following improvements will typically increase capacity?

1. Increasing productivity 2. Standardizing output 3. Reducing changeover times

Which of the following cactors directly affect the effective capacity?

1. Inventory shortages 2. Employee absenteeism 3. Machine breakdowns

Which of the following statements about the master schedule are true?

1. It allows marketing to make valid delivery commitments. 2. It is different from the aggregate plan.

Which of the following statements about the master schedule are false?

1. It is used at the operational level, not by higher-level management 2. Because it is derived from the aggregate plan, the number in the master plan match those in the aggregate plan.

Which of the following situations causes a misjudgment of a firm's capacity requirements?

1. Marketing personnel are overly optimistic in their predictions. 2. Predictions focus mainly on the potential revenue that will be earned

Which of the following are possible demand options for dealing with demand-capacity mismatches?

1. New demand 2. Pricing 3. Promotion 4. Back orders

Long-term capacity alternatives include which of the following?

1. Opening branch facilities 2. Contracting an existing facility 3. Expanding an existing facility 4. relocating existing operations 5. closing branch facilities

Which of the following are possible supply options for dealing with demand-capacity mismatches?

1. Overtime 2. Part-time workers 3. inventories

Which of the following are included in the cost for a given period?

1. Overtime (output) cost 2. Back-order cost 3. Regular output cost 4. Hire/lay-off cost 5. Inventory cost 6. Subcontracting (output) cost

Which of the following statements about supply options for dealing with demand-supply mismatches are true?

1. Overtime is advantageous because it can be implemented quickly, with almost no additional overhead. 2. The cost of inventory includes more than simply the storage cost for the items. 3. Subcontracting allows less control over output and may lead to higher costs and quality problems.

Which of the following are correct formulas for profit?

1. P = RQ-(FC-vQ) 2. P = RQ-(FC+vQ)

Which of the following statements about variability in capacity planning/forecasting is/are true?

1. Service systems have considerable variability in service requests, making capacity planning challenging. 2. Service systems have considerable variability in service time, making capacity planning challenging.

Which of the following are differences between manufacturing and service aggregate planning?

1. Services cannot be inventoried. 2. Employees in services are often able to handle a wider variety of tasks, making labor a little more flexible. 3. It can be more difficult to measure or define capacity availability in services.

Which of the following are ways to enhance the development of capacity strategies?

1. Take into account the acquition of capacity chunks. 2. Consider which life cycle stage the product is in. 3. Make provisions for possible future expansion.

Which of the following statements about demand options for dealing with demand-supply mismatches are true?

1. The degree of price elasticity affects how well pricing strategies will work. 2. Automatic back orders are a useful way to shift demand fulfillment from one period to the next. 3. Promotions could exacerbate the demand-capacity mismatch.

Which of the following are points for consideration when deciding whether to outsource or produce in-house?

1. The nature of demand 2. The level of quality available/desired. 3. The available capacity.

A hotel room illustrates several of the challenges associated with planning service capacity. Which of the following illustrate these?

1. There is high demand during certain times of the year. 2. An empty hotel room cannot be stored for future use. 3. A hotel room must be in a location a customer would like to stay.

Which of the following are outputs of the aggregate planning process?

1. Total cost of a plan 2. Projected levels of inventory. 3. projected levels of output 4. projected levels of subcontracting 5. projected levels of employment

Which of the following are additional questions that should be asked in making capacity planning decisions, beyond the initial key questions?

1. What are the potential risks? 2. How much will it cost? 3. Should capacity be changed all at once?

Which of the following are not the key questions to be answered when making capacity planning decisions?

1. Why is the capacity needed? 2. From whom should we purchase the capacity?

What are the two axes of a payoff table? check both.

1. alternatives 2. possible states of nature

Which of the following firms likely use yield management.

1. restaurants 2. cruise lines 3. airlines 4. resorts 5. hotels

Which of the following are assumptions for cost-volume analysis?

1. revenue per unit revenue exceeds per unit variable cost 2. There is only one product. 3. The variable cost per unit does not change 4. everything produced can be sold 5. The revenue per unit is the same regardless of volume.

Why is it essential to take supply chain capabilities into account when doing aggregate planning?

1. to make sure there are no timing issues 2. To make sure there are no quantity issues

Which of the following are the key questions to be answered when mkaing capacity planning decisions?

1. what kind of capacity is needed 2. When is the capacity needed 3. How mFuch capacity is needed

Which of the following is the correct formula for utilization?

Actual output/ Design capacity * 100%

Which of the following statements about aggregate planning is not true?

Aggregate planners try to ensure that capacity always exceeds demand.

______ planners try to match supply and demand within the constraints dictated by _______ or agreements, at a minimum cost.

Aggregate, policies

Which of the following is not a reason that makes service capacity more difficult to plan than manufacturing capacity?

Amount of inventory required

A bottleneck operation is the step whose ____ is _____ than that of other steps in the sequence of operations.

Capacity, lower

The difference between the cash received from sales and other sources and the cash outflow for labor, materials, overhead, and taxes is known as_____.

Cash flow

Given the following situation, which level of certainty is present? Sale of 100 units with an individual profit of 50 cents. What is the order profit?

Certain

Environment in which relevant parameters have known values.

Certainty

How are decisions made under certainty?

Choose the alternative that has the best payoff under that state of nature.

Which are the three important factors in choosing a strategy for meeting uneven demand?

Company policy, flexibility, costs

Design capacity minus allowances such as personal time and maintenance is known as ______.

Effective capacities.

Which of the following is the correct formula for efficiency?

Efficiency= Actual output/Effective output * 100%

T or F: Globalization simplifies capacity decisions because there are more, cheaper options.

False

T or F: The more uniform production output is, the less effective capacity the operation has.

False

Environments in which certain future events have probable outcomes.

Risk

The expected monetary value approach is most appropriate when a decision maker is what?

Risk neutral

Determining the range over which the choice of alternatives would remain the same.

Sensitivity analysis

____ provides a range of probability over which the alternatives would remain the same.

Sensitivity analysis

The result of different departments each attempting to reach a solution that is optimum for that department.

Suboptimization

Rough-cut capacity planning is the validation of a ________ master schedule. It ensures the _______ of a master schedule.

Tentative, Feasibility

Which of the following statements about disaggregating the aggregate plan is not true?

The aggregate plan must be broken down by units.

What is the expected monetary value criterion?

The best expected value among the alternatives.

Which of the following statements about time fences is true?

The further out a proposed change is, the easier it is to make it.

Which of the following is the main disadvantage of trial-and-error techniques using spreadsheets for aggregate planning?

They do not necessarily result in an optimal plan.

T or F: In evaluating capacity alternatives, both financial and qualitative analyses must be performed.

True

T or F: Making a decision under certainty is straightforward.

True

_____ is the quantity at which two competing alternatives are equivalent.

an indifference point