OSCM Exam 2

1. For Platinum Nugget Hotel in Las Vegas, Saturday is the best day of the week for business. The gambling take for the hotel on Saturdays over the past four weeks was: Week $ Take 1. $250,000 2. $190,000 3. $300,000 4. $280,000 Using a moving average with n = 3 terms, what would be the forecast for week 5? a) $256,667 b) $246,667 c) $255,000 d) $232,124

Answer: A - ($190,000 + $300,000 + $280,000)/3 = $256,667

Order-to-delivery lead time generally would be longest for which type of product? A. One that is engineered to order B. One that is assembled to order C. One that is made to stock D. One that is made to order

Answer: A - ETO has the most lead-time components.

The identification, evaluation, selection, and management of suppliers is: a) Sourcing. b) Supply management. c) Supply chain management. d) Spend analysis.

Answer: A - Sourcing is the identification, evaluation, selection, and management of suppliers

Long-term/strategic demand planning is typically done using what units? a) Total business unit sales b) Total product family sales c) Total product item sales d) Sales at a given location

Answer: A - Strategic demand planning supports total business-level decisions

3. A company has the information shown in the chart below regarding its forecast performance in the past three periods. Period Actual Demand Forecast Demand Error Absolute Value of Error 1 1,100 -300 300 2 1,200 1,000 3 1,400 −100 What is the mean absolute deviation (MAD)? a) 200 b) 225 c) −66.67 d) 1,200

Answer: A - Summing the absolute values of the errors and determining the average results is (300 + 200 + 100)/3 = 200.

All the following are true about supplier scorecards EXCEPT: a) They reduce the need for incoming quality inspection. b) They are used to provide performance feedback to suppliers. c) They are often used to categorize suppliers based on an overall score. d) They are used to measure supplier performance based on key performance indicators.

Answer: A - Supplier scorecards do not reduce the need for incoming inspection, but they do provide feedback on key performance indicators, and they are used to categorize suppliers.

1. Jones Company has identified an item for which the supply risk is high and the value of the purchase to the firm is low. A recommended sourcing strategy for Jones is to: a) Use multiple sourcing. b) Increase efficiencies. c) Build partnerships. d) Consolidate purchases.

Answer: A - When supply risk is high and the value of the purchase to the firm is low, multiple sourcing is recommended

1. Johnson Company has the following data about customer orders for the month of June: Orders Received: 5,000 orders Total Units Ordered: 40,000 units Total Units Delivered: 37,800 Total Orders Delivered Complete: 4,600 What was Johnson's unit fill rate? A. 92 percent B. 94.5 percent C. 12.5 percent D. 91 percent

Answer: B - 37,800/40,000 = 94.5 percent

A company has decided that it no longer needs to extensively count and inspect the products it receives from a supplier. This suggests that the purchasing company has begun: a) Spend analysis. b) Supplier certification. c) Process simplification. d) Time reduction analysis.

Answer: B - After certifying a supplier, a company may decide it no longer needs to perform certain activities such as counting and inspecting.

Which of the following statements best describes demand forecasting? a) The objective of forecasting is to develop the best statistical model. b) Better forecasts usually come from combinations of inputs. c) Executives usually make better forecasts than machines. d) Forecasting and demand planning have little to do with each other.

Answer: B - Developing a good forecasting process usually involves more than just statistical analysis of data. Combinations of inputs help avoid bias in a forecasting process.

Which of the following is NOT one of the costs considered in aggregate production planning? A. Subcontracting cost. B. Capital equipment cost. C. Inventory cost. D. Firing (layoff) cost.

Answer: B - Facilities and capital equipment decisions are long-term decisions with strategic implications; aggregate plans focus on intermediate-term non-strategic decisions.

1. When performing a make/buy analysis, what "buy" cost must be included when comparing the two costs? a) Materials b) Fixed overhead c) Labor d) All the above

Answer: B - Fixed overhead must be included in cost calculations when making or buying a product or service. Fixed overhead is a cost incurred whether buying or making.

What strategy is suggested for a strategic supplier according to Krajlic matrix? a) On-line auction b) Partnership c) Secure the supply d) Competitive bidding

Answer: B - Partnership and secured contracts are the best methods to deal with a strategic supplier.

4. Williams Inc. has acquired software to help manage interactions with its supply base. This suggests that Williams Inc. is involved in: a) Vendor-managed inventory. b) Supplier relationship management. c) Online reverse auctions. d) Supplier auditing.

Answer: B - SRM is a comprehensive system utilizing software for managing interactions with the supply base.

1. When you need to identify a supplier for a new purchase, the FIRST place that you should look is: a) A local trade show. b) The list of your company's current suppliers. c) The list of suppliers that your company has used in the past. d) The websites of industry groups.

Answer: B -The starting point should be the list of current suppliers. If a current supplier can be used, the time required to evaluate and manage the supplier can be reduced.

Which of the following is true concerning sales and operations planning? A. Once the plan is finalized, it should not be changed during the planning period. B. There is a specific set of steps all firms should follow in the sales and operations planning process. C. A benefit of the process is that the firm should achieve high service levels with lower inventory. D. By keeping the schedule stable, production can be optimized.

Answer: C - A benefit of S&OP is that the firm can achieve improved customer service with lower finished good inventory.

Zanda Corp. and Jones Corp. are identical in every way (products produced, costs, demand, etc.) except for one. Zanda uses a level production plan while Jones prefers a chase production plan. Which of the following is most likely to be true? A. Zanda will have higher investment in plant and equipment. B. Zanda will have higher hiring and firing costs. C. Zanda will have higher inventory carrying costs.

Answer: C - A firm with a level production plan will have higher average inventory levels than a firm pursuing a chase production plan.

Jones Corporation is preparing an aggregate production plan for washing machines for the next four quarters. The company's expected quarterly demand is given in the following chart. The company will have 1,000 washers in inventory at the beginning of the year and wishes to maintain at least that number at the end of each quarter. Following is other critical data: Production cost per unit = $250 Inventory carrying cost per quarter per unit = $10 (based on quarter-ending inventory) Hiring cost per worker = $1,000 Firing cost per worker = $2,000 Beginning number of workers = 10 Each worker can produce 100 units per quarter. Any worker on the staff at the end of the year will not be fired at that time. Beginning Inventory: 1,000 Beginning Workers: 10 Quarter Demand Regular Production Overtime Ending Inventory Workers Required Hire Fire 1 4,000 2 6,000 3 3,000 4 7,000 Total 20,000 Given this data, what is the inventory carrying cost of a LEVEL plan? A. $100,000 B. $700,000 C. $70,000 D. $7,000

Answer: C - A level production plan is [20,000 units / 4 quarters = 5,000 units per quarter. With the 1,000 units of beginning inventory, this results in ending inventory of 2,000 units at the end of quarter 1 and 3,000 units of inventory at the end of quarter 3. The ending inventory at the end of quarter 2 and 4 is 1,000 in accordance with the company policy of holding at least 1,000 units at the end of each

The use of technology to collect and analyze data concerning customers' buying behavior is an important aspect of: A. Basic customer service. B. Customer satisfaction. C. Customer relationship management. D. Customer success.

Answer: C - CRM is a software and information technology-based approach used to collect and analyze customer data from numerous sources for the purpose of developing strategically appropriate relationships with customers

3. In recent years some companies have begun to work closely with their customers and/or suppliers by sharing information to develop demand plans and execute those plans. The procedure they are following is known as: a) Coordinated foreplaning of requirements. b) Joint planning of demand forecasts. c) Collaborative planning, forecasting, and replenishment. d) Conjoint analysis and forecasting.

Answer: C - Collaborative planning, forecasting, and replenishment is a process for sharing information and plans with supply chain partners.

6. A panel of experts that provides judgement-based forecasting is known as: a) Grassroots b) Executive judgement c) Delphi method Marketing research

Answer: C - Delphi method is a forecast method based on questionnaires sent to panel of experts

Determining the right number of suppliers that a company should use is: a) Spend analysis. b) Strategic sourcing. c) Supply base optimization. Supply chain resilience

Answer: C - Determining the right number of suppliers that a company should use is supply base optimization.

. What are the three process steps for accessing and selecting a supplier? a) Identify, analyze, develop b) Develop, evaluate, manage c) Identify, evaluate, agree d) Bid, analyze, manage

Answer: C - For supplier assessment and selection, the sourcing team must identify the supplier, evaluate them for quality, and create agreements with them.

6. Customers who are both low revenue generators and low profit generators for a firm should be: A. Terminated as customers. B. Provided with a minimum level of customer service. C. Reviewed for possible termination or continuation. D. Treated with customer success relationships to improve revenue and profit.

Answer: C - Low profit/low revenue customers should not necessarily be terminated, but they should be reviewed to determine whether termination is appropriate. If not, the appropriate relationship should be determined.

1. Moderate- to high-risk purchases with low to moderate levels of spend are categorized as: a) Noncritical. b) Leverage. c) Bottleneck. d) Strategic.

Answer: C - Moderate- to high-risk purchases with low to moderate levels of spend are categorized as bottleneck

9. Which of the following are not considered a relevant aggregate planning cost? A. Lost sales cost B. Inventory holding cost C. Management and supervisory training cost D. Subcontracting cost

Answer: C - Relevant costs for aggregate planning are: inventory holding cost, regular production cost, overtime, hiring/firing/layoff costs, backorder/lost sales cost, and subcontracting cost.

Sales and Operational Planning: A. Provides an opportunity for customers to interact with the cross-functional team that develops operational and marketing strategies. B. Ensures that decisions in sales, marketing and operations can be taken without reference to financial concerns. C. Provides a regular opportunity for cross-functional teams to review data from the field and to decide how the company should best respond. D. Is a forum where detailed production plans are developed and ratified.

Answer: C - Sales and operational planning give companies a regular opportunity to review data from the field and to decide how the company should best respond.

Which of the following is an advantage of a chase production strategy (as compared to a level plan)? A. Low investment in equipment. B. High inventory carrying cost. C. Lower inventory investment. D. Less investment in employee training.

Answer: C - The chase plan will have lower inventory investment than the level plan but will have higher hiring/layoff, overtime and training costs and will require higher equipment investment than the level plan.

1. Zanda Corp. had outsourced its production to a company located in Asia. Recently it decided to continue to outsource but bring the production back to a company located in the United States. This decision was likely made after Zanda: a) Conducted a spend analysis. b) Conducted a make or buy analysis. c) Examined total cost of ownership. d) Developed supplier certification processes.

Answer: C - The decision to bring production closer to home could only come after an analysis of total cost of ownership

Alpha Company has a performance standard of 97 percent fill rate. Last month it achieved a 94 percent fill rate. This is an example of: A. A knowledge gap. B. A standards gap. C. A performance gap. D. A perception gap.

Answer: C - The difference between a performance standard and actual performance is the performance gap.

6. What component of demand best represents the following dataset? Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 781 805 831 876 901 910 a) Stable b) Seasonal c) Trend d) Step Trend

Answer: C - Upward trend has been detected

1. Which of the following is NOT a benefit of outsourcing? a) Greater flexibility to change technology b) Better access to market information c) Lower supply management costs d) Less capital needed for investment

Answer: C - When outsourcing, a company has to spend more time and effort managing a supplier, so supply management costs are likely to increase rather than to decrease.

3. Which measure of basic service will most likely show poorest performance for a firm? A. Unit fill rate B. Order fill rate C. Line fill rate D. Perfect orders

Answer: D - Because perfect orders not only involve availability measures but also lead time and reliability, the rate of perfect orders will always be lower than the other alternatives.

1. Why does a company hire purchased services? a) Lacking skillset for required tasks b) Financial reasons c) Government regulations d) All the above

Answer: D - Companies hire purchased services for all these reasons. Skills, manpower shortages, head count cost, or regulations.

6. Fluctuating customer demand can result in the following: a) Customer dissatisfaction b) Backlog c) Safety stock All of the above

Answer: D - Fluctuating customer demand causes all the above to occur.

1. The process of understanding how a firm is spending its money and with which suppliers is called: a) Strategic sourcing. b) Make or buy analysis. c) Market analysis. d) Spend analysis.

Answer: D - Spend analysis refers to analyzing the dollars spent with which suppliers.

1. Qualitative factors that should be assessed when making an insourcing/outsourcing decision include all of the following EXCEPT: a) Compatibility of the supplier's organizational culture and values with your company b) The importance assigned to the supplier's location c) The skills and knowledge of the supplier's management team d) The costs incurred at the start of the contract

Answer: D - The costs incurred at the start of a contract are quantitative, not qualitative, costs.

John Jones, senior VP for Zanda Corp., is looking at three alternative aggregate production plans for the next six-month period. At his company, demand varies by month with substantial month-to-month differences. The three alternatives are a "pure level plan," which keeps an absolutely constant workforce, a "pure chase plan" relying on hiring and layoffs, and a hybrid plan. He is most likely to find that the pure level plan: A. Has lower inventory carrying cost than the hybrid plan. B. Has higher hiring/layoff cost than the chase plan. C. Has higher hiring/layoff cost than the hybrid plan. D. Has higher inventory carrying cost than the chase plan.

Answer: D - The hybrid plan will have lower hiring/layoff and overtime expenses than the chase plan but will have higher inventory carrying costs. The hybrid plan will have higher hiring/layoff and overtime costs than the level plan but will have lower inventory carrying costs.

. Alpha Company sold 2,000 widgets yesterday. It had forecasted sales of 1,900 units. Using exponential smoothing with a smoothing constant of 0.6, what is the forecast for today's sales of widgets? a) 2,060 b) 1,940 c) 2,040 d) 1,960

Answer: D = 1,900 + 0.6(2,000 − 1,900) = 1,960

1. Which of the following would NOT be a step in conducting an insourcing/outsourcing analysis? a) Assessing quantitative costs of outsourcing b) Evaluating new suppliers who could make the SKU c) Assessing the relationship of the product to the firm's core competencies d) Conducting a detailed internal audit of purchasing practices

Answer: D- All of these are steps in make or buy analysis except reviewing internal purchasing practices.

1. Benefits of single sourcing include all of the following EXCEPT: a) Quantity discounts. b) More consistent quality. c) Better supplier relationships. d) Less supply risks.

Answer: D- Single sourcing increases supply risk.

Which aggregate planning method would you use if it is low cost to ramp up production, workforce is plentiful, and zero inventory is expected at the end of the month. A. Level B. Chase C. Hybrid D. Outsourced

Chase plan

6. A company has the data shown in the chart below concerning its forecast performance over the past four time periods. Complete the chart and compute the MAD and MFE Period Actual Demand Forecast Error Absolute Value of Error 1 345 320 25 2 320 10 3 335 350 4 340 −30 5 350 20 6 400 -10 Total

Period Actual Demand Forecast Error Absolute Value of Error 1 345 320 25 25 2 320 310 10 10 3 335 350 -15 15 4 310 340 −30 30 5 370 350 20 20 6 400 420 -20 20 Total -10 120 MFE = Error / Total of Period MAD = Abs Error / Total of Period MFE = -10/6 = -1.67 MAD = 120/6 = 20