SALES AND OPERATIONS PLANNING QUESTIONS
An MTO company would like to cut a product's backlog from six to four months. If annual demand is 360 units, the production plan for this year should be how many units? A. 420 units B. 300 units C. 480 units D. 360 units
A. 420 units In an MTO environment, reducing the backlog by two months requires producing and shipping two additional months worth of units. The annual demand of 360 units equals a monthly average of 30 units, so 60 additional units would be required. The annual demand of 360 plus the 60 additional units to reduce the backlog would equal 420 units.
If supply and demand are not in balance at the aggregate supply level, what should be the priority to resolve the issue? A. Adjusting supply even if it is difficult B. Adjusting how supply and demand are measured so imbalances are less frequent C. Adjusting supply and demand at the strategic level so it is not needed at the aggregate supply level D. Adjusting demand if it is less difficult than adjusting supply
A. Adjusting supply even if it is difficult Supply and demand balancing both occur regularly at a well-functioning organization, but the more difficult and costly efforts that may be required are typically attempted on the supply side before resorting to greater efforts on the demand side. This is because supply adjustments require internal changes while demand adjustments involve influencing external customers to accept changes.
Which of the following is most likely to occur in a company that does not use a formal sales and operations planning process? A. Conflicting processes will exist individually within the various departments. B. The potentially available demand quantity will not be recognized. C. Inventory turns will be used to plan production for the next month. D. Senior executives will develop the plans required for operation.
A. Conflicting processes will exist individually within the various departments. Each department will have its own plan for tracking plan to actual, but the plans will not be integrated.
What term is used for the sales and operations planning process of dividing products or services into families, brands, and subfamilies for various planning levels? A. Product/service hierarchy B. Product positioning C. Product load profile D. Product configuration
A. Product/service hierarchy A product/service hierarchy is an approach to dividing products or services into families, brands, and subfamilies for various planning levels.
Which of the following is the first level at which existing inventory is accounted for in the planning hierarchy? A. Sales and operations planning B. Master planning C. Detailed scheduling and planning D. Business planning
A. Sales and operations planning Sales and operations planning accounts for inventory as part of the plan in order to determine production requirements.
A sales forecast for a product in a certain period is defined as the company's: A. expected sales. B. shipments to customers. C. sales quota. D. desired sales.
A. expected sales. A forecast is the expected level of sales, not the quota. Desired sales may exceed the expected sales, and customer shipments may not consume the forecast in the same period.
Demand for a part that is produced by another plant or division within the same organization is known as: A. interplant demand. B. internal demand. C. distribution demand. D. coupled demand.
A. interplant demand. Interplant demand is one plant's need for a part or product that is produced by another plant or division within the same organization.
The number of exposures to stockouts is related to: A. the number of replenishment orders. B. the reorder point. C. the required customer service level. D. the level of safety stock.
A. the number of replenishment orders. The chance of stocking out occurs when inventory is low, which occurs at the time an order is being placed.
Records state that finished goods inventory has 100 items in stock when there are actually 110. The first 100 customer orders are accepted and scheduled for immediate shipment. The next 50 customer orders are scheduled and promised for shipment the following week based on the next scheduled receipt. What is the customer service level for the orders scheduled for shipment? A. 91% B. 100% C. 111% D. Not enough information to determine answer
B. 100% The 100 that were promised this week will all be shipped, so this is a 100% customer service level for the time period.
What should the length of the master scheduling planning horizon be for a make-to-stock product? A. At least as long as the manufacturing lead time B. At least as long as the cumulative lead time C. Equal to the sales and operations planning horizon D. Equal to the delivery lead time
B. At least as long as the cumulative lead time If the planning horizon is shorter than the longest cumulative lead time, there will not be enough time to order components.
Which of the following best describes performance related to sales and operations planning (S&OP)? A. Balance supply with demand within the demand time fence. B. Balance supply with demand over the planning horizon. C. Balance supply with demand within the cumulative lead time. D. Balance current supply with the next period's demand.
B. Balance supply with demand over the planning horizon. The key to S&OP is to balance supply and demand throughout the entire planning horizon.
The sales forecast is disaggregated into individual forecasts at the distribution center level. What may this result in? A. Increases in the planners' need for involvement B. Forecast errors at the detail level C. Decreases in safety stock levels D. Inconsistency between the total forecast and the distribution center forecasts
B. Forecast errors at the detail level Forecasts are more accurate at the aggregate level. It is necessary to break the aggregate forecast into individual forecasts at the distribution center level, but the detailed forecasts will be less accurate.
Which of the following actions to improve the validity of the master schedule is most under the master scheduler's control? A. Identifying sources of demand problems B. Improving the accuracy of the resource bills of material C. Aggregating capacity by flattening bills of material D. Reducing sources of supply problems
B. Improving the accuracy of the resource bills of material Maintaining the resource bills of material to reflect current conditions has an ongoing impact on the validity of the master schedule.
What is a bill of resources? A. Listing of key materials required to manufacture one unit of a selected item B. Listing of key resources required to manufacture one unit of a selected item C. Amount of product that can be loaded for distribution D. Unique configuration created to aid the master scheduler
B. Listing of key resources required to manufacture one unit of a selected item The bill of resources details the key resources required to manufacture one unit of an item.
What happens when the planning horizon is shorter than an item's cumulative lead time? A. Higher level items cannot be planned. B. Lower level items cannot be planned. C. Customer service improves. D. Item cumulative lead time shortens.
B. Lower level items cannot be planned. Lower level items cannot be planned because the sequence of lead-time offsetting adds up to a longer period than the planning horizon. Therefore, the low-level items, requiring the longest lead time into the future, are not planned. Because of lack of planning and the subsequent need for expediting, the customer service level will eventually worsen, not improve. Item cumulative lead time will not shorten automatically. Because MRP planning follows the BOM, higher level items, which are planned first, will receive timely attention.
Sales and operations planning (S&OP) is typically performed at which of the following levels? A. Semi-finished goods B. Product family C. Raw material D. End item (finished goods)
B. Product family S&OP is typically performed at the product family level. It acts as the bridge between the strategic business plan and the master schedule.
Which of the following is an activity included in the master planning of resources? A. MRP B. S&OP C. Strategic planning D. Business planning
B. S&OP Sales and operations planning (S&OP), demand management, and master scheduling are the activities included in the master planning of resources. Business and strategic planning are incorrect because they take place before the master planning of resources begins. Material requirements planning (MRP) is incorrect because it is performed at a lower level.
After the business plan, what is the next step in the planning hierarchy? A. Production plan B. Sales and operations plan C. Logistics plan D. Master schedule
B. Sales and operations plan The business plan is a long-term plan; the next step is to break it down to a medium-term plan, which is what the sales and operations plan does.
Which team has the responsibility for preparing the preliminary production plan? A. Executive S&OP team B. Supply planning team C. Demand planning team D. Pre-S&OP team
B. Supply planning team The supply planning team is responsible for preparing the production plan and recommending changes as necessary to meet the demand plan. The other answers are incorrect because the demand planning team reviews the sales plan; the pre-S&OP team makes decisions on balancing supply and demand; and the executive S&OP team reviews and makes the final decisions on sales and operations plans as necessary.
Which of the following is a reason for evaluating multiple sales and operations plans during the pre-S&OP meeting? A. Because the S&OP plan cannot be finalized until delivered to top management B. To assess their financial implications C. Because the forecast provided may not be accurate D. Because they are theoretical plans only and so can be changed at any time
B. To assess their financial implications The S&OP process requires thorough analysis of alternative sales and operations scenarios to assess their financial implications.
During a core competency analysis, it is discovered that the company has best-in-class capabilities in designing integrated circuits for their top-end products. A few multinational integrated circuit manufacturers have the potential to lower costs significantly. What should the outsourcing decision be? A. To outsource to the chip manufacturer that comes closest to sharing the company's vision of the future B. To keep this technology in-house C. To weight the highest-quality outside supplier most heavily D. To outsource to the chip manufacturer whose technical design group is geographically closest to the company
B. To keep this technology in-house Outsourcing is the process of having suppliers provide goods and services that were previously provided internally. It involves substitution—the replacement of internal capacity and production by that of the supplier.
An MTS company would like to cut its physical inventory from four to two months. If annual demand is 360 units, the production plan for this year should be how many units? A. 480 units B. 360 units C. 300 units D. 420 units
C. 300 units In an MTS environment, the objective to decrease finished goods inventory by two months requires producing two months' less inventory than annual demand requirements. There are currently 4 months of physical inventory in stock (120 units) the objective is to reduce to 2 months (60 units). To do this, they must sell off 60 current inventory units to reduce backlog. Next year they need to sell 360 units, so they only need to produce 300 units as 60 units are already in inventory.
Which of the following statements is true of forecast demand in the master production schedule as it relates to material requirements planning? A. Forecast demand is ignored within the cumulative lead time. B. Forecast demand is ignored beyond the cumulative lead time. C. Forecast demand is treated like any other gross demand. D. Forecast demand is treated like safety stock replenishment.
C. Forecast demand is treated like any other gross demand. Demand is demand, no matter what the source.
A firm's marketing strategy directly impacts the production plan by which of the following actions? A. Increasing after-sale service options B. Increasing customer service functions C. Increasing demand D. Changing capacity
C. Increasing demand By increasing demand from the customer base, marketing will directly impact the existing production schedule created by production management.
A make-to-stock company produces 15 product families of small appliances and fulfills orders from both stock and production. Each product family has a large number of configurations to accommodate multiple uses, features, and options. What is the most difficult to plan in this environment? A. Volume B. Backlog C. Mix D. Capacity
C. Mix Product mix will be the most difficult to plan, due to the large variety.
Why does sales and operations planning (S&OP) address both monetary units and product families? A. Accounting needs monetary unit information, and production needs product information. B. Knowing both enables a cross-check to ensure consistency. C. Monetary units are an input, and product family plans are an output. D. The planning horizon covers both long- and short-term planning.
C. Monetary units are an input, and product family plans are an output. The business plan is an input to the demand part of S&OP and is stated in monetary units; the production plan is an output and is stated in product families. S&OP is considered a medium-term planning horizon.
Which information could be evaluated prior to the end of the month in order to streamline the sales and operations planning process? A. On-time performance B. Forecast accuracy C. New product review D. Finished goods levels
C. New product review No history exists for new products, so the information can be reviewed any time. The other information is all dependent on end-of-period figures.
A resource plan is based on which of the following components? A. One lot size of each product B. One unit of each product C. One unit of a typical product D. One lot size of a typical product
C. One unit of a typical product A bill of resources lists the required capacity and key resources needed to manufacture one unit of a selected item or family.
Manufacturing is responsible for executing which of the plans that come from the sales and operations planning meeting? A. Backlog B. Sales C. Production D. Capacity
C. Production Manufacturing is responsible for the production plan.
What should be included in the pre-S&OP meeting? A. Determination of reasons for quality problems B. Discussion of customer service improvement plans C. Solution for imbalances of supply and demand D. Definition of product families to be used for planning
C. Solution for imbalances of supply and demand. In the pre-S&OP meeting, decisions on demand and supply balance are made, problems are resolved, issues are identified, and alternatives are developed. Findings are then sent to the executive S&OP group.
In the sales and operations plan of a make-to-stock company, which of the following indicates that a chase production strategy is being employed? A. The inventory plan increases and decreases along with sales. B. The quality plan closely approximates the sales plan. C. The production plan closely approximates the sales plan. D. The backlog plan remains level as the production level changes.
C. The production plan closely approximates the sales plan. In a chase strategy, the sales and production plans approximate each other.
Which of the following is most correct regarding the production plan in a make-to-stock environment? A. Past-due load in the production plan receives an increased priority by the planner's use of the critical ratio technique. B. A production plan cannot be used for one-of-a-kind products that have not been assigned to a product family. C. The production plan is the time-phased plan of overall output, and it may be stated in terms of units, tons, or linear feet. D. An overloaded production plan alerts the master scheduler to correct the condition in the master production schedule.
C. The production plan is the time-phased plan of overall output, and it may be stated in terms of units, tons, or linear feet. The production plan is the time-phased plan of overall output.
What is the relationship between the number of weeks in the backlog and the number of weeks in the master scheduling demand time fence? A. They are equal. B. Backlog weeks are greater. C. There is no correlation. D. There is a direct correlation.
C. There is no correlation. The demand time fence indicates when production schedules should be firmed, so there is no correlation with backlog.
Which of the following new product characteristics will most affect the choice of a product family for sales and operations planning (S&OP)? A. Volume B. Mix C. Life cycle D. Design
D. Design S&OP plans families of items within a production environment and process choice, so the design of the product would determine which production process it would be similar to.
During the S&OP process, performing a financial evaluation of alternative strategies includes which of the following? A. Number and productivity of workers, cost of changing work levels, inventory costs, and priority sequence of load B. Inventory costs only C. Cost of changing work levels and inventory costs D. Number and productivity of workers, cost of changing work levels, and inventory costs
D. Number and productivity of workers, cost of changing work levels, and inventory costs "Cost of changing work levels and inventory costs" would be correct if it were to include the number and productivity of the workers, which does have a financial impact. "Inventory costs" is incorrect because, in addition to excluding the number and productivity of workers, it also excludes the cost of changing work levels, which has an impact on the financial alternatives. "Number and productivity of workers, cost of changing work levels, inventory costs, and priority sequence of load" is incorrect because it includes the priority sequence of the load, which is determined at the execution level of MPC and not during the S&OP process.
Which of the following products is most likely to be the simplest to develop a sales and operations plan for? A. Ballpoint pens B. Printers C. Blue jeans D. Plywood
D. Plywood Plywood is produced using a continuous process and then cut into lengths. The other products would have more complex product structures and multiple product families.
Which of the following actions will a company most likely take as a primary focus of its level production strategy to deal with demand peaks while meeting standard lead time delivery? A. Level load demand. B. Work overtime. C. Subcontract. D. Produce ahead.
D. Produce ahead. Building up inventory is used to buffer peak demand.
S&OP typically is done at which of the following levels? A. Component options B. End item C. Stock keeping units D. Product family
D. Product family S&OP typically is done at the product family level. End items or stock keeping units generally are planned at the master scheduling level, and are therefore incorrect answers. Component options are planned at the material planning level of MPC, and therefore also incorrect.
Which of the following approaches can streamline the sales and operations planning review process? A. Generate reports that show full detail and associated aggregations. B. Delegate the reviews among the demand team. C. Add additional months to the rolling plan only when necessary. D. Report only out-of-tolerance conditions, with further detail available.
D. Report only out-of-tolerance conditions, with further detail available It is most important to identify and assess out-of-tolerance conditions.
A disagreement between sales and production when modifying the sales and operations plan is most likely to be caused by which of the following? A. Sales not considering production's overdue orders B. No capacity for a two-week shutdown in July C. Product mix sales always being inaccurate D. Sales volume being consistently overstated
D. Sales volume being consistently overstated An overstated sales plan will result in an overstated production plan, causing production to overplan resources.
A company produces some of its 20 top sellers every day. It has a customer service policy of 99.5%, with next-day air shipments for each order. What is the most likely reason for not carrying safety stock on its highest-volume products? A. Not carrying safety stock improves inventory turns. B. Producing some of each item every day guarantees no stockouts. C. It is acceptable to have stockouts because the service level policy is not 100%. D. Stockout duration will be short and few orders will be affected.
D. Stockout duration will be short and few orders will be affected. If a stockout were to occur, the inventory would be replenished within 24 hours. Shipments can still occur by the next day due to the daily production of top sellers, so this will be a delay of only one additional day. The organization must be operating under the assumption that a one-day delay will still result in satisfied customers.
A production leveling strategy refers to: A. matching demand somewhat and using inventory to meet demand. B. producing a minimum level and matching demand through subcontracting. C. matching demand at any given time. D. producing to average levels.
D. producing to average levels. A level production method maintains a stable production rate while varying inventory levels to meet demand.