Operations Management Exam3

Greyon Spinning Mills Inc. owns 600 spinning machines. Out of these, only 500 are used in a given year. Given this information, the utilization of spinning machines at Greyon Spinning Mills Inc. is _____.

0.83

If an online retail store has cost of goods sold equal to $2 million, has 200 operating days in a year, and has a total average on-hand inventory of $500,000, the cost of goods sold per day is _____.

10,000

Speedex, an automobile company, has an annual sales volume of $3 million, cost of goods sold equal to $2 million, total average on-hand inventory of $600,000, and 150 operating days in a year. What is the daily revenue earned by the company?

20,000

A company currently has no items in inventory. The demand for the next four months is 200, 400, 250, and 350 units. Assuming a level production rate of 350 units per month, determine the ending inventory at the end of the fourth month.

200

In a garments factory, a part requires 0.10 hours of labor per unit in Work Center B and 1 hour of setup time. The planned order release (order size) for a week is 2000 units. Which of the following is the capacity requirement for a week at Work Center B?

201

Josh Smith, the materials manager at a retail store, has determined that a particular product experienced 5 turns last year, with an annual sales volume of $15 million. What was the average inventory value for this product last year?

3 MIL

TekSupply Inc., an automobile parts supplier, held an average automobile parts inventory of $4 million last year. Its cost of goods sold was $25 million. Therefore, the automobile parts experienced an inventory turnover of _____ turns last year.

6.25

is the process of determining the amount of labor and machine resources required to accomplish the tasks of production on a more detailed level, taking into account all component parts and end items in the materials plan.

CAPACITY REQUIREMENTS PLANNING

matches capacity additions with demand as closely as possible.

CAPACITY STRADDLE STRATEGY

is inventory that results from purchasing or producing in larger lots than are needed for immediate consumption or sale.

CYCLE INVENTORY

is the process of translating aggregate plans into short-term operational plans that provide the basis for weekly and daily schedules and detailed resource requirements.

DISSAGGREGATION

For goods-producing firms, at which of the following levels of resource planning does scheduling for individual subassemblies and resources by week and day take place?

Disaggregation

are achieved when the average unit cost of a good or service decreases as the capacity and/or volume of throughput increases.

ECONOMIES OF SCALE

refers to moving work from one workstation to another, assigning people to tasks, setting priorities for jobs, scheduling equipment, and controlling processes.

EXECUTION

A high average inventory value reduces the chances of inventory obsolescence.

FALSE

Air shipments have the lowest transportation cost and can carry unlimited weight.

FALSE

Diseconomies of scale are known as the capacity cushion.

FALSE

Electronic data interchange and Internet links decrease the velocity of supply chains.

FALSE

In a fixed-order-quantity system, when demand is uncertain, using economic order quantity (EOQ) based only on the average demand will result in a low probability of a stockout.

FALSE

In the context of causal forecasting models with multiple regression, an R-squared (R 2) value of 0.70 means that 30 percent of the variation in the dependent variable is explained by the independent variable.

FALSE

Long-term capacity decisions usually involve adjusting schedules or staffing levels.

FALSE

Offering complementary goods or services is an example of a short-term capacity strategy.

FALSE

Resource management for most service-providing organizations generally requires as many intermediate levels of planning as it does for manufacturing.

FALSE

Setup costs include costs associated with maintaining storage facilities, such as gas and electricity, taxes, and insurance.

FALSE

Single-period inventory models are used in situations involving items that can be carried in inventory and sold in future periods.

FALSE

The Theory of Constraints focuses on eliminating all bottleneck activities in a process.

FALSE

The purpose of a master production schedule (MPS) is to break down the aggregate planning decisions into such details as order sizes and schedules for individual subassemblies and resources by week and day.

FALSE

Two examples of process-focused performance measures for sequencing rules are tardiness and lateness.

FALSE

is the difference between the observed value of the time series and the forecast.

FORECAST ERROR

is any entity—real or virtual—that coordinates and shares information between buyers and sellers.

INTERMEDIARY

In the context of fixed-quantity systems, __ is defined as the on-hand quantity (OH) plus any orders placed but which have not arrived minus any backorders (BO).

INVENTORY POSITION

In the context of sequencing, __ is the difference between the completion time and the due date of a job.

LATENESS

In the context of managing inventories in supply chains, __ is the time between placement of an order and its receipt.

LEAD TIME

The _____ function of a supply chain is responsible for selecting transportation carriers and managing company-owned fleets of vehicles.

LOGISTICS

is the discipline of managing the flow of materials and transportation activities to ensure adequate customer service at reasonable cost.

LOGISTICS

In the context of sequencing, __ is the time needed to process a given set of jobs.

MAKESPAN

is the process of using the logic of dependent demand to calculate the quantity and timing of orders for all subassemblies and components that go into and support the production of the end item(s).

MATERIALS REQUIREMENTS PLANNING EXPLOSION

is inventory that has been ordered but is in transit.

PIPELINE INVENTORY

_____ is the supply chain function responsible for acquiring raw materials, component parts, tools, services, and other items required from external suppliers.

PROCUREMENT

is a method for building a statistical model that defines a relationship between a single dependent variable and one or more independent variables, all of which are numerical.

REGRESSION ANALYSIS

consists of dynamic methods to forecast demand, allocate perishable assets across market segments, decide when to overbook and by how much, and determine what price to charge different customer classes.

REVENUE MANAGEMENT SYSTEM

In the context of operations management, __ refers to the assignment of start and completion times to particular jobs, people, or equipment.

SCHEDULING

applies to inventory situations in which one order is placed for a good in anticipation of a future selling season where demand is uncertain.

SINGLE PERIOD INVENTORY MODEL

Stable demand is usually called

STATIC DEMAND

is based on the assumption that the future will be an extrapolation of the past.

STATISTICAL FORECASTING

In the context of inventory costs, _____ can reflect lost sales for external customers or costs associated with interruptions to manufacturing and a assembly lines for internal customers.

STOCKOUT COSTS

In the context of sequencing, __ is the amount of time by which the completion time exceeds the due date of a job.

TARDINESS

is the underlying pattern of growth or decline in a time series.

TREND

A work order is a specification of work to be performed for a customer or a client.

TRUE

Cash-to-cash conversion cycle is the average time to convert a dollar spent to acquire raw materials into a dollar collected for a finished good.

TRUE

Customized scheduling spreadsheets use readily available software such as Microsoft Excel, but may be rather expensive to develop.

TRUE

Different industries use different software packages for scheduling because every industry has different problem structures.

TRUE

Enterprise resource planning (ERP) systems integrate all aspects of a business into a unified information system.

TRUE

Forecasting is a key component in customer relationship management.

TRUE

In industries where jobs have low skill requirements, changing workforce levels can be cost effective.

TRUE

In the context of demand planning, customers' wants and needs define the customer benefit package.

TRUE

Marketing and operations prefer high inventory levels, whereas finance would prefer small inventories.

TRUE

The Clarke-Wright Heuristic Method is used to solve the common scheduling problem in logistics that involves determining routes from a central depot or warehouse to many customers.

TRUE

The ideas and methods surrounding a revenue management system are often called yield management.

TRUE

The single-period inventory model applies to inventory situations where demand is uncertain.

TRUE

CraftWare Inc., a furniture manufacturer, uses ABC analysis to define its inventory value. The inventory contains wood, cast iron, adhesive, and carbon fiber. If wood accounts for 50 percent of the items and 5 percent of the total dollar value; carbon fiber accounts for 10 percent of the items and 60 percent of the total dollar value; cast iron accounts for 25 percent of the items and 18 percent of the total dollar value; and adhesive accounts for 15 percent of the items and 17 percent of the total dollar value, _____ can be classified as a class C item.

WOOD

Which of the following is a way to manage capacity by shifting and stimulating demand?

a. Adding peripheral goods and/or services

Which of the following is true of purchasing?

a. It can have a significant impact on total supply chain costs.

Which of the following is a disadvantage of vendor-managed inventory (VMI)?

a. It often results in higher customer inventories than necessary.

Which of the following is true of order amplification?

a. Order amplification in the supply chain leads to the bullwhip effect.

Which of the following lot sizing rules is best applied when setup or order costs are high?

a. The fixed-order quantity rule

In the context of ABC inventory analysis, which of the following statements is true of class A items?

a. They require close control by operations managers.

In the context of a fairly stable time series with relatively little random variability, which of the following statements is true of single exponential smoothing (SES)?

a. Values of the smoothing constant larger than 0.5 place more emphasis on recent data.

In the context of a fixed-order-quantity system, stockouts occur whenever the lead-time demand _____.

a. exceeds the reorder point

Nonbottleneck management principles differ from bottleneck management principles because according to nonbottleneck management principles, _____.

a. idle time is acceptable if there is no work to do

The lot-for-lot (LFL) rule is best applied when:

a. inventory-carrying costs are high.

A single-period inventory problem can be solved using a technique called:

a. marginal economic analysis.

In the context of sequencing, the earliest due date (EDD) rule:

a. minimizes the maximum number of jobs past due.

In the context of sequencing, the _____ minimizes the average lateness of a set of jobs.

a. shortest processing time rule

Capacity requirements are computed by multiplying the number of units scheduled for production at a work center by the:

a. the unit resource requirements and then adding in the setup time.

A company currently has 100 items in inventory. The demand for the next four months is 500, 800, 900, and 300 units. Determine the monthly production rate if a level strategy is selected with the goal of ending the fourth month with 400 units in inventory.

b. 700 units/month

Magnira Hotels is a leading chain of hotels. Its managers reserve 30% of the rooms available only to the members of its club. They also provide the rooms at subsidized prices to these members. In this scenario, which of the following components of revenue management system is most likely used by Magnira Hotels?

b. Allocation

Which of the following is true of a level production strategy?

b. Equipment schedules are stable.

Which of the following is true of the lot-for-lot (LFL) rule?

b. It ignores the costs associated with purchase orders.

Which of the following statements is true of a work order?

b. It includes processing requirements for a type of work.

Which of the following is true of a master production schedule (MPS)?

b. It provides a means for evaluating alternative schedules in terms of capacity requirements.

In the context of aggregate planning options, which of the following costs are an implication of allowing stockouts?

b. Lost sales and customer loyalty costs

Which of the following lot sizing rules bases the order quantity on a standard-size container or pallet load?

b. The fixed-order quantity rule

Lumeris Inc., an automobile manufacturer, has an inflexible work schedule and requires its workers to work nine hours a day and six days a week. Its laborers do not have adequate skills to perform their job efficiently. The inflexible work schedule and inadequate labor skills are examples of _____.

b. nonphysical constraints

In the context of operations management, triage nurses deciding on the order in which emergency patients are to be treated is an example of _____.

b. sequencing

In the context of the metrics used to identify improvements to the operation of supply chains, financial measures:

b. show how supply chain performance affects the bottom line.

A doctor's office charges no-show patients $30 if they do not cancel their appointment 24 hours prior to the appointment. In this scenario, which of the following can be used by the doctor's office to handle the risk of idle service capacity?

c. A revenue management system

_____ is a common approach to gather data for judgmental forecasts.

c. A survey questionnaire

Which of the following best defines inventory turnover?

c. It is a measure of how quickly goods are moving through the supply chain.

If the time series in an exponential smoothing model exhibits a negative trend, the _____.

c. forecast will overshoot the actual values

In the context of measuring supply chain performance, the goal of sustainability measures is to:

c. have a carbon-neutral supply chain.

Vision Toys uses a fixed-quantity system to manage its inventories. The inventory includes plastic and LED bulbs. It was observed that the company often faces stockout of plastic. The average weekly demand for plastic is 100 pounds, and historical data show that the standard deviation of weekly demand is about 7. The lead time from the plastic supplier is 2 weeks. If the company's acceptable service level is 95 percent and the number of standard deviations necessary to achieve the acceptable service level is 1.645, the reorder point for plastic with safety stock is:

c. more than 175 pounds but less than or equal to 225 pounds.

In a two-resource sequencing problem, _____.

c. the goal is to minimize makespan

Avexim Pharmaceutical Laboratories is an international group of companies that manufactures an antiepileptic prescription drug in huge volumes. The setup time for manufacturing the drug is 75 minutes, the processing time is 8 minutes, and the order size is 700 units. In this case, which of the following is the total time required to meet the given production volume?

d. 5675 minutes

Which of the following is a way to manage capacity by adjusting short-term capacity levels?

d. Shifting work to slack periods

Blyrie Inc., a sports goods manufacturing company, follows a policy that involves manufacturing only when the demand exceeds the amount of goods already manufactured. Given this information, Blyrie Inc. most likely uses a _____ to expand its capacity.

d. capacity lag strategy

In the Delphi method of judgmental forecasting, _____.

d. experts are not consulted as a group to make predictions

In a revenue management system, forecasting, allocation, overbooking, and pricing must work in unison if the objective is to:

d. maximize the revenue generated by a perishable asset.

In the context of sequencing, the shortest processing time (SPT) rule tends to:

d. minimize work-in-process inventory.

An exponential smoothing model must have a smoothing constant (α) _____ to be roughly equivalent to a moving average model with a seven-month moving average.

d. more than 0.20

Managing orders, transportation, and distribution to provide goods and services is part of the _____ function of the Supply Chain Operations Reference (SCOR) model.

deliver