Operations Management Final

(T/F) Diseconomies of scale are known as the capacity cushion

FALSE

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

TRUE

(T/F) Forecasting is a key component in customer relationship management

TRUE

(T/F) In industries where jobs have low skill requirements, changing workforce levels can be cost effective.

TRUE

(T/F) In the context of demand planning, customers' wants and needs define the customer benefit package.

TRUE

(T/F) Marketing and operations prefer high inventory levels, whereas finance would prefer small inventories.

TRUE

(T/F) The ideas and methods surrounding a revenue management system are often called yield management

TRUE

(T/F) The single-period inventory model applies to inventory situations where demand is uncertain

TRUE

(T/F) A work order is a specification of work to be performed for a customer or a client

TRUE

_____ is a common approach to gather data for judgmental forecasts. A. A moving average model B. Regression analysis C. A survey questionnaire D. Single exponential smoothing

C. A survey questionnaire

(T/F) 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

Which of the following is a way to manage capacity by shifting and stimulating demand? A. Adding peripheral goods and/or services B. Adding or sharing equipment C. Changing labor schedules D. Changing labor skill mix

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 B. It is critical to satisfy employees' needs and expectations C. The delivery of goods and services is the responsibility of the purchasing function of a supply chain D. The principal goal of purchasing is to source products from a single supplier to avoid capacity risks

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 B. It does not allow vendors to view inventory needs from the customer's perspective C. It prohibits the use of customer information, which leads to poor control of inventory and capacity D. It prevents vendors from making production decisions using downstream customer demand data

A. It often results in higher customer inventories than necessary

The mean absolute deviation (MAD) for the forecasts shown in the following table is: Month: Forecast Demand, Actual Demand April: 190, 180 May: 175, 200 June: 190, 200 July: 240, 220 August: 225, 195 A. More than 10 but less than or equal to 20 B. More than 20 but less than or equal to 30 C. More than 30 but less than or equal to 40 D. More than 40 but less than or equal to 50

A. More than 10 but less than or equal to 20

Which of the following is true of order amplification? A. Order amplification in the supply chain leads to the bullwhip effect B. Large order sizes can help manage order amplification C. Order amplification decreases as one moves back up the supply chain away from the retail customer D. Increasing price fluctuations can help manage order amplification

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

_____ is the supply chain function responsible for acquiring raw materials, component parts, tools, services, and other items required from external suppliers. A. Procurement B. Scheduling C. Integration D. Job design

A. Procurement

Which of the following lot sizing rules is best applied when setup or order costs are high? A. The fixed-order quantity rule B. The lot-for-lot rule C. The periodic-order quantity rule D. The gross requirements rule

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 B. They comprise less than 30 percent of the total dollar usage C. They can be managed using automated computer systems D. They account for more than 50 percent of inventory 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 B. Exponential smoothing models completely forget past data if the smoothing constant is strictly between 0 and 1 C. Typical values for the smoothing constant are in the range of 1 to 1.5 D. Values of the smoothing constant smaller than 0.1 allow a forecast to react faster to changing conditions

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 B. exceeds the work-in-process inventory C. becomes equal to the finished-goods inventory D. becomes equal to the break-even point

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 B. an hour lost at a nonbottleneck resource is an hour lost for the entire process or factory output C. large order sizes should be used to minimize setup time and maximize resource utilization D. the input should always exceed the capacity

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 B. space constraints are low C. costs associated with purchase orders are high D. setup costs are moderate

A. inventory-carrying costs are high

A single-period inventory problem can be solved using a technique called: A. marginal economic analysis B. total cost analysis C. critical value analysis D. reorder point analysis

A. marginal economic analysis

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the optimal replenishment level with safety stock for a fixed-period system (FPS) under the model assumptions is: Demand 140 units per week Order Cost $30 per order Inv.-Holding Cost $0.40 per unit per year Lead Time 3 weeks Economic Time Interval 7 weeks stdev in weekly demand 8 Service level 95% stdev to achieve acceptable service level 1.645 A. more than 1,350 but less than 1,550 units B. more than 1,550 but less than 1,650 units C. more than 1,650 but less than 1,750 units D. more than 1,750 but less than 1,850 units

A. more than 1,350 but less than 1,550 units

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 B. the setup time and then subtracting the unit resource requirements C. the setup time and then adding in the unit resource requirements D. the unit resource requirements and then subtracting the setup time

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

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. A. wood B. carbon fiber C. cast iron D. adhesive

A. wood

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? A. $10,000 B. $20,000 C. $30,000 D. $40,000

B. $20,000

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 A. 0.75 B. 0.83 C. 1 D. 1.2

B. 0.83

Alex, a manager at Symbic Inc., plotted the company's total energy costs of 1 billion dollars over the past 10 years on a chart. The chart suggested that the energy costs appear to be increasing in a fairly predictable linear fashion and that the energy costs are related to time by a linear function Y t = 3 + 5t, where Y t represents the estimate of the energy cost in year t. Given the equation, which of the following is the value of the intercept of the straight line that best fits the time series? A. 1 B. 3 C. 5 D. 10

B. 3

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. A. 500 units/month B. 700 units/month C. 900 units/month D. 1100 units/month

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? A. Investment B. Allocation C. Capacity Expansion D. Capacity Sharing

B. Allocation

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? A. Aggregate planning B. Disaggregation C. Execution D. Demand forecasting

B. Disaggregation

Which of the following is true of a level production strategy? A. Labor schedules are dynamic B. Equipment schedules are stable C. There are no capacity restrictions D. The production rate keeps changing

B. Equipment schedules are stable

Which of the following is true of the lot-for-lot (LFL) rule? A. It minimizes the costs associated with production setups B. It ignores the costs associated with purchase orders C. It maximizes the amount of inventory that needs to be carried D. It masks the true nature of dependent demand

B. It ignores the costs associated with purchase orders

Which of the following statements is true of a work order? A. It is also called the capacity cushion B. It includes processing requirements for a type of work C. It cannot be defined for services D. It does not include resources needed for a type of work

B. It includes processing requirements for a type of work

Which of the following is true of a master production schedule (MPS)? A. Its primary output is a time-phased report for scheduling raw materials purchase B. It provides a means for evaluating alternative schedules in terms of capacity requirements C. Its input is obtained from the materials requirements planning D. It projects the requirements for the individual parts based on the demand for the finished goods

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? A. Inventory-Carrying Costs B. Lost sales and customer loyalty costs C. High labor costs and premiums D. Separation costs

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? A. The lot-for-lot rule B. The fixed-order quantity rule C. The periodic-order quantity rule D. The gross requirements rule

B. The fixed-order quantity rule

The following table shows the data for the sales of tennis rackets at a store for 4 consecutive months. Find the forecast error in month 4 using a 3-month moving average. Month: 1, 2, 3, 4 Sales: 80, 95, 125, 110 A. The forecast error in month 4 is less than or equal to 5 B. The forecast error in month 4 is more than 5 but less than or equal to 10 C. The forecast error in month 4 is more than 10 but less than or equal to 15 D. The forecast error in month 4 is more than 15

B. The forecast error in month 4 is more than 5 but less than or equal to 10

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 _____. A. physical constraints B. nonphysical constraints C. bottleneck activities D. work orders

B. nonphysical constraints

In the context of the metrics used to identify improvements to the operation of supply chains, financial measures: A. include perfect order fulfillment and perfect delivery fulfillment B. show how supply chain performance affects the bottom line C. calculate order fulfillment lead time in supply chains D. show how quickly goods move through supply chains

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? A. A capacity straddle strategy B. A capacity lag strategy C. A revenue management system D. A pull system

C. A revenue management system

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? A. $1 million B. $2.5 million C. $3 million D. $4.5 million

C. $3 million

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. A. 100 B. 150 C. 200 D. 250

C. 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? A. 101 B. 151 C. 201 D. 251

C. 201

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. A. 2.5 B. 4.25 C. 6.25 D. 9.5

C. 6.25

Which of the following best defines inventory turnover? A. It is the cost associated with repairs of goods that have been returned B. It is the time taken to fill a customer's order C. It is a measure of how quickly goods are moving through the supply chain D. It is a measure of the number of perfect orders

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

The following table shows the sales data of server computers of Ziffcore Inc. for the past 5 years. The management plotted the data on a chart. The chart suggested that the sales appear to be increasing in a fairly predictable linear fashion and that the sales are related to time by a linear function Y t = 240 + 340t. Using simple linear regression, calculate the forecast for sales in year 6. Year: 1, 2, 3, 4, 5 Sales: 580, 920, 1260, 1600, 1940 A. The forecast for sales in year 6 is more than 1800 but less than or equal to 2000 B. The forecast for sales in year 6 is more than 2000 but less than or equal to 2200 C. The forecast for sales in year 6 is more than 2200 but less than or equal to 2400 D. The forecast for sales in year 6 is more than 2400 but less than or equal to 2600

C. The forecast for sales in year 6 is more than 2200 but less than or equal to 2400

The following table shows the data for the sales of a new music album at a store for 4 consecutive months. Find the forecast for the next month using a 3-month moving average. Month: 1, 2, 3, 4 Sales: 112, 105, 125, 118 A. The forecast for the next month is more than 90 but less than or equal to 100 B. The forecast for the next month is more than 100 but less than or equal to 110 C. The forecast for the next month is more than 110 but less than or equal to 120 D. The forecast for the next month is more than 120 but less than or equal to 130

C. The forecast for the next month is more than 110 but less than or equal to 120

Moving average (MA) methods work best when: A. a long planning horizon is involved B. a cyclical pattern is observed in a time series C. demand is relatively stable and consistent D. there is a major trend in a time series

C. demand is relatively stable and consistent

If the time series in an exponential smoothing model exhibits a negative trend, the _____. A. mean square error will be negative B. value of smoothing constant will either be less than zero or greater than one C. forecast will overshoot the actual values D. future forecasts will rely solely upon expertise of people in developing forecasts

C. forecast will overshoot the actual values

In the context of measuring supply chain performance, the goal of sustainability measures is to: A. reduce the order cycle time for all customers B. have a byproduct-free production process C. have a carbon-neutral supply chain D. minimize the time taken to fill a customer's order

C. have a carbon-neutral supply chain

The _____ function of a supply chain is responsible for selecting transportation carriers and managing company-owned fleets of vehicles. A. integration B. procurement C. logistics D. scheduling

C. logistics

Net Steels is a steel manufacturing company. It orders 180 metric tons of raw material per order. It was observed that the company often faces stockout. To tackle this issue, the company incorporated a fixed-quantity system (FQS) and collected the following data. Demand 11,000 metric tons per year Order Cost $18,000 per order Item Cost $36,000 per metric ton Inv.-Holding Cost 20% per year Using the data, Net Steels determined that the economic order quantity (EOQ) should be 235 metric tons. In this scenario, the annual amount that Net Steels can save by ordering as per the EOQ instead of its conventional order is: A. less than $45,000 B. more than $45,000 but less than or equal to $55,000 C. more than $55,000 but less than or equal to $65,000 D. more than $65,000

C. more than $55,000 but less than or equal to $65,000

The mean absolute percentage error (MAPE) for the forecasts shown in the following table is: Month: Forecast Demand, Actual Demand April: 110, 100 May: 150, 125 June: 160, 170 July: 110, 130 August: 150, 180 A. less than or equal to 5 percent B. more than 5 percent but less than or equal to 10 percent C. more than 10 percent but less than or equal to 15 percent D. more than 15 percent

C. more than 10 percent but less than or equal to 15 percent

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: A. less than or equal to 125 pounds B. more than 125 pounds but less than or equal to 175 pounds C. more than 175 pounds but less than or equal to 225 pounds D. more than 225 pounds

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

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the economic time interval for establishing an optimal policy for a fixed-period system (FPS) under the model assumptions is: Demand 12,000 units per year Order Cost $50 per order Inv.-Holding Cost $0.50 per unit per year Lead Time 2 weeks stdev in weekly demand 7 Service level 95% Weeks in a year 52 A. less than or equal to 3 weeks B. more than 3 weeks but less than or equal to 6 weeks C. more than 6 weeks but less than or equal to 9 weeks D. more than 9 weeks

C. more than 6 weeks but less than or equal to 9 weeks

____ 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

A ____ matches capacity additions with demand as closely as possible.

Capacity straddle strategy

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 _____. A. $2,500 B. $15,000 C. $7,500 D. $10,000

D. $10,000

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? A. 968 minutes B. 1300 minutes C. 4275 minutes D. 5675 minutes

D. 5675 minutes

Which of the following is a way to manage capacity by adjusting short-term capacity levels? A. Varying the price of goods or services B. Adding peripheral goods and/or services C. Providing reservations D. Shifting work to slack periods

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. A. capacity lead strategy B. capacity reduction strategy C. capacity straddle strategy D. capacity lag strategy

D. capacity lag strategy

Managing orders, transportation, and distribution to provide goods and services is part of the _____ function of the Supply Chain Operations Reference (SCOR) model. A. plan B. source C. make D. deliver

D. deliver

In the Delphi method of judgmental forecasting, _____. A. predictions are based on the assumption that the future will be an extrapolation of the past B. predictions are based on one or more independent variables, all of which are numerical C. people from outside an organization are not eligible to make predictions D. experts are not consulted as a group to make predictions

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: A. manage a nonperishable asset B. meet the future demand of goods and services C. determine the single price that needs to be charged to all customers D. maximize the revenue generated by a perishable asset

D. maximize the revenue generated by a perishable asset

In the context of forecasting errors, _____ eliminates the measurement scale factor. A. normalized mean signed deviation B. mean absolute deviation C. normalized root mean square error D. mean absolute percentage error

D. mean absolute percentage error

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. A. less than or equal to 0.10 B. more than 0.10 but less than or equal to 0.15 C. more than 0.15 but less than or equal to 0.20 D. more than 0.20

D. more than 0.20

Brenda is the owner of a spa store that operates 50 weeks per year. Spair Shampoo is a high margin stock keeping unit (SKU), but the product goes out of stock frequently. She decides to use a fixed-quantity system (FQS) and orders boxes of Spair Shampoo containing 10 bottles per box from a vendor 160 miles away. She collects the following data with respect to the sales of Spair Shampoo. Demand 10 boxes per week Order Cost $40 per order Item Cost $80 per box Inv.-Holding Cost 15% per year Lead Time 3 weeks stdev in weekly demand 6 Service level 96% Using the given data, it can be concluded that the economic order quantity (EOQ) of the Spair Shampoo boxes is: A. less than 25 boxes B. more than 25 but less than or equal to 35 boxes C. more than 35 but less than or equal to 45 boxes D. more than 55 boxes

D. more than 55 boxes

____ 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.

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

(T/F) A high average inventory value reduces the chances of inventory obsolescence

FALSE

(T/F) Air shipments have the lowest transportation cost and can carry unlimited weight.

FALSE

(T/F) Electronic data interchange and Internet links decrease the velocity of supply chains.

FALSE

(T/F) 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

(T/F) 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

(T/F) Long-term capacity decisions usually involve adjusting schedules or staffing levels.

FALSE

(T/F) Offering complementary goods or services is an example of a short-term capacity strategy

FALSE

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

FALSE

(T/F) Setup costs include costs associated with maintaining storage facilities, such as gas and electricity, taxes, and insurance

FALSE

(T/F) Single-period inventory models are used in situations involving items that can be carried in inventory and sold in future periods

FALSE

(T/F) The Theory of Constraints focuses on eliminating all bottleneck activities in a process

FALSE

(T/F) 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

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

Forecast error

____ 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 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

A ____ 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

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

Statistical forecasting

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

cycle inventory

A(n) ____ 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

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

logistics

Stable demand is usually called _____

static demand

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

the lead time

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

the single-period inventory model

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

trend