Operations Management Quiz 4
According to the textbook, which of the following is considered a reason that ERP implementations fail?
-Lack of communication between the firm and its ERP software provider -Top Management doesn't take an active role in the implementation process -Management underestimates the training required to implement the system
While ERP is a relatively new technology, it has grown rapidly since the early 1990s. Which of the following is a reason that has contributed to its rapid growth?
-The year 2000 millennium bug -The rapid development of computer and information technology over the last three decades -A recent development in ERP called cloud computing
enterprise resource planning
A packaged business software system that lets a company automate and integrate the majority of its business processes, share common data and practices across the enterprise and produce and access information in a real-time environment.
rough-cut capacity plan
A plan that is used to check the feasibility of the master production schedule.
lead capacity strategy
A proactive approach that adds or subtracts capacity in anticipation of future market condition and demand.
chase production strategy
A production strategy that adjusts output to match the demand pattern during each production period.
lag capacity strategy
A reactive approach that adjusts capacity in response to demand.
periodic review system
A review of physical inventory at specific points in time.
near field communication (NFC)
A secure form of data exchange between an NFC tag or Android-powered device with another Android-powered device. NFC is a specialized subset of RFID technology.
Capacity requirements planning
A shortrange capacity planning technique that is used to check the feasibility of the material requirements plan.
material requirements plan
A software application that has been available since the 1970s; it performs an analysis of the firm's existing internal conditions and reports back what the production and purchase requirements are for a given finished product manufacturing schedule.
Radio frequency identification (RFID)
A technology that enables huge amounts of information to be stored on chips (called tags) and read at a distance by readers, without requiring line-of-sight scanning.
bullwhip effect
A term referring to ineffective communication between buyers and suppliers and infrequent delivery of materials, combined with production based on poor forecasts along a supply chain that results in either too little or too much inventory at various points of storage and consumption. Simply, it causes an amplification of the variation in the demand pattern along the supply chain.
80/20 rule
A theory originating from Pareto analysis, which suggests that most of a firm's problem "events" (80 percent) are accounted for by just a few (20 percent) of the problems; can also be applied to other areas, such as ABC inventory control, which says that 80 percent of the inventory dollars come from 20 percent of the inventory items.
distribution requirements plan
A timephased finished goods inventory replenishment plan in a distribution network
ABC inventory control system
A useful technique for determining which inventories should be managed more closely and which others should not (A-items are the most important).
economic manufacturing quantity (EMQ)
A variation of the classic EOQ model, used to determine the most economical number of units to produce.
quantity discount model
A variation of the classic EOQ model, wherein purchase price is allowed to vary with the quantity purchased.
electronic product code (EPC)
A widely used RFID standard managed by EPC global, Inc.
inventory turnover ratio
A widely used measure to analyze how efficiently a firm uses its inventory to generate revenue.
The two types of RFID tag are:
Active and passive.
single integrator solution
An ERP system that uses all the desired applications from the same vendor.
closed-loop MRP
An MRP-based manufacturing planning and control system that incorporates aggregate production planning, master production scheduling, material requirements planning and capacity requirements planning.
active RFID tags
An RFID tag that is equipped with an onboard power supply to power the integrated circuits and broadcast its signal to the tag reader.
continuous review system
An inventory management system where the physical inventory levels are counted on a continuous or daily basis.
manufacturing resource planning
An outgrowth and extension of the original closed loop MRP system.
Enterprise systems made from applications purchased from multiple vendors over time may be referred to as:
Best-of-breed
Which of the following shows the parent-component relationships and the exact quantity of each component required for making a higher-level part?
Bill of Materials
Which production planning strategy varies production to match demand?
Chase production strategy
Use of the periodic review system is characterized by:
Constant order quantities at variable time intervals.
Direct costs
Costs that are directly traceable to the unit produced, such as the amount of materials and labor used to produce a unit of the finished good.
Fixed costs
Costs that are independent of the output quantity.
When General Motors purchases tires for their automobiles, this can be classified as:
Dependent demand
Each unit produced contains $1.25 in materials. This is an example of:
Direct cost
Which of the following is a time-phased finished-goods inventory replenishment plan in a distribution network?
Distribution requirements plan
When using the continuous review system, stockouts can occur:
During the delivery lead time
Which of the following is a reason firms are migrating to ERP systems?
ERP systems use a centralized database system to tie the entire organization together
reorder point (ROP)
The lowest inventory level at which a new order must be placed to avoid a stockout during the order cycle time period.
price break point
The minimum quantity required to receive a quantity discount.
The quantity discount model is used when:
The purchase price varies.
Which of the following was a limitation of the legacy MRP systems?
The systems were designed to perform a very specific operational function
An RFID system consists of:
The tag, reader, communication network, and software.
Distribution requirements planning
The time-phased net requirements from central supply warehouses and distribution centers. It links production with distribution planning by providing aggregate time-phased net requirements information to the master production schedule.
available-to-promise (ATP) quantity
The uncommitted portion of a firm's planned production. It is used to promise new customer orders.
Indirect costs
Those costs that cannot be traced directly to the unit produced and are synonymous with manufacturing overhead.
level production strategy
Using a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern.
cloud computing
When shared resources and other information are made available to users over the Internet, usually for a subscription fee. It allows small businesses, for example, to make use of sophisticated software without actually making the purchase; also termed on-demand computing.
service level
The in-stock probability.
dependent demand
The internal demand for parts based on the demand of the final product in which the parts are used.
economic order quantity (EOQ) model
The classic independent demand inventory system that computes the optimal order quantity to minimize total inventory costs.
Which of the following describes the capacity planning horizon order from long to short range?
1st - Resource requirements plan (RRP), 2nd - Rough-cut capacity plan (RCCP), 3rd - Capacity requirements plan (CRP)
When using the ABC Inventory Classification, A items typically account for about:
80% of the annual dollar usage.
legacy MRP system
A broad label used to describe an older information system that usually works at an operational level to schedule production within a single facility.
cycle counting
A commonly used technique in which physical inventory is counted on a periodic basis to ensure that physical inventory matches current inventory records.
electronic data interchange
A computer-to-computer exchange of business documents such as purchase orders, order status inquiries and reports, promotion announcements and shipping and billing notices.
ABC inventory matrix
A diagram that illustrates whether a firm's physical inventory matches its inventory usage. It is derived by plotting an ABC analysis based on inventory usage classification on the vertical axis and an ABC analysis based on physical inventory classification on the horizontal axis.
Pareto analysis
A graphic technique that prioritizes the most frequently occurring problems or issues. The analysis recommends that problems falling into the most frequently occurring category be assigned the highest priority and managed closely.
product family
A group consisting of different products that share similar characteristics, components or manufacturing processes.
resource requirements planning
A long range capacity planning module that is used to check whether aggregate resources are capable of satisfying the aggregate production plan.
aggregate production plan
A long-range production plan; it sets the aggregate output rate, workforce size, utilization, inventory and backlog levels for a plant.
master production schedule
A medium range production plan that is more detailed than the aggregate production plan.
Too much inventory creates:
Excess carrying cost.
variable costs
Expenses that vary as a function of the output level.
Completed items ready for shipment are classified as:
Finished goods inventories
make-to-order
Firms that make custom products based on orders from customers, resulting in long lead times and higher unit costs.
make-to-stock
Firms that typically emphasize immediate delivery of off-the-shelf, standard goods at relatively low prices compared to the chase strategy.
If the EOQ assumptions hold, and if a firm orders the EOQ, the average inventory level over time should be
Half the EOQ.
The Economic Manufacturing Quantity (EMQ) model relaxes which assumption of the classical EOQ model?
Instantaneous replenishment
A limitation that these systems needed continuous modifications pertains to which of the following?
Legacy MRP system
Which production strategy is best suited for firms needing highly skilled labor where hiring and training costs are high?
Level production strategy
The categories of inventory are raw materials, work-in-process, finished goods and _______.
Maintenance, repair and operating supplies
Which of the following is very detailed and specifies the end-product to be made, how many units are required and when they need to be completed?
Master production schedule
Which production planning strategy maintains a core workforce while using overtime, temporary, or part-time workers to manage demand fluctuations?
Mixed production strategy
setup costs
The costs associated with setting up machines and equipment to produce a batch of product; the term is often used in place of order costs.
independent demand
The demand for final products and service parts. It has a demand pattern that is affected by trends, seasonal patterns and general market conditions.
Cycle counting can be described as:
Physically counting inventory on a periodic basis.
passive RFID tags
RFID tags that are without an internal power source and require power from a tag reader.
Which of the following is considered an advantage/benefit of utilizing an ERP system?
Reduces the bullwhip effect
Which of the following is not an assumption of the basic economic order quantity model?
Replenishments take place at the proper time
Which of the following is not a dependent demand item?
Retail goods at a department store
To check the feasibility of the Master Production Schedule, one would look to:
Rough-Cut Capacity Plan
time fence system
Separates the planning horizon into two segments: a firmed and a tentative segment.
Organizations that choose to implement one single system with all of the desired applications from a single vendor is said to have chosen a(n):
Single integrator solution
Which of the following systems allows changes and other modifications to be executed quickly to minimize delivery lead times?
The Enterprise Resource Planning System
planned order releases
The bottom line of an MRP part record. It designates when the specific quantity is to be ordered from the supplier or to begin being processed. These quantities also determine the gross requirements of the dependent or "children" parts going into this higher level part or product.