SCMA 331 FINAL CH 13
________ maintains a constant output rate, or work force level, over the planning horizon.
Level scheduling
Finding an ideal mixed strategy is complicated by the huge number of possible strategies.
True
One motive for using demand-influencing aggregate planning options is to create uses for excess capacity within an organization.
True
What four things are needed to develop an aggregate plan?
(1) a logical overall unit for measuring sales and output; (2) a forecast of demand for a reasonable intermediate planning period in aggregate planning terms; (3) a method to determine the relevant costs; (4) a model that combines forecasts and costs so that scheduling decisions can be made for the planning period
Identify the five conditions that make revenue management of interest.
(1) service or product can be sold in advance of consumption; (2) fluctuating demand; (3) relatively fixed resource (capacity); (4) segmentable demand; and (5) low variable costs and high fixed costs
"An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning periods" best describes which of the following? A) the linear decision rule B) simulation C) the management coefficients model D) the transportation method E) graphical methods
D
Which of the following is NOT an input to S&OP? A) capacity decisions B) supply-chain support C) workforce D) inventory on hand E) master production schedule
E
Because service firms do not inventory their output, a pure chase strategy is not appropriate.
False
One of the demand options of aggregate planning is to vary the workforce by hiring or layoffs.
False
Plans for new product development generally fall within the scope of aggregate planning.
False
The aggregate planning process usually includes dispatching of individual jobs.
False
The level scheduling strategy allows lower inventories than the pure chase strategy.
False
The objective of aggregate planning is usually to meet forecast demand while smoothing employment and driving down inventory levels over the planning period.
False
________ for developing aggregate plans work with a few variables at a time and are easy to understand and use.
Graphical techniques
What is the primary management challenge when implementing revenue management?
Identifying differences in customers' willingness to pay and pricing accordingly.
In aggregate planning, the amount of overtime and the size of the work force are both adjustable elements of capacity.
True
Mixed strategies in aggregate planning may utilize inventory, work force, and production rate changes over the planning horizon.
True
One of the four things needed for aggregate planning is a logical overall unit for measuring sales and output.
True
One question that operations managers must answer when generating an aggregate plan is whether prices or other factors should be changed to influence demand.
True
Techniques for controlling the cost of labor in services include accurate scheduling of labor hours to assure quick response to customer demand, on-call labor for unexpected demand, flexibility of labor skills for reallocation of available labor, and flexibility in rate of output or hours of work to meet changing demand.
True
The strategies of aggregate planning are broadly divided into demand options and capacity options.
True
The transportation method of linear programming is an optimizing approach to aggregate planning.
True
The use of part-time workers as an aggregate planning option may be less costly than using full-time workers, but it may also reduce quality levels.
True
When developing an aggregate plan, one of the adjustable elements of capacity is the extent of subcontracting.
True
________ is a capacity option that works especially well in the service sector where labor needs are relatively unskilled.
Using part-time workers
A(n) ________ is the result of the disaggregation of an aggregate plan.
master production schedule
A hotel room that goes unrented, a dental appointment that no patient booked, and an airline seat that went unsold, are all examples of ________ in services.
perishable inventory
Advertising and promotion are methods of manipulating product or service supply in aggregate planning.
False
Identify (a) the demand options for aggregate planning; and (b) the capacity (supply) options for aggregate planning.
(a) Demand options are: influencing demand (through price, promotion, advertising, selling), back ordering during high-demand periods, and counterseasonal product and service mixing. (b) Capacity options are: changing inventory levels, varying workforce size by hiring or layoffs, varying production rates through overtime or idle time, subcontracting, and using part-time workers.
What are successful techniques of controlling the cost of labor involved in service firms?
1. accurate scheduling of labor-hours to assure quick response to customer demand 2. an on-call labor resource that can be added or deleted to meet unexpected demand 3. flexibility of individual worker skills that permits reallocation of available labor 4. flexibility in rate of output or hours of work to meet changing demand
Disaggregation: A) breaks the aggregate plan into greater detail. B) transforms the master production schedule into an aggregate plan. C) calculates the optimal price points for yield management. D) converts product schedules and labor assignments to a facility-wide plan. E) is an assumption required for the use of the transportation model in aggregate planning.
A
The objective of aggregate planning is to meet forecast demand while ________ over the planning period. A) minimizing cost B) maximizing service level C) minimizing stock out D) minimizing fixed cost E) all of the above
A
Under which of the following do planning tasks associated with job assignments, ordering, job scheduling, and dispatching typically fall? A) short-range plans B) intermediate-range plans C) long-range plans D) mission-related planning E) strategic planning
A
What directly results from disaggregation of an aggregate plan? A) a master production schedule B) priority scheduling C) a transportation matrix D) a capacity-demand matrix E) detailed work schedules
A
Which of the following actions is consistent with the use of level scheduling? A) use inventory to meet demand requirements B) use overtime to meet higher-than-average demand requirements C) vary production levels to meet demand requirements D) vary work force to meet demand requirements E) none of the above
A
Which of the following aggregate planning strategies is a demand option? A) changing price B) subcontracting C) varying production levels D) changing inventory levels E) using part-time workers
A
Describe the advantages and limitations of the graphical method of aggregate planning.
Advantages include that it is easy to understand and use. Limitations include: (1) it's a trial-and error approach, (2) there is no guarantee that it will provide an optimal solution, and (3) it works with only a few variables at a time.
Describe the advantages and limitations of the transportation method for aggregate planning.
Advantages include that it provides an optimal solution, and it is flexible by allowing overtime, subcontracting, extra shifts, and inventory carryover options. However, it does not work when more factors such as hiring and layoffs are introduced.
________ is an approach to determine the quantity and timing of production for the intermediate future.
Aggregate planning
A manager is applying the transportation model of linear programming to solve an aggregate planning problem. Demand in period 1 is 100 units, and in period 2, demand is 150 units. The manager has 125 hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of regular employment should be used in period 1? (Assume demand must be met in both periods 1 and 2 for the lowest possible cost and that production is 1 unit per hour.) A) 100 B) 125 C) 150 D) 50 E) none of the above
B
Dependence on an external source of supply is found in which of the following aggregate planning strategies? A) varying production rates through overtime or idle time B) subcontracting C) using part-time workers D) back ordering during high demand periods E) hiring and laying off
B
In aggregate planning, which one of the following is not a basic option for altering demand? A) promotion B) subcontracting C) back ordering D) pricing E) personal selling
B
In the service sector, which of the following aggregate planning strategies might direct your client to a competitor? A) using part-time workers B) subcontracting C) changing inventory level D) varying production rates through overtime or idle time E) varying work force size by hiring or layoffs
B
Industries in which revenue management techniques are easiest to apply are those where: A) use tends to be predictable, and pricing tends to be fixed. B) use tends to be predictable, and pricing tends to be variable. C) use tends to be uncertain, and pricing tends to be fixed. D) use tends to be uncertain, and pricing tends to be variable. E) All of the above, i.e., there is no difference.
B
To use revenue management strategies, a business should have which combination of costs? A) high variable and high fixed B) low variable and high fixed C) high variable and low fixed D) low variable and low fixed E) either A or B
B
Under which of the following do planning tasks associated with production planning and budgeting, as well as setting employment, inventory, and subcontracting levels, typically fall? A) short-range plans B) intermediate-range plans C) long-range plans D) demand options E) strategic planning
B
Which choice below best describes the counterseasonal product demand option? A) producing such products as lawnmowers and sunglasses during the winter B) developing a mix of products that smoothes out their demands C) lowering prices when demand is slack D) using subcontractors only when demand is excessive E) the breaking of the aggregate plan into finer levels of detail
B
Which of these aggregate planning strategies is a capacity option? A) back ordering B) using part-time workers C) counterseasonal product mixing D) changing price E) promotion
B
Which of these is among the demand options of aggregate planning? A) subcontracting B) back-ordering during high-demand periods C) changing inventory levels D) varying workforce size E) varying production rates through overtime or idle time
B
A firm practices a pure chase strategy. Production last quarter was 1000. Demand over the next four quarters is estimated to be 900, 700, 1000, and 1000. Hiring cost is $20 per unit, and layoff cost is $5 per unit. Over the next year, what will be the sum of hiring and layoff costs? A) $500 B) $2,500 C) $7,500 D) $7,000 E) $12,500
C
A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period), it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that: A) the January requirement is below level production of 420 units. B) level production is approximately 1000 units per day. C) level production of 420 units per day is below the January requirement. D) level production is approximately 420 units per month. E) the firm must hire workers between December and January.
C
Frito-Lay uses aggregate planning to match capacity with demand because of the ________ associated with its specialized processes. A) high variable cost and high fixed cost B) high variable cost and low fixed cost C) low variable cost and high fixed cost D) low variable cost and low fixed cost E) none of the above
C
In level scheduling, what is kept uniform from month to month? A) product mix B) inventory levels C) production/workforce levels D) demand levels E) sub-contracting levels
C
Top executives tend to focus their attention on which type of forecasts? A) short-range B) intermediate-range C) long-range D) weather E) the forecast for the next day's absentee levels
C
What is the typical time horizon for aggregate planning? A) less than a month B) up to 3 months C) 3 to 18 months D) over one year E) over 5 years
C
Which of the following aggregate planning options is NOT associated with manipulation of product or service demand? A) price cuts or discounts B) promotion C) subcontracting D) counterseasonal products or services E) advertising
C
Which of the following characteristics makes revenue management UNATTRACTIVE to organizations that have perishable inventory? A) demand can be segmented B) service can be sold in advance of consumption C) capacity is easily changed D) variable costs are low and fixed costs are high E) demand fluctuates
C
Which of the following is NOT an advantage of level scheduling? A) stable employment B) lower absenteeism C) matching production exactly with sales D) lower turnover E) more employee commitment
C
Which of the following is NOT one of the four things needed for aggregate planning? A) a logical overall unit for measuring sales and output B) a method to determine the relevant costs C) a mathematical model that will minimize costs over the intermediate planning period D) an aggregate demand forecast for an intermediate planning period E) All of these are needed for aggregate planning.
C
Explain the fundamental difference between the "capacity options" and the "demand options" of aggregate planning strategies.
Capacity options do not try to change the demand but attempt to absorb the demand fluctuations; capacity options deal with supply, not demand. Demand options try to smooth the demand pattern, but do not impact supply or capacity.
Which of the following is NOT one of the successful techniques for controlling the cost of labor in services? A) accurate scheduling of labor-hours to assure quick response to customer demand B) an on-call labor resource that can be added or deleted to meet unexpected demand C) little flexibility in worker hours to decrease the burden on management D) flexibility of individual worker skills that permits reallocation of available labor E) flexibility in rate of output or hours of work to meet changing demand
C
Which of the following statements about aggregate planning is TRUE? A) An advantage of the counterseasonal product and service mixing option is that it matches seasonal fluctuations without hiring/training costs. B) In aggregate planning, back orders are a means of manipulating supply while part-time workers are a way of manipulating product or service demand. C) A pure chase strategy allows lower inventories when compared to a pure level scheduling. D) A disadvantage of subcontracting is that it may require skills or equipment outside the firm's areas of expertise. E) The option of varying workforce size by hiring or layoffs is used where the size of the labor pool is small.
C
Which of the following statements regarding aggregate planning is TRUE? A) In a pure level strategy, production rates or work force levels are adjusted to match demand requirements over the planning horizon. B) A pure level strategy allows lower inventories when compared to pure chase and hybrid strategies. C) Mixed strategies in aggregate planning may utilize inventory, work force, and production rate changes over the planning horizon. D) Because service firms have no inventory, the pure chase strategy does not apply. E) A disadvantage of the option of changing inventory levels is that it forces abrupt production changes.
C
A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. Which of the following tactics would be most representative of following a chase strategy? A) add 100 units to inventory in the next period B) add 200 units to inventory in the next period C) hire workers to match the 100-unit difference D) lay off workers to match the 200-unit difference E) implement a lower price point to increase demand
D
Aggregate planning would entail which of the following production aspects at BMW for a 12-month period? A) number of cars with a hi-fi stereo system to produce B) number of two-door vs. four-door cars to produce C) number of green cars to produce D) total number of cars to produce E) B, C, and D
D
Revenue (or yield) management is best described as: A) a situation where management yields to labor demands. B) a situation where the labor union yields to management demands. C) a process designed to increase the rate of output. D) allocation of scarce resources to customers at prices that will maximize revenue. E) management's selection of a product mix yielding maximum profits.
D
What is the effort to plan the coordination of demand forecasts with functional areas of the firm and its supply chain? A) enterprise resource planning B) material requirements planning C) capacity planning D) sales and operations planning E) new product development
D
Which choice best describes level scheduling? A) Daily production is variable from period to period. B) Subcontracting, hiring, and layoffs manipulate supply. C) Price points are calculated to match demand to capacity. D) Inventory goes up or down to buffer the difference between demand and production. E) Overtime is used to handle seasonal demand fluctuations.
D
Which of the following aggregate planning methods does not work if hiring and layoffs are possible? A) the linear decision rule B) simulation C) the management coefficients model D) the transportation method E) graphical methods
D
Which of the following aggregate planning strategies is a capacity option? A) influencing demand by changing price B) counterseasonal product mixing C) influencing demand by extending lead times D) changing inventory levels E) influencing demand by back ordering
D
Which of the following aggregate planning strategies is known to lower employee morale? A) yield management B) counterseasonal product and service mixing C) changing inventory levels D) varying work force size by hiring or layoffs E) back ordering during high demand periods
D
Which of the following is NOT consistent with level scheduling? A) varying the use of subcontracting B) finding alternative work for employees during low-demand periods C) using built-up inventory to meet demand requirements D) varying production levels and/or work force to meet demand requirements E) All of the above are inconsistent with the pure level strategy.
D
Which of the following is the term used for intermediate-range capacity planning with a time horizon of three to eighteen months? A) material requirements planning B) enterprise resource planning C) strategic planning D) aggregate planning E) job scheduling
D
________ is the process of breaking the aggregate plan into greater detail.
Disaggregation
What is disaggregation?
Disaggregation is the process of breaking the aggregate plan into greater detail.
Aggregate planning for service firms that provide intangible output deals mainly with: A) smoothing the production rate and finding the optimal size of the workforce. B) capital investment decisions. C) centralized purchasing. D) centralized production. E) planning for human resource requirements and managing demand.
E
An aggregate plan satisfies forecast demand by potentially adjusting all EXCEPT which of the following? A) production rates B) labor levels C) inventory levels D) overtime work E) facility capacity
E
Revenue management is MOST likely to be used in which one of the following situations? A) a fast food restaurant with wide demand fluctuations during the day B) a dental clinic that wants to fill its appointment book C) a firm with a good counterseasonal product mix D) a shipping company that can change its fleet size easily E) an airline attempting to fill "perishable" seats at maximum revenue
E
Which of the following aggregate planning options attempts to manipulate product or service demand? A) inventories B) part-time workers C) subcontracting D) overtime/idle time E) price cuts
E
Which of the following is consistent with a pure chase strategy? A) vary production levels to meet demand requirements B) vary work force to meet demand requirements C) vary production levels and work force to meet demand requirements D) little or no use of inventory to meet demand requirements E) All of the above are consistent with a pure chase strategy.
E
Which of the following statements regarding aggregate planning in services is FALSE? A) Approaches to aggregate planning differ by the type of service provided. B) Some service organizations conduct aggregate planning in exactly the same way as manufacturing firms, but with demand management taking a more active role. C) Aggregate planning in some service industries may be easier than in manufacturing. D) Labor is the primary aggregate planning vehicle. E) Level scheduling is far more common than using a chase strategy.
E
Which of the following would most likely fall under the scope of only an operations manager? A) research and development B) new product plans C) capital investments D) facility location/capacity E) setting inventory levels
E
________ involves capacity decisions that determine the allocation of resources to maximize revenue or yield.
Revenue management (or Yield management)
What is a disadvantage common to the following two strategies: (1) varying inventory levels and (2) back ordering during periods of high demand?
Shortages or backorders may result in lost sales, i.e., customers may go elsewhere.
Compare the chase strategy versus level scheduling.
The chase strategy sets production equal to forecasted demand, using varying workforce levels, overtime, idle time, part-time employees, or subcontracting. Its main advantage is low inventory levels. The level strategy maintains a constant output rate, production rate, or workforce level over the planning horizon. A stable workforce generally leads to better quality, less turnover and absenteeism, and more employee commitment to corporate goals.
Graphical techniques are easy to understand and use, but are not well-suited for generating optimal strategies.
True
List, in order, the five steps of the graphical method of aggregate planning. Is it possible that these steps can be properly followed and the solution properly implemented without using a graph? Explain.
The steps are: 1. Determine the demand in each period. 2. Determine capacity for regular time, overtime, and subcontracting each period. 3. Find labor costs, hiring and layoff costs, and inventory holding costs. 4. Consider company policy that may apply to the workers or to stock levels. 5. Develop alternative plans and examine their total costs. The steps can be followed and the solution implemented with tables of values and without
The textbook illustrates demand management in the form of price cuts or discounts. Can demand manipulation for aggregate planning involve price increases? Explain; provide an example.
The text did allude to price increases when it stated that air conditioners are "least expensive in winter"-they must be more expensive when demand is high. Lower prices for one circumstance imply higher prices (or lower discounts) in other circumstances. Student examples may build from text examples, or come from experience, such as: energy companies can use peak-load pricing; transit systems have higher rush-hour fares, etc. The bottom line is that higher prices may lower demand during certain periods. In some cases, that demand will be lost (with the revenue at least partially being made up in the form of a higher price per unit). In other cases, that demand will be pushed to a different period (smoothed), which is actually a good thing for the company from a cost perspective.
What is the typical planning horizon for aggregate planning?
The typical planning horizon is intermediate—3 to 18 months ahead.
Most people would argue that a service firm must follow chase or mixed strategies. On the other hand, most state agencies, which are clearly service-oriented, are not at all able to "chase" demand. Discuss how they manipulate demand to allow the level strategy to be used.
This is a critical-thinking item for students. Most will recognize that state agencies (driver's license, tax, etc.) are often level because of restrictions on their ability to hire and layoff at will. Most students will uncover examples from personal experience, such as: demand is forced to meet level capacity by queues, waiting lines, processing delays (back orders), appointments, or ultimately by lost "sales."
If a service firm were to attempt level scheduling for aggregate planning, should its level of output be at average demand, peak demand, or minimum demand?
This is a critical-thinking question for students. The answer depends on the ability of customers to reschedule or reserve service times, and upon the organization's view toward lost sales. Level = average if customers can reserve or reschedule. Level = maximum if the organization wishes to prevent lost sales.
Normally, the transportation model is used to solve problems involving several physical sources of product and several physical uses of the product, as in factories and warehouses. How is it possible to use the transportation model where the "routes" are from one time period to another? Describe how this provides aggregate planners with a usable mathematical model.
Time travel is not involved. "From" regular time March "To" demand May simply describes when production took place to provide the units sold in May. "From" April production "To" March demand simply describes back orders — demand in one month is met by production in a later period. The algorithm is optimizing — it minimizes cost over the planning period; the algorithm balances supply and demand by combinations of capacity options and demand options.
A hotel room that goes unrented and an airline seat that goes unsold are both examples of perishable inventory in services.
True
Aggregate planning for fast food restaurants is very similar to aggregate planning in manufacturing, but with much smaller units of time.
True
Aggregate planning in manufacturing ties organizational strategic goals to a production plan.
True
Aggregate planning occurs over the medium or intermediate future of 3 to 18 months.
True
Disaggregation is the process of breaking the aggregate plan into greater detail; one example of this detail is the master production schedule.
True
The ________ strategy sets production equal to forecasted demand.
chase
Developing a mix of ________ products is a widely used demand smoothing technique.
counterseasonal
Among the mathematical approaches to aggregate planning, ________ is good at working with inventories, holding costs, overtime, and subcontracting, but not with hiring and layoffs.
the transportation method of linear programming
