2.A Ch 4. Operations Planning and Control

Which of the following is an integral part of the sales and operations planning (S&OP) process because it promotes meeting brevity and consensus building? A. Replanning B. Maximum 12-month planning horizon C. Individual item-level review D. Allowing functional areas to develop separate demand plans P 2-81

A. A key aspect of the S&OP process is replanning. Only changes since the last meeting need to be reviewed; this promotes meeting brevity. Since the plan is reviewed each month and decisions can be revisited, replanning promotes consensus building.

Which of the following production strategies sometimes meets resistance from distribution centers because of the increased demands for skills training and capacity expansion? A. Assemble-to-order B. Make-to-order C. Make-to-stock D. Just-in-Time (JIT) P 2-91

A. An assemble-to-order strategy may require warehouse or sales personnel to complete the final stages of finishing a product, thus requiring workers to acquire new skills and, in some cases, the facility to expand capacity to accommodate the finishing operations.

Which of the following provides a point of reference for formulating sales and operations planning? A. Business plan B. Financial plan C. Production forecast D. Marketing plan P 2-77

A. The sales and operations plan takes the business plan as its point of reference for developing a plan that balances supply and demand by merging input from sales and marketing on the one hand and operations on the other.

Which of the following would be a typical time horizon for sales and operations planning? A. One week to one month B. One month to one quarter C. 12 to 18 months D. 18 months to three years P 2-86

A. The sales and operations plan typically extends out at least a year and no more than 18 months and involves both short- and medium-term planning.

For which of the following items should demand be calculated rather than forecast? A. All Chevrolets B. All Chevrolet Cruzes C. All steering wheels for new Chevrolet Cruzes D. All Chevrolet replacement parts P 2-91

C. Steering wheels are a dependent demand item; the demand for dependent items should be calculated from the forecast of demand for their parent items. Steering wheels are a component; the new cars they go into are the parents. Replacement parts are sold, manufactured, and forecast as independent items, not as dependent components.

Which of the following would be included in a list of dependent demand items? A. Computer hard drives delivered to the computer manufacturer for installation depending on customer request B. Car mirrors delivered to an automotive dealership as repair parts C. Shirts delivered to a retailer for stocking on shelves D. Computer audio subsystems delivered to a computer superstore for sale as upgrade items P 2-91?

A. Dependent demand items are components delivered for installation in finished products. The same items may also be subject to independent demand when, like hard drives in the option above, they are sold separately for purchase in repair operations or as upgrades. If the item is ordered directly by the consumer, it is part of independent demand; if it is ordered for installation in a parent product only, it is the subject of dependent demand.

The sales and operations plan (S&OP) includes which of the following? A. Monthly production figures by product family B. Monthly production figures by individual manufacturing center C. Monthly production figures for individual stock keeping units (SKUs) D. Weekly production figures by individual stock keeping unit (SKU) P 2-87

A. S&OP focuses on monthly production amounts for product families. Scheduling for individual products (SKUs) comes later in the planning process.

When a restaurant pursues a chase production strategy, at the points of highest and lowest load, capacity key performance indicators for hourly labor and perishable inventory should show that there is: A. just the right amount of capacity at both the highest and lowest loads. B. the right amount of capacity at the highest load and too much capacity at the lowest load. C. too much capacity at the highest and lowest loads. D. too little capacity at the highest load and just the right amount of capacity at the lowest load. P 2-89

A. The APICS Dictionary, 15th edition, defines a chase production method as "a production planning method that maintains a stable inventory level while varying production to meet demand." Balancing capacity against load in this strategy means that capacity is able to increase to meet peak load and is able to be reduced in time for the period of low load.

The sales and operations planning (S&OP) team might decide to adopt a chase production strategy because it offers which of the following benefits? A. Reduced inventory holding costs B. More predictable production scheduling C. Protection against a sudden need to hire temporary workers in production D. Reduction of resource costs during demand periods P 2-89

A. The chase production strategy, also called demand matching, attempts to match production to demand in each period of the schedule. If the strategy succeeds, inventory costs can be kept to a minimum. The trade-offs include the possibility of extra hiring (or layoffs) if demand and production don't match or a need to ramp up capacity to match peak demand.

A demand plan dashboard for use in the demand review meeting of the sales and operations planning (S&OP) process should include which of the following information? A. Key events, risks, and notes on where demand-side departments disagree B. Metrics on demand for future months C. Supply capacity D. Separate demand plans from each demand-side department P 2-82

A. The demand manager can facilitate the demand review meeting by preparing demand plan dashboards that consolidate the various departments' plans, highlighting where significant disagreements exist. Note that the dashboard also lists examples of key historical (not future) performance metrics, assumptions, events, opportunities, risks, and decisions.

What is the proper order for the meetings in the sales and operations planning (S&OP) process? A. Product review, demand planning, supply planning, financial review, pre-meeting B. Pre-meeting, product review, demand planning, financial review, supply planning C. Product review, supply planning, demand planning, pre-meeting, financial review D. Pre-meeting, demand planning, product review, financial review, supply planning P 2-79

A. The meetings in the S&OP process may include a product review, demand planning, supply planning, a financial review, a pre-meeting, and the executive S&OP meeting. Note that the product review and the financial review are meetings suggested by Crum in Demand Management Best Practices, while the other meetings are part of Wallace's S&OP process steps from Sales and Operations Planning: The How-to Handbook.

Which of the following could be subject to alteration as the result of decisions made in an executive sales and operations planning (S&OP) meeting? A. Marketing plans B. Debt versus equity levels C. Product features D. Weekly production schedules P 2-84

A. The monthly S&OP meeting deals with aggregate-level information about product families and output. The S&OP executive committee compares the demand plan to the business plan to see if actions need to be taken to bring them in line with each other (e.g., additional marketing activities).

What is the focus of strategic and business planning? A. Marshalling resources and determining actions to support the organizational mission and goals B. Examining the system's capacity over 15 to 18 months, factoring in lead time of resources C. Setting out a strategy detailing how to go about the process of going public on stock exchanges for the first time D. Taking the forecast and determining what production can accomplish using available capacity P 2-76

A. The strategic plan is a long-term plan, extending over five to ten years or more, that focuses on how to marshal resources and determine actions to support the mission and goals of the organization.

An organization is looking to use demand management to tailor demand to meet available capacity at product launch, due to limited initial capacity. How can the organization best achieve its goals? A. Lower the price on a semi-permanent basis. B. Raise the price on a semi-permanent basis. C. Offer trade-in promotions. D. Push critical product reviews. P 2-18

B. Given that initial capacity is limited, the company is likely to want to initially slow demand. Raising the price on a semi-permanent basis—by offering a release price point that is higher than the intended long-term price point—can effectively lower demand temporarily until capacity catches up. Pushing critical product reviews may also lower demand, but it may permanently harm demand as well and is not the best option for the organization.

How often, under normal circumstances, does a pre-S&OP meeting take place? A. Weekly B. Monthly C. Quarterly D. Annually P 2-86

B. Sales and operations planning (S&OP) is a monthly process.

A business plan would typically include which of the following? A. Definition of sales territories B. Long-term guidance for developing tactical production plans C. Clearly defined marketing tactics D. Monthly production figures for each product family P 2-77

B. The business plan provides a long-range view of strategy and guidance for developing tactical plans for sales, marketing, and operations.

For an assemble-to-order product, the master production schedule is likely to focus on scheduling which of the following? A. Finished goods B. Modules C. Customer deliveries D. Orders P 2-91

B. The focus of master scheduling in assemble-to-order is on scheduling the manufacture of the modules or components and on final assembly.

How often are sales and operations planning (S&OP) executive meetings generally held? A. Every week B. Every month C. Every quarter D. Every year P 2-76

B. The monthly S&OP executive meeting involves the chief executive officer (CEO) along with the demand (sales and marketing), supply (operations), and financial executives and other direct reports to the CEO.

Which of the following meetings is typically used to arrive at a consensus between plant managers, logistics managers, schedulers, customer service managers, and other supply chain managers prior to involving executives in sales and operations planning (S&OP)? A. Supply planning meeting B. Pre-S&OP meeting C. S&OP meeting D. Demand planning meeting P 2-84

B. The purpose of the pre-S&OP meeting is to get stakeholders from both supply and demand planning in agreement prior to the main S&OP meeting presided over by executives.

Which of the following is the most appropriate subject for discussion at the demand planning phase meeting that is part of the sales and operations planning (S&OP) process? A. Strategies to propose solutions to any supply and demand mismatch B. Identifying how to get cooperation for the plan with the entire supply chain C. Strategies to close any gaps between the demand plan and business plan revenue goals D. Identifying areas where supply, demand, and finance plans can reach consensus P 2-81

C. After discussing demand consensus for product families and changes since the last meeting, the rest of the demand review meeting within the demand planning phase should be spent on what strategies can be employed to close any gaps between the demand plan and business plan revenue goals.

What demand-side activity is an input into strategic planning? A. Priority planning B. Rough-cut capacity planning C. Demand management D. Production activity control P 2-77

C. Demand management feeds into the strategic planning process. All the other options are developed in steps following strategic planning.

What processes are used in master planning? A. Supplier and channel selection B. Strategic and business planning C. Sales and operations planning and resource planning D. Risk identification and mitigation P 2-77

C. Master planning starts by taking the forecast and determining what production can accomplish using available capacity (sales and operations planning) and by directing investments in capacity (resource planning). The overarching goal is always to satisfy the organization's stakeholders.

Which of the following would promote proper implementation of demand plans and reduce demand variability? I. Altering the date of the preliminary sales and operations planning (S&OP) meeting to match when data are available II. Basing trend projections on as many extrinsic leading indicators of change as possible III. Using key drivers of change as a "sanity check" on forecasts IV. Using last year's sales data as a "sanity check" on this year's forecasts A. II and III B. I, II, and III C. I, III, and IV D. I, II, III, and IV P 2-81

C. Scheduling the preliminary S&OP meeting to occur at the point in the month when the most accurate data are available is preferable to holding these meetings at an arbitrary date. While it is important to use extrinsic forecasting as part of demand planning, it is best to reduce the number of key drivers of change to just those that provide good correlation. Both key drivers of change and last year's sales data are useful as quick "sanity checks" on forecasts.

Which of the following professionals should chair the demand planning phase meeting that is part of the sales and operations planning (S&OP) process? A. Demand manager B. Chief executive officer C. Highest-ranking demand-side professional D. Highest-ranking supply-side professional P 2-80

C. The highest ranking demand-side professional, such as the vice president of sales or marketing, not the demand manager, typically chairs this small, brief meeting between representatives of product and brand management, marketing, and sales.

The sales and operations plan as a whole provides a statement of company plans for what period? A. One quarter B. 6 to 12 months or more C. 12 to 18 months or more D. 3 to 5 years or more P 2-86

C. The sales and operations plan is the definitive statement of company plans for the near to intermediate term—typically 12 to 18 months or more. It covers enough time to enable planning for resources and to support the annual long-range business planning process.

What step of the sales and operations planning (S&OP) process comes after evaluating demand levels? A. Reviewing performance B. Financial review C. Evaluating supply capability D. Reconciling demand, supply, and financial plans P 2-83

C. The steps in the S&OP process are, in order, reviewing performance, evaluating demand levels, evaluating supply capability, and reconciling demand, supply, and financial plans.

A statistical forecast should be: A. avoided when information on real-time sales is available. B. the sole input to demand plans. C. the result of discussion and consensus building. D. one of many inputs to demand plans. P 2-51

D. A quantitative (intrinsic) forecast is intended as a frame of reference for further planning, and thus it should be combined with forecasts using extrinsic data on trends and modified using qualitative data such as expert opinions.

Which basic operations strategy assumes the risk of stockouts in exchange for protection against high costs for overtime and capacity maximization? A. Demand matching B. Lean production C. Chase production D. Level production P 2-89

D. Level production offers the benefits of simplicity and, from an operations viewpoint, predictability (no last-minute hiring of temporary employees or layoffs). The tradeoff is the potential for inventory to pile up during periods of low demand or for stockouts if demand spikes upward.

Which of the following provides a sound method for grouping products into product families for the operations plan? A. Appeal to a particular age group B. Similar seasonality C. National market destination D. Similarity of manufacturing processes P 2-88

D. Product families for purposes of the operations plan are chosen by similar manufacturing requirements to facilitate other planning processes, such as production scheduling. (Marketing can group products in other ways for its purposes.)

Which of the following production strategies allows for mass customization without long lead times? A. Make-to-order B. Lean production C. Make-to-stock D. Assemble-to-order P 2-91

D. The assemble-to-order strategy incorporates some of the benefits of mass production and some of the benefits of true customization by mass-producing components that can be assembled into one of several different versions of a product after receipt of an order.

Which of the following would not be an acceptable measurement of output for an operations plan for use by operations managers? A. Numbers B. Liters C. Tons D. Euros P 2-87

D. The operations plan focuses on the output of product (or services), and output should be described in units. Other areas of the organization such as finance would be interested in output listed in a monetary value such as euros.