Chapters 10, 12, 13, 14
If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is $50, what is the annual ordering cost?
$1,200 Solution: 24 x $50 = $1,200
If annual demand is 48,000 units, orders are placed in quantities of 2000 units at a time, and the cost to place an order is $80, what is the annual ordering cost?
$1,920 Solution: (D/Q)(S) (48000/2000)80 = $1,920
. In the service industry it is considered good performance when a company has an inventory loss of only:
1%
For the following data, verify the amount of employees needed. Cost Data Demand Labor cost Jan 400 Regular 20 $/hr Feb 250 Over Time 30 $/hr Mar 275 Hiring 250 $/employee April 325 Firing 400 $/employee May 350 Inventory Holding 10 $/unit/period Shortage 15 $/unit/period material 45 $/unit/period Capacity Workforce beginning 15 employees Inventory initial 100 units Production rate 8 hrs/unit Regular time 160 hrs/period/employee Over time available 40 hrs/period/employee
15 Solution: Net cumulative demand = 1600 - 100 = 1500 units Step 2: 1500 / 5 periods = 300 units Step 3: 300 units; 300/8 / 160 = 15 employees
Consider a production line that has a station with two machines, and each unit produced at the station needs to be processed by both of the machines. (A unit cannot be worked on by both machines simultaneously.) Each machine has a production capacity of 4 units per hour. What is the lowest possible cycle time of the station?
15 minutes per unit Solution: 60 min/hr / 4 units/hr = 15 min per unit
Owens Corning reported savings of ______________ by using ERP
$65 million
For the basic EOQ model, what is the formula for the total annual cost?
(D/Q)S + (Q/2)H
Which of the following is an assumption of the basic EOQ model?
) Demand is known and constant.
Approximately how much of the U.S. workforce works in an office environment
50%
How many different layout solutions are possible with 7 departments?
5040
Suppose that a plant manager uses economic batch sizes for production of a product. Suppose further that the setup cost is $50 per batch, the holding cost per unit per year is $10, the annual demand is 30,000 units, the firm operates (and experiences demand) 300 days per year, and the production rate per day is 1000 units. What will be the maximum inventory level that this product ever reaches?
519 Hint:
Raissa's Pizza parlor has an average monthly demand of 1200 pizzas. Statistically, each employee can produce 10 pizzas per hour. The parlor is open 20 days each month. How many employees must they need to meet the demand using a level aggregate plan?
6 Solution: 1200 / 20 = 60 / 10 = 6
Consider a periodic review inventory system with a lead time of two weeks and a review period of seven weeks. If the standard deviation of weekly demand is 200 and the desired cycle-service level is 86%, what should the safety stock equal?
648 Solution: R = dL + SS; see Appendix B SS = zdL
How many different layout solutions are possible with 7 departments?
7!
Using a level production plan how many oil changes must each employee be capable of to meet a weekly demand of 1400 oil changes in a five day work week if there are 4 employees?
70 1400 / 5 = 280 / 4 = 70
Consider a periodic review system. The target inventory level is 1000 units. It is time to review the item, and the on-hand inventory level is 200 units. How many units should be ordered?
800 Hint: TI = d(RP + L) + SS; see Appendix B SS = zdL; Q = TI - OH
Consider a periodic review system with a lead time of two weeks and a review period of seven weeks. If the average demand per week is 1000 units and 300 units of safety stock are held, what should the target inventory level be?
9300 Hint: TI = d(RP + L) + SS; see Appendix B SS = zdL
The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very back (furthest away from the dock)? Item Trips Area Needed (blocks) A 300 60 B 220 3 C 72 1 D 60 10 E 24 3
A Solution: See pages 357-358 (Trip ratio = trips/area needed: A = 300/60 = 5; B= 220/3 = 73.3; C = 72/1 = 72; D = 60/10 = 6; E = 24/3 = 8: A lowest trip ratio store furthest from dock)
Which of the following statements is not true?
A perfectly balanced line has no bottlenecks.
Which popular facility layout software package works from an REL chart?
ALDEP
What are two of the most popular facility layout software packages?
ALDEP and CRAFT
Which of the following allow you to calculate the average amount of inventory in transit?
ATI - (365*t)/d
Which of the following is not true for action notices that are produced by MRP systems?
An action notice is produced when inventory is moved to the manufacturing floor.
If the EOQ is ordered, which of the following is true?
Annual ordering cost is equal to annual holding cost
If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model?
Both models use the same formula to compute annual holding cost
Which of the following does not share a common ERP database?
CEO strategic plan
Which popular facility layout software package uses a from-to matrix?
CRAFT
Which of the following is not a way to increase capacity?
Change depreciation methods.
_______________ MRP is an MRP system that includes production planning, master production scheduling, and capacity requirements planning.
Closed-loop
How can the EPQ model be economically reconciled with just-in-time (JIT) production?
Decrease ordering cost (S).
The step, when Designing a Product Layout, whose goal is to design a product layout that can produce the desired number of units with the least amount of work centers and a balance of workload.
Determine output rate
In a periodic review system, if you are basing your time between orders on the EOQ, what should be its length in weeks?
EOQ / average weekly demand
What does ERP stand for?
Enterprise Resource Planning
Using a chase strategy with the following 4 month demand and starting employee count, how many employees will be fired and how many will be hired if each employee can fix 20 engines per period? November = 1920 Starting Employee Count = 90 December = 2160 January = 1440 February = 1200
18, 48 Solution: Nov Dec Jan Feb demand 25 10 15 12 prod rate 25 10 15 12 Emply need period 96 108 72 60 hire 6 12 0 0 fire 0 0 36 12 6+12 = 18 to hire 36+12 = 48 to fire
When developing a detailed layout, what tools would be used?
3-D models and CAD software
If a company carries 13 weeks of supply, what is the inventory turnover?
4 Solution: 52 wks / 13 weeks = 4
What proportion of U.S. companies with greater than $1 billion in annual revenues has implemented ERP?
40%
Evaluating an aggregate plan in terms of inventory levels is using what perspective?
cost
Which of the following is not a direct input to capacity requirements planning?
current inventory levels
What is Wal-Mart's primary consideration for its store layout decision regarding the number and size of aisles in its stores?
customer exposure to merchandise
Evaluating an aggregate plan in terms of number of back orders is using what perspective?
customer service
What is a technique for improving inventory record accuracy?
cycle counting
What is the term for the maximum amount of time each workstation has to complete its assigned task?
cycle time
What term tells us how frequently a product is completed?
cycle time
Which of the following most closely describes dependent demand?
demand derived from finished products
In a two-bin system, what does the quantity in the second bin represent?
demand during replenishment lead time
Which of the following is not affected by decisions about how much inventory to hold?
depreciation
Finished goods in transit to the customer are called what?
distribution inventory
Which type of movement is most like rectilinear?
driving in New York City
Setup time is changed:
each time the machine is prepared to produce the desired item quantity.
. What does EPQ stand for?
economic production quantity
When evaluating the production plan you should use all but which of the following:
effect on marketing plan
The challenge in process layouts is to arrange resources to maximize __________ and minimize ___________.
efficiency, waste of movement
Production and inventory planners release orders to ________________________.
either an external supplier or to the shop floor
An item that has no parents is a(n) ______________.
end item
What is an information system designed to integrate internal and external members of the supply chain?
enterprise resource planning
Once you implement a new aggregate plan you must then:
evaluate the plan's performance in terms of cost and human resources.
If an order is not scheduled to arrive in time, the planner tries to ________________.
expedite the order
A difficulty with back orders, even when the customer waits, can be ________________.
extra administrative costs
Which ERP module includes investment management?
finance and accounting
Independent demand is the demand for ______________.
finished products
A wheat farm is an example of which layout type?
fixed position
Bridge construction is an example of which layout type?
fixed position
Building construction is an example of which layout type?
fixed position
Shipbuilding is an example of which layout type?
fixed position
. One important consideration in designing any layout is
flexibility
The first step in designing a layout is
gathering information
In a product layout facility the manager must decide
general sequence the work must be performed in
In MRP, the starting points for each part and material needed to accomplish the master production schedule are the ___________________.
gross requirements
The comparison of aggregate plans is difficult when they produce different quantities and thus _________.
have different ending inventories
Studies mentioned in the textbook have shown that workers that are in close proximity to each other are more likely to ______________________.
have greater understanding, tolerance, and trust for one another
Shifting demand makes sense when the company has ______________________.
high fixed costs and low variable costs
Which of the following is least like a product layout?
hospital
Capacity requirements planning enables the company to evaluate ____________________.
how well it is using its critical work centers
Evaluating an aggregate plan in terms of employment stability is using what perspective?
human resources
Sales and operations planning integrates the medium-range functional plans for all except which of the following?
human resources
Which ERP module includes work-flow analysis?
human resources
What type of aggregate plan keeps a stable workforce and uses backorders to compensate for excess demand needs?
hybrid
Which of the following is not an intangible benefit of ERP?
improved on-time delivery performance
An error in replenishment ordering can result from a(n) _____________________________.
inaccuracy in the inventory records file
Which of the following may not be a result of a poor layout?
increased flow of information
Which of the following is not one of the four basic categories of ERP modules?
information systems
When a company's product is nontangible (a service), which of the following is no longer a viable option?
inventory
For the level aggregate plan, fluctuations in demand are absorbed by ________________.
inventory and back orders
. Companies can achieve cost-efficient operations by using which of the following inventory approaches?
inventory building to leverage reduced setup costs
The ____________ is (are) checked for the materials on hand and those that need to be procured. a) master production schedule
inventory records
Which of the following is not one of the four basic layout types?
inverted
CRP systems are used to check that the amount of work:
is feasible.
When you are considering different production planning approaches, the magnitude of change:
larger changes need more dramatic measures.
The time interval necessary to either manufacture or purchase an item is its ______________.
lead time
The most critical factors for successful EPR implementation are ______ and _________ ______.
leadership, top management commitment
Process layouts have
less automation
What type of aggregate plan maintains a constant workforce and produces the same amount of product in each time period?
level
What is typically used to quantitatively compare the effectiveness of layouts?
load-distance model
When line balancing, which rule does the textbook suggest for assigning tasks to workstations?
longest task time
If setup costs are essentially zero (negligible when compared to carrying costs), which approach should be used for lot sizing?
lot for lot
The quantity of the replenishment order is based on the __________________________.
lot sizing rule used
Which inventory function helps firms garner quantity discounts?
lot-size inventory
Accounting uses the aggregate plan for all the following except:
making short term loans
Dell practices _____________________________.
mass customization
The ____________ details the company's planned products, quantity, and the schedule used by marketing when promising deliveries.
master production schedule
The next level down in the planning process after development of the aggregate plan is the _____________.
master production schedule
Which of the following is not an input to the aggregate planning process?
master production schedule
A computer-based information system designed to manage dependent demand inventory is _____________.
material requirements planning
What information system enables companies to have the right material in the right amounts available at the right time?
material requirements planning
Which of the following is not a primary objective of the master production schedule?
minimize shipping costs
An advantage of the chase aggregate plan is ____________________________.
minimizes finished good holding costs
The Production Plan is usually updated and reevaluated
monthly
. Percentage of Line Items Shipped on Schedule recognizes that:
not all orders are equal but fails to take into account the dollar value of orders
ABC inventory assumes that a company's inventory is ____ equal and _______________ the same level of _________.
not, does not need, control
Which of the following is not typically indicated as part of the resources authorized in an aggregate plan?
number of machines to be used
For capacity requirements planning, loads for critical work centers are calculated based on ___________.
open shop orders and planned shop orders
In the mid-1970s, MRPII was developed. One of its major components is:
operations execution
For every scheduled receipt in an MRP table, there is also in the organization a(n) __________________.
order that has been placed but not yet been received
What is the term for the number of units we wish to produce over a specific period of time?
output rate
What are the two primary objectives of aggregate planning?
output rate and workforce size
What is it called when a publishing company has decided to send the technical information development elsewhere and have no in-house capability?
outsourcing
Which of the following is not a lot size rule?
overall factors
What is the most common method for increasing output capacity?
overtime
What is the term for a system in which the product being worked on is physically attached to the line and automatically moved to the next station when the cycle time has elapsed?
paced line
A (an) _________________ inventory record provides an up-to-date inventory balance by recording all inventory transactions as they happen.
perpetual
The gross requirements of a given component part are determined from ______________________.
planned orders of the parent
In evaluating the current situation, the ____________ is the percentage of normal capacity at which the company is currently operating.
point of departure
A disadvantage of the level aggregate plan is _________________.
possible poor customer service from extensive use of backorders
A demand-based option in which the marketing tries to shift demand patterns to minimize demand fluctuations is called
proactive
. A company with a pure intermittent processing system is most likely to use which layout type?
process
A grocery store is most like which of the following layout types?
process
A hospital is an example of which layout type?
process
A job shop is most likely to use which layout type?
process
A university is an example of which layout type?
process
The company's __________ dictates type of layout the company will have
process
A hybrid layout combines
process and product
A car wash is an example of which layout type?
product
A company with a pure continuous processing system is most likely to use which layout type?
product
A high-volume paper mill is an example of which layout type?
product
A single-line cafeteria is an example of which layout type?
product
Which of the following is not typically contained in the marketing plan?
product design
One disadvantage of using undertime is
product labor cost increases
A visual depiction of the subassemblies and components that are needed to produce a finished product is called a(n) ______________________.
product structure tree
For any period the beginning inventory, plus any replenishment orders due, less the gross requirement equals is called the __________________________.
projected available quantity
The beginning inventory for any time period is equal to _____________________________________.
projected available quantity from at the end of the previous period
Information in the inventory records file that can change with inventory transactions includes the ________.
projected inventory level
Which of the following best describes subcontracting?
provides additional output capacity during periods of high demand
On which key trade-off does the textbook focus concerning office layouts?
proximity vs. privacy
All of the following are detailed by the aggregate plan except for?
purchases of components from vendors
Which of the following is not typical of overtime?
quality may decrease
According to the textbook, most manufacturing operations, production or inventory control planners are responsible for working with MRP. Planners are typically responsible for all except which of the following:
raw material pricing
What are purchased items or extracted materials that will be transformed into components or products called?
raw materials inventory
A demand-based option in which the operations department uses inventories and back orders to react to demand fluctuations is called
reactive
What is the shortest distance between two locations using north-south and east-west movements called?
rectilinear distance
. The goal of developing an aggregate plan using composite product information is:
reduce the number of calculations
Under a periodic review system, enough inventory must be carried to protect against stockout for the ___________.
replenishment lead time plus the review period
Scheduled receipts are _________________________________________.
replenishment orders that have been placed but not yet received
The Marketing Plan identifies all but which of the following:
resources
Information that may be contained in the inventory records file includes all except which of the following?
run times for manufactured parts
Which ERP module handles billing?
sales and marketing
UPS is a company that hires a very high number of __________ and _________ workers.
seasonal , part time
The first step in developing the production plan is:
selection of the aggregate plan that matches your company's objectives.
All of the following affect holding costs except
setup cost
A proactive marketing approach in aggregate planning involves ____________________.
shifting the demand patterns to level demand fluctuations
Group technology creates groupings of products primarily based on what?
similar processing requirements
For the general warehouse layout problem, which department should be located furthest from the dock?
smallest ratio of trips needed to area needed
The master production schedule is typically stated as:
specific finished goods
A SKU is a ______________ at a _____________ geographic location.
specific item, particular
Which inventory function provides a cushion against unexpected supply shortage?
speculative inventory
Which inventory function provides a hedge against inflation?
speculative inventory
For the basic EOQ model, how many units should be ordered each time that an order is placed?
square root of 2DS/H
. If the EOQ is ordered, which of the following represents the total annual cost of ordering and holding?
square root of 2DSH
Using a relationship chart to develop acceptable layouts is part of a classic layout technique called
systematic layout planning
ERP systems provide _____ and _____ benefits.
tangible, intangible
Which of the following is used in determining the order quantity in the periodic review system?
target inventory level
Which of the following is not a resource that might not be included in deciding a facility layout?
telephone switch
The current time period is referred to as __________________.
the action bucket
Gross requirements for finished products are taken from ________________________.
the authorized MPS
The lead time can be less than the cumulative lead time when _________________________.
the company has inventory on hand
The theoretical minimum number of stations is the number of workstations that would be needed if:
the line was 100% efficient.
The cumulative lead time is _______________________________.
the longest route in terms of time from the low level items to the end item in the product structure tree
The bottleneck determines ________________.
the minimum cycle time of the whole process
An order released to a supplier authorizes ______________________________________.
the shipment of the material so that it arrives as needed
Selection of the lot size rule to be used should be based on minimizing ____________________.
the sum of ordering and carrying costs
What are the two major decisions to be made when using the periodic review system?
the time between orders and the target inventory level
. Warehouse layouts have the key characteristics of process layouts except
there is no movement between the storage areas
What does TBO stand for?
time between orders
MRP develops a ____________ that shows future demand, supply and inventories by time period.
time-phased schedule
The master production schedule is shared:
to all members of the supply chain.
The ERP system provides a single interface:
to external members of the supply chain as well.
. Which inventory function exists between the manufacturing plant and the distribution plant?
transportation inventory
Companies that use back orders are asking their customers to ___________________.
wait for delivery of the product
The master production schedule is reviewed
weekly
The inventory objective of customer service is measured by any of the following except _______________.
weeks of supply
The formula to calculate a week's of supply is?
weeks of supply = average inventory on hand in dollars/average weekly usage in dollars
The authorized MPS is a statement of ______________________________.
what the company expects to build and when it expects to build it
Which of the following is not an identified reason why manufacturing firms do not use optimal EOQ order quantities?
what the sales price is
An action notice is generated ________________________________________.
when a planned order needs to be released
In inventory management, when discussing customer service we mean:
whether the product is available when the customer wants it.
The aggregate plan helps manufacturing with all of the following except:
whom to employ
What does WIP stand for?
work-in-process
If you allocate scarce resources to customers at prices that maximize the yield to the company you are using:
yield management
Which of the following is more like a product layout as compared to a process layout?
Facilities are more capital intensive
Which of the following is not a major supplier of ERP systems?
IBM
Consider the basic EOQ model. If annual demand doubles, what happens to the total annual setup and holding cost?
It increases by 41.42%.
Which of the following is not one of the six ways to use inventory?
JIT inventory
Which of the following is an objective of MRP?
Keep priorities updated and valid.
Which of the following is not true for firing permanent employees?
Keeping senior employees is always the least cost effective approach.
Which of the following is an assumption of the basic EOQ model?
Lead time is known and constant.
Which of the following is not true concerning indented bills of materials?
Lead times determine how far children are indented.
Which of the following is more like a product layout as compared to a process layout?
Less skilled workers can be used.
When there is insufficient inventory to satisfy the forecast for a particular period a(n) _____________ order must be placed.
MPS
Hand tools, lubricants, and cleaning supplies are usually examples of what?
MRO inventory
Which of the following inventory functions does not involve end products sold to customers?
MRO inventory
Capacity requirements planning uses data from _________________________.
MRP
Which of the following is more like a product layout as compared to a process layout?
Material handling costs are lower.
Which production line shapes are particularly useful for the sharing of resources?
O and U
_____________________ is the probability that demand during lead time will not exceed on-hand inventory.
Order-cycle service level
Which of the following is an assumption of the basic EOQ model?
Orders arrive at once (in one lot).
. Which basic EOQ assumption does the EPQ model relax?
Orders arrive at once.
ERP is a software designed for _____________________ and _____________________ business processes.
Organizing, managing
What implies that about 20% of the inventory items will account for about 80% of the inventory value?
Pareto's law
Which of the following statements is true?
Periodic counting generally counts every item in stock, whereas annually cycle counting generally does not daily.
Which of the following is more like a product layout as compared to a process layout?
Processing rates are faster.
Which of the following is more like a product layout as compared to a process layout?
Products cannot be easily added or deleted from the existing product line.
Which of the following is an assumption of the basic EOQ model?
Quantity discounts are not considered.
Which layout design tool is primarily based on managers' opinions?
REL chart
What are the two primary tools used to identify closeness measures during the layout design process?
REL chart and from-to matrix
Which of the following is more like a product layout as compared to a process layout?
Resources used are specialized.
Second-generation ERP systems are referred to as ___________ software.
SCM
The formula for calculating safety stock when an estimate of demand during lead time and its standard deviation are known is?
SS = z*σdl
Which of the following is more like a product layout as compared to a process layout?
Scheduling resources is less challenging.
Which of the following is more like a product layout as compared to a process layout?
Space requirements for inventory storage are lower.
In a periodic review inventory system, how many units are ordered?
Target inventory level on hand balance
If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model?
The EPQ model produces a higher total annual cost.
If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model?
The inventory depletion rate is not the same for both models.
If the costs (S and H) and demands (D) are the same, which of the following is true with regard to the EPQ model as compared to the EOQ model?
The lot size under the EPQ model is bigger than under the EOQ model.
When is the basic EOQ model a special case of the EPQ model?
The production rate per day approaches infinity.
If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model?
The two models use different formulas to compute annual ordering cost.
Which of the following is not true for planned orders?
They are necessary only for finished products.
Which of the following is not true concerning replenishment orders?
They are orders for the final product.
Which company is widely considered to be the leader of just-in-time production?
Toyota
Which of the following statements is not true?
Using perpetual inventory records results in different order quantities than using a two-bin system.
Intermittent operations are seen in organizations that produce:
a large variety of different products
When there is insufficient inventory to cover the gross requirements for a period
a planned order is placed
A company's ____________ plan is a statement of the resources available to the operations group during the next 6 to 18 months
aggregate
Percentage of orders shipped on schedule is a good measure of finished goods customer service if:
all orders and customers have similar value.
Which of the following is an advantage of producing at average demand levels?
allows for a lower investment in capacity
A positive quantity in the current period's planned order row means that ___________________.
an order must be released
. What is the formula for inventory turnover?
annual cost of goods sold / average inventory in dollars
The ranking in ABC inventory analysis is based on what?
annual dollar usage
What costs are considered in the basic EOQ model?
annual ordering costs + annual holding costs
What costs are considered in the quantity discount model?
annual purchasing costs + annual holding costs + annual ordering costs
Which inventory function specifically is designed to allow the company to maintain a level production strategy?
anticipation inventory
Which is the primary inventory function that is activated after coupons are distributed to customers?
anticipation inventory
If the available capacity at a work center is not adequate, the company can __________________.
authorize overtime
Which of the following is least like a process layout?
automobile plant
With capacity requirements planning, the calculated workload for a work center is compared with ___________.
available capacity
In a level production plan, equipment capacity is set equal to
average demand
What is the amount by which the efficiency of a production line falls short of 100%?
balance delay
Assigning tasks to workstations is known as __________________.
balancing the line
The ____________ file lists the materials needed to build a product.
bill of material
The MRP file that contains data on specific materials used to make final products and their correct quantities is the ______________________.
bill of materials file
The MRP input listing the intermediate assemblies, subassemblies, component parts, raw materials, and the quantities of each needed to produce one final product is the ___________________________.
bill of materials file
According to the textbook, the available space of a facility is best seen by using a
block plan
What is the longest task in a process called?
bottleneck
Companies use ____________ to check that enough work is scheduled for operations and that the amount of work scheduled is feasible.
capacity requirements planning
Which of the following is least like a fixed-position layout?
car wash
Different lot size rules determine the quantity of the order and __________________.
change the frequency of replenishment orders
What type of aggregate plan sets labor and equipment capacity to satisfy demand each period?
chase
If inventory records fail to accurately reflect the quantity of materials available, all except which of the following may occur?
continuous operations
Second generation ERP systems addressed the first generation deficiency of:
continuous planning capabilities
What are two logical ways in which to base the time between orders in a periodic review system?
convenience or EOQ calculations
